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The end of this week marks the winter solstice. There is not a lot about that specific day to be excited about. On one hand, it is the darkest and shortest day of the year. On the other, it is the middle of winter, so it’s cold! As an added kicker, this year we even get to find out that day whether our Federal government is going to be “shut-down” (again), but I digress.
To me, the symbolic nature of this day is that it is essentially breathing life to a new year. Every day from this point forward is a little bit brighter, and it lasts a little bit longer. It is a great reminder that all dark and cold seasons come to an end. It also means we are getting closer to spring and warmer days again.
This has not been the most fun quarter (or year) to be an investor. Almost everything around the globe is down. It suddenly feels dark and cold in financial markets and there is no shortage of scary headlines out there…especially if you go looking for them.
Over the course of this year, we have spoken and written numerous times about how rare of a year 2017 was in terms of market volatility. With US markets rising around 20% and foreign markets rising nearly 30%, investing seemed risk free and easy.
While us saying this is one thing, we wanted to offer some additional perspective and evidence on what has and continues to transpire. Days like yesterday (Thursday, 10/25) give hope that the drawdown is over and a recovery has begun, but the reality is that we simply do not know when the recovery will fully take stride, and there very well may be more turbulence along the way.
First and foremost, for those that want the deeper dive, here is a link to a recent article by Larry Swedroe, the Director of Research for the BAM Alliance: An Awakening Bear? I highly recommend it for those that have the capacity and interest in understanding further. He has been at the forefront of BAM and the investment research community for decades, and is among the rare people that is extremely well respected in both the academic and investment communities. Further, his commentary is always specific to the style of investing we employ.
Among the many notable comments Larry provides in his article, he offers the following chart of market declines of 5% or greater during a calendar month since 2009:
In essence, these drops are not all that uncommon. In fact, prolonged drops that can last several weeks are not either, as evidenced by the consecutive months in 2010 and 2011. In addition, the 2016 decline actually lasted well into February, but had recovered by the end of the calendar month and therefore, is not included.
As you arise this morning, you likely know already that the global stock market fell very sharply yesterday. It was the worst day for markets since this past February. The selloff continued overnight in foreign markets, pushing them downward toward their 20-month lows.
Predictably, the news media has a wide variety of things to blame for the simple reality that there were a lot more sellers yesterday than buyers, fueled heavily by machine-trading. Some blame interest rates rising, while others blame trade wars and tariffs, and others blame the Fed.
We need to stop trying to blame anyone or anything, and just accept that markets do this from time to time. Make no mistake, it does not feel good when it happens, but it is far more common than we realize.
And most importantly, times like this are why high-quality bonds are so important to have in a portfolio.
As a brief reality check, this is the 23rd time that the S&P 500 has dropped 5% or greater from its peak since March of 2009. On average, the recovery period has been 42 days. All of them seemed like the world was falling apart at the time. And each time, the market recovered. Continue reading “October Market Volatility”
(Edited from commentary by Larry Swedroe, Director of Research for The BAM Alliance)
For some time now, investors have been very concerned about the potential for a global trade war – a war in which there are not any real winners. That, of course, worries investors, especially those who were taught that the Smoot Hawley Tariffs enacted in 1930 was a major contributor to the Great Depression. While it certainly did not help, the causes of the Great Depression go way beyond tariffs, and the depth of the depression is mostly attributed to poor monetary and fiscal policy decisions by Central Bankers around the globe. The concerns have left many wondering what (if anything) they should do.
First, whenever an investor is concerned about any issue, they should stop and ask themselves this question: Am I the only one who knows about this? Clearly the answer is going to be no. As believers of the idea that market prices already reflect all publicly known information, it is reasonable to discern that stock markets not only reflect what we are reading in the news, but also the odds of these events actually occurring. Thus, unless you somehow believe that you know more than the collective wisdom of all the institutional investment managers, hedge funds and mutual fund professionals (who do about 90% of the trading, and thus set prices), it is too late to act.
Second, ask yourself if you think folks like Warren Buffet are aware of the situation. Again, the answer will surely be yes, and he isn’t doing any selling. Unless you believe you are smarter than Buffett, it is wise to take his advice and avoid trying to time the market.
Third, seek real analysis on the impact, not the opinions of talking heads on the television. Oxford Economics, a global leader in economic analysis and forecasting, calculated the tariffs with China would shave 0.1% – 0.3% off of GDP the next two years. This is a far, far cry from the doomsday scenarios being painted by the news media. We must reiterate here that forecasts are rarely perfectly accurate, but it undermines the reality that the results of a trade war are likely less than most believe. Continue reading “Musings on Trade Wars”
We are thrilled to announce the addition of Richard Hall, CFP® to the Pitzl Financial team. Rick brings two decades of experience in financial services to our firm, hailing from Merrill Lynch, Smith Barney, and Norwest (Wells Fargo).
As a Wealth Advisor at Pitzl Financial, Rick will be instrumental in the financial planning process with our clients, providing individualized advice and strategy, along with the evidence-based investment philosophy you have come to expect. Throughout his career, he has taken great pride in assisting individuals and families with making prudent and impactful financial decisions.
Rick is a CERTIFIED FINANCIAL PLANNER™ professional, and a graduate of Southwest Minnesota State University with a bachelor’s degree in business administration with a finance concentration.
