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On the Horizon

Thoughts, musings, and a little bit of entertainment from the world of personal finance.

Fear and Loathing

3/18/2020

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There is so much fear flying around right now.  And we loathe it. We have written about this before, but using fear to compel action is just the worst.  And what we have right now is large-scale policy responses born out of fear. There was a meme that was shared with us the other day that we feel is very appropriate: ​
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Kenny Rogers

3/4/2020

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As I’m writing this (first week in March), the market is in the middle of some obscene volatility thanks to the coronavirus that has started taking over the world like the second coming of Genghis Khan.  The crystal ball is decidedly murky on this one, so no telling what things will be like when you’re reading this in April, but here’s hoping the zombie apocalypse chapter story you’ve read in these very pages hasn’t been a massive case of cosmic foreshadowing!

Something I’ve heard a lot in the last week from clients is: “should we be selling stocks?”  Perhaps you’ve had the same thought yourself. Fortunately, there’s a straightforward answer to that question: yes, you should sell.

But, but....what about long-term investing and buying the dip and “the market will recover” and everything else people say?  Irrelevant! Let me explain:  ​

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Is This Fine?

2/28/2020

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We had originally intended to keep unpacking December’s This One’s For Us newsletter and get into the superstitions and black magic of technical analysis...but things have taken a rather interesting turn in the last week, so let’s address the elephant - er, the bioengineered microscopic pathogen - that’s (probably) in the room.  It’s not yet April, so we’ll try really hard to stick to facts...or at least what has been publicly admitted to.
Here’s what a pandemic looks like:

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The Tao of Leprechauns

2/10/2020

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In honor of it being March, let’s talk about leprechauns.

First - did you know that Leprechaun (the movie) was Jennifer Anniston’s first film role?  Starring film role, that is. Apparently she had a bit part as one of the McDonald’s dancers in Mac and Me in the late 80’s.  Which, from what I can gather, is kind of like if E.T. was produced, directed, and starred Ronald McDonald.  But I digress. Back to leprechauns!

Second - did you know that prior to the 20th century, leprechauns were depicted as wearing red, not green?  True story. Yeats actually claimed both, that it was the solitary leprechauns who wore red and the “trooping” ones that wore green.  So go ahead and wear your red proudly at the St. Paddy’s Day parade this year, you solitary leprechaun, you.

Third - we all know about the leprechaun’s pot o’ gold, ostensibly at the end of the rainbow.  But do you know what leprechauns do
for a living?  Yes, they have an occupation.  They are - wait for it - cobblers.  Which, unless things are drastically different in the fairy realm, is not the most lucrative of professions.  So how does a race of (usually) unseen cobblers become known throughout the world for hoards of gold coins? The only possible explanation is that…


Fourth - leprechauns are masterful savers.  While I can’t entirely condone the whole “bury your gold in the ground” thing, I think there’s a lesson for all us in the uniform way that leprechauns across the board have managed to save up massive amounts of money.


Way back in the first ever Rogue Waves
, I gave out the two secrets to investment success.  Remember what they were? Time and compound interest.  Leprechauns are perfectly illustrative of the time component.  Even if you get zero growth on your money, a little bit of savings will turn into an entire pot of gold with enough time.


Now, since you as I, as mere humans, don’t have the savings time horizon of a leprechaun, we’ll need to take advantage of investing secret number two: compound interest.  How do we do that? There’s an easy bit and a hard bit. The easy bit is to put your money in things that actively pay you interest or dividends - bonds, real estate funds, dividend-paying stocks.  Happy to talk through your options with you.


The hard bit is putting your money in things that actively pay you interest or dividends AND
match your risk tolerance.  If you see your account value going down and you hit the eject (sell) button, then both your compound interest AND your time stop working for you, and you’re 0 for 2 on the investing secrets to success.  At which point you may very well think it a good idea to start chasing rainbows looking for pots of gold.


Until Discovery Channel starts airing a “Rainbow Chasers” reality TV show, that’s probably not a brilliant way to make money.  Stick to the budgeting/saving/compound interest over time method, and you’ll be alright. And if you need a little help getting on that path, drop us a line -
russ@atiwealthpartners.com.


Sláinte!

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Going Viral

1/24/2020

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Three weeks into 2020 and things continue apace.  The world has been to the brink of war and back (remember that?), the impeachment trial is finally underway, and now there’s fears of a new global pandemic.  Meanwhile, markets are up over 2% on the month, which annualizes to another 30% year. Which is absurd, so don’t get your hopes up.

