November 3, 2020
Finishing 2020 Strong
By Guest Columnist, Phil Lebkuecher, Shadowridge Asset Management, LLC
Our guest columnist from Shadowridge Asset Management, LLC is Phil Lebkuecher, an Investment Advisor Representative of Shadowridge holding the Behavioral Financial Advisor certification.
You know you’ve been doing something for a long time when a colleague describes you as an “industry veteran.” That’s the way Will Hepburn described me to his clients last week. And yes, it made me aware that I did start as an advisor in 1992 and have been an active investor since 1984.
Obviously, 2020 has been one, if not the, most challenging years we’ve faced in a long time. During these challenging times, I believe we learn the most about ourselves and what we truly value. With that knowledge, we can more become more effective and efficient in managing our finances.
You can still end 2020 strong. How? I’ve listed some ideas below, which you might wish to review and take action on before January 1, 2021.
- Have a signed and updated estate plan, including a will, power of attorney, and health directives. Last week, a client contacted me to say that he and his wife had completed and signed these documents. I love getting those calls from families, especially those with minor-aged children! If you and your family don’t have these documents, I suggest setting a date to get this done before the end of the year. A basic estate plan can be easily accomplished in 30 days, as many individuals and families do not need complex estate planning. We can suggest resources if you are unsure of where to start.
- Review what, if any, life insurance policies you have or might need. Life insurance can be wonderful financial protection for your loved ones who depend on you financially. It can also give your family the financial means to grieve and get through a difficult loss. Having the right amount (death benefit) and type (employer-based, term or permanent) is critical to a family when faced with losing a loved one. If you’re unsure about any of this, give us a call.
- Review and fully fund important financial aspects of your life, especially retirement. I remind people that while you can finance many things like an education, a house or a car, you can’t “finance” your retirement. Living in retirement takes financial resources. Regardless of your age or how many more years you expect to work, maximizing what you are saving and investing for your future can be a smart move. If you have a retirement plan through work, such as a 401k or 403b, are you funding it as much as you can? If your employer has a pension plan (like TRS for Texas school teachers), state legislation may not allow you to “add” to those types of plans, but you could be eligible to fund a 403b, Roth 403b, IRA or Roth IRA. If you already have these accounts, consider making maximum allowable contributions to these plans. If you are unsure, let us know. It’s our job to keep on top of the current rules.
- If you have debt: student loans, credit cards, or line of credit, take the next 60 days to make a plan to pay these debts off. These types of debts can have a tremendous drag your finances, today and especially in the future. It can be helpful to put this information together on a spreadsheet, or at least have your debt information all written out. Knowing the amount owed, the interest rate being charged, and the status (current or delinquent) can help you formulate a solid plan to pay off these debts and lighten your financial burden. Wouldn’t that be a good feeling?
With the elections and the end of the year fast approaching, I hope you will take some time to review these items. Making a decision and taking action is much better than delaying, especially when these decisions can help both you and your loved ones, now and in the future. And that’s true no matter what year it is!
Hepburn Capital’s main phone number 928-778-4000 is a land line and cannot accept texts. Also, we cannot accept trading instructions on our telephone message service. We need to speak with you in person about trades or cash requests so we can verify it is really you making the request. This is part of our security protocols to keep your money safe.
What the Markets Are Doing
And, the Election Winner Is . . .
Last week I published an update addressing client’s concerns about the election. One piece of history points out that when the stock market is up during the period from August 1 to October 31, the incumbent normally wins. If the stock markets are down, the challenger usually wins.
Last Tuesday when I wrote this, the stock market was up by 3% percent, suggesting a continuance of the current administration. I ended the article by cautioning that we still had 4 trading days left in the period. Well those 4 days wiped out the 3-month gains and left the S&P 500 down 4/100th of a percent (Data from Fasttrack), a statistically insignificant amount. So, this normally reliable indicator is saying “Flip a coin. No one knows”.