He and his wife, Maggie, and their five children live in White Bear Lake, Minnesota. In his free time, Rick likes to stay active playing basketball with his kids, watching his daughters dance, and searching for monster walleye.
The addition of Rick, along with Justin Gabriel (whom we introduced in our January newsletter), adds a great deal of depth and support to our advisory team.
Please join us in welcoming Rick to the Pitzl team. We look forward to continuing to develop and strengthen our planning capabilities and service model in the years ahead.
Global markets have been thumped pretty bad over the last week, and the last two trading days in particular. As of the time of this writing (Tuesday morning, 4:30am), it appears today will open lower as well. Will that hold? I don’t know. It depends on whether traders buy more than they sell today.
Yesterday, the Dow lost more points than any single day in history. This statement, of course, is the headline story for several news outlets. However, in percentage terms, it only marks the 108th worst day in its 121-year history.
Make no mistake, the market fell sharply, but it was far from its worst day ever. Further, the last time we experienced a drop like this was 2011, so it has been about seven years since we felt this roughly once-per-year event.
We wrote and talked with you at length over the last year about how strange of a year it was, where volatility basically evaporated from the global markets. Stocks seemed to be riding a wave of positive economic news toward an endless horizon.Continue reading “Ah…so that’s what risk feels like”
The highly anticipated tax reform we have been hearing much about lately is expected to be passed into law today. While the economic and political implications of this bill will be unknown for some time, we at least have an understanding of the individual changes taking shape that will impact your planning in the years ahead.
My focus in this email is to give you a very general take on what is changing for individuals, and what to consider right away from a planning perspective. Nearly everything available in the mainstream media right now ought to be taken with a grain of salt…on either side of the political spectrum. Very little of what I have been seeing contains much real substance for people. Instead, they either focus on slivers of the bill, or on making a politically biased opinion or hysterical predictions of the impact. And as usual, that goes both directions. Don’t fall for the click bait.
You know where we stand on predictions, whether that be the direction of markets, economic consensus, or the ability of the CBO to project pretty much anything beyond a year or two. We simply don’t know yet, and acknowledging that will help you stay focused on what matters and what you can control.
You also have to look at the bill as a whole, rather than isolating certain components to make a statement. For example, arguing that taking away personal exemptions from families is harmful is extremely misleading without considering that a higher child tax credit will typically more than make up the difference. You are probably hearing / reading that you ought to consider prepaying income or property taxes this year, as those deductions will be limited in the years ahead. However, if you are subject to AMT, prepaying these taxes will save you exactly $0 in Federal income taxes.
Last Friday, Equifax, one of the major credit reporting bureaus, issued a press release announcing that on July 29 it had discovered “unauthorized access” to data belonging to as many as 143 million U.S. consumers. We have compiled some information that we hope may help you understand what happened and what to do next. There has been a lot of information being thrown around the web the last several days ranging from solid to bizarre conspiracy theories. At the end of the day, this is not likely to disappear overnight, and yes, this is absolutely a big deal.
Equifax has stated its internal investigation determined no evidence of unauthorized activity on its core consumer or commercial credit reporting databases. However, the data accessed includes names, Social Security numbers, birth dates, addresses and, in some cases, driver’s license numbers. In addition, credit card numbers were accessed for approximately 209,000 U.S. consumers and personal identifying information on documents for another 182,000 people.
Equifax has set up awebsiteon which you can enter your last name and the last six digits of your Social Security number to see if you have been affected by the breach.
Many people using this website have received error messages, perhaps due to the volume of people accessing it. Unfortunately, at this time, the results provided by the website can be vague and not necessarily reliable. Considering that the 143 million U.S. consumers affected represent 55 percent of the adult U.S. population over the age of 18, we recommend that you act as if your information was accessed as part of this data breach. Continue reading “Equifax Data Breach – What You Need to Know”
We are honored to be recognized as one of the Top 9 Best Financial Advisory firms in the Twin Cities! The commentary below is the review originally posted at AdvisoryHQ.com:
“All of our review and ranking articles are always 100% independently researched and written. Firms do not pay for their ranking or our award emblem. In fact, most firms do not even know that they are being reviewed and ranked by AdvisoryHQ until after our reviews have been published to the public.”
Pitzl Financial Review
Pitzl Financial is a wealth manager and financial advisor in Minnesota, that believes in blending objective financial planning with investment management discipline to help clients preserve, protect, and enhance their wealth through various stages of their lives.
As a client of Pitzl Financial, you have likely heard us reframe the modern concept of “Wealth.” While most people today associate the word with being materially rich, the origins of the word can be traced to Middle English, when it meant “the condition of well-being or happiness.”
As we entered the New Year, our office decided to practice what we preach and took a step to increase the “wealth” of the Pitzl & Pitzl and Pitzl Financial teams by investing in our social / cultural capital — we purchased a Ping Pong Table for our newly expanded office space.
However, over a week after the table’s arrival, it remained in scattered pieces on the floor of our office.
An unexpected problem presented itself after we ripped open the box. The table came in a lot of pieces and is quite time consuming to put together! To make matters worse, the tools we have were ill-suited for the task. Continue reading “The Problem with New Years Resolutions”