As for the “why”, well it’s certainly not due to fundamentals.  Global trade (as measured by the Baltic Dry Index) is at a 9-month low and falling, and the IMF has cut their global growth forecast to 2.9%, which is the lowest since the financial crisis...and those forecasts tend to be optimistic.  But thankfully the Fed shows no signs of slowing their repo operations, so the market has the green light to keep going higher. The Fed even - get this - floated the idea of lending directly to hedge funds during the next liquidity crisis.
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Portfolio Renourishment

1/10/2020

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It’s beach renourishment time again!  The dredges and pipes and bulldozers are all hard at work this offseason fighting with mother nature to try and keep those free-spirited sand grains in one place.  Or at least temporarily reset them, I suppose. The more cynical among us might argue that it’s a bit of a losing battle...but man does that new beach look good.

From time to time, it’s a good idea to give your portfolio a little renourishment as well.  We’re not talking about selling everything and starting over - after all, you don’t scrape the beach away down to bedrock and then rebuild it.  You just need to move some things around a little bit.

There are all kinds of pithy sayings out there about how to renourish your portfolio: “cut your losers and let your winners run”, “if you liked it before, you should like it even more now that it’s cheaper”, etc.  Gag.  All you really need to do is a simple rebalance.
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This One's For Us

12/27/2019

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Happy Holidays, dear readers!  Believe it or not, the vast majority of the newsletters we write are not, in fact, for our own entertainment.  A couple of them definitely are - notably the April Tin Foil Hat series and the October Halloween series - but apart from those semiannual gems, most of the time we are trying to educate, inform, amuse, explain, entertain, and/or deobfuscate.

This one, however, will likely turn out to be none of that.  If you’ve been paying attention to those trade confirmations that hit your inbox at the stroke of midnight, you’ll have noticed that we’ve been busy headed into year-end.  The following is a glimpse into what we’re thinking, and why. Fair warning, it may feel a bit like climbing up an Escher staircase. But like we said, this one’s for us.


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Magic 8-ball Forecasting

12/10/2019

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Hindsight is 20/20, as they say.  Unfortunately, since my benevolent overlords editors here at Beachcomber have these things called “deadlines”, there is absolutely zero hindsight available for this first Rogue Waves of 2020, as it is, in fact, still 2019 as I write this.  Which must mean it’s Magic 8-Ball time!

What’s that?  You think we meant to say “crystal ball”?  Ah, yes, that is to be expected given all the punny ways you can put “vision” and “2020” together for economic forecasting.  But from time to time we like to refrain from beating a dead horse. And also, economic forecasts are useless.


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Do It Yourself

11/26/2019

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‘Tis the season for reflection and giving thanks, so here are three things in the investment world we are thankful for:


  • Thankful that we weren’t onstage for that Tesla electric truck/ATV reveal.  Tesla glass? More like Elijah Price from Glass.
  • Thankful that we’re not part of Softbank and their “Vision” Fund.  In case you missed it, Softbank’s Vision Fund invested $10.65B into WeWork at the height of its hype, valuing the company at $47B.  And then after the IP-NO disaster, Softbank was forced into a bailout of WeWork for an additional $8B or so combined debt/equity investment, which means the company would be valued for about $16B or so.  Of which the “Vision” Fund will have invested about $18B. Huh. Well, it turns out that now Softbank is having some issues coming up with the money for that bailout because even that valuation is looking absurd to the other Japanese syndicate banks.
  • Thankful that I’m not an employee, investor, or even user of WeWork.  What a dumpster fire. Have you seen their new commercials? Where apparently they’re trying to rebrand as...we’re not quite sure, but it seems like they’re going for “interior designers”.  And now Adam Neumann is under investigation by the SEC for self-dealing. Ya think? Ya think??  The guy trademarked the word “We” and then sold the trademark to his company for $6M.  Did you know Adam Neumann’s wife is Gwyneth Paltrow’s cousin? Gwyneth Paltrow, whose lifestyle brand Goop is selling $34 toilet paper for the holidays (for 24 rolls, but still).  I wonder what’s in the WeWork bathrooms. 

In the midst of our holiday travel this past weekend, we happened to tune in to some financial talk radio station, and this commercial came on - an ad for something that provided outsourced small business accounting.  It was a pretty classic ad format that tries to induce a fear response:

  1. WORST-CASE SCENARIO
  2. What causes worst-case scenario
  3. How to avoid worst-case scenario (conveniently enough by buying this amazing product!)

Sound familiar?  Well, this one went on to add “whatever you do, don’t try to do it yourself.”

In response, and in the spirit of Thanksgiving, let us be the first to say: get stuffed, radio commercial man.  Of course you can do it yourself. In fact, we’re willing to make a blanket statement that if something is being advertised - especially on the radio - you either don’t need it or absolutely can do it yourself.


