The 2020 VisionSubmitted by RetireWiseCFP on January 5th, 2020
I love the sound, the vibe, and the look of the Year 2020. 20─20 seems like something we would all want to be a part of: fun, exhilarating, vibrant, balanced, and positive. Before I go any further, I want to take a moment to acknowledge the passing of two multi-decade clients and a shining example to me of how to put family first, the husband and wife team Jim & Pauline.
Where are we now?
The markets are in the happy, happy, joy, joy mood, the opposite of when I sat down to write to you three months ago. You may remember that the negative market volatilities then were mainly in reaction to presidential tweets. I also recall one particular sharp drop was in reaction to the fact that a Chinese negotiating team visiting Washington, D.C., canceled a visit to Montana to look at cows and farmland. I wrote this: “Why should the stock of a company focused on a cure for cancer or obesity be knocked down because of that? I am confident the madness will abate in due time.” Well, the madness did abate as I expected. My friends, it is not because I am a genius. It is simply because I am a disciplined investor.
Where do we go from here?
The imaginations, the inventions, the success of some of the great companies we own and new companies coming up will continue to surpass by a factor of 10X what the cynics, naysayers, and doomsayers could ever foresee. Here is an example: The lady in this YouTube video is a scientist and CEO of a company working on converting pollution into ethanol and chemicals. The technology is the equivalent of removing 700 million (yes, my friends, not a typo) cars from the road. https://youtu.be/N0ghPEB7tmg. This is why I am a persistent optimist about this country, its people, and the markets. Greater solutions to our challenges are coming! Never let anyone steal your sunshine.
On fixed income and alternatives:
The Federal Reserve now seems firmly committed to not raising rates and have simply made that decision clearer to all. They are not going to raise rates. They are going to let more companies be able to afford more workers, , let people be able to afford more housing, and let the economic engine run longer. They are not worrying about the imaginary bogeyman of inflation caused by higher wages for lower and middle-income workers. This is good for the average person, good for the economy, and good for investors. This is the new music coming out of the Fed, and I like it. Yeah, this is groovy, baby!
On Alternatives: I am still hearing the gold bugs chirping, but I say, I hear you knocking, but you can’t come in. Bitcoin boosters are still out there. It is becoming more and more of a narrow sub-culture. I think 80% of the folks that jumped on the bandwagon have moved on. Is there a future for cryptocurrency? I think yes, primarily as a store of financial assets for some people, especially those that live in countries with unpredictable governments, but not really as financial security for most people. Cryptocurrency is still too complicated, and the matter of cybersecurity is also too great a negative against it to be really big at this point.
What should we look out for?
The American economy and workers now have two BIG structural positives going for them in 2020 and beyond. One, there is a sort of truce with China—but a truce with severe negative undertones. It says to any CEO, think twice or three times before you go to China: tariffs can be imposed again at any time. Two, the redo of NAFTA is huge because any American company thinking strictly in terms of lowest cost as the way to be competitive can no longer build a future on that. I will have more to say about the impact of these two structural game-changers going forward, in terms of reevaluating the prospects of some industries and companies.
We start the year 2020 with a clear vision and with disciplined action as investors. We use these two frameworks to invest through the storms, through the rains, also through the blinding sunshine of hype. Do I know exactly what is in store for 2020? No, but I am humbly prepared for the crisis and opportunities that await us. Happy New Year!!!
Femi T. Shote, MSF, ChFC, CFP®
Accredited Investment Fiduciary®