Tape Talk | Investing, Business, Wealth, and Your Money

On this week's episode of Tape Talk, Quint and Daniel dissect the recent market volatility on the heels of the news of US tariff hikes.

Agreement Hurdles

The United States and China have had an increasingly difficult time finding agreement on trade. Recent revisions to the deal by China led to President Trump implementing a new 25% tariff on a basket of goods from the country. This prompt shift from closing in on a deal to the negotiations entering rough waters left US stocks navigating increased volatility in an attempt to discern what lies ahead.

Managing Rough Waters

When it comes to managing through periods of volatility, it all comes down to your risk temperament and risk tolerance. Investors must strike a balance between the amount of volatility that will allow them to sleep soundly at night with the amount that their portfolio can tolerate on the path to their goals. Both knowing and implementing these two are key to long-term success in reaching your financial goals.

Sticking to a Plan

The final piece of the puzzle in volatile times is ensuring you have a financial plan in place and are reviewing that with your advisor during times of uncertainty. Since investing without a plan is more like gambling, we believe this element of an individuals' financial picture is essential for their long-term success in navigating choppy markets.

On this week's episode of Tape Talk, Quint and Daniel discuss the volatility transpiring in the market over the past week and what the might mean to investors.

Tweet Storm

Investors spent the weekend digesting tweets from President Trump alluding to a "no deal" with China on trade after the country attempted to make major revisions in the ongoing agreement. This news caused markets to drop Monday as investors had clear expectations that a trade deal was on the horizon.

Volatility is Back

One of the core truths of investing is that volatility never goes away, it simply takes a short vacation. After a great start to the year, investors may be getting painfully reminded of this fact as they were shaken from their complacency with the market moves this week.

Risk Tolerance and Rebalancing

This week illustrates the importance of two key pieces of your investing puzzle. The first is truly understanding the risk you can tolerate when the markets are volatile, not just when they're good. The second is regularly rebalancing back to that risk allocation even if it means selling down some things that are performing well to buy things that recently haven't. Having a plan and sticking to it will put you leaps and bounds ahead of more emotional investors which means in the long-run you'll likely come out ahead.

On this week's episode of Tape Talk, Quint and Daniel discuss an edge that "professional" or large investors have in investing markets as well as some ways the individual investor might benefit.

Headlines

One of the major stories making headlines this week was Warren Buffett’s backing of Occidental Petroleum in its attempt to acquire Anadarko Petroleum after the company announced plans to be acquired by rival Chevron. An article by Bloomberg illustrates the benefits a large and well-connected investor such as Warren Buffett has in ensuring that potential opportunities literally come calling.

Big Investor's Moves Aren't Secret

Even though large investors get the first mover advantage in many circumstances, their moves and investments are hardly shrouded in secrecy. In fact, as Quint and Daniel discuss, many of these investment managers are obligated to report their investments and changes on a quarterly basis. While this data is delayed, it does give investors insight into what some of the large money managers on Wall Street are putting their money behind.

Look For Opportunity, Carefully

While investors can get a peek into what money managers are doing, investors would be wise to develop their own thesis rather than blindly following. The reason is simple, reading a buy and sell report hardly tells you the whole thesis and strategy a money manager may be following. However, as Quint points out, there are times when you may be able to assess an investment made by a money manager and ultimately enter that position at a better price or value than the large manager. Patience and a watchful eye are critical in these circumstances!

On this week's episode of Tape Talk, Quint and Daniel take a deep dive into investors' required rate of return. What is it? Why is it important? And, how does it factor into your financial plan?

Headlines

Before going too far into our topic of the week we take a look at news hitting headlines over the past week. One, in particular, has caught investors' attention, the annual update on the Social Security Trust Fund. This report highlights two important numbers for retirees to consider. First, the date when Social Security is estimated to start using its reserves to pay benefits. Second, when those reserves will be depleted and benefits may need to be cut if Congress doesn't act beforehand. While these dates may seem far off, they are important to incorporate into your financial planning now to minimize the potential impact later.

