Market insights and analysis

I shared some thoughts recently related to Jerry Wagner’s overview of the 2022 first-half performance of Flexible Plan Investments’ (FPI’s) turnkey multi-strategy portfolios. I reviewed, from the financial adviser’s perspective, many of the benefits of risk-managed strategies—in good times and bad.

Reading Dr. Edward Thorp’s 1967 book “Beat the Market” in the summer of 1968 changed my life. I had picked the book up as a summer read while home from college. I was intrigued. Years before, I had read a Life magazine account of how Professor Thorp had created the system to beat the dealer at the game of blackjack, or 21.

I hope you have read Jerry Wagner’s recent article “This time was different!” It provided a good overview of the 2022 relative performance of Flexible Plan Investments’ (FPI’s) turnkey multi-strategy portfolios and FPI’s full complement of Strategic Solutions strategies during this year’s volatile market environment.

Normally when an adviser claims, “This time is different,” they are trying to make the opposite point. Usually, the phrase is used to deride bullish investors who are claiming that all of the excesses leading to a booming stock market won’t turn out to be harbingers of a nasty correction in the not too distant future.

Do these questions ever keep you up at night? “What if we head into a recession and stocks tumble 30%, 40%, 50%?” “What if the economy starts to soar and we have years of growth and prosperity? How should I be invested?”

I went into my local Walmart over the weekend to buy a number of items, including a 10-pack of 7.5-oz. Diet Coke. (Yes, I know it’s not the best thing to drink, but one “mini” can a day is better than the two regular-sized ones I used to drink.)

At this time of the year, 20% to 25% of Americans endure watery eyes, sneezing, congestion, and headaches. And pollen is the cause. When the first irritating signs of hay fever hit me this year, I started researching. And that’s when I noticed the following five similarities between allergies and investing (I know it seems like a stretch, but bear with me).

With the S&P 500 putting in its worst week since January, finishing down nine out of the last 10 weeks, and now touching bear market territory, it is probably an understatement to call the market environment “uncertain.”

Personal biases influence how people interpret events and what they experience emotionally. For example, there will always be a bullish, bearish, and neutral way to interpret the news that the financial markets are faced with every day. Which one is correct? Who can say?

Many years ago, Jerry Wagner, Flexible Plan Investments’ founder and president, recognized the value of incorporating multiple asset classes into a portfolio—not statically but dynamically. Using multiple asset classes was not a new concept at the time, but using them dynamically was.

When we have bouts of volatility, it is important to remember what Jay Mooreland, the founder of the Behavioral Finance Network, says, “The market’s volatility is not your volatility.”

I recently interviewed a financial adviser for Proactive Advisor Magazine, who said, “As a financial adviser, I think it is important to understand your strongest skillsets and areas where other professionals may be able to provide specific expertise that will benefit your clients. … Most notable here is our use of third-party asset managers. They bring research, staffing, strategy development, and overall investment sophistication that I could not replicate on my own.”

The Beatles sang of it in their first American hit. And nearly 60 years later, on May 3, Lady Gaga released a new single with the same subject matter for the movie “Top Gun: Maverick.” Hand-holding. We learned to do it innocently as children. Then as teens, it took on a different meaning. Throughout adulthood and into senior life, it still remains meaningful.

I’ve always been a huge baseball fan—whether as a player myself or following a Major League Baseball (MLB) team. With the MLB season at risk of significant postponement earlier this year, it has been a pleasure to see the early-season action proceed in pretty normal fashion throughout April.

I can still feel the doorjamb pressed hard against the back of my head, each move causing a painful tug against an errant strand of hair. But I wanted to be there, and I strained to stretch my body upward, fighting the urge to resort to tiptoes. Dad took the ruler and balanced it evenly on the top of my head. He then quickly penciled in a line at its intersection with the molding behind me.