Stock market performance has wiped out 33 months of gains for some major indexes. The Dow Jones Industrial Average of 30 large company stocks and the Russel 2000 average of 2000 smaller company stocks are both back down to levels they were at in January of 2018. Tech stocks, primarily in the Nasdaq Composite Index, have done well, but most stocks have underperformed tech the past few years as the large and small company Indexes show.
Looking at the 11 industry sectors in the S&P 500 Index and removing Technology leaves an average of 1% per year gain since January 2018. Pretty dismal returns.
So, what do most investors do? Most will sell their underperformers and move money into whatever has been working. These days it is technology, technology, technology, especially the FAANG stocks, Facebook, Apple, Amazon, Netflix and Google. Many investors are now overweighted into expensive growth stocks like these, and what I am seeing in new client portfolios is a lot like what I saw in 1999, when tech was booming and the Internet was on everyone’s mind, leaving investors with way too little diversification.
In 2000, the tech-heavy Nasdaq 100 Index was at an all-time high. By late 2002 the term tech-wreck was in common use and six years of gains were wiped out for Nasdaq Index Fund investors. It was not until 2016 that the Nasdaq 100 again reached its year 2000 levels. Sixteen years for Nasdaq index fund investors to break even.
Tech Investors buying stocks today such as Tesla, Shopify, Salesforce, Zoom, and Square are throwing caution to the wind buying companies with little if any earnings, just as investors did during the dot.com era of 1999 did, much to their regret.
As the old disclaimer points out, “past performance is not an indicator of future results”.
If your portfolio is growth oriented or overweighted in tech stocks or funds, call us for a free portfolio review to assess how much risk you are really carrying. If you don’t know, call us today at 928-778-4000 to talk about this. It is important.
Now, more than ever, it is imperative that you use tactical asset management due to the rising risks we face in the markets. At Hepburn Capital and Shadowridge Asset Management, we have pre-planned, proven tactics to help you avoid risk.
If you don’t know how to do this, or simply don’t want to commit to watching the market every day to be effective at it, reply to this email newsletter to schedule a free consultation.
What’s Happening in Your Portfolio
About two weeks ago, we began pulling you out of the stock markets, and as of this writing on November 1, 2020 we have less than 10% stock market exposure, with most investments in corporate and US Treasury funds, as well as cash and money market funds.
I guess that tells you what Ryan and I think of this market!
A Peek into the Future
Convert Your Gas-Powered Car to Electric
Chevrolet is beginning to retrofit cars with internal combustion engines with electric motors. This may be a game changer. Check it out.
Diamonds Saving the Environment?
On the rooftop of a power-generating waste incineration plant near Zurich, Switzerland, a row of large machines pulls carbon dioxide from the atmosphere. Some of that CO2 then goes to a production facility in Chicago, where a startup called Aether is turning it into something new: the world’s first carbon-negative diamonds…. Read more at the link below:
Vocal Diagnostics: A Revolutionary Health Tool
Scientists are using AI to pioneer a new field of medicine called vocal diagnostics. By simply listening to someone’s voice, they can now diagnose conditions such as dementia, depression, autism, PTSD and even heart disease. The accuracy for diseases like Parkinson’s is now 99%, and 92% for Alzheimer’s, and the technology is moving from the lab to doctors’ rooms. Read more about this at Nature
If my Smart TV is so smart, why doesn’t it know that I voted weeks ago so it can stop showing me all the political commercials?
What We Were Saying Back Then
The Top 10 Investment Scams
I’ve done presentations on “The Top 10 Investment Scams and How to Avoid Them” all over the country. Although I had not done the presentation for about two years, I was asked to fill in at the last minute and record it for Prescott’s Senior Connection, a terrific resource forum for caregivers in our community. I literally had no preparation, just printed off my notes and began recording a few minutes later, so the delivery may be a bit rough, but the content is still terrific. Check it out using the link in the next paragraph.
