Big Picture Planning

Winn partners Logo social

“Man. Because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present: the result being that he does not live in the present or the future: he lives as if he is never going to die, and then dies having never really lived.” The Dalai Lama (when asked what surprised him most about humanity)

The flagship issue of Worth Considering was written on a plane coming back from a client’s memorial service. That event, and others like it, struck me about the importance of living a purposeful life and how proper financial management plays an important role in that balance.

I am currently between travels to memorials for family members and for clients. These were wonderful men. One was one of the last survivors of the attack on Pearl Harbor. He was a genuine hero as a soldier and as a family man. We spent some quality family time celebrating his 95 years of vibrant life. The other was a successful dentist who left us way too soon in his early-60s. He leaves behind a thriving dental practice, a loving widow, and two school aged boys.

I’m not trying to intrude on their privacy, I only want to illustrate that we never know when our time is up. Here are real world examples of two men with a more than 30 year lifespan gap. One had great-grandchildren roughly that same age as the other’s children. We never know when we’re going to go, and we need to plan for the possibility of either outcome.

This is one of the most critical aspects of our work. Working with clients to assure they have these big picture plans in place is probably the most rewarding thing we do.

We all work diligently for the majority of our lives to be sure we retire to a certain level of comfort and provide the most sound opportunities for our loved ones and chosen causes after we’re gone. This can’t be accomplished through neglect or blind luck. It takes planning and a portfolio of assets must be managed to drive this plan that uniquely defines our lives and legacies.

That’s what we are passionate about.

Years ago we came upon the notion of trying to provide “stability in motion” for our clients. To us this means maintaining the investment discipline necessary to guide portfolios through the inevitable tumultuous times in the markets. It also means establishing plans for retirement income and estate wishes that aren’t permanently impacted by those investment market vagaries.

Our view is that the financial world is in the midst of an important consolidation period; a healthy pause in other words. These periods aren’t without their worries. When the markets spend time in a range, like they’ve done for several months now, the speculation about direction picks up.

I recently spent time with Porter Stansberry’s analyst and editorial team at a private conference. For those who aren’t’ familiar, Porter is a well-known and often controversial newsletter writer. He challenges each of the analysts on his team as well as those he invites as guests to offer and defend their strongest investment themes. We’ve followed the work of many of these folks throughout the years and developed a good amount of trust in their analysis.

The ideas ranged from interesting (I’d highlight input from Steve Sjuggerud and Porter himself) to inane (Doug Casey ran away with the show in that regard). There were some differing outlooks in the room, obviously but there were also some interesting points of commonality.

Weighing that trip along with everything else we read and hear, we’re not particularly nervous by anything we see on the horizon. We continue to believe some sort of pause is merited, but we also continue to have a positive outlook on most assets after this pause.

We are likely to see the markets gyrate some, but mostly stand pat for a while. If that turns out to be the case, corporate earnings will have time to grow into the current market valuations rather than the markets moving strongly ahead and growing beyond reasonable valuations. In short, it would be a refreshing pause that removes any legitimate fear of bubbles being created.

In mid-May it is impossible to say where we’ll stand at year-end but our view is that we’d be well served if the strange events of 2011 were repeated. It was a year in which the major markets were virtually unchanged, but within that seemingly static environment corporate earnings barreled ahead. The result was a much healthier and less expensive market heading into 2012.

Pauses often serve to extend expansions. Despite the challenges we admit exist, this current pause has a good chance of fitting that mold.

We’re going through an adjustment period. Markets that have been led by monetary stimulus must now be led more on fundamental measures of earnings and valuation. This is a process, not an event. The Fed is tapering QE, not abruptly ending it. This is unique territory and every market around the world is adjusting to this reality.

History suggests that the summer months are typically the weakest in the markets. We wouldn’t be surprised if that pattern repeats again this year. That doesn’t mean markets have to fall substantially, they can just languish directionless for a while. That sideways motion might simply disguise the creation of longer term value.

The takeaways:

  • A sound portfolio isn’t merely a series of tips or hot ideas; there must be a cohesive plan. Will you need to fund a multi-decade retirement? Or will your assets need to become a productive legacy far sooner than you’d expect? We simply can’t know. If you don’t have a plan that gives you confidence about what would happen if you don’t wake up tomorrow, or for the income you’ll need when you wake up 40 years from now, please let us know. We’d like to help.
  • Bill Gross, the Bond King of PIMCO fame, recently published his opinion that we might be entering a generational period in which normal interest rates in the market aren’t 4%, but closer to 2%. This is his projection of the end result of the recent years of Fed action and deflation fears. Specifically, he wrote in his Investment Outlook that: The “focus on the future ‘neutral’ policy rate is the critical key to unlocking value in all asset markets. If future cash returns are 2% (our belief) instead of 4%, then other assets such as stocks and real estate must be assumed to be more fairly priced as well. Current fears of asset bubbles would be unfounded.” While we don’t have near term enthusiasm, we do agree that bubble talk is best centered on bonds, not stocks and real estate. A well-diversified portfolio should have little to fear.
  • As smart as Bill Gross may be, the Dalai Lama is wiser. The quote at the top of this piece hopefully will serve as an inspiration to us all.
Category: Worth Considering No Comments

Comments are closed.