Required Rate of Return

Your required rate of return is the return you need on your investments based on starting value, contribution, and time to your goal. This number is important because it must be assessed with the current market environment to determine if your goal is reasonable. While the goal you have could be anything, we most often talk about the required rate of return in regards to retirement. The reason for this is simple, it's one of the goals people want as little margin of error as possible. For that reason, we dissect what this metric means to investors as they begin planning for their future retirement.

Risk Temperament

The return you need is not the only important factor to consider in financial planning. The amount of risk you can physically and emotionally stomach is also critical to your success. It's for this reason that we work closely with people to determine if their required rate of return and their risk temperament are in alignment. Once they are, investors are typically well on their way to a fruitful financial planning journey ahead.

On this week's episode of Tape Talk, Quint and Daniel interview Paul Lountzis of Lountzis Asset Management and listen to his insights about risk in the investment markets here.

Worldwide Liquidity

As we dive into where markets are today we discuss the tremendous liquidity that has been provided by central banks around the world. While this has helped stabilize much of the world economies it has also forced investors to take on undue risk as they search for yield. Since the Federal Reserve here in the US still doesn't seem ready to hike rates further any time soon investors may get a little too complacent in these risky assets by the time future rate hikes come.

Time Horizons Matter

Investing has major distinctions from trading. Investors often are required to have patience and perseverance while waiting for their thesis to unfold. Paul Lountzis talks about how this manifests at his firm and what it means as he looks to take on new investors, pointing them to the fact that they need to have a time horizon measured in years and not months for the funds they invest.

Passive Isn't Bad, But It's Not Everything

Quint and Paul talk through the popular trend of passive investing and agree that it can be a powerful tool for those trying to build their wealth. On the other hand, for those focused on capital preservation and limiting downside volatility, there may also be instances that management has its place in their portfolio.

On this week's episode of Tape Talk, Quint and Daniel tackle the recent headlines about the inverted yield curve and what that might mean for investors' portfolios.

What's A Yield Curve?

While you might not often talk yields at your regular cocktail party, the topic may just come up more as it sprinkled news headlines recently. Unfortunately, though it is critical to the understanding of inversion, the yield curve may be unfamiliar to some. Daniel takes some time to explain just what we're talking about when we mention this curve in yields.

Just What Inverted?

Over the past couple of weeks, you might have read the news about the inverted yield curve as well as how inverted yield curves are reliable indicators of recession. However, Quint explains just what points in the current yield curve actually inverted and why that might not indicate what many are thinking.

Federal Reserve, In Control?

Looking at yields on the short-end, such as 3-6 months, is a good indication of the Federal Reserve's influence in rates. The current yields here are very close to the Fed Funds Rate which is the target rate set by the Fed. Going further out on maturities, the market begins to price in what it thinks about interest rates and the economy. What we've seen recently is a disagreement by the market of the Fed's broadcasted tightening. In fact, not long after the market voted on future yields, the Fed indicated its intention to slow further rate rises and balance sheet reductions.

The Fed Owns What?

To wrap up the show, Quint talks about the Federal Reserve balance sheet and what is so stunning about its composition in recent years. To conclude we discuss whether or not the Fed can ever really allow its balance sheet to "normalize" from here or if we now live in a new normal of perpetual quantitative easing.

On this week's episode of Tape Talk, Quint and Daniel look at the ways clients might become their own worst enemy when it comes to their financial plan. Here are four ways we see people sabotaging their plans.

Undisciplined Spending

Coming off some of the highest earning years of your life and likely with the least amount of dependents left in your household, you may have gotten used to spending what you want when you want to. One of the things you'll face in retirement is the paycheck stopping and your spending now relying on a fixed pool of assets. This means that your plan requires some discipline to create a budget, monitor your spending, and stick with the plan.

Unspoken Goals

If you have goals in mind for life and retirement that you're not talking about with your financial planner, that's simply not good! Your financial plan attempts to incorporate the many knowns and unknowns about your current and future financial life. If you have any ambitious goals which require financial resources it is better to talk about these with your financial planner early and revisit often so that your plan aligns with the picture you have in mind for your life.

