When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.
— Henry Ford
Henry Ford’s quote above is how I feel every time I watch the news. Everything is worded to the extreme to drive fear and division. The voice of reason seems to have been replaced by I am right and everyone else is wrong attitude and you need to listen to me. One example, out of millions, that shows how over the top our media have made everyone was an article in the New York Times in April stating since 2018 some 50,000 high school referees quit, after being followed to their cars, attacked by players on the field, and struck by objects thrown by spectators. That is a sad reflection on what we have become. To help you past all the sensationalism I note the following as I try and keep everything in perspective:
- Is inflation causing business to pull back? Job openings fell in May but still outnumber available workers by almost 2 to 1.—CNBC July 6, 2022
- How bad was the last six months in the market? The S&P 500 Index finished its worst first half since 1970.-Nick Murray
- Will all the baby boomers retire leaving no one to work? Recent survey respondents who are still working, with a median age of 60, have average savings of around $112,000. One-quarter of those surveyed, and 30% of millennials, said they were planning to rely on “cryptocurrencies” to finance some of their retirement.—MarketWatch, July 2, 2022
- Is now the time to get in or get out? Berkshire Hathaway snapped up $51 billion in stocks in the first quarter of 2022, more than any other three-month period in its history. Warren Buffett said, “Occasionally, Berkshire gets a chance to do something, and it’s not because we’re smart. It’s because we are sane.”—Forbes, May 17, 2022
- Does government have money? California anticipates a budget surplus of $97.5 billion, a record for California or any other state. The surplus is bigger than the entire 2020 spending of every state except New York and Texas and was driven by taxes on capital gains, which reached their highest share of tax collections since 1999, before the dot-com crash.—Bloomberg, May 13, 2022
- Is it different this time? Since 1946, stock market declines of 10-20% have happened 29 times, 20%-40% nine times, and 40% or more three times. Two takeaways: First, most stock market pullbacks above 20% have been associated with recessions (there have been 12 since 1946). Second, for long-term investors, severe pullbacks of 20%-40% are rare or don’t last very long – only 14 months.—CNBC, January 25, 2022
- Are people hurting?
- Real income for the bottom 50% rose a stunning 11.7% in 2021.—Axios, May 3, 2022
- For the first time in three decades, US Household cash now exceeds household debt. While negative debt is a sign of comfort, there have been seven recessions between the early 1950s and early 1980s when it was also negative.—MSN April 20, 2022
- Are you looking at Medicare Advantage Plans to save money? A government watchdog report found private Medicare plans routinely rejected claims that should have been paid and denied services that reviewers found to be medically necessary. The report discovered private Medicare plans denied 18% of claims allowed under Medicare coverage rules and turned down 13% of authorizations for medical services that Medicare would have allowed.—USA Today, April 28, 2022
- Are corporations making money? Last year was the most profitable year for American corporations since 1950 with profits for US businesses surging by 35%.—Bloomberg, March 30, 2022
We all hear the dreaded word “recession”. A recession is generally defined as a decline in GDP (gross domestic production) for two successive quarters. When you look at item 9 above you see business in 2021 was the best it has ever been so a decline in GDP is certainly not unexpected. If you look at item 6 above there have been 12 recessions since 1946 and they last an average of 14 months. That doesn’t make a recession any less painful for anyone, it simply helps put things in perspective. The reason for every recession may be different but the result is not. We simply see a dip in output from the record levels. The great companies of the world go to work and figure out how to make money even when the governments of the world do things that don’t make sense.
As an investor with your retirement at stake it is easy to be concerned but what we are going through right now is something we planned for and expected as we set our investment policy for you. Research of US market indexes from 1926 to 2021 by Fama and French showed the average 5-year cumulative return after a market drop of 20% was above 70%. Our plan to help insure you don’t run out of money is based on 30-40 years of data rather than 30-40 months of news media hype telling you the world is coming to an end.
Your hard earned savings are too valuable for speculation!
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