21 Jun 2022

And Now: Some Good News

The most salient question today is whether or not the US and the rest of the world will enter a recession. The answer, of course, is that, at some point, we will enter a recession. I think that a much harder question is when we enter a recession. I’ve heard a few people say that we’re in one now because the first quarter’s Gross Domestic Product (GDP) was negative, and… Read More

13 Jun 2022

Inflation: A Deep Dive

I like to say that this newsletter is a mix of information on investing, financial planning, and economics. Regular readers know that I tend to focus most on investing, then financial planning, and economics is a distant third place. The current inflation environment, however, is forcing me to cover more economics, although the reality is that inflation materially impacts investing and planning. Today, I will look at inflation in isolation,… Read More

6 Jun 2022

The Second-Most Important Element of Retirement Planning

I’ve focused on bear markets for the last two weeks because the stock market briefly dipped into bear market territory a few weeks ago. Since then, markets have recovered some of what was lost, although there is still a way to go to get back to even. One of my colleagues pointed out that as long as your portfolio could reliably provide the cash flow that you need to live… Read More

31 May 2022

A Look at Bear Markets, Part II

What a difference week makes! Last week, with the market down -18.2 percent from its all-time high and dipping into bear market territory at some points during the day, it felt like a bear market was a sure thing. Of course, it may still happen, but with stocks now down -12.8 percent, it doesn’t feel as imminent. Last week’s article focused heavily on bear markets, almost to the point of… Read More

23 May 2022

A Look at Bear Markets

Even though the S&P 500 closed flat on Friday, it was down substantially in the middle of the day, down -2.3 percent in the late morning. At that moment, the S&P was down more than 20 percent from the all-time high set in January. Since a bear market is generally defined as a -20 percent decline from the recent peak (also called a drawdown), a lot of digital ink was… Read More

9 May 2022

The Week When Not Much Happened?

The volatility last week was startling. The S&P 500 was up 2.99 percent on Wednesday but then fell -3.56 on Thursday. It was just as startling as the week before, when the S&P 500 rose 2.47 percent on Thursday, only to fall by -3.63 percent on Friday. Or the week before that, when stocks rose 1.61 percent on Tuesday and fell -1.48 percent on Thursday and -2.77 percent on Friday…. Read More

2 May 2022

Ben Franklin on Volatility

I’ll bet you know the old Ben Franklin saying that ‘the only things certain in life are death and taxes.’ While those things are certain, there is, thankfully, much more to life. A full life will mean different things to different people, but there are probably common elements that include family, friends, good health, prosperity, spiritual wellbeing, and fun, among other things. We also know that life can be difficult…. Read More

11 Apr 2022

Economists Estimate the Probability of Recession

In the market summary above, I referenced the fact that the yield on the ten-year Treasury note is back above the yield on the two-year Treasury note. There was a relatively brief period where that wasn’t true, and a lot of consternation in the media and among investors that the inverted yield curve (when the shorter-term yield is higher than the longer-term yield) meant a recession was coming. In my… Read More

21 Mar 2022

Visualizing Market Losses Today

I’ve been accused of repeating myself, and, in truth, it’s a fair accusation. Today I want to show a chart that I’ve shown before. Instead of showing the total growth of the stock market over time, where the good drowns out the bad, I want to highlight the bad. I don’t want to scare anyone; I actually think it’s reassuring. The measure I’m showing is called a drawdown, which shows… Read More

14 Mar 2022

The High Cost of Hedging

When markets are falling, clients often ask about whether certain ‘risk mitigation’ strategies make sense. Mitigation isn’t a word you use every day unless you’re a lawyer or in the insurance industry, but the meaning is simple: it is an action that reduces the severity, seriousness, or painfulness of something. Usually, when someone talks about it from an investment standpoint, they usually mean some kind of complicated hedging strategy. Over… Read More