mark leibman

You Can’t Always Get What You Want

© Can Stock Photo / lucidwaters

Wouldn’t it be great to have an easy job with a big salary? Or a hot sports car that was very low-priced? Or a luscious dessert with no calories?

The financial equivalent: an investment with good returns and stable value. Believe us when we say this is a popular concept.

Nearly five decades ago, the Rolling Stones advised that “You can’t always get what you want.” This is surely true of each of the situations described above. You just cannot get those desirable combinations.

But “if you try sometime, you just might find, you get what you need.” On the investment front, many people need their money to grow over time to meet long term goals. Stability of value along the way would be comforting to have. The true need is growth, and the key measure is how much money you wind up with in the distant future.

The real return on truly stable assets is usually low. Some people with a lot of assets relative to their needs can live with low returns. Most of our clients need their money working harder than that—so necessarily must forego stability along the way. (Or, adjust their goals to reflect more modest circumstances.)

We take pride in telling it like it is. Although many sellers promote the false notion that you CAN get good returns and enjoy stable values, we believe you can handle the truth. Markets go up and down—and that’s OK. Whether you were born with effective investment instincts or we had to train and coach you, many of you have shown the ability to live with volatility and invest effectively anyway.

Go ahead, ask us again about that mythical investment with good returns and stable value. We will help you understand that you can’t always get what you want, but you can get what you need. Call or email us if you wish to discuss your situation.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

122 Out of 7 Billion

© Can Stock Photo / thesupe87

Of the seven billion people on the planet, more than three billion have access to the internet—including 286 million in the United States1. Any of these millions and billions may read our work and our thoughts here at 228Main.com, no cost.

The funny thing is, we started out writing with a specific audience of 122 households in mind. These are the people who trust us to manage their portfolios and help them frame their financial issues. We began writing these articles to improve our ability to communicate with and serve 122 of you, our existing core clients.

It turns out that there is a pleasant side effect to this process. We find that making it easier to connect with you has improved our capacity. We used to think that the 122 households were about our limit for how many we could take on without compromising service. But as our operations grow more effective, we believe we have been able to deliver better and better service. We now believe we may have room to grow to 160 client households.

We don’t know who will wind up filling our excess capacity, where they live, or what their circumstances are. But we do know a few things about them already.

They will have effective attitudes about investing, or be willing to learn them. In other words, they will fit into our niche market of the mind. They will have a few hundred thousand dollars available for long-term investing, or more. They will understand that we put all of our efforts into trying to grow the buckets and communicating with clients, instead of spending some of our time organizing wine tastings or delivering smoked turkeys or chasing prospects around.

We have long thought we have all the business we need. We do not know what the future holds, though, and the regulatory environment is constantly changing. We do not always believe in the conventional textbook wisdom. Regulations based on the textbook approach may potentially make business more difficult for those of us who would rather try something different. The increased scale afforded by our newfound capacity might be helpful in handling regulatory compliance down the road.

Our work for our core clients is extremely gratifying. If you are one, thank you for the opportunity to serve you. If you may be one of the thirty-eight future clients, please soak up all you can here at http://www.228Main.com. Feel free to get in touch with us via phone or e-mail. And for the rest of the millions and billions, we’re glad you are here, too—you are welcome to eavesdrop while we talk to our clients.

1Data from http://www.internetlivestats.com


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

We Are All Connected

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Much has been written about the polarization of American society. While noisy disagreement and entirely human behavior has always been part of our fabric, the whole “us” versus “them” theme seems to be a bigger part of our social discourse. It seeps into our politics and economics too, it seems.

Yet everything is connected. What many miss are the interests we share.

If you hope to be collecting Social Security benefits many years into the future, you might have an interest in making sure that each child today grows up to be a healthy and educated and productive citizen. Why? They will pay more Social Security taxes if they do—and better work towards your financial future. You are connected to the next generation.

Some seem to assume that big companies are always out to get them, and favor any new regulation or restraint that might be proposed to limit their activity. Yet if we needed to fly across the country, would we dare do so in an artisanal airplane, built with locally-sourced materials by a local craft person? You are connected to big companies.

Likewise, the largest oil companies in the world routinely spend more than 96% of their revenues helping people get back and forth to work, powering their homes, and providing materials used in everyday life. If you use gasoline or electricity or plastic, you are connected to them.

“Wall Street”—to some, the only villains in the last financial crisis—presents another example. Communities building schools or sewers, employers building facilities or buying machinery, teachers hoping to retire on their pensions, people saving for retirement or living on their capital in retirement: all these depend on services from the securities industry. We are all connected.

