The Markets
In our last newsletter, I spoke to the five (5) reasons June/July could be challenging. The number one reason was Brexit, Britain’s exit from the European Union. Unfortunately, that reason came to pass. The ramifications, as mentioned in the newsletter, I felt, would be one of short-term chaos in the financial markets throughout the world. This, too, has already started. How long and how severe it might be is unknown. However, the important point here is the answer to these two questions:
1. Does it impact any long-term financial plans? Answer: No.
2. Does it impact our investment philosophy? Answer: No, although we do stand ready to adjust our portfolios as need be for sure.
In short, I believe, although no assurances can be given, we are well positioned for the volatility created by this event. I say this because of our naturally defensive position according to our philosophy and the fact we are underweight international positions.
What happens with Brexit from here? It is uncertain, but I do believe that the EU is going to chase England to the end of the earth. I do not believe there will be any way they will allow one of their biggest markets to become more distant. I believe they will sign a free trade deal with enthusiasm and quickly. Everyone has an incentive to do so. No one has an incentive not to. In addition, this could free the U.S. and UK to sign a free trade deal that the EU has been holding up. This is potentially very good news. As always, I believe this will be a buying opportunity in the long term. The good news related to that is our positions in the Multi-Asset StrategySM have a very high level of cash on hand right now on average.
This is certainly not the time to panic. This too will pass. Markets often panic. We should not. There have been 51 drops of the magnitude of the June 24th S&P 500 decline of 3.6% (and worse) in the past three decades. It is also important to note that the EU accounts for only 17% of the world economic output. People are always trying to panic the public. Market commentaries know very little and pretend to know everything. Try not to listen!
Just as a review of past events, I have put together a list of the most memorable events since the great financial crisis of 2008 that we have had to rebound from, which we have, of course. This is a partial list, but I think illustrates the point:
- Greek debt cut to below investment grade
- Dubai credit crisis shakes global markets
- Flash Crash of 2010
- The end of The Fed’s QE program
- EU and IMF bailout Ireland
- Portugal receives a bailout
- S&P downgrades US debt to AA+
- European sovereign debt crisis spreads
- North Korea confirms successful nuclear testing
- Chinese stock market crashes
- Russia moves troops into Crimea
- Numerous terrorist attacks
- Federal Reserve hikes interest rates
- Ebola outbreak
- Argentina defaults on its debt
Whew! I decided to stop at fifteen, but could have kept going on for a while. I think all the important points have already been covered here. We will report on more as warranted of course.
QUARTERLY QUOTES
“If I am an optimist long term, why should I worry about the short term?”
Warren Buffett
Famed Investor
Perfect for this month!
“Save for retirement, 15% of income via IRAs, 401(k)s, etc. Try to accumulate ten times your last salary. Invest simply and manage risk.”
Susannah Mushatt Jones
116 year old Brooklyn woman
(last know American born in the 1800s)
who recently passed
I assume she said this many years ago. She had also said the three keys to life are sleeping, not smoking or drinking and indulge in your favorite food. Hers was bacon! Quite simple, all the way around.
“I don’t know if he’s right, but he doesn’t know either.”
Warren Buffett, Famed Investor, when asked
about an economist’s prediction. It made me think
of the media comment in this newsletter.
Enjoy! That’s it for now. We want you to know we are trying to follow all events closely and doing all we can to be good long-term stewards of your money. As always, feel free to call us as needed. We are always delighted to hear from you. All calls will be returned promptly as you know (usually within 24 hours).
We are eagerly looking forward to working with you in the quarters and years ahead and thank you for all your referrals to date. Also, as always, should the markets dictate an interim newsletter, we will do so.
OUR PHILOSOPHY
Successful investing is a marathon, not a sprint. Sometimes investing is like watching paint dry, marking time, boring and with not much movement. Sometimes it is chaotic and fear based. Greed and fear are often present. We are long-term investors. We believe four to five years is the appropriate time frame to assess risk and reward. At the end of that time, another four to five year time frame takes place. This keeps happening until one is in the distribution phase of life and needs to live off their assets. Therefore, of course, it is where we are at the end of the race that counts. Although no guarantees can be given, our goal with all our clients is to get to the end of the race in as good a position as possible given their particular life circumstance.
Disclosure Statements
Standard & Poor’s 500
A market capitalization-weighted index of 500 widely held stocks is often used as a proxy for the stock market. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses.
Risk and Return
The views expressed are not necessarily the opinion of Royal Alliance Associates, Inc. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results.
This newsletter contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed.
Investors should be aware of additional risks associated with international investing due to factors such as greater economic and political instability, increased volatility, currency fluctuation, and differences in auditing and other financial standards and that these risks can be accentuated in emerging markets.
Important Consumer Disclosure
This newsletter contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. References made herein to the market indices are for illustrative purposes only. An investor cannot invest directly in an index. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. Certain information contained herein has been derived from third party sources. Although believed to be reliable, we make no representations as to the accuracy or completeness of any such information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Additionally, certain statements that indicate future possibilities are forward looking statements. Due to known and unknown risks, other uncertainties and factors, actual results may vary materially from those portrayed in such forward looking statements. As such, there is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.
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