The novel coronavirus is two years on, so what’s the deal with “the return to normal”? Some historical context and a few reminders.
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Bumps on the Road to Wealth: How to Invest for Times of Higher Inflation
When inflation dominates the headlines, it can feel like prices are headed up and up and up forever! But it’s never really a straight line, is it? Putting inflation in perspective.
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Feel the Churn
Back in the snowbird chapter of my life, we learned that stormy weather—rough seas—washed a wealth of interesting shells up on the beach. Looking for shells was always more fruitful when the weather had been rough.
The world situation and our markets have been nothing if not stormy this year! War has few parallels as a human tragedy; the economic ramifications are widespread.
Some of our holdings have risen in price because of the disruptions: raw materials and miners and energy, for example. Others have gone the other way.
But overall, we’re pleased with how our holdings have behaved.
Just as rough weather washes shells up on the beach, we’ve found new opportunities in the rough markets. The other thing that turmoil brings us is the chance to rebalance—take some money off the top of things that have gone up, add to the bargains that emerge among our holdings.
While some are paralyzed by the commotion, we’re finding that our principles are serving us well:
- We look for the best bargains
- We own the orchard for the fruit crop
- We avoid stampedes in the market
Clients, want to talk more about what this means for you? Reach out, at any time.
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Feel the Churn – 228Main.com Presents: The Best of Leibman Financial Services
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Keeping a Singular Focus in a Global Whirlwind
Clients, some of you have reached out to talk about the latest global developments and their implications for our work together.
We’re watching the news carefully, like everyone else. The hopeful view, if there is one, is in the vibrant and quick response by NATO, the EU, as well as what might be called a Western alliance and our allies around the world. These organizations are responding to a situation which could clearly continue to escalate. And those American politicians and media platforms most influenced by Russia do not seem to have much sway in shaping public opinion overall, thank goodness.
Ukraine was said by some to be a threat to Russia, for talking up increased ties to NATO and the EU: this is a pretense to reframe aggression as prevention. Putin is like the farmer insisting he doesn’t want to buy all the land—just what adjoins his own. If Ukraine were assimilated by Russia, then would Poland pose a similar threat next? And then maybe Germany and France in turn?
Russia’s economy is small, as a share of global trade. The problem is in the raw materials and energy on which the rest of the world has come to rely. Ukraine likewise is a significant exporter of crops and natural resources. The disruption to these markets will probably exacerbate inflation; a recession may well result. (Remember, though, that one is always on the way.) If energy costs, for instance, continue to rise—and they could—it is hard to see how the sales of all other goods and services avoid shrinking.
It is also important to remember that, technically, a recession is a decrease of any size in GDP for two quarters running. So if we had a quarter where we were at 99% of the record quarter before, and then did 1% less again the next quarter, that’s a recession. So we should never assume “what the next recession will mean” without some context and perspective.
The crosscurrents in the markets have been vicious. We’ve made portfolio changes cautiously, of course. We always want to make sure we can meet your needs for cash flow while keeping your long-term goals in the picture.
The key thing is, we can meet your need for cash flow without selling anything at a bad time. We can wait out a downturn whenever it comes, and we’ll seek to make the best of it by swapping into holdings likely to recover the fastest.
No guarantees. But clients, you’re watching things; we’re watching things. Call or email me with questions or concerns.
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Keeping a Singular Focus in a Global Whirlwind – 228Main.com Presents: The Best of Leibman Financial Services
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Solid Ground and Serious Conflict
You’ve heard us talk before about not getting caught up in panic. It goes to one of our core principles, the idea of avoiding stampedes.
It gets a little complicated when we’re talking about world events that are so immediate. Conflict can be deadly and do serious damage, and the effects reach us all—whether we realize it or not.
We’re in a moment where the business headlines and market volatility are more stark than usual. It can feel disturbing, like things are less certain than ever.
But those of us just beyond the emergencies have an opportunity to reflect. What an important time it is to make sure that our goals, our values, and our resources are aligned. Are we focusing our efforts within our sphere of control? Are we investing in those causes we believe will be of service in this world?
