Category: Financial Planning

Investing in Hotel California

“You can check out any time you like, but you can never leave.” Hotel California, The Eagles

Last week it was reported that 45 people were killed while leaving a Jewish festival at Mount Meron. The annual religious festival attracts around 100,000 people. Its history dates to the Jewish resistance to Rome in the 1st century. Typical of the festival is dancing, singing, and bone fires. However, this year what began with joy and celebration quickly turned to tragedy. Although the massive crowds came a few at a time, most began leaving all at once.

The resulting crush – and the tragedy that accompanied it – was preventable. Inadequate facilities – specifically the size of the exits – were known to be a problem. But the pull of the festivities brought large numbers of people anyway. While incredibly tragic, the crush is a helpful illustration of what happens at the end of a stock market bubble. Irrational exuberance leads to the inevitable crush as everyone tries to leave the party at the same time. Today’s stock market is like investing in Hotel California. Checking out is easy – it’s leaving that’s difficult.

Market Update: Safety Nets are Essential

“These are the times that try men’s souls.” Thomas Paine, The Crisis.
The Coronavirus is an unpredictable event that has disrupted supply chains, shut down economies, and created fear and panic in the markets. Any time there are sudden declines of this magnitude, we can expect prices to rebound in some fashion. This is often referred to as a “dead cat bounce”, which is perhaps not the best visual at times like these. But it’s meant to convey the idea that even things that are destined to end badly can have moments of optimism.

The Death of Depth in the Death of the 60/40 Portfolio

We too live in a “pretending age”, where in-depth evaluations of important subjects are rare. Often, shallow analysis is passed off as game-changing discoveries instead of the fodder they are for title gazers. Such is the case with the recent obituaries published for the 60/40 portfolio. When it comes to investing, there is perhaps no issue more important than asset allocation. It is, in fact, the greatest determinant for portfolio returns over time. So with that in mind, let’s discuss the death of depth in the death of the 60/40 portfolio.

Somewhere Else

Having an idea of where you want to go is great, but it isn’t the same as knowing where you are going. Many investors can articulate where they want their portfolios to go, but very few can follow the directions to get to their destination.

The Buffett Indicator And You

In his 2001 interview with Fortune, Warren Buffett pointed to what he called the “best single measure of where valuations stand at any given moment”. This metric has become known as the “Buffett Indicator”. It measures the total value of all publicly traded securities as a percentage of the countries total business (i.e. GNP). It is currently indicating something important.

The Problem of Pain

Occasionally, it’s important to review our investment philosophy. We do this in our newsletter as well as posts to this blog, and we do it for both our current clients and those who are looking for a different approach to investment management.

Powered By The Energizer Bunny

The U.S. stock market is doing its best to imitate a rocket powered by the Energizer Bunny. Some might complain that, in light of this never-ending bull market, our caution is getting in the way of larger gains. That concern is worthy of a response, which I hope to briefly provide now.

Use Butter, Not Margin

Regardless of where you land on this most-important issue, the benefits and drawbacks of margarine is not the focus of this blog post. Rather, I wish to discuss the benefits and drawbacks of margin, with an emphasis on the much more dangerous drawbacks. As my mama always said (or should have, anyway) “use butter, not margin”.

Living In A Bubble

It is true that there exists a strong correlation between housing and wages: when wages go up, so do home prices; when wages stagnate, so do home prices. Or, at least, they should. Unless you are living in a bubble…

Are You Flunking P/E?

Flunking P.E. is pretty difficult to do. Most who do, are those who don’t show up in the first place – or, as in the case of many investors today, those who show up at the wrong time.