Investment Newsletter for the end of January, 2018

The market continued upward this month and all of you have very nice gains. Of course, the reality is we do not know why. Market fluctuations can be blamed on a lot of things and sometimes the explanation is more art than science.

The easiest explanation is that the market is reacting to Trump’s economic expansion. Of course, this reason is very easy to debunk. Most of his regulatory changes (which I support) have not had any effect yet. Likewise, the tax changes have barely started having an effect. It is absolutely true that the US economy is booming. What is not clear and cannot be determined is whether the economy is booming because of a future Trump expectation or because of a delayed Obama effect. Or maybe it has nothing to do with either one of them.

Traditional Efficient Market Theory states that stock prices are based on future expectations. The pricing is always rational. I do not completely buy into this idea. It is essentially correct but assumes that stupid people become smart when in a large enough group. It ignores greed bubbles, fear pits, and all the madness of the crowd. We know the crowd can be stupid. Look at the run-up and collapse of Bitcoin. All of you have seen market booms and busts. Of course, we cannot predict the timing of a bubble start or collapse. We cannot predict how dramatic the collapse will be either.

Stock prices are high right now. Pretty darn sweet, in fact. Are we in a bubble? There is no way to tell until after this theoretical bubble pops. Will the stock market go down 10%, 20% this month, this year, or three years from now? That question has no answer although it is easy to make one up. For example, “I predict steady gains for the remainder of the year, followed by uncertainty causing declines of a minimum of 10%.” This type of garbage is presented constantly by TV talking heads, stock experts, brokerage firms, etc. Clients demand it. The truth is no one knows.

There are more fanciful answers. When the market was poor a few years ago, the prevailing wisdom (excuse me while I cough) was that the bad economy in Greece, Spain, etc. was causing the market to collapse. Of course, Greece still has a bad economy but no one talks about that one anymore. It does not fit the story. The best I heard was two years ago. There was a big market decline after Thanksgiving. The reason in the press was that black Friday sales were poor in China. Of course, they do not have Thanksgiving or much of a black Friday in China. Also, most US companies do not care about consumer sales in another country. That explanation was gone by lunch time. Even the experts were embarrassed.

Since we do not know why something is happening, it is hard to determine what to do. Should you change your plan? The answer here is to change nothing. While the crowd will eventually run screaming for the door, we do not know when that will happen. Stick to the plan.

I have had a very good year in business. I wish to thank all of you for your support.


Investment Fee Schedule

Rate Assets Under Management
1.44% Below $125,000
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
.60% Above $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.

E-Book Download

Questions for the comments

Did my newsletter make sense? Do you agree or disagree with what I said?

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