It is roughly a decade since the brewing of the financial crisis. Since that time, central banks worldwide have flooded the markets with what economists call, “helicopter money”; vast volumes of notes printed and circulated – as if flung from a helicopter – to create growth and inflation in their national economies. Wherever one looks today, prices of financial assets appear bloated. Warren Buffet has publicly stated that because interest rates are so low, the valuations are not excessive. Far be it for me to contradict the “Oracle of Omaha”!
The forecast for interest rates has been all over the lot. Many economists have predicted that as the Federal Reserve scales back its balance sheet by buying back maturing treasuries, interest rates would have a natural tendency to rise.
Other pundits explain that with such high levels of debt, the U.S. and the Federal Reserve want to keep rates low. Furthermore, on a relative basis, the U.S. pays much more interest to investors than Germany and Japan, two major G-5 members, thereby, making it a relatively attractive investment even at current rates. Opposing viewpoints are not uncommon in economic and market predictions.
Regardless of prevailing market conditions, our belief is focused on the ‘”Reasonableness Approach” to investing. One must take true stock of one’s own ability to withstand risk. Age, net worth, income requirements and ability to tolerate risk must all be taken into consideration of the “Reasonableness Factor”. The most important consideration is the degree that one can be