Good afternoon,
Let’s review a few things:
The Market – the markets have been doing well from spring 2020 and continuing through 2021 year to date. See attached for market commentary and performance numbers from First Trust Portfolios. And let’s not forget this standard disclaimer that I’ve seen for my entire career, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
However, just because the markets do well, doesn’t mean that the average investor keeps pace. This study from Dalbar says that the average investor earns less than market returns.
How could this be? To what do we attribute the discrepancy? And of course WMR investors are way above average. The answer has to do not with performance, but rather with investor behavior. Investors who trade a lot, or buy and sell often or try to time the markets have performance that is worse than those who buy and hold. Buying and selling not only incurs excess costs and tax consequences but rarely outperforms simply buying and holding shares in the constantly rising dividends of the greatest companies in the world. Which is why I often mention that I’m not in the investment business, but more in the behavioral finance business. Not only do I rescue investors from other advisors, but I also save them from themselves.
Crypto - Crypto is back in the news. Bitcoin’s value has risen, again, not quite to the highs it reached in spring, but it is off the lows of a few months ago. There is still no SEC approved crypto investment vehicle, but there are several on the horizon so it should only be a matter of time. And there are companies involved in and around the crypto space if you like that area. Give me a call and we can talk about it.
And speaking of crypto, these guys gave the money back. Hackers stole $600 million in crypto currency and then gave it back. Wow.
https://www.cnbc.com/2021/08/23/poly-network-hacker-returns-remaining-cryptocurrency.html
So if crypto is going to be a thing, and it certainly is, then cyber security is going to play a huge role. Not just your own cyber security protection, email and passwords and such, which I have written about in previous WMRs, but as an investment idea in companies in that business. There are ways to participate in that industry, call me and let’s talk about it.
Owning shares in the constantly rising dividends of the greatest companies in the world is always a great idea.
Owning some crypto as a speculation and/or hedge might merit some consideration.
However, cash is still king.
We’ve had a spate of stormy weather here in the D this summer. Which caused some medium sized branches to fall from trees into my back yard. Maybe 5 or 6 of them that were 5 or 6 inches in diameter and 12-15 feet long. Too large to be packed into one of those paper yard waste bags and hauled away by the trash people. So I called my municipality, what is the process for disposing of such material? “You should cut them into 4 foot segments, bind them into bundles, each bundle should be less than 60 pounds and leave them out with your trash.” Which sounded like way more yard work than I have capacity for. So as I contemplated other options while working from my patio, I heard the unmistakable sound of a tree shredder working at another property about half a block away. I walked over to the guys and queried them about my dilemma. How should I go about handling it? “Well, $50 should be able to take care of that….” The project foreman advised me. Perfect. I handed the young man $50 cash and one hour later my fallen branch problem was solved. Note that he didn’t request bitcoin.
And speaking of cash, lots and lots of cash, I recently finished watching a new Netflix series, Cocaine Cowboys, The Kings of Miami. The true story of a couple of hard working guys in 1980s Miami, Sal Magluta and Willie Falcon who rise from nothing to become the biggest guys in the cocaine business at that time. Millions and millions and millions in cash. I don’t know what it is that attracts me to this kind of story, but I’m fascinated by it. The series is only 6 episodes and interviews the actual people involved at the time. https://www.imdb.com/title/tt15049206/
Spoiler alert, Sal is still in jail while Willie served his time and was released. His whereabouts today are unknown.
Here is the original Cocaine Cowboys, the 2006 documentary by the same filmmaker. https://www.imdb.com/title/tt0380268/?ref_=fn_al_tt_1
Not the story of Willie and Sal, but other drug smugglers of the day. This one is very interesting also.
Cocaine Cowboys 2, once again by the same filmmaker, and centering around the story of Griselda Blanco, “The Godmother,” is not, IMO, as good as the others. https://www.imdb.com/title/tt1176726/?ref_=fn_al_tt_6
In a final personal tidbit, this week is college move in week. I have a son who is a rising senior (I learned a couple of years ago that “going to be senior” is not the correct way to describe it) and is moving in to a house with a bunch of his fraternity brothers across the street from the fraternity house. What could go wrong? The good news is that I’m not really needed anymore other than him borrowing my full size, ozone depleting, gas guzzling, carbon spewing SUV to move his stuff around.
I also now have a daughter who is a freshman in college (is it still acceptable to say “freshman?” or is it fresh-person? Or first year student? Or something else?) I did have to help her move up this week, though again I was mainly used for my transportation skills. Her mom did all the work organizing and setting up her apartment, which turned out amazing. I gotta admit that as I was on campus again, I’m a little jealous of the youngsters, I think that despite the new covid world order in which we live, they’re going to have a good time.
As I mentioned last week, the universe often sends me signs. No, I won’t link to the song again. As an example, and this is 100% true, when I was moving my son’s stuff to school several years ago when he was a freshman, here is the song that was playing on my SiriusXM station, “Cat’s in the Cradle,” by Harry Chapin.
https://www.youtube.com/watch?v=KUwjNBjqR-c
Not to be outdone this time around, the universe served up this one as I gathered my daughter’s belongings for her move.
“Daughters,” by John Mayer.
https://www.youtube.com/watch?v=rZLbUIa7exE
I can’t make this up.
This week’s chuckle is from what is arguably the best college movie ever made, Animal House. While much of the movie is NSFW, this clip is. Here are Otis Day & The Knights with “Shout.”
https://www.youtube.com/watch?v=MG7KCOO76Wc
LF27 – “In God We Trust, all others pay cash.” – sign on the wall at a local cider mill.
Have a great week and stay healthy.
This material includes links to third party sites not affiliated with Lincoln Financial Advisors. Lincoln Financial Advisors is not responsible for the content and does not guarantee the accuracy of any information or material contained therein. Lincoln Financial Advisors Corp. does not participate in the crypto marketplace. The opinions expressed are those of Michael Acho and not necessarily those of Lincoln Financial Advisors Corp. CRN-3735065-082621