Funding the Kids' (or Grandkids) Life

Your retirement and financial plan is built around your life. So, while certain circumstances might make it simply unavoidable, it generally is detrimental to your plan's viability to continually support adult kids over time. While this could take the form of education assistance or repayment, debt help, family vacations, and more if you haven't built it into your plan as a goal these line items could add up to your plan not working. Now that you and the kids are all adults with your own financial lives it is important to have as honest of a discussion as possible least your financial decisions now coming back to affect them later when your plan begins to falter.

Not Thinking Through Speed Bumps

No financial plan is a perfect picture of what the future holds! This is why we update plans on a regular basis to incorporate new information and ensure the plan still works. However, there are a lot of variables that a good financial planner and review and assess to see how they might impact your plan. These variables such as the death of a spouse, long-term care, or a wide array of investment returns, can be modeled into your plan to see its impacts.

On this week's episode of Tape Talk, Quint and Daniel break down the recent headlines about the Federal Reserve's outlook and interest rate forecasts for the year.

Rates Steady

The FOMC very expectedly kept rates unchanged after their latest meeting. However, the more newsworthy bit out of the meeting was their lowered economic forecast for the year. Further, they sent a clearly dovish signal to maintain rates are their current level for the rest of the year.

How Interest Rates Work

Supply and demand is the law of nature on both Main Street and when it comes to interest rates. Quint breaks down how supply and demand are what the Fed uses when it tightens and eases policy to influence interest rates.

Quantitative Easing Primer

The Fed had recently been unwinding its largest balance sheet in history. Quint looks at what this means for the economy and why the new reality of a heavily invested Fed means that this balance sheet won't be dramatically shrinking any time soon.

On this week's episode of Tape Talk, Quint and Daniel welcome spring with some tips for spring cleaning your financial life.

Rebalance and Review Investment Allocations

If you didn't already do so at the end of the year, it's time to rebalance your accounts which don't automatically do so themselves. This is an important part of any investment strategy to ensure you stay aligned with the investment objectives you set out for yourself. Additionally, it's important to take this to review your investment allocation and ensure it is in line with both your risk tolerance and your risk temperament.

IRA and Roth IRA Contributions

With one month left to go before the 2018 tax filing deadline, it is a good time to consider any last minute 2018 retirement account contributions. Additionally, while taxes are on the mind and all your paperwork is handy it is the perfect time of year to review your retirement savings strategy for 2019 and how it can be best optimized.

Review Your Will (or make one!)

While you already have many of your financial statements in front of you for the tax filing season it is a good time to review your will. This important legal document is something most people don't think about until too late yet it can save you and your family much strife when it does eventually need to be utilized. Once every year or two, it is important to dust off this document, review it, and make any changes you might need.

Review Your Insurance

Insurance policies tend to be a "set it and forget it" type of situation in our financial lives. However, insurance is directly related to the areas of our life that are being insured and these areas tend to change from year to year. Because of this, it's important to review your various types of insurance policies to ensure they still meet your goals and objectives. Further, if you are unsure the amount or type of insurance you need in any circumstance, it is a good time to set a meeting with a financial planner.

Your Financial Plan

If you don't know it already, it's time to get to know your required rate of return. If you knew it in the past, it's time to revisit. Tax season is perfect for financial planning because many of your financial numbers are already in front of you. By doing a planning, or updating an existing one, you can be sure you know and understand the rate of return you require to meet your goals as well as what this means for your overall financial life.

If you are interested in learning more about our financial planning services and discovering your required rate of return CONTACT US!

On this week's shortened episode of Tape Talk, Quint and Daniel take a look at the recent stock rally through the lens of the past couple months of volatility.

Consolidation Is The Theme

Stocks as a whole are now up significantly for the year, yet they are only back to the levels they started as this past December, prior to the pre-holiday decline. This means two things. First, stocks have entered a very logical area of technical consolidation where gains may slow and buyers and sellers may battle each other for the next trend. Second, the short term moves have been sharp in both directions and some digestion of these moves would be healthy if investors hope for a longer term trend higher from here.

Dividends In Play

Daniel takes a little time to discuss what the dividend growth strategy has been looking at throughout this volatile market to provide growing income for dividend-focused investors. Then, Quint considers how dividends may be a significant piece of investor returns in the near future if this market decides to go sideways for years rather than months.