News & Views
Nervous and Slightly Numb
“An investment operation is one which upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” –Benjamin Graham, The Intelligent Investor (Chapter 1)
Come on 2020, can you just get on with it? Thank goodness we have entered the fourth quarter. The final stretch! Yet, this is a critical quarter as we’re all sitting on the edge of our seats watching what may be one of the most contentious Presidential elections in history. Moreover, the uncertainty about the trajectory of COVID-19 in the upcoming fall and winter seasons have us all anxious. Slightly numb to it all, even.
As it relates to investing, our reminder about the election is that it’s dangerous to mix our political views with our investment decisions. Warren Buffett has stated it himself that “if you mix your politics with investment decisions, you’re making a big mistake.” Now let us be very clear, we are not saying that this election, or politics in general, do NOT matter to the markets. They do. But making investment decisions based on our predictions about political outcomes can be a hazard to our investment success.
“Investor, please meet TINA. TINA, please meet investor. I doubt you’ll like each other, but you’re going to have to get along.”
T.I.N.A. = There Is No Alternative
If you are hearing this acronym for the first time, there are a few things you must understand about it that has now become common in the investment-industry lexicon:
Norris Perné & French Named to 2020 Financial Times 300 Top Registered Investment Advisors for the Second Consecutive Year
July 31, 2020 09:00 AM Eastern Daylight Time
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Norris Perné & French (NPF) is pleased to announce that it has been named to the 2020 edition of the Financial Times 300 Top Registered Investment Advisers. This is the second consecutive year that NPF has been included in the FT300.
The top 300 firms were chosen based on several key factors, including: assets under management (AUM); AUM growth rate; years in existence; industry credentials of the firm’s advisors; online accessibility; and compliance records.
“Stability leads to instability. The more stable things become, and the longer things are stable, the more unstable they will be when the crisis hits.” – Hyman Minsky
Lately, it seems we have more questions than answers. Even basic decisions in life have felt like a challenge amidst the disarray. Things like trips, big purchases, or even careers/retirement can hardly be ascertained when we don’t have a clear picture of what life will be like in the next three months, let alone the next 12 months.
Dazed and confused.
That’s probably how you are feeling right now as you watch the stock market rally while we continue to see some of the worst economic data since the Great Depression. On the surface, it would seem like a massive disconnect. We know things are bad, so why isn’t the market behaving as such? Because we knew it would be awful.
Markets on Lockdown: Sheltering in Your Plan
“The truth is, the next crisis won’t be caused by the same problem…It will likely come from something we are not watching or thinking about (although in hindsight, it will seem obvious). That’s what makes it a crisis.” -NPF Client Letter, January 2020
Market liquidity is like oxygen: you take it for granted when it is plentiful, but you absolutely notice it when it disappears. For the past twelve years, liquidity (except during a few occasions) has been ample – liquidity, by the way, represents an asset’s ability to be transformed into another (i.e. cash) without a loss. However, in moments of extreme panic, liquidity dries up quickly causing losses for market participants that have no other choice but to accept a lower price than fair value for an asset sale (namely, stocks and bonds).
As investors, we must accept that the financial markets can occasionally be a dangerous place. The only certainty we have is that the future will surprise us, as it is unpredictable. If it were predictable, you would not be rewarded for putting your hard-earned savings to use in investment assets.
Willingness to tolerate risk = Opportunity to be rewarded for investment