Happy Father’s Day to the WHA client community dads! I just realized I did not do cards this year (for moms or dads!!), as I had done for as long as I can remember. I have to admit that I am still off my schedule since COVID 19 struck. (FYI - I sent a donation in all of your honor to FriendshipWorks. As you can imagine, Elder isolation has been a huge catastrophe since Covid began. FW is helping in this department big time).
However, bit by bit I am getting back to normal. Working mostly from home and not seeing everyone in person has thrown me for more of a loop than I could imagine! I know form talking to some of you that you could say the same. Nonetheless, we all strive to get better. I remember Joe Plumeri, the former president of Smith Barney (later CEO of Willis group) calling it “CACI” - the “Constant Assault on Continuous Improvement.” It’s a good frame of thinking and I always remembered it.
Now on to our regularly scheduled programming…
Many things are afoot.
I admit these are strange times. So many possible financial scenarios exist, but at the end of the day, it always seems more of the same. Prior to Covid we had the economy doing ok, stocks moving up, the Fed stimulating and a relatively low tax regime.
After Covid, an election cycle, shutdowns, vaccines, re-openings, threats of higher taxes, more spending proposals and so on and so forth, we have th economy doing ‘ok,’, stocks moving up, the Fed stimulating and the same relatively low tax regime.
The one difference, and wild card is that the cost pressures that were nibbling at commodity resource markets for years have finally matured. Increasing. demand, Zimbabwe style monetary policy, and narrow supply options, have created astounding price increases in just about every commodity.
The Fed says this is transitory. Perhaps they don’t want to remove the stimulus that the stock market so desperately relies on, and calling it ‘transitory’ allows them to keep pumping - “totally irresponsible” as intelligent investor Stan Druckenmiller describes it:
Stan Druckenmiller says the Fed is endangering the US Dollar’s Reserve Status
But perhaps it is transitory - at least the lumber prices up 300% part. But I have felt a risk of a government created 1970s economy possibly building here. This is why we keep a gold allocation but have also added real estate ideas.
For a humorous take on investment allocation, here is Paul Tudor Jones, a wildly successful hedge fund manager, saying that if he were managing a pension fund, and if the Fed keeps stimulating (this was before Wednesday’s Fed meeting where they basically kept the stimulus going), he would put 5% of the money in cash, 5% in Bitcoin, 5% in gold and 5% in commodities. The other 80% he would have no idea what to do with in this environment:
Other Stuff
And that’s enough talk of economic stuff. In the financial planning department, I am keeping my eye on estate plan/tax and income tax changes. The President likely wants to get to 70% vaccinations and pass some kind of infrastructure (boondoggle) spending bill before getting around to raising your taxes. So we have time. But not much. I am advising higher income/asset clients to consider tax free/gain harvesting strategies for 2021.
Insurance wise, some of you have discussed long term care insurance ('“LTC”) with me. In the past few years more companies have left this market and some like Massmutual, only sell long term care/life insurance hybrid policies now. Insurance company inabilities to price a straight product correctly in the past and now affordably, is blowing out this market. Hybrid policies can be a good solution - just know for better or worse, they are much more profitable to insurance companies than traditional LTC policies.
With an even worse draught and fire season expected for California this year, my west coast clients may face a time in the near future where their properties are uninsurable by regular means. Those of us in MA are familiar with how the government subsidizes the home insurance policies of rich people on the cape, so it's possible they work something out in CA. But who knows. That’s a big state to subsidize.
I have also started a small cap and venture investing idea newsletter. I mentioned this in an email in May. Some of you expressed interested and now get that weekly/biweekly update. If you are not getting that but would like to, let me know!
Housekeeping
I am fully vaccinated and inoculated so I am ready to meet anyone who has been shy before this point. I’ve met some clients at my office, at their home and outside for lunch. I am flexible and would very much like to see all of you in person one way or another if possible.
I will be reaching out this week to try to get times with as many of you as possible. I look forward to it.