The presentation is simple to access. There is no need to log in and no password required. You can get there directly via this link:
Have You Received a Statement This Quarter?
We arrange for independent custodians to send you account statements at least quarterly, even if there is no activity in your accounts. Your independently produced statements, sent to you directly from the custodian, are for your protection.
Whether you choose to get paper statements or electronic ones you can print when you choose to, it is very important that you receive statements one way or the other. If you have not received a statement this quarter, please call the office so we can correct that situation for you. (928) 778-4000
Slice of Life
Hepburn Capital is becoming the local face of Shadowridge Asset Management, LLC, of Austin, TX.
On September 17th, the two firms executed a merger agreement which will have me running my Future Technologies strategy for Shadowridge, and Ryan Redfern, President and Chief Investment Officer for Shadowridge, providing signals for several of his strategies for use by Hepburn Capital clients.
Ryan and I both have excellent long-term track records of knowing when to move out of the stock markets early in declines, and Ryan’s money flow indicators are excellent at signaling when to get back in. When we combine strategies and look at past performance, the results are excellent. Of course, past performance cannot ensure future results, but I think you will be pleased.
The two firms have the same primary goals: Our first priority is to protect your investments from major market declines that have cut account values by ½ for index fund investors, as we have seen. Our second priority is to produce satisfying returns for you, but please understand, priority #1 comes first.
Not much will feel different for HCM clients as a result of the merger. Both firms use E*TRADE as our primary custodian, so your accounts do not have to transfer anywhere. They will stay at E*Trade, but you will see a new account number assigned. I plan to remain in my Prescott office, and Yvette and I will be your primary points of contact, although the Shadowridge team can now back us up if we are not available when you call.
As you can see, my newsletter is still being published with the goal of addressing the things you most want to discuss when we visit in the office.
1. Am I seeing the things you worry about in the economy and markets?
2. What am I doing to protect you from those things?
3. How are your accounts doing?
The merger seems to be a win-win-win for you, me and Shadowridge, so we are excited about the future.
There is some paperwork needed to effect the change of adviser firms. E*TRADE was very late getting us their full requirements, so we are really backed up on getting paperwork out. If you have not signed yours yet, please be patient, it is coming.
* The model accounts mentioned in this article are hypothetical examples of how the strategy may work as designed. Performance and activity in client accounts may be different from that in the model in amount of each investment, specific timing of trades, and actual security used, which may vary from account to account. Not all trades are profitable. It should not be assumed that current or future holdings will be profitable. A list of all trades in these accounts for the past 12 months will be provided upon written request.
** Indexes are unmanaged lists of stocks considered representative of a broad stock market segment. Investors cannot invest directly in an Index.
This newsletter may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Information in this newsletter may be derived from sources deemed to be reliable, however we cannot guarantee its accuracy. Please discuss any legal or tax matters with your advisors in those areas. Neither the information presented nor any opinions expressed herein constitute a solicitation for the purchase or sale of any security.
In all investing, past performance cannot assure future results, and as such, our efforts are not guaranteed. Losses can occur. All strategies offered by Shadowridge Asset Management, LLC, adapt to changes in the markets by changing the investments they hold, therefore, comparisons to broad stock market indexes such as the unmanaged indexes mentioned may not be appropriate. Sometimes client accounts are invested in stocks or markets not included in these indexes. Past performance does not guarantee future results. Investment return and principal value will vary so that when redeemed, an investor’s account values may be worth more or less than when purchased. Mutual fund shares and other investments used in our managed accounts are not insured by the FDIC or any other agency, are not obligations of or guaranteed by any financial institution and involve investment risk, including possible loss of principal. Advisory services offered through Shadowridge Asset Management, LLC, a Registered Investment Advisor. Adviser will not transact business unless properly registered and licensed in the potential client’s state of residence.
Copyright (C) 2020 William T. Hepburn. All rights reserved.