We had an exciting month. Big declines followed by big increases with another decline on the last day. Everyone lost about the same amount in February that they gained in January, more or less. I personally do not like exciting. Slow and boring fits me much better.
I have a problem with exciting. Peoples’ brains disengage from their wallets. I realize that I have better knowledge of the market than you do. That reason is why you hire me after all. Nonetheless, I wish to share with you how I evaluate news events and market swings.
When there is a large swing in the stock market, everyone’s instinctive reaction is to want to know why. The news outlets will make up stories as necessary. My first reaction is to ask the question is there a specific reason that makes sense? “Someone said something,” “inflation uncertainty,” etc. are all babble. They are not specific nor can anyone explain how that relates to the stock market prices. An actual increase in interest rates, a tower getting blown up, a strike called, etc. are specific. If I cannot see an obvious connection, then I go on the assumption that it is emotional reaction. As I have said many times, emotions overreact.
The market on one day mid-month went down 1,600 points. Some bank official hinted that there might be an interest hike. He had no power to cause a hike. And duh, everyone knows interest rates will have to go up at some point. It did not matter, the news broadcasted “inflation fears.” Investors ran for the door and a bunch more ran after them and the sheep went over the cliff. The computer algorithms that the big quant funds use saw the decline and sold even more. Two days later, it started recovering very nicely. You see nothing changed economically. It was stupidity.
A few days ago, Trump proposed fairly severe import tariffs on steel and aluminum. The market is down 700 points since then. This news is specific but I am uncertain as to the connection to the market. Yes, I understand that users of these metals will have higher prices and those higher prices will filter eventually through the economy. Please explain how these tariffs relate to the stock price of Home Depot, Shell Oil, Tyson Foods, Intel, etc. These companies do not use these metals. The future connection is fairly remote. The second part of the argument is that it will ignite a trade war. China, etc. will now not take our imports. That part is a non-specific maybe at some point in the future. Fear.
In general, I do not like tariffs for I think they yield a net loss but the story isn’t simple. They reduce the national economy. The effect, though, is long term not in the next year or two. The story is different in terms of some local economies. In places such as Ohio, Pennsylvania, etc. a steel tariff might enable people to pay their mortgages. The tariff would give those people more buying power and thus they would be able to contribute more to the economy. My point is that predicting the future consequences of an event such as a tariff is very difficult and must be done with caution.
On this news, I am going to wait for more details before I react.
Investment Fee Schedule
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the whole account. Compared to my old fee structure, under the new fee structure the cost for a $1 million account would be $500 lower per year and the cost for a $1.5 million account would be $1,500 lower per year. I will still waive personal tax return fees for accounts over $1 million. All services stay the same. I am just lowering my upper end fees. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
Questions for the comments
Did my newsletter make sense? Do you agree or disagree with what I said?