Happy Spring everyone!
Much to share during my quarterly missive, so get ready for an action packed episode: some updates on what our office has been doing last few months, comments on internal/administrative improvements, some market commentary with insights from a recent conference, some thoughts on today’s media environment and an upcoming webinar we will be hosting, and finally a few personal updates.
Harbour updates:
First, Martha is now officially fully licensed—acing both her series 7 and series 66 tests! I think most of you have met or talked to her, so nobody is at all surprised that she crushed the tests first time around. She has been learning by sitting in meetings and helping us with reports. You may have noticed Ansley in meetings also, we have been working to co-train so we all have better visibility supporting each other and you.
I spoke back in March at the Good Business Summit with a panel about balancing work with life as a busy entrepreneur. It certainly helps to love what you do for a living, but we talked much about how important it is to center yourself with family, faith and activities you find beautiful. Was a lot of fun with other fascinating speakers.
We have a new website coming out soon, stay tuned! We are looking to simplify and better incorporate some of our thought leadership/activities through the website vs our old Raymond James website template. You might have a reason to check it out in future! We do quite a bit in and for the community, I think most like to know what were up to. And if you’re keeping track, my market commentary since I started sending these emails has held up well in the test of time.
Administrative/resource improvements:
We are not a medical practice, but we certainly can learn much from our clients who are. To simplify scheduling, we are going to send out review schedules for everyone in the future along with emailed meeting invites. Getting far enough ahead and knowing your normal preferences, we believe most of these meetings won’t need to be rescheduled and we won’t have to waste your time getting on our calendars. Of course, you’re always welcome to reach out as important items appear!
You may not have kept track, but your team has racked up many degrees, licenses and designations. You’ve got a rocket scientist, MBA, math major, business major, about 6 designations and I think 15 or so licenses--so being technical proficient is a priority for all of us. You thus wouldn’t be surprised that we have been fascinated by developments in technology, especially AI, in how it can improve our jobs. With an emphasis on privacy, we have been beta testing a few tools. One of them is an automated transcription assistant, which summarizes meetings and creates follow up items. The planning software we use and research tools we use have incorporated many recent improvements allowing for better identification of opportunities in both tax ideas and investments. And of course, the acceleration of available tools coming from both Raymond James and M Financial has been quite exciting as we look to be better equipped to deal with whatever issue you share with us. All this being said, I still think it is a long long time before AI has the wisdom and
Later this month, the industry is FINALLY moving to T+1. This simply means that it will take one day less to receive cash when we sell securities.
Market Commentary:
Going back to December, I said: “.. it’s likely this rally continues for a while. Once again, economics supersedes geopolitics. I do not believe this means that inflation is over… While I don’t believe we will see a return to the 9% inflation we saw in 2022, I also don’t believe we’re going to see 2% anytime soon and remain bullish on positions tied with ownership.”
Accordingly, going into ’24 we remained bullish on equities/growth and bearish on bonds. And that is exactly what we’ve seen this year, leading to continued outperformance this year in both conservative and aggressive accounts. It is truly remarkable that traditional bonds have now seen one of the longest and steepest losing streaks in history—the 10-year trailing return is now close to zero. For many who have been in traditional bond portfolios, this has been painful. Almost as bad, bonds have been trading in a similar direction as stocks—losing some of their value as a diversifying asset. Happily as you know, we have minimized traditional bond exposure and performed far better within our fixed income allocations. Are bonds broken forever? I don’t believe so, but I’m not convinced the time is now to buy them when we can earn such healthy yields in positions without much duration risk.
Yes, the Fed still has outsized influence on the market and yes, we continue to watch closely. The latest Fed meeting followed a series of higher than expected inflation reports, some indicating that inflation had started to creep upwards after steeply falling from 2021’s very high rates. Powell correctly noted that these reports could have been ‘noise’ and said they’d remain dependent on future reports, but noted the funds rate would remain higher for longer. At same time and less discussed, the Fed reduced the pace of reducing its balance sheet. This is a less restrictive policy, which ultimately resulted in a bit of a relief rally after the slight downturn from the inflation reports.
Is it not remarkable that we have, for the first time in history, Iran and Israel hitting each other with military strikes and oil remaining below $80/barrel? I will continue to say it, economics are far more important than geopolitics to the financial markets. With that in mind, I turn to the upcoming election. Just wake me when it’s over. Kidding! Sort of. But I thought I’d share some insights from the Strategic Investment Conference (SIC) and other readings (especially Epsilon Theory—I attend their conference first weekend in June).
Speaking at SIC were a who’s who in the world of finance and geo-political analysis: General Petraus, Frank Lutz, my former colleague David Rosenberg, a part-time Kiawah resident Grant Williams, Pippa Malmgren, and hedge fund/money managers representing trillions—like Mario Gabelli and legendary investor Britt Harris. As usual, there was no full consensus. Fun fact, really smart people don’t always agree. I always try to filter what each is saying by some knowledge of their background and whatever bias might come from their job. Short sellers are usually bearish—equity managers are usually bullish—etc. But there were some great takeaways. My favorite line of the conference came from Britt Harris: “… bearish commentators always sound the smartest, but bulls live in the biggest houses…”. He believes we’re in the middle of a continuing equity bull market—especially in the US and that growth will continue to outperform value. Many others were nowhere near as rosy.
