Hi Everybody,
I hope you enjoyed a great summer. Is it just me or are summers flying by quicker nowadays? I don’t know, the days may crawl but the years do fly. Here is a quick update on the financial markets. The stock indexes are hitting all-time high levels. They are doing this despite the pandemic, inflation worries, political chaos, a congressional spending bill that could cause taxes to increase for corporations and individuals, the loss of the step-up in basis for assets at death, the gigantic national debt, the Fed tapering bond purchases, and if that’s not enough, we are coming into the treacherous month of October. Yikes!
2022 is going to mark 40 years in this business for me, and I can tell you that all those problems I just mentioned don’t matter right now. And they won’t matter, until they do. Now, I’m no Cassandra, being cursed with the ability to predict the future. I do know though that ultimately, problems must be faced, and from a financial standpoint, the market will be the arbitrator of what is important and what isn’t. And just a reminder, I’ve seen similar problems like this multiple times during my career. Working through them isn’t always pleasant but we’ve come out okay on the other side. I think this time it will be no different. Let’s all just buckle up.
I want to give you a quick funny story of risk/reward. My grandson likes to build Legos. Today’s Legos are nothing like the Lego blocks I used to build when I was a kid. Anyway, I wanted to teach him something about investing. I looked at some expensive Lego sets that I thought might hold their value 6-7 years from now that I could sell online at a profit. So I bought the sets. I explained to my grandson what the plan was. There was one particular set that I knew he wanted to build now and not wait for 7 years to see if the value would increase, thus turning it into a good investment. He said, “Grandpa, what are we going to do with the set?’ Now as I said, I knew he wanted to open and build it instead of holding it for the future. I said, “I think we should keep it because I think we could sell it for $300 in the future” (I think I paid $175). I could tell he was disappointed, but then the risk/reward mindset of a 7 year old who wanted to open it right now and not wait said, “but Grandpa, what if the price goes down??”
How can I argue with the investment wisdom of a 7 year old? He might be right and it might not turn into a good investment after all. So guess what we did? We built the set and that turned out to be a lot more valuable than any potential earnings we would have made by waiting.
Until next time, I’m Phil Albitz.