Is this an argument for turning a blind eye to bad behavior or hurtful policies or injustice or anything else that cries out for change? No way. We each should challenge the things that deserve to be challenged, and support the things that deserve to be supported. We won’t all agree on which is which.

But perhaps our differences would more often get us to a better place if we each kept in mind that everything—and everyone—is connected.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

When Dark Clouds Fill the Sky

© Can Stock Photo / pzAxe

Warren Buffett’s latest shareholder letter contained a remarkable paragraph:

“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”

Long-time clients saw how this worked in the recovery from the 2009 crisis low point, and the post-9/11 lows in 2002. You are a remarkable group: when others panicked and sold out, many of you stayed the course. There is no guarantee, of course, that history will repeat, or that past performance indicates future outcomes.

Like great chess players, we need to be thinking many moves ahead. In our opinion, the economy in the US and around the globe is pretty good. We do not buy the whole stock market, we pick our spots. And we are excited about those spots.

But we do need to be steeled to both occasional market corrections of up to 10%, and the deeper declines that occur from time to time. They cannot be reliably predicted. What is in our control, however, is how we react. Do we sell out at low points, or get in position for a possible recovery? We are taking steps that may mitigate a general market decline—no guarantees, of course.

We are a little more prone to keep a little cash in reserve, to diversify into lower-priced markets, to continue to prune holdings that may be extended and add names we believe to be bargains. Most of our holdings are not sitting at all-time highs, although overall market averages are–the S&P 500 for example reached a new high as recently as March 1st1. You can read about our current themes here.

In the very best case, markets and our account values fluctuate. This is the tradeoff we accept in order to seek the returns we need to pursue our goals.

We have a great partnership with you, our amazing group of clients. You understand living with volatility can lead to long term rewards. We think we know what to do, whether the skies are blue or the dark clouds have gathered. If you have questions or comments, please write or call.

1Market data from Standard & Poor’s


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

A Penny for Your Stocks

© Can Stock Photo / sqback

Occasionally, you will hear the term “penny stocks” coming up in investment advice. Often this may be in the form of a slick advertisement telling you how much money you’re missing out on by not investing in penny stocks. Unfortunately, in many cases these solicitations are trying to take advantage of you.

What are penny stocks, and why are they so dangerous? So-called penny stocks are stocks that are not listed on any major stock exchange, which typically trade for very low prices per share. In general a company’s share price does not necessarily tell you much about the quality of a company, since different companies float different numbers of shares. But small, unlisted companies generally are not able to circulate useful numbers of shares at anything above a very low price, and typically trade at a few dollars per share or less.

Because these companies float relatively small numbers of shares, they are subject to extreme volatility and their prices may experience very rapid swings up or down. This may not sound so bad on paper (at least the “up” part), but unlisted stocks also suffer serious liquidity risks. Unlike exchange-listed stocks, you can’t push a button and buy or sell penny stocks with an accurate price quote at any given time: over-the-counter stock transactions depend on being able to track down another buyer or seller and negotiate with them. You might buy a stock at $0.20 and watch it go up to $0.30, only to find that nobody actually wants to buy it from you for $0.30. By the time you manage to unload your shares, you may be back down to $0.20 or even lower.

These risks should be enough to warn away most reasonable investors. But on top of that, the structural problems that plague penny stocks also make them an attractive hunting ground for predatory scammers. The classic “pump and dump” scam takes advantage of low trade volumes to easily run up the price with relatively modest stock purchases. The rising price can then be used to encourage victims to buy in, driving the price even higher. At this point the scammer pulls the plug and sells their shares at a profit, crashing the price and leaving their victims holding devalued shares in a worthless company. Any time you hear someone discussing penny stocks, there is a good chance they are either a scammer or a victim who has already been pulled in.

Many such scams have been showing up lately because the scammers have a powerful new bait in the form of cannabis company stocks. The growing trend of state-by-state marijuana legalization has created lucrative new markets that many investors want to get in on, but the continuing threat of legal action at a federal level keeps legitimate finance companies on the sidelines. As a response a number of fly-by-night companies have formed claiming to offer vehicles for individual investors to buy into the growing marijuana market. Be warned: not only could these companies be shut down overnight by federal agencies, many of them are bogus to begin with.

Penny stocks may seem like an enticing way to get in on the ground floor of the next big thing. But companies with the next big thing generally don’t go directly to market—if someone has a great business idea, you can bet it will be snapped up by private venture capitalists. Penny stocks are a minefield best avoided altogether. As always, remember: if something sounds too good to be true, it probably is.

