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Speculating About Presidential Elections is Not Fruitful

So, I’m chatting with a buddy.  We are doing our best to maintain Social Distancing, wearing masks and sincere in our determination to avoid spraying potentially contagious droplets on one another.

My buddy opened up with “I am very worried about the stock market if Joe Biden gets elected”.  (“Market Worry” is not what we want our clients to experience.) Of course, just the day before, a conversation with someone else opened with the same worry about Donald Trump’s potential re-election.

To assist our buddy with calming the ‘Market Worry’ surrounding the upcoming Presidential Election I produced a slide titled ‘Markets Have Rewarded Long-Term Investors Under a Variety of Presidents’.  Upon even cursory examination it is revealed that­­, in spite of whether our President is a Republican or a Democrat, markets have trended up!

For further information – you might enjoy clicking through to this link:

Click Here to read more.

OUR VIEW:  Any prediction that the market will Decline (Or Advance) if a Democrat or Republican is elected is a Speculation with no basis in historical evidence.

My hope is that I was able reduce my buddy’s ‘Market Worry,’ which she cannot control, by pointing out that she has planned for market volatility by controlling what she can control. For retired investors, that could look like setting aside several years of expected ‘Cash Withdrawal Need’ in Short-Term, Investment-Grade, Globally-Diversified Fixed Income.

Think about it: If an investor were to set aside 15 years of spending in Fixed Income at age 65, and let the rest of her portfolio ride in equities, she would not have to worry much about short term stock market volatility. As the enclosed chart indicates, investors have historically had a good shot at positive returns over long periods of time.

My buddy then commented “I Feel Better About Not Outliving My Money”!  Hooray – Mission Accomplished!

Trusting you are living your life well, maintaining Social Distance and, finding comfort in a Purposefully Derived portfolio, I remain

On Behalf of the Firm,

Tom Warburton




Begin with the End in Mind

So, a buddy comes in…actually…our buddy was visiting with us online via GoToMeeting as we at Warburton Capital continue to work remotely and shelter in place to defeat the Coronavirus!

Our buddy had been watching Financial Pornography and heard an “Expert” utter the alarming words “It’s Different This Time”!  Man, oh Man…I really think this “Expert” was dropped on his head before he was a year old.

Personally, I throw up when I hear alarmist statements like “It’s Different This Time”.  The Legendary Investor, Sir John Templeton, once commented that “The Four Most Dangerous Words In Investing Are – It’s Different This Time”!

The crisis du jour may change, but it’s never really different in the marketplace is it?

Investors around the globe meet in the marketplace to exchange securities in pursuit of a profit.  They make their bid/ask offers based on their individual views of all available information, market prices and speculations – Investors Do This Today Just Like Investors Have Done This In The Past!

The varied opinions of investors/traders are very healthy and lead to “Price Discovery”.  When a trade is made – everybody in the entire world knows Just What A Security Is Worth – At That Instant.  Of course, the Efficient Markets Hypothesis has taught us that that Unexpected News in the near (or far distant) future will lead to Securities Having A Different Price On Some Unknowable Date In The Unknowable Future.

Our advice to our buddy went down the road of “Let’s Forget About Forecasting, Let’s Derive A Rational Goal Achieving Plan and Let’s Begin With The End In Mind”!

Thereafter we laid out a 12 Step Program for our buddy – and any of you who would like – to pursue “A Rational Wealth Management Experience”:

  1. Make Your Goal(s) the Centerpiece.
  2. Avoid “Investment Generalists” and engage in Top Down Planning with an Objective Professional who thinks about your wealth beyond, simply, “Your Portfolio”.
  3. Maintain a Long-Term Perspective and Long-Term Discipline.
  4. Globally Diversify Stock and Bond Holdings.
  5. Forget about What Percentage Of Your Investments Should Be In Stocks Or Bonds, rather, Allocate A Purposeful And Necessary Dollar Amount To Fixed Income For Emergencies and/or Lifestyle Funding.
  6. Having funded your Known Spending Needs with Fixed Income, Allocate Surplus Liquidity to Global Equities.
  7. Invest your Fixed Income conservatively (we each take plenty of risk with our Equities – don’t bear a similar risk with Fixed Income) favoring short-term investment grade Bonds.
  8. Over-Weight Equities to Sub-Asset Classes which have exhibited statistically significant broad market out-performance on a risk-adjusted basis.
  9. Invest ONLY in Securities with minimal expenses (Give yourself a “Fair Shake”) and minimal tax ramifications (Why pay unnecessary taxes?).
  10. View short-term markets news as “interesting” but not “useful”.
  11. Ignore the forecasts of the financial media and other speculators.
  12. Sit back and Enjoy Your Life!

Having considered our logic, our buddy sat quietly, appeared to be reflecting, scratched his head a few times, nodded affirmatively and blurted out – “I Get It – Let’s Do It”!