Perhaps it’s how we keep panic from our hearts: find stability in being the most you that you can be. The dust will never settle if we insist on all the pacing, jumping up and down, or spinning in circles.
Invest wisely, spend well. It goes for our money and our attention. The leap to panic is a shorter—but way more costly—trip.
When you need to talk through anything troubling, please reach out.
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Solid Ground and Serious Conflict – 228Main.com Presents: The Best of Leibman Financial Services
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On Having a Seasonal Bout of Whiplash
Trying to make sense of stock moves during earnings season might make you sympathize with Elmer Fudd.
Maybe you’ve seen the classic cartoon that goes like this: Bugs Bunny and Daffy Duck, chased by the hunter Emler Fudd, start arguing over which animal Elmer is supposed to be hunting.
“Duck season!” Bugs yells.
“Rabbit season!” Daffy insists. They continue this way until Bugs seamlessly switches his response to “Rabbit season!” At this point Daffy Duck counters with the only logical response… “Duck season!”
Elmer promptly shoots his foolish prey.
And now everyone’s shouting, “Earnings season!” Each company that issues publicly-traded stock must report about its financial wellbeing quarterly. In theory, the effects of this process should be simple for investors: a company that posts a good performance should see stock gains, and a company that posts a poor performance should see stock losses. Right?
But many folks view earnings reports through the lens of their expectations. A company that does well might still seem like a disappointment to those who expected even more from it. And when a company beats consensus expectations, some investors may second-guess the showing and bet on an even bigger blowout.
Stock prices can swing wildly up and down in response to earnings reports, with less logic than the duck season, rabbit season debate. If you listen to market commentary you may hear many different (even contradictory) explanations for why a company dropped on seemingly good earnings or rose on seemingly bad earnings.
Zoom out: ten years from now, do you think you will remember what one of your stock holdings did in response to one earnings report those many years ago?
The big investment news stories worth remembering will be about bigger issues than a quarterly earnings report.
We already know stock investing involves volatility—and some of it comes around like clockwork every three months. Clients, if you are ever wondering about sudden market moves, give us a call before anybody goes daffy.
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On Having a Seasonal Bout of Whiplash – 228Main.com Presents: The Best of Leibman Financial Services
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It’s Not All Bad News? A Closer Look at Some Newsworthy Numbers
The number of numbers in the news can be… overwhelming, at times. Records of all kinds are broken every day, but here’s the good news: it’s not all bad news.
Trends ebb and flow, and we’re noticing some promising signs. Let’s break down a few.
First, remember that life is a mixed bag. The past two years have brought considerable heartbreak and stress, but any change also tends to make way for new growth.
Anecdotally, we’ve been heartened by the number of stories we’ve heard from you about businesses using their downtime well. Closures gave many folks the opportunity to refurbish or expand their operations—your coffee shop opening a new location, your favorite storefront getting some much-needed repairs. And so many grocery stores and retailers continue to develop their services, like the infrastructure for easier pickups and deliveries.
And then some numbers take a little more consideration to appreciate. For example, the most recently released data suggest that it’s quitting time for many Americans. In the final months of 2021, more Americans than ever were leaving jobs—by the millions—DealBook reports. This can be a great sign, as quits tend to happen when workers feel the outlook is good, that something better must be next. A quit trend like this sometimes accompanies a period of fast economic growth. No guarantees, but at least the sentiment is that many are looking forward to a better future.
Another bright spot is the surge in business applications: Americans are starting new businesses at the fastest pace in years. The New York Times explains that the number of business applications rose 25% from 2020 to 2021. That’s typically a sign of new energy being generated in the economy. When the rate of business formation is slow, it’s a sign that jobs are going stale, business relationships can get strained and rigid. Upheaval, however, has many working people rethinking their opportunities.
All this is to say that things are moving, things are changing. It’s never all good news; it’s never all bad news. We’ll be here. We’ll keep at it.
And we’re glad you’re with us.
Clients, got any numbers worth discussing? Call or write, anytime.