If you hear about a “fabulous” investment opportunity and need help figuring out whether it is legitimate, please give us a call or email us.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Fear and Greed

© Can Stock Photo / Andreus

Two of the primary emotions affecting the stock market, it is said, are fear and greed.

Facts and figures are prominent in our work of assessing and ranking various investment opportunities. But in the day to day action of any market, buyers and sellers and their motivations have an oversize impact.

In our view, fear has dominated most of the last eight years in the US stock market. Many investors sold out after the double drubbings beginning in 2000 and in 2007. Money flows from retail investors, reflecting withdrawals from the market in most recent years, seem to confirm it.

Anecdotally, we also noticed burgeoning interest in strategies that hoped to avoid exposure to the stock market yet still make money. Commodities, derivatives, factor investing, bonds at low interest rates and other fads drew in a lot of money. This, we believe, reflected fear of the stock market.

For much of the market rise since 2009, it was said to be ‘the most hated rally in history’ because so many people missed out.

Knowing Warren Buffett’s famous dictum, “Be greedy when others are fearful, and fearful when others are greedy,” we stayed the course through the downturn. None of us hated this rally, did we?

Now the market sits at all-time highs. This probably makes sense when earnings are high and rising, and interest rates remain fairly low. But we are on the lookout for signs that greed has become the dominant force in the market. When others become greedy, perhaps we need to become fearful.

We are also doing other things, as well. You may have noticed winning positions getting trimmed back, and potential new bargains (we hope!) being added to portfolios. Owning bargains is no guarantee against loss, but we believe it helps. We are also nibbling at other markets in other lands, ones that have lagged and may be at low levels.

Our new portfolio design, accommodating layers of cash and more moderate investments as well as our traditional research-driven core layer, is another way to attempt to mitigate future downside.

The markets go up and down. We cannot build wealth over the long haul without facing that, and living with it. If you would like to talk about your portfolio or situation in detail, please call or email us.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

This Will Change the World

© Can Stock Photo / martin33

The human tendency is to believe that present circumstances will continue. The gap between expectations and unfolding reality is where profit potential lives. Therefore understanding unanticipated change is one of the key tasks in our quest for investment gains.

Two related trends are about to unleash massive change and opportunity. If we can puzzle out some of the ramifications, it may serve us very well.

Solar power, being a technology, is declining in cost about ten percent per year. In some applications, it is already competitive with more conventional sources. As the cost continues to decline, we may surmise that solar power will represent an increasing fraction of world energy production—and the overall cost of electricity may begin to fall.

The second trend is the declining cost of energy storage. Bloomberg recently reported on the ribbon-cutting of a power-plant size array of batteries, in California, for meeting peaks in demand. The cost of the facility is twice that of a conventional natural gas peaking plant.

Although paying double does not seem to be an economic threat to the old way of doing things, Bloomberg reports that the cost of storage on that scale has dropped 90% in a decade. Again, energy storage is a technology, and the cost of technology tends to drop over time. We know how this works, right?

Connect the dots: we soon may have ever-cheaper energy available when we need it, courtesy of what we might call the Next Energy Revolution.

Economic history is largely a story of new sources of energy. Water power and steam power launched the modern era more than two centuries ago, with the Industrial Revolution. Petroleum in all its forms was central to the astonishing change and growth in the 20th century. What changes will the next revolution bring?

• Given lower costs for energy, will households consume more of it, or spend more money on other things?

• Will less developed areas of the world modernize more rapidly, powered by the sun?

• Does this hasten the rise of electric vehicles?

• Which companies or industries will be helped by cheaper energy? Which will suffer?

• How much wealthier will the world be, as a consequence?

Change brings opportunities and threats. We have begun to identify winners and losers in the next energy revolution. Much more study and thought will be required. Please call or email us if you would like to discuss how this affects your situation.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Spring 2017 Market Themes

© Can Stock Photo / photoslb

We look for promising investments by studying opportunities in detail, reading annual reports, SEC filings, analyst commentary, and doing our own arithmetic. Potential gains live in the gap between the unfolding reality and consensus expectations. The outcome of this study and thought is a list of investments we would like to own.

Although we look at individual companies, we often find themes in our list. This makes sense when you consider that undervalued companies are often found in unpopular industries.

Last fall we wrote about three of our market themes. Biotechnology companies, the evolution of the automobile, and natural resources continue to figure into our thinking. Other themes have emerged.