Our buddy is now on the road to deriving, with our collaboration, A Rational Wealth Management Plan designed to achieve his uniquely personal goals with minimal risk.

Our buddy is, also, starting to view the financial market talking heads as Entertainers – which they certainly are!

In closing, I trust you are watching CNBC much like you watch the Weather Channel.  It’s a terrific source of Current Events which we find to be “Interesting”, however, “Not Useful” for Long-Term Goal-Achieving Planning!

I further trust you are not making investment decisions based on the many – and often conflicting – predictions coming out of the mouths of the “so-called” speculating experts.  These folks on Television are experts alright, experts at entertaining us!

Always wishing you well, I remain

On Behalf of the Firm,

Tom Warburton




Coronavirus and the Market

What is the impact of Coronavirus on my investments?

The term “novel coronavirus” is so new, some people have apparently wondered whether it is related to Corona beer. (It is not; it’s named after its crown-shaped particles.) And yet, how quickly it has grabbed global headlines. As the viral news has spread, so too has financial uncertainty. What’s going to happen next? Will it further infect our domestic or global economies? In case it does, should you try to shift your investments to remain one step ahead?

Our advice is simple: Do try to avoid this or
any other health risk through good hygiene. Wash your hands. Cover your mouth
when you cough. Eat well, exercise, and get plenty of sleep.

But do not let the
breaking news directly impact your investment strategy.

The keys to following an evidence-based investment strategy
are …

  • Having a globally diversified investment
    portfolio.
  • Structuring your portfolio to capture a measure
    of the market’s expected long-term returns.
  • Tolerating a measure of this sort of risk to
    earn those expected long-term returns.
  • Identifying how much market risk you must expect
    to endure to achieve your personal financial goals and allocating your
    investments accordingly.

In other words, it may feel counterintuitive, but if you
have done the above you have planned for this type of contingency already. In
investing, there are things that you can control, and there are things that you
cannot. The impact of coronavirus to the market is something that we can’t
control; sticking to your plan is.

Admittedly, that’s often easier said than done. Here are a
few reminders on why sticking with an evidence-based investment plan remains
your best financial “treatment.”

“I’m assuming there will be no
apocalypse. And that’s almost always, if not quite always, a good assumption.” —
John
C. Bogle

If you’re not invested, your investments can’t recover. Few
of us make it through our days without enduring the occasional moderate to
severe ailment. Once we recover, it feels so good to be “normal” again, we
often experience a surge of energy. Similarly, markets are going to take a hit
now and then. But with historical evidence as our guide, they’ll also often
recover dramatically and without warning. If you exit the market to avoid the
pain, you’re also quite likely to miss out on portions of the expected gain.

Markets endure. We by no means wish to downplay the
socioeconomic suffering coronavirus has created. But even in relatively recent
memory, we’ve endured similar events – from SARS, to Zika, to Ebola. Each is
terrible, tragic, and frightening as it plays out. But each time, markets have
moved on. Whether coronavirus spreads further or we can quickly tamp it down, overwhelming
historical evidence
suggests capital markets will once again endure.

The risk is already priced in. The latest news on
coronavirus is unfolding far too fast for any one investor to react to it … but
not nearly fast enough to keep up with highly efficient markets. As each new
piece of news is released, markets nearly instantly reflect it in new prices. So,
if you decide to sell your holdings in response to bad news, you’ll do so at a
price already discounted to reflect it. In short, you’ll lock in a loss,
rather than ride out the storm.

Bottom line, market risks come in all shapes and sizes. This
includes the financial and economic repercussions of a widespread virus, be it
real or virtual. While it’s never fun to hunker down and tolerate risks as they
play out, it likely remains your best course of action. Please let us know if
we can help you maintain your investment plan at this time, or judiciously
adjust your plan if you feel it no longer reflects your greater financial
goals.




PRESS RELEASE: Tina Parkhill Elected to Our Board of Directors

Thomas K. Warburton, Chairman of Warburton Capital Management announced the election of Tina Parkhill to our Board of Directors.

As an impassioned community advocate, Tina is heavily involved in a number of non-profits with a focus on the arts, family and children, abuse and recovery and mental health.  Most recently, Tina earned a 2016 Woman of Distinction award given by the Tulsa Business Journal.

Tina serves as board vice president of resource development for Family &
Children’s Services, president-elect of Leadership Tulsa and serves as a board member for both the OSU National Alumni Association and the bArt Center for Music.

She was recently selected as chair-elect for Youth Services 2018 Blank Canvas, served on the executive leadership team for the 2017 American Heart Association’s Heart Ball and the Honorary Event Chair for New Hope Oklahoma’s Mardi Gras fundraising event.