To many, there is nothing more meditative and relaxing than building and nurturing a garden. As Rutgers University professor Joel Flagler explains it, “There are certain, very stabilizing forces in gardening that can ground us when we are feeling shaky, uncertain, terrified really. It’s these predictable outcomes, predictable rhythms of the garden that are very comforting. …”

Recently, I was listening to an expert on investor psychology who stated, “Investors feel comfortable investing when markets are behaving as they expect.” That made me think about my article about the emotions of fear, uncertainty, and doubt (FUD) and their often negative influence on investors’ decisions. It also made me think back to the many conversations I have had with investors and advisers about the wide range of uncertainties we all have to face throughout life.

Did you know that April is Financial Literacy Month? Financial Literacy Month was designated officially by the United States Senate in 2004 via Resolution 316, during the administration of George W. Bush. According to Forbes, “The campaign began as Youth Financial Literacy Day, first introduced by the National Endowment for Financial Education (NEFE). In 2000, NEFE handed over the reins to the Jump$tart Coalition, which expanded the one-day campaign to an entire month called Financial Literacy for Youth Month. The event’s name was eventually changed to Financial Literacy Month.”

When we think of our lives or just talk about what we have been doing lately with a friend, we tend to focus on big events. If we have just started a new job or a baby was born, the event dominates our conversations. Similarly, political and economic news can consume the headlines and color what we think is occurring around us.

The calendar says that now it’s spring in the Northern Hemisphere. It arrived at 11:33 a.m. EST on Sunday. On Saturday, it was winter. On Sunday, it was spring. Just like that, an overnight change in seasons.

Some time ago, I listened to an interview on Bloomberg radio with Thomas Gilovich, a well-known professor of psychology at Cornell University. He has conducted research in social psychology and behavioral economics, with a focus on human biases in decision-making. He is the author of several books, including “How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life.”

It was over 30 years ago. I sat in a pew in a little church on the village green of Franklin, Michigan. It was the usual Sunday service, but I was stirred by the sermon from a minister who was still relatively new to me.

A few years ago, I was reading an article about Dennis Gartman, a well-known market professional and frequent financial news commentator. According to Financial Advisor’s story, “A risky crypto bet dented Dennis Gartman’s retirement account.” Gartman reportedly had told CNBC less than two months prior to the story that bitcoin “is nonsense.”

DIY investing has surged during the pandemic. A survey of online brokerage operations showed new account openings up 50%–300% in the first quarter of 2020. According to CNBC, Robinhood, the darling of the younger generation, added 10 million accounts in 2021 (though it appears their monthly active users are declining slightly).

Throughout my life, I have been a fan of science fiction. To pick up a book that can take me on a journey through space or time has never failed to remove me from the everyday and broaden my horizons.

This column has explored the topic of risk management in some detail over the years, addressing several questions: Are the retail investor and financial adviser underserved by the buy-and-hold philosophy? What is the potential role of dynamic, risk-managed strategies in investors’ portfolios? How might modern risk-managed portfolios be best constructed on a conceptual level?

“Nothing is certain except death and taxes.” How often that phrase has been quoted since Ben Franklin penned it in a letter to his friend, the French scientist Jean-Baptiste Leroy, in the midst of the French Revolution.

As has probably been the case for all of you, change has been a significant part of my life. I was fortunate that when I attended college, times they were “a-changin’.” The computer age was dawning. I was able to see the potential of combining traditional investment analysis with the powerful abilities of the PC. A change was necessary. The type of analysis I wanted to do was too computational. It was too intensive to do by hand, and it was not easily repeatable.

A few years ago, staff members were waiting for us at the airport, which was teeming with people when the transatlantic plane touched down. In a crowded, cavernous room, with signs everywhere, they found our luggage and escorted us through customs. Whisked into a private car, they sped us to the dock and our rivercraft.

They say New Year’s resolutions are meant to be broken. I am sure there are at least a few readers of this article who are already frustrated—10 days into the year—by their inability to follow through on some of their well-intentioned resolutions.

