Since this bear market started, I’ve concluded several articles by saying that we’ve planned for this. When I say this, I don’t mean that we predicted what would happen this year or why – we didn’t. I mean that we’ve planned for this in two ways. First, we knew that the returns this year were possible, and second, we’ve included bad returns in our financial planning models to estimate the… Read More
These are trying times for investors. We all know that markets are risky, and there are extended periods of bad times, but historically, the good times have more than offset the bad times, and the risks have been worth taking. In an attempt to ease the pain of down markets, some investors have pursued what is commonly called low-volatility funds. Other names for similar strategies include minimum variance and minimum volatility, but… Read More
My article from last week, which you can read here, prompted a few people to ask derivations of, “Why don’t we sell our stocks – or at least reduce them – until the recession is over and sidestep some losses?” It’s an understandable question, but it makes me uncomfortable because I have some powerful memories of the 2008 global financial crisis when clients who bailed out of the market still felt… Read More
When the Federal Reserve raised interest rates last week, they also published their Summary of Economic Projections, which you can find here. You won’t find the word ‘recession’ in the document, but there is a pretty strong signal that the Fed thinks a recession is on the horizon in 2022. The second page includes a nice table that shows what the Federal Reserve Board members and presidents estimate for economic… Read More
Stocks sold off sharply this week, as noted above, mostly because markets had anticipated good news on the inflation front and didn’t get it. When I first saw the release, I thought it looked pretty good because the headline rate of inflation was only a tenth of one percent for the month, which brought the rolling one-year rate down to 7.8 percent. While 7.8 percent is still far too high,… Read More
In the 1970s, the Federal Reserve Board of Kansas City put on a series of three-day symposiums and invited economists, central bankers, and journalists to the Great American West to discuss the day’s topics. Former Fed Chair Paul Volker, who famously broke the back of inflation, liked to fly fish, so he steered the conference to Jackson Hole, Wyoming, in 1981, where it’s stayed ever since. The event became a… Read More
While inflation may or may not have peaked, Federal Reserve officials are still talking about raising interest rates. Several Fed officials called for rate hikes through 2023, and St. Louis Fed President said that the overnight rate should be four percent by the end of this calendar year (it’s currently between 2.25 and 2.50 percent). Although the Fed is already raising rates, a process also known as tightening, I wondered… Read More
I heard an amazing statistic a few weeks ago: Berkshire Hathaway, Warren Buffett’s investment vehicle, could lose 99 percent of its value and still enjoy a track record that beats the S&P 500. Over the weekend, Berkshire released their second-quarter earnings, which reminded me of my newfound fact, so I pulled up the data. Sure enough, it’s true. And perhaps even more remarkably, it’s been consistently true since the year… Read More
I sometimes include changes in the dollar in the market summary that precedes the data table above. I cover the dollar less and less, though, because it’s so abstract. That said, the dollar has been immensely strong recently, and it’s impacting our portfolios. Any patriot likes the sound of a strong currency – after all, a strong currency should reflect a strong country. And a weak or debased currency is… Read More
Inflation is hard to measure, which is why there are many ways to measure it. In addition to the Consumer Price Inflation (CPI) indexes that I’ve discussed in recent months, there are also Producer Price Indexes (PPI), the Personal Consumption Expenditures (PCE) indexes, the Gross Domestic Product (GDP) purchased price index, the GDP price index, and the GDP Price Deflator index. Oh my! While I don’t intend for this letter… Read More
