Month: December 2023

Surviving a summit attempt on a world class mountain requires the use of every means available towards success, including proper clothing and gear, physical conditioning, mental preparation, technical training, route planning, team coordination, danger recognition, and, of course, sound and timely decision-making in every instance. Dwelling in such a hostile environment long enough to earn ‘the attempt’, and live to share the experience, is improbable for most ambitious climbers. An equally challenging adventure is the lengthy retirement in a high-inflation environment, a path fraught with perils maximizing the probability retirees will outlive their capital. We are slowly discovering the Fed’s recent rate hikes broke certain components of the economy while failing to fully subdue entrenched core inflation; let’s recognize and engage some inflation-fighting retirement strategies!

• Assume a higher inflation rate in your planning. An impactful and lasting financial dynamic must factor into planning and investment decisions; get this issue on your financial radar.

• Allocate retirement capital towards assets that appreciate, and produce competitive income streams in an inflationary environment (Prior Blog: HighInflationInvestments) Pricing power rules amidst high inflation.

• Live frugally and maintain strict budgeting. Most American retirees spend more money in year one than the final working year. Living on a fixed income with high inflation is serious business; don’t let the above be you.

• Optimize Social Security, which will impact the longevity and productivity of your retirement capital pool. Discover which Social Security option maximizes the probability of the greatest lifetime family financial benefit.

• Diversify sources of income. Use your God-given talents, have fun, and be creative. Every dollar you earn is a dollar that can remain invested, or freely given to another in need. Be a conduit of financial blessing because of your personal fiscal discipline. Will God not bless this profoundly?

• Manage health care costs prudently. Understand your health plan options, features, and costs, and comparison shop¹. Be your own primary health advocate with a solid regimen for nutrition, exercise, sun exposure, hydration, and sleep. Read daily to enhance your understanding of natural good health.

Any great mountaineer who does everything right can still in a flash be devoured by an avalanche, just as fixed income retirees in a fiscally reckless society can be left holding a currency with no meaning in God’s economy. I think this means we should strive for financial excellence but always hold it loosely, and to be thankful for what we have and generous with those in need.

God bless your efforts and Happy New Year! Shaun

“The point is this: whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that having all sufficiency in all things at all times, you may abound in every good work.” ~2 Corinthians 9:6-8

1 Smart Asset, “How to Account for Inflation in Retirement Planning”, October 27, 2023

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

While it’s sensible to witness the ballooning debt load of one’s own over-spending nation and expect an unpleasant conclusion, it isn’t reasonable to presume the process will necessarily mimic The Great Depression of the early 20’TH century. Historically, the financial demise of fiscally irresponsible countries has come in the form of deflation, which Argentina has frequently demonstrated, or inflation, which most recently Zimbabwe graciously illustrated. While it seems broadly understood the U.S. government’s relentless over-spending must culminate in a restructuring of the financial system, it appears little perceived the chosen venue by both the government and central bank is inflation.   

Deflation essentially consists of borrowing every dollar any fool will lend you, stiffing your creditors, and then enduring the awful consequences of trade abandonment, job scarcity, high unemployment, broad demand reduction, decreasing prices, and a hoarding of cash and currency. Think of it as an honest default. Inflation, defined as “an arbitrary increase in the volume of currency at a rate exceeding annual economic output”, is a dishonest default few can perceive. Picture a person handing you a $10 bill while removing a $20 from your back pocket. Inflation is a lining of the national highway of fiscal hari-kari with numerous, pleasant distractions, the greatest of which is the appearance of wealth. Consider how the scheme works, and you will know how best to conduct yourself.

When a fiscally reckless government becomes overly indebted, it can honestly cut spending, which is deflationary, or it can dishonestly monetize its debt by increasing spending and fund it with a combination of money-printing and interest rate suppression. New names don’t change old behaviors; these are the only options. Understand that sufficient currency will be fabricated to continue inflating America’s debt bubble, and that rates will be allowed to rise only enough to convince most people that containing inflation is a priority, and you’ll see how critical it is to do the following things:

• Own assets that appreciate in an inflationary environment, like real estate, stocks, natural resources, and hard assets.