Consolidation has fundamentally changed the dynamics of the airline industry. It used to be that fierce waves of competition caused price cutting, which led to poor financial results and even bankruptcies. But there are not twenty players, or even ten any more. Consolidation and liquidation has reduced the number of major competitors to four.

The four biggies compete with each other, but more gently. Each knows that lower growth ambitions and stable pricing may lead to greater profits than higher growth ambitions and lower prices. This idea of a pricing oligopoly seems to explain the behavior of the airlines, which are booking record profits. We believe the market has not awoken to the new dynamics, and undervalues the stocks. We may be wrong.

The European equity markets have had one problem after another for more than a decade. An index of major blue chip stocks, the Eurostoxx 50, is lower than it was ten years ago. Meanwhile in the US, major averages have doubled. Dividend yields and prices are more favorable “over there.” So we have begun to include European equity exposure in portfolios.

The Buy List of thirty-some holdings reflects these themes and other opportunities we believe to be attractive. There are no guarantees on any of them. We can tell you we are excited about the prospects. If you would like to discuss your holdings or situation in detail, please write or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Stock investing involves risk including loss of principal.

Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Case Study: The Looming Retirement of Mr. & Mrs. C

© Can Stock Photo / lucidwaters

We recently were consulted by folks who are just a few years from retirement. Mr. and Mrs. C had a chance to make a major purchase that they had long considered and would really enjoy. Some people want a camper or a boat, others a cabin…you get the picture. They wanted our help to figure out if it would fit with the rest of their plans and planning.

The process we used to help them is the same framework we use to help people understand how retirement will work for them, financially speaking. Perhaps it will be of interest to you.

There are four kinds of numbers that figure in.

  1. Monthly outgo—how much will it take to run the household in retirement, to live as you plan to live?
  2. Monthly income—what are the pieces of recurring monthly income? Monthly pension benefits, Social Security, and rental income are in this category.
  3. Planned lump sum purchases or obligations to pay. This was the thing that stumped Mr. & Mrs. C. They had a chance to lay out some money that could improve their lives a lot, and needed to know whether it would work out.
  4. Lump sum resources available. Long term savings, 401(k) plans, IRA’s, investments, and money from planned sales of assets are the main categories here.

Fortunately, Mr. & Mrs. C have expected retirement income sources that should sustain their lifestyle in retirement. Once that was determined, we could move on to sorting out the best way to handle the purchase they planned.

There are tax considerations to withdrawing retirement plan dollars, cash flow considerations from taking on debt, and opportunity costs to cashing in investments. We framed the costs and benefits of each alternative so they could figure out what they wanted to do. If you would like to talk about your situation, please call or email us to set a time for discussion.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

News from the Trade Desk

© Can Stock Photo / mflippo

 As a hands-on research and portfolio management shop, we develop capabilities that many advisors do not need or have. If we were just finding money and sending it off to a third party to manage, life would be simple (and boring).

From time to time our research uncovers potential opportunities in discounted corporate bonds. The market for these high yield bonds is challenging. At times the market is “thin,” which means there is a lack of buyers and sellers. That makes it difficult to complete the purchases we desire.

Fortunately, LPL Financial has experienced and capable traders on the bond desk. They help us execute multimillion dollar bulk transactions at the best available prices. Buying for many accounts at one time in a bulk deal is a more efficient way to do it.

The opportunity in bonds is somewhat rare. We have only purchased eight different issuing companies in sixteen years. But there is another kind of trading that is relatively constant—the purchase and sale of stock.

The bulk bond purchases led us to a breakthrough in our stock trading protocol. One day we learned at 1 P.M. that a big bond purchase had been completed. We needed to go through eighty accounts and make sales of stock to raise money to pay for the newly purchased bonds. We had two hours before the market closed.

We had devised a protocol (a set of rules) to guide us. The four holdings we liked the least were ranked in order of priority to sell. In each account, we sold in that order until the bonds were paid for. Greg Leibman worked from one end of the list, Mark Leibman worked from the other, and they met in the middle before the market closed.

More recently we adapted the protocol concept to make stock trades. We came to a negative conclusion about an industry we previously invested in—at the same time we uncovered a new opportunity in another industry. We devised a protocol to sell one and buy the other, and completed more than five hundred stock trades in a single day.

The trade desk is where two of our key activities come together for you: research and portfolio management. We are pleased at the continued development of our research. The time we save with effective operations goes back into communicating with you—so call or email if you would like perspective on any money question.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

Stock investing involves risk including loss of principal.