July 1, 2022

The first six months of 2022 saw the S&P 500 decline 23.6% from its all-time high at 4,796.56 on January 3 to a closing low (so far) of 3,666.77 on June 16.  The S&P “officially” hit bear market territory around June 13, when it ended the day 22% below that record high on January 3.[i]  The Index finished its worst first half since 1970 at 3,785.38.

More noteworthy even than the extent of the decline was its gathering violence: in mid-June, when we stumbled into bear territory, the market ran off a streak of five out of seven trading days on which 90% of S&P 500 stocks closed lower.  That’s a bad run, to say the least.

Now, let’s stop right there.  Regardless of any other points, I’ll make in this newsletter, the most urgent should already be clear.  Simply put, the best way to destroy any chance for lifetime investment success has historically been to sell one’s quality portfolios into a bear market.  But to sell when investor sentiment is sufficiently negative to drive 90% of S&P companies lower on five out of seven trading days—that is, to sell when everyone else is selling—must strike us as the height of long-term folly. Read More

May 1, 2022

Welcome to May—we bid a not-so-fond farewell to the first third of 2022.  In my mind, everything before summer is a prelude.  And while we have another 51 days of spring, the weather turns remarkably better in May.  In the markets, not so much.  From 1950 to 2021, May is the fifth-worst month for returns, averaging just 0.17% gain, with 43 up years and 29 down.  (February, June, August, and September are worse, with September being historically the worst month of the year with an average loss of 0.69%[i])

Perhaps you have noticed, we rebalance our portfolios in February, May, August, and November.  Rebalancing means we take any cash built up from dividends, contributions, or distributions and invest that cash into positions that have underperformed the rest of the portfolio.  We want to bring the laggards back into the established allocation percentages. Read More

April 1, 2022

What a long, strange trip it’s been[i].  Two years ago, we were learning more about a Corona Virus—and it had nothing to do with Corona Beer.  My boating friends and I celebrated St. Paddy’s day 2020 in some very crowded bars in downtown Annapolis—and two weeks later, we sat in a circle on a Kent Island dock separated by at least 10 feet so that we would miss the “rona.”

We’ve gone through two years of the ebbs and floes of Covid, new variants, new waves, new restrictions, and new regulations.  Then the 2020 Presidential Election—turned into a bitterly partisan and contentious event that still separates many families and friends.  COVID, and the politics of the election, sparked a 40-year high inflation spike—with, I think, at least another 12 months of that on the horizon.  And of course, this last month, we see the brutal Russian/Ukrainian war—which will only fan the inflation fire.  And as icing on the cake, add multiple violent protests throughout our country, and we have had, to put it mildly, a very eventful start to the 2020 decade. Read More

Corrections are Buying Opportunities

Since 1980, the S&P 500 has registered at least one significant drop in value every year.  During those four decades, the average drop per year is 14.3%.  Let me highlight that: every year since 1980, the S&P 500 has had an intra-year decrease in value on average of 14.3%.  This drop is frequently referred to as a Correction[i].  Corrections are no fun.  They keep people up at night worrying about their investments.  What in the heck is going on this time? Is this time different?  My Certificates of Deposits do not correct.  My savings accounts do not correct.  My mortgage does not correct.  Why is it that my portfolio has corrections? Read More

Bubble, bubble, bubble!  Tune in the news and particularly the financial news, and this is all we hear—bubble-talk!  The teaser (just before a quick word from their sponsor) is something like this, “Some financial experts think the market is approaching bubble territory.”  Then, after 20 minutes of commercials, the expert, who is usually the same expert who has been predicting doom-and-gloom since the 1950s, says they are “concerned” and they think, no urge, investors to “use caution” or “tread lightly.”  On February 25, one station even trotted out perma-bear Nouriel Roubini.  A sure sign of desperation for bad news is Mr. Roubini. Read More

Just 48 days till Spring, and it can’t arrive a day too early.  And while I look forward to Spring and some warmer weather, there’s always another day shortly after March 20 that dampens my mood—April 15, tax day!  These next 74 days get a little busy around here as we try to get out the 1099’s and get in the final IRA payments.  We actually like to be active, so that part is not too bad.  It is the call from our CPA that I dread.  Don’t get me wrong; I usually have a good idea whether it is going to be good or bad—it’s almost always bad news.  But it is the degree of badness that causes my heartburn.  Here are a few points about this time of year. Read More

Well, I have certainly been a slacker when it comes to this newsletter.  This summer was busy both in and out of the office, and I am definitely using that as my excuse.  Plus, there has not been much financial stuff since the May 28 newsletter to cover.  As a year, 2020 has been a bad horror movie, but there was nothing but good news in the markets since March 23.  And let’s face it, there are a limited number of ways and a finite number of times that we can say “hold on” or “the market is fine” before people start tuning you out.   Read More