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The Year in Review

11/10/2019

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Fare thee well, 2019!  It’s that time of year when we’re inclined to look back on the year that was and reflect on how to make the next year even better - and yes, you can do that with personal finance as well.  So here’s a look back at everything Rogue Waves sent your way in 2019:


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Things That Go Bump In the (Over)Night

10/30/2019

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It’s the most wonderful time of the year.  To only slightly paraphrase Andy Williams:

There’ll be parties for hosting
Marshmallows for toasting
And frightening kids don’t you know

There’ll be scary ghost stories
And tales of the gories of
Halloweens long, long ago

It’s the most wonderful time
Yes the most wonderful time
Oh the most wonderful time

Of the year


There’s nothing quite like the combination of that crisp chill of fall in the air, the sight of millions of leaves dying a fiery death (because of the colors, not because they’re in California), and the earthy scent as they start to decay and crunch underfoot for raising the spirits.  Figuratively. But also perhaps literally.

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How Many Baskets?

9/30/2019

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To pick up where we left off last month: Diversification, huh, what is it good for?  Well, most people would say a lot, that diversification is the foundational bedrock of an investment portfolio.  But also - and this next point might be somewhat controversial - nothing.

If you want to make money in the stock market - like, turn $1,000 into $100,000 money - you won’t do that with diversification.  Well, you will, but it’ll take 50 years. The quickest way to make money is by making a very small number of very large, concentrated bets...and then hopefully the bets pay off.  Think of any famous investor you’ve heard of, and they’ve probably made their money that way.

The problem is, it’s a huge gamble.  For every one investor you just named, there are hundreds that nobody has ever heard of, because they lost.  And then there’s the ones that made it to the big leagues and subsequently crashed into bankruptcy: Long-Term Capital Management, Amaranth Advisors, Marin Capital, Tiger Management, MF Global...the list goes on.  So sure, you can do all kinds of research/activism/questionably-legal market manipulating activities to try and make the gamble less of a gamble (*cough
*hedge funds*cough*), but any investment with that kind of payoff comes with all sorts of risk.


That risk is exactly why the SEC, in their paternalistic omniscience, have limited most of the best investment opportunities out there to “accredited investors”.  For the vast majority of “non-accredited investors”, that level of risk is unacceptable. If your investments are in the form of a 401(k), or maybe you have a brokerage account but know you will be needing to use those funds in retirement, the possibility of losing all your money should never be on the table to begin with.  Yes, turning $1,000 into $100,000 a couple times over would be nice, but we’ll choose instead to take the worst possible outcomes off the table and make money the old-fashioned way: savings and time. And so we turn to diversification. Diversifying will not make you money, but it will certainly mitigate potential losses.


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Europe, or, You're Up

9/1/2019

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Back in the USA!  And for our first meal in Atlanta after two months, we had...Chinese.  Which was delicious, but our fortune cookie said - no joke - “Don’t invest in the stock market.  Invest in family instead.” Well played, China. Apparently we have progressed to the psyops portion of the trade war.

But let’s leave China to the side for the time being (until we get into what it means to have the world’s reserve currency) and stick with Europe for another month.  Europe is a hot mess.

​Let’s start with Brexit.  Boris Johnson is brilliant.  Well, perhaps not. I mean, he kind of looks like he never outgrew his second year of boarding school where experimentation with sloppy hair and dress was all the rage, which admittedly taints our opinion.  But he and/or his advisors (rumor has it Dominic Cummings is largely the brains behind the Brexit tactics) have played this beautifully.
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Back to School?

8/10/2019

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Happy Labor Day!  Our summer school valuation series has wrapped up, just in time for the kids to go back to actual school.  So let’s talk for a second about actual school. Specifically, college...or not.

College costs have gone up by about 2.5-3% a year for the last couple decades.  That’s not bad in and of itself, but that is still about 8 times more than wages have gone up in the same time period, which leads to a problem with affordability.



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Tour de France

7/30/2019

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Bonjour mis amis!  Cette newsletter arrive du France, ou est cette auteur pour deux mois pour regard le clime economique et political de l’Europe...mais est comme ca truque de “Flight of the Conchords”.  Parlez-vous Frances? Eh...no.
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So fear not, that will be the end of the French.  Language, anyway. The French themselves will be around for a while still.  Despite themselves. 

We managed to catch part of the Tour de France last week...and by “catch”, I mean there was a parade of...floats?  But they weren’t really floats, they were decorated cars. One was a giant chicken. And they going at a solid 20mph, too, not your leisurely float pace.  And people were harnessed in to the top/back/sides throwing knick-knacks at you as they whizzed by.

After accumulating a big pile of free loot, you wait and wait and then watch some cars go by with about three times the value of the car in bikes on the roof rack, and then BAM!  The riders fly by and are gone in about 10 seconds.  There wasn’t even time to look for the different jersey colors, though in hindsight we got a good picture of Peter Sagan and whoever was king of the mountains in Stage 15.  There’s probably a nice, drawn-out analogy there between cycling strategy and investing...teamwork, pacing, endurance, and so forth. But that’s not where we’re going with this.  No. Instead, we are going to take you on our own little tour of France, and try and discern what makes the French so, well...French.

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