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Jul 18

Market Update – Still a Bear Market!

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There are two environments where it’s most difficult for us as investors to keep our emotions in check and stick to our gameplan. First, when markets are falling and we’re fighting the urge to sell out at the worst possible time, and second, like right now, when markets seem to be moving relentlessly higher and we’re compelled to chase them. Of course, the important question is whether we’re in an environment that’s friend or foe to those markets we’re tempted to chase since the former would justify the risk-taking while the latter would eventually punish it. As always, the best…
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Jun 14

Exiting Financial Repression

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A few months back, we wrote about the Bendy Road, which highlighted how the most prudent path forward for investors, in our opinion, wouldn’t be without some excitement along the way. After all, any worthwhile road trip must have its fair share of changing scenery and moments of exhilaration. There is rarely a straight, perilless path to anywhere worth going. After a fantastic start to the year for more economically defensive asset categories such as treasury bonds and precious metals, the month of May brought an inevitable pullback in prices that, although deeper than one would like, isn’t at all…
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May 17

Little Victories

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One of the human impulses that’s most destructive to long-term investment success is the desire to maximize returns regardless of the risk in doing so. Whether this manifests in buying the popular stock of the day hoping for similar results in the future or buying a seemingly more diversified stock market index after a historically stellar run, the allure of good returns can distract us from what matters most – avoiding large losses. Although investing in “the market” via an index fund may not feel like it, at the wrong point in time it can be akin to swinging for…
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Apr 13

How Are Your Cash and Securities Protected When Banks Fail?

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We have any number of risks to manage in our lives. When it comes to our financial well-being, few risks make us feel as nervous as a banking crisis. In 2008 it was revealed that many financial institutions owned worthless mortgage-backed securities, which sent financial markets around the world into a tailspin. Historically, however, most bank failures were caused by good old fashioned, “It’s a Wonderful Life” style runs on the bank. What makes bank runs scary is that we all know the bank doesn’t have all of our money on hand, as they’ve loaned as much as they can…
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Mar 16

A Bendy Road

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The experience one expects to have in financial markets comes down largely to whether he or she believes market forces are more natural or artificial in nature. By natural, I’m referring to more free-flowing, random, and at times chaotic, whereas artificial represents controlled, planned, and efficient. An investor couldn’t be blamed for thinking the latter given the tremendous efforts monetary authorities and governments generally have made in recent years to steer favorable market outcomes. This effort to control markets, to create a straighter path, has led many to believe that positive investment results are assured and risks of meaningful losses…
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Feb 13

Lost In Speculation

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When someone gets lost, it doesn’t happen suddenly, nor does the realization of it. It’s a progression from being “not lost”, to being a little turned around, to getting somewhat concerned, more concerned, then officially lost. If one gets lost in the presence of their spouse, then there’s generally some debate about the issue along that progression. Throw in overconfidence, denial, blame, and eventually, if we’re lucky, maybe an admission of some responsibility for getting lost. We all know the feeling when it comes to being lost on the road. Most, if they’re being honest, know the feeling of being…
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Jan 23

What Lies Ahead in 2023

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This year was a year where effective defense made the difference. To come out of it with positive returns, as nice as that would be, simply wasn’t in the cards without a healthy dose of risk and even more luck. To lose much less than others, or more importantly, what popular asset classes lost, was a huge victory. The question now of course is where does this leave us as we head into 2023? To answer this question, it might be most helpful to think about it within the context of time. In weather, it’s pretty well established that forecasting…
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Jan 11

2022 Asset Class Returns: Year in Review

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Toward the end of last year’s “Year in Review” piece I wrote: “You may be in the camp of investors that sees a year like this year as an opportunity lost as opposed to a sign that we have entered dangerous stock market times.”  2021 was one of those years where the US stock market outperformed most other investment categories by enough that it may have been easy for investors to assume there was less risk in the market than there really was at the end of last year. Unfortunately, to many investors’ surprise, 2022 came along and proved that,…
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Dec 15

My Portfolio Has Lost Value—Now What?

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When your investments are going up, it’s easy to picture how you’ll react when they go down because you don’t really feel it.  Not at that moment.  In fact, you’re feeling pretty good, what with your investments going up and all.  It sure is different when the actual down period hits, though, isn’t it?  We are ten months into this current stock market downturn and a traditional diversified portfolio of half stocks and half bonds is down roughly -18%.  Our corresponding portfolios at Cadence are down a fair bit less than that, but more on that later.  Ten months into…
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Nov 16

Beachball or Brick?

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Anybody with an investment account, regardless of how it’s allocated, is probably well aware that markets are down significantly this year. That hasn’t always been the case, since in previous market downturns there were other asset classes that held up just fine while stocks declined. The first thing to remember is that although these situations aren’t the norm, they do happen. From time to time, everything moves in the same direction. We have no problem with it when that direction is up, but when it’s down, we certainly take notice. A strategy that normally protects well against volatile market periods…
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