I get a lot of “expert” advice, as I assume you all do. Time-limited special reports on technical, fundamental, economic, and social indicators are always immediately available. I get offered the best articles, best recommendations, best investments for dealing with inflation, the three worst investments for inflationary times, downside protection in any market, as well as protection against volatility, running out of money, fraud, security threats, and the single best secret for preparing for the unknown. Everything is a custom-tailored solution for me, mostly based on whispers, leaked rumors, and expert opinions. In addition, I get a lot of opportunities… again specifically for me, back tested and guaranteed. New Proven Income Opportunities, or New Revenue Streams… that if acted upon today will also earn me the top questions to ask prospects or the top questions to ask my advisor. If I ask nicely, I can usually get Today’s Key News with the Best Strategies for Tomorrow that replace the Old Investment Strategies that don’t work anymore thrown in.
I know that paragraph was a little over the top, but those are all real portions from the subject lines of what I dumped in the trash recently, and I get it all day, every day. I know you all are probably similar, and most of the junk you receive also gets tossed in the trash, but it is still tedious to deal with that unending assault, and it does what it is designed to do… plant seeds and wear us down. You know what… I really should investigate the three best investments for dealing with inflation. Or, I think I really would like to add one simple thing to reduce the short-term volatility that keeps me up at night. All these solicitations are persuasive, well designed, and can look extremely professional.
Well designed and well written solutions and forecasts are extremely influential, especially when they come from pedigreed, confident presenters. They are even more influential to us when we find them from our already vetted choice of information (T.V. channel, newspaper, magazine, or news website). But when it comes to big projections for the future, things such as where the market is going to be by year’s end, what inflation will be in five months, what interest rate the FED will stop at, or what Global Gross Domestic Product will be, the shoe shiner’s prediction is worth just as much as some hedge fund manager’s prediction. This is true even when it comes to how you are personally investing your own savings. Not even the best experts know the future well enough to give you the best answer.
This doesn’t mean all the data and study is worthless, nor does it mean all the experts are crooks and not worth listening to. More than anything, studying and understanding the data today, as well as how things happened in the past, increases our perspective. This helps us to create boundaries we can use to identify our options given the current circumstances, and by listening to a broad array of advice givers and historians we strengthen and straighten our own guidelines. Given all of that, my own advice would be, the more certain someone is on what you should do based on their projection of the future (especially if it is short term), the more you should be looking for another opinion.
All of this talk about emails, advice, and predictions is due to what we’ve been witnessing last week relating to the cryptocurrency market. I get a little worked up when I think about the possible harm done to crypto-investors, or “crypto believers” as they were labeled by a crypto advisor (YouTuber) in a recent FORTUNE article. If you dig into some of the talk about the recent drop in the cryptocurrency market, you end up learning that many Stablecoins (the crypto equivalent to Money Market Funds) “broke the buck.” In other words, each coin that is supposed to be pegged at $1.00 went below $1.00, with the TerraUSD coin dropping from $1.00 to $0.10 over the course of a week. I believe the faith of many true “crypto believers” is being tested. Even though I am on the other side of the fence and think that what people are buying is in essence nothing, I still believe these people, whether young or older, are simply good people who got pulled in by that unending hype and social peer pressure.
I will wrap this up by telling you the summary of what I’ve been seeing from our own data sources and chosen historians, after clearing through the spam, and what our plans are from here.
Now that the Federal Reserve has begun raising interest rates, some of the uncertainty (worry) tied to FED action has been set aside for a time. The biggest boogeyman continues to be inflation, not just the number itself, but also what inflation will do to the economy and to the markets. A lot of commentators are publishing “percentage chances” that the U.S. economy will go into a recession. Those forecasted percentages have been increasing lately, and those that I believe are coming from cooler heads are ranging between 20% and 35% for the 2022 year. A recession probably will occur within the next two years, a result of interest rate increases tied to the massive monetary and fiscal expansion. Even if we don’t like it, recessions are just the other side of the normal economic business cycle.
Until that day finally shows up, the threat of recession will be another ingredient to add to the ongoing market uncertainty. Things have been very volatile. Although we may remark that it just doesn’t make sense that the market could be up 3% one day, then down 3% the next, when you understand that the market is just the behavior of all the emotions of its participants (me and you), it does make sense. We are fearful of the unknown future, but we are hopeful everything is going to be all right and good.
We are going to start investing a portion of our cash into Certificates of Deposit. With the recent rate increases, we are now seeing CDs of three-month maturity at 0.80 – 0.90%. This is not as high as we wish, but it is much more than cash, and without the downside risk that bonds are currently experiencing. Those rates will continue to rise, following Federal Reserve Funds Rate increases. In addition, we will be putting small amounts of cash to work with new equity purchases. When everything sells off, good companies get pulled down with the rest, and bargains present themselves. Even if we were to enter a recession, there will be companies that do better than others, and still find a way to continue to earn profits and grow their earnings for shareholders.
I’ll close like I usually do. If you have upcoming cash requirements for things like roofs, cars, vacations, or weddings, give us a quick call and we’ll make sure your allocation is in order. If you are worried in general about the state of the market, country, or world, come in and we’ll discuss things (we do it every day anyway with each other in the office!). Also, as I hope you can tell, I pay attention to a lot of that stuff you all read or hear regarding investment advice and offerings. I always love the opportunity to discuss what you’ve seen, whether that means explaining why it isn’t legitimate, or comparing it to how we invest your savings if it is.
The Summer is almost upon us. Good luck if that means having kids at home all day… or congratulations if it means extra time with grandchildren! Get away from the world of worry and demands of work as you are able, you all deserve some rest and relaxation!