• Prioritize income-producing investments, as inflation places a premium on present dollars while devaluing future dollars.

• Focus on quality, as speculative frenzies will be periodically sifted, like in 2022. In stock ownership, this means capital efficient businesses with large free cash flow; in bond ownership, it means not lending to heavily indebted entities.

• Maintain a long-term mindset with investment holdings. Deflation is decisive, but inflation takes time. America may dominate the world in a highly inflationary environment for many more years. Only when the currency is widely rejected will the inflation scheme unravel, and there is no viable replacement on the horizon today for the U.S. dollar.  

Remember chronic inflation always destroys cash savers and pensioners first. Stay productive as long as possible. Avoid idle cash savings. Understand it’s not that assets are suddenly appreciating faster, but that the currency is losing value more precipitously!

Most importantly, be thankful for the blessings you have and be generous with those in need as you celebrate Christmas this year, Shaun.

“For to us a child is born, to us a son is given; and the government shall be on his shoulder, and his name shall be called Wonderful Counselor, Mighty God, Everlasting Father, Prince of Peace.” ~Isaiah 9:6

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

While favorable circumstances are agreeable to human nature, and therefore, by most people welcomed and enjoyed, it is primarily amid trial and suffering that personal growth occurs, and in which the character is fashioned. My strongest memories as a mountaineer consist not of getting a photo shoot on the summits of 14,000 peaks in cloudless days, but of desperately trying to survive life-threatening storms, with a noticeably high probability of failure! Those terrifying storms proved far more influential to my development as a climber than all the clear days, as they exposed more weaknesses and required more focus, effort, and perseverance. This ‘Trial by Fire’ principle also applies to investing, and since bear markets (defined as a 20% decline in prices from the recent peak) routinely catch most investors by surprise, we’ll be wise today, while the coast seems clear, to consider the opportunities the bear market offers to improve our investing skills.

• Lower valuations on equities are offered, which reduces risk for equity investors. Notable investors build cash prior to a bear market, to purchase stocks at low valuations in a bear market, the very impetus of new bull markets.

• Significant buying opportunities are presented. The most profitable stocks most legendary investors ever owned were generally purchased during a bear market. Warren Buffet, Stan Druckenmiller, Howard Marks, Michael Burry, and countless others have attested to this.

• The market renders an advantage to the judicious buyer. When there are more sellers than buyers, smart buyers notice. When a ‘stampede for the exits’ occurs, smart buyers act. Just as more square feet of a house are exchanged for each $1 invested at low real estate prices, so are more future earnings of profitable businesses in a bear market! The contrarian market is masterful at drawing investors’ attention away from this central issue. The goal is not to strive to time the bear market bottom, but to accumulate great businesses at reasonable prices.

• The efficiency of ‘dividend compounding’ and ‘dollar cost averaging’ both increase during low, bear market pricing. Keep two things in mind: this benefit is realized in the late stages of the next bull market, and stocks purchased in a bear market must still exist at that time to benefit you. Bear markets generally accompany recessions, and recessions generally accompany bankruptcies. Aging climbers ascend only in pleasant weather. Become a scrutinous discerner of quality.

• The ‘Zombie cleanse’ of major bear market/recessions can turn mal-investment into productive capital, increase market competition and efficiency, and set the stage for both a sustainable growth economy and new bull market. Become a duration participant of new bull markets by learning how to behave in bear markets.

Climbing in those big White Mountain storms was crazy, but it greatly enhanced my under-average ability, and over-attention to caution. In 2016, while ascending Mt. Whitney in a light storm, we were astonished by the dozens of climbers literally running down the mountain in terror. The whole summit cone quickly became ours, and we confidently enjoyed the most enjoyable, and one of the safest climbs ever! This is how great investors would describe the bear market. Watch for big swings in sentiment. When universal despondency prevails, your greatest opportunity as an investor has arrived. Have a specific plan; “aim small, miss small”.

Think about it, Shaun.

“Give a portion to seven, or even eight, for you know not what disaster may happen on earth.” ~Ecclesiastes 11:2 

“Lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal, for where your treasure is, there your heart will be also.” ~Matthew 6:20-21

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. Investors should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not insure a profit and does not protect against loss in declining markets. 

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.