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It's Not All Bad News? A Closer Look at Newsworthy Numbers – 228Main.com Presents: The Best of Leibman Financial Services
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Half-Century Headlines: The 50-Year Financial Times of You!
Clients, we’ve discussed before how the pain of a loss is felt two times more greatly than the happiness from a corresponding gain. While this may be how our human brains are designed to experience things, we do have a chance to intervene: we get to define what a loss is. We also have the ability to recognize how time affects our experiences of pain and happiness.
Often, our losses occur suddenly: a quick drop in the market, the sudden failure of an engine, the physical (or emotional) loss of a friend.
Gains are usually slow-building: years and decades spent with a loved one, miles upon miles with your favorite car, the slow climb to retirement wealth. It’s hard to appreciate the full happiness of the good times in the moment. The quick strike of the sad times, however, tends to linger.
Journalists Stacey Vanek Smith and Cardiff Garcia put it this way: “This combination of sudden, bad things and slow, good things can mess up the way we see the world. We notice the sudden but miss the gradual.”
So the daily news cycle is successful in part because of that pain. Consider for a minute a world where there isn’t daily news. In this world, you get one newspaper every December 31, recapping all of the important things that happened that year. What would make the front page?
Now extend the time horizon. What makes the front page of a once-in-a-decade newspaper?
We encourage you to take this exercise and apply it to your financial life. Call it The 50-Year Financial Times of You. What’s above the fold? Would any of the four major financial crashes of the past 50 years get the top spot? How about that $4 that you spent on a coffee last Tuesday?
Clients, we each have the byline in our own 50-Year Financial Times of You. We’re grateful to be among your readers, and humbled when we’re included in the process—even if it’s in the funny pages.
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Half-Century Headlines: The 50-Year Financial Times of You – 228Main.com Presents: The Best of Leibman Financial Services
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In the News: Supply Chains and Yoyos
There has been a lot of talk in the news lately about problems with the supply chain. Fuel shortages, power shortages, microchip shortages, transportation shortages—these days, it seems like there is just not enough to go around.
Listening to dire predictions about how much worse things will get, it is easy to get nervous for the future.
We have been here before, though. Remember the early days of the pandemic? Bare grocery shelves and toilet paper panics. Or the early days of the recovery? Home values shooting up and hardware stores adjusting lumber prices multiple times per day.
For one item after another, we have watched supplies dry up to a trickle—and then come flooding back. Once the initial supply crunch is resolved, quite often other, smaller shortages eventually come back. And eventually go away.
The global pandemic has done a lot to expose the weakness of our supply chains. Sometimes, it seems each one is less like a chain and more like a yoyo spinning up and down, up and down. Maybe the disruptions get a little slower each time, and eventually they will come to rest.
But none of it is new. Commodities have always been cyclical. We hear about chip shortages and gas shortages, but these things happen with some regularity. The disruption of the past year and a half has just sped things up. In the past 30 years, oil has dipped below $40 a barrel at least five times and has peaked above $80 a barrel at least five times.
It is difficult to get too hot and bothered about oil being $80 a barrel when within the last decade it spent multiple years well above $100 a barrel.
What eventually cures our shortages is always the same thing: as long as it is possible to make a buck doing something worth doing, there will be people stepping up to fill that need. When gas supplies are low, oil companies drill new wells. When chip supplies are low, chipmakers build new fabrication plants. When transportation capacity is low, logistics companies buy new trucks. There is a lot of money to be made selling gas and microchips and shipping when things are tight.
New supply does not come online overnight. It can take a long time for supplies to ramp up to meet demand. And by the time they do, the yoyo has so much momentum that it usually overshoots the mark and keeps going the other way. A drought turns into a flood, slowly, but still faster than most people would expect. Supplies dry up again as prices come down and production becomes less profitable. High prices plant the seeds for low prices, which plant the seeds of high prices again.
We have been around this story before—and around, and around, and around again. Clients, if you need to go around it with us, just give us a call.
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In the News: Supply Chains and Yoyos – 228Main.com Presents: The Best of Leibman Financial Services
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