The majority of the other commentators warned of economic storms coming. Some thought later in 2030+, others as soon as next year after the election. Most believe the market will run very hard/fast before then. Of course, they are going to be right eventually on a downturn. And that is true no matter when you make a bearish forecast throughout history. The main reasons for gloom were due to both geopolitics and unsustainable debt. War in Europe, war in middle east, cold war between East and West, an upcoming election between two unpopular candidates in a hyper polarized media environment. Couple this with government debts far in excess of anything we’ve ever seen. You know the story, it’s all you probably see in the news. You simply cannot look at what all is happening in the world right now and dismiss it as not having ANY financial impact. And some of what was shared during this conference was chilling—Pippa believes we’re already in WW3, though it’s being fought in cyber, infrastructure, and finance (drain the US Treasury pitting cheap drones against expensive carriers). Believe it or not, Petraus was optimistic that there is a likely path to peace that doesn’t go through significant conflict. And the discussions about technical developments in AI, sustainable energy development, genetics, longevity and chronic diseases is overwhelmingly exciting. One believed cancer cures and cellular age reduction were within reach in our lifetimes. Harris discussed all the things that almost killed us all in the 50’s, 60’s, and 70’s. That didn’t’. Does human ingenuity and shared believe in humanity hold us together again? Or are we in the beginning of the “4th Turning” as Neil Howe discusses in his book? I don’t know. But I do know that-as I mentioned in the beginning-geopolitics has an indirect affect on financial markets. And that nobody thought other countries overall were a better place for financial assets than the US, even though there are many exciting investment opportunities overseas. I have enjoyed my relationship with Epsilon Theory and their leaders like Ben Hunt, who I now consider friends… and feel we have an ‘inside scoop’ on the world of narratives that we will absolutely use to the best of our abilities to help manage your money. That conference is late May.
But I also know, as I first started saying in 2022 after the invasion of Ukraine, that cyber security now… protecting your stuff… is more important now than ever. The cyber attacks are real and are growing. They will get more sophisticated and target you, if they haven’t already. That means never ever opening a suspicious email attachment and confirming the sender every time. It means not trusting people who call, especially out of the blue. It means to trust your instinct if someone sounds like a relative but doesn’t sound exactly right (AI can imitate voices). It means to take protecting your passwords seriously and having 2 factor authentication ‘on’ in everything important to you. And it means having a plan if there’s a cyber-attack on our infrastructure.
Upcoming Webinar:
I recently read a fantastic book by Daniel Kahneman called Thinking Fast and Slow. Behavioral finance is a required course in many professional designations and Kahneman, who recently passed, is one of the OG's in the field. We've all seen optical illusions and understand that our eyes can play tricks on us. This book and the field of behavioral finance discusses the 'mental illusions' or traps our mind can play on us as we make financial decisions. Unfortunately, I have seen many of those in the media utilize these traps--I suspect you feel the strong efforts of manipulation on your behavior. At the core of many of these traps is the fact that our brains are more sensitive to fear than greed and that we 'anchor' on recent information to make quick decisions. Teaster: A bat and ball cost $1.10. If a ball costs $.10 and a bat costs $1 more than the ball, how much is the bat? If you said $1, look again. I'm not perfect and have fallen into some myself, but I am going to host a webinar in June on this important topic. Let's work to make ourselves a little more immune to the manipulation of 'nudge' so we can be better investors and citizens! Mark your calendars for June 18th at noon and we will be recording.
Personal:
You can probably tell, we’ve been very very busy, which is true. In the spirit of balance, I’m going to be out of office in Scotland with Alissa from the 10th-20th. I will be available via email if necessary, but our team can handle most requests. Ansley will also be taking a short break from the 20st to 31st celebrating her husband’s birthday.
The Corley Family:
Spring has been a busy season for Corley’s. Our daughter, Lilly, completed her freshman year at “The USC,” in May. For those of you that might get confused, that’s Gamecock Country. She takes after her mother in looks and brain power and finished the year with an overall GPA of 3.5. With all her dual credit classes that she took in high school, she’s technically a Junior. Pretty amazing!
Our son, Alex, was blessed with a lot of his mother’s D1 athletic talent. He’s only an 8th grader but he competes on the varsity track & field team. He’s not a runner because he inherited some genes from me. He excels in the field side, most notably javelin.
At the beginning of each meet, it’s fun to watch his competition (freshmen, sophomores, juniors, & seniors) size him up. Just watching them mentally blow off the 5’11” 160lb framed eighth grader makes me snicker because I know what’s coming.
By the end of his 2024 track season, he pushed the school javelin record out 6 times and finally let it settle at 149’ 5”. He set that record at the SCISA Division II state meet by taking 1st place by over 19 inches. That mark also earned him the current title of #1 eighth grader in the nation throwing an 800g javelin, the same weight as Olympians. That’s pretty cool too!
