May 4, 2018
Do you remember the 1980’s? I do. How about the 1970’s and stagflation? …nothing we could do about it we were told. High inflation with low employment was the way it was going to be. Inflation had increased during the 1970’s, peaking at 14.8% in March of 1980. Then Ronald Reagan was elected President of the United States with the platform of lowering income taxes, reducing government size and regulation. He took office in early 1981.
Fed President Paul Volcker and the Federal Reserve Board worked to starve the inflation beast by raising the fed funds prime rate to a peak of 20% in June of 1981. The US was already in a recession beginning 1980 lasting into 1982. Business and people were hurting, Volcker was roundly criticized, but then interest rates and inflation began to decline and employment to increase. The stock market took off and we prospered. The 80’s are now seen as a great time for our economy.
It was thought the 90’s could never be as good as the 80’s but the 90’s were “pretty darn good!” Of course there were ups and downs (volatility) and severe over-reactions (speculation) developing. “High tech” led a severe market decline in 2000 and investors switched to speculation in real estate because this time the Fed lowered interest rates dramatically. That led to the severe correction in both stocks and real estate from 2007 through March 9, 2009. But many people took advantage of low interest rates to refinance mortgages. Since then, people have been understandably cautious, especially about the stock market, but the brave and serious investor has continued to earn long-term returns by remaining invested.
Slow growth has characterized our economy since March of 2009. Brian Westbury, an economist, calls it the “Plow Horse Economy”…slow and steady. 2017 was a pleasant year with low interest rates for borrowers while the stock market climbed higher. But 2018 is different – greater fluctuations in the prices of stocks that sound even larger when one neglects to convert large numbers into small percentages of change in the S&P, DJIA or NASDAQ. Interest rates are rising – maybe just back to “normal”…not too high, not too low. (Was that what the beloved childhood story of the three bears was all about?)
“Volatility” is a buzz word; marketing wants you to believe you can have less volatility with investments without losing return. Don’t believe it – throughout time, volatility has been the friend of the investor. “Buy low and sell high” – people know that slogan. But low volatility equates to low return in most cases. Sound investing recognizes the difference between speculation and sensible risk taking. We continue to believe our country will continue through good times and bad times and investing will reward you in the long run.
I enjoy hearing from you after we send a newsletter: “Louise, you are preaching to the choir.” Great, but more people need to become members of the choir…don’t you agree? Our goal is to increase members, including grandchildren, children, friends, relatives, and parents who become responsible life time investors in our great economy.
We believe that serious, but cautious investing is a true path to a level of freedom and security in life and retirement!
An Important Article From the Wall Street Journal by Warren Kozak, Opinion Page, April 28-29
We spend considerable time explaining important components of estate planning to our clients. We include the following: listing accounts as TOD or POD, the benefits and misunderstandings of the objectives of revocable trusts, the importance of listing up-to-date beneficiaries for accounts, and the reasons and need for wills, powers of attorneys for health care and financial matters. Go to Kozak’s article titled “You Can Limit Death’s Financial Costs, if Not the Emotional Ones” for his helpful description of his experience after his wife’s death on January 1st.
We invite you to call us to discuss your accounts and planning questions at any time.
Louise Googins, Advisor
Karl Kuelthau, Advisor
Andrew Yadro, Advisor
Michael Googins, Administrator
Kim Rankin, Accountant