Born and raised in Clayton, New Mexico, Tina moved to Tulsa after graduating from OSU in Stillwater with a BS in Marketing. “My first job out of college was as a field sales representative with Ernest & Julio Gallo,” said Tina. “I really enjoyed the experience because of the formal training and development program which provided accelerated management opportunities.” When asked what she likes about Tulsa, Tina said she loves the philanthropic nature of the community. “We have some of the most generous people, supporting so many deserving causes.”

Tina is the owner of Parkhill’s South Liquors and Wine in Tulsa. Warburton commented, “Like many of our clients, Tina is a business owner and faces the unique challenges of running and growing a business. Her leadership ability, business acumen and visibility in our community position her as an ideal Director to guide our enterprise into the future.

I’m confident Tina will make many positive contributions in actualizing our long-term strategic plans and helping us achieve our Core Value, which is To Help People! Please join me in congratulating Tina and welcoming her to our team.”




ABS – Always Be Saving

So, a buddy comes in. This buddy is an outrageously frugal 36-year-old single woman who, amazingly, Manages to Save 30% Of Her Gross Compensation! I asked her how she did this and she said she had a motto – ABS – Always Be Saving!  (Kinda reminds me of the ABC motto – Always Be Closing – from the movie Glengary Glen Ross…but…that’s a whole different story.)

We embarked on a discussion about Saving/Investing in the current market environment and discovered common ground as regards our perspective on Market Forecasters.

As a market observer for over 45 years I’ve observed that every January the same thing happens. Lots of folks – many are so-called ‘experts’– look back at last year’s performance to draw comparisons and conclusions they can use to predict what markets will do in the year to come.

At Warburton Capital we don’t make predictions, however, let’s answer this question:

  • ‘What lesson from 2019 can we apply to 2020?’

Wind back the clock to twelve months ago. The words running across CNBC’s home page were, “US stocks post worst year in a decade as the S&P 500 falls more than 6% in 2018.” The Wall Street Journal summarized the
state of market affairs with this headline: “U.S. Indexes Close with Worst Yearly Losses Since 2008.” Depression and Gloomy Predictions proliferated.

Some folks decided to ‘time the market’, sell to cash and wait for prices to go down. They thought that after 11 years, the bull market was finally on its way out.  So how did those gloomy predictions and rainy-day forecasts work out:

  • Global equity markets finished 2019 up more than 25% – MSCI World Index
  • Fixed income gained more than 8% – Bloomberg Barclays Global Agg Bond Index

Let’s now answer the question about ‘What lesson from 2019 can we apply to 2020’?

  • It’s blindingly obvious: Don’t Bet on Forecasts and Predictions.

We need to remember that missing out on growth does as much damage to a portfolio as losing that amount. How long does it take to make any loss back? How does someone who got out know when to get back in? Market
Timing is seductive, however, to be effective one is required to be right twice– at the top and at the bottom – over and over again.  In the words of Warren Buffett, “I’ve never observed a Market Timer to be right more than once in a row!”

Forget the Forecasters. Don’t time the market in 2020 or ever. Don’t gamble on getting in and getting out. Rather, figure out how much of your portfolio you need allocated to Safe Assets and allocate the remainder to Risky Assets so you can capture the ups and ride out the downs.

At Warburton Capital we work with our clients to achieve the foregoing by engaging in Top Down Planning to derive a Purposeful Strategy for current holdings, incremental saving or even withdrawals. Not enough “experts” subscribe to our point of view. They’re still trying to time the markets by predicting short-term market movements…risk on…risk off…blah blah.

You’ve heard the conventional wisdom, “The definition of insanity is doing the same thing over and over again and expecting a different result.” I see Jim Cramer and his brethren speculators demonstrating this market timing insanity daily as part of the Financial Pornography on CNBC – which I so love simply for the entertainment value!

It seems impossible to know when the best time to get into the market is because we can’t predict the future. And if you think about it, that makes sense. If the market’s doing its job, prices ought to be set at a level where you experience anxiety. It’s unrealistic to think the market would ever offer an obvious time to “get in.” If it did, there would be no risk and no reward.

So, what should you do in 2020?  Keep in mind 2019’s most important lesson (which is the same lesson from every year before): Don’t bet on Forecasts or Predictions. Be a long-term investor in a well-reasoned broadly diversified Purposeful portfolio. Reduce your anxiety by having a Purposeful amount of ‘Safe Assets,’ Make sure the people advising you align with your perspective. Never attempt to time the markets. You’ll have more time to enjoy life!

Closing by returning to the beginning of this missive – in case you worried that our ‘Always Saving’ buddy is so frugal that she is a miser, not to worry.  She travels the world routinely and recently paid cash for a brand-new Tesla. I observe and applaud substantial life/ work balance!

Trusting this will find you well, enjoying the New Year and practicing the ‘Always Be Saving’ habit of our ultra-frugal buddy, we remain

Yours Truly,

Warburton Capital Management