When I sat down to write this article, my wife was beginning to take down the Christmas decorations. She loves Christmas and tries to make our home as festive as possible for the holidays. When they all come down in January, it is a bit depressing.

When I was still a teenager, I began a bad habit. While thinking about the future, I would always reference “someday.” The big decisions: Someday I’ll get a job. Someday I’ll get married. Someday I’ll buy a home. Someday I’ll have children. Someday I’ll retire. Someday I’ll have grandchildren. The smaller ones: Someday I’ll get a new car. Someday I’ll lose weight. Someday I’ll go to Europe.

Even with new variants of COVID, the tradition is hard to end. Last year, many firms abandoned the company Christmas party due to state-mandated shutdowns and a virus-frightened populace. But this year, tradition won out, and the holiday party was reinstated.

I visited New York City a few years ago. I sat for over an hour as the plane was prepared and de-iced in the middle of what seemed to be unending snowfall. As I watched the snowflakes dance about outside my window, I was struck by their quick and random movements. Although a part of the same storm, each individual snowflake seemed to have a mind of its own.

Each year, Proactive Advisor Magazine publishes reviews of major trends in the wealth-management industry, especially those related to managed investment accounts; the use of third-party investment managers; and viewpoints on active, risk-managed investment strategies.

It was the fall of 1956. Action from the World Series blared from the radio. It was the New York Yankees versus the Brooklyn Dodgers, game five. Don Larsen threw his 97th pitch. “Strike!” called the umpire, and the audience witnessed perfection. Twenty-seven batters up, 27 retired—all without a hit, walk, or error. The perfect game.

With Thanksgiving fast approaching, on behalf of Flexible Plan Investments (FPI), I would like to thank the many people who have worked with our company this year: our investor clients, financial advisers, our third-party partners throughout the investment industry and elsewhere, and members and businesses of our local community.

I love to meet with clients. Like the bite of a cold wind on a frosty November morning in the Midwest, a meeting with a client can bring an adviser back to the concerns of actual people trying to survive in a real economy.

We all have insurance of some kind—health, auto, life, disability, renters, and/or home. Just in case … When we drive, we have our seat belts and lots of new safety features for our car, like airbags.

Fences are usually used to separate property owned by two different people. Being “on the fence” means that you’re unable to make up your mind, unable to choose between two positions, balanced precariously, in neither one world nor the other.

Countless news reports and research studies have examined the consequences of the COVID-19 pandemic in the U.S. over the past two years. As important a topic as it might be, we may all be experiencing a degree of information overload.

It’s almost Halloween, and we’re still in the middle of a scary period in the stock market. September is known as the worst-performing month of the year. October is the most volatile. Could there be a better time to discuss what frightens investors most—the things that go bump in the night?

Whether you are talking to portfolio managers, researchers, financial advisers, or marketing experts in the financial-services industry, the conventional wisdom seems to be that investors are motivated primarily by two emotions: greed and fear.

I seem to say this each year around the beginning of October: It’s hard to believe the NFL football season is already a quarter gone. (Though I have to keep reminding myself that it is 17 games for the first season ever.)

I’ve been dealing with knee problems for several years now. As a result, I started reviewing medical literature looking for options. During my research, I read a blog post by Dr. Kevin Stone of the San Francisco–based Stone Clinic. The clinic is considered one of the leading knee clinics in the county. It is the first stop for many pro athletes dealing with knee injuries.

A few years ago, two things made me think about what Flexible Plan does from a different perspective.

Since I began investing in the late 1960s, I have always been in the active investing camp. When I started Flexible Plan Investments, Ltd., in 1981, the only investment services we offered were active management (and that is still true today). I thought an investment manager should be “flexible” rather than locked into a rigid buy-and-hold approach.

I cannot imagine writing about any other topic this week than the 20th anniversary of 9/11.

Eleven years ago, I wrote about the triumph resulting from having a plan B. In today’s headlines, we can see what happens when there is no plan B.

Investors received a small taste of downside volatility last week, with the major indexes recovering on Friday to see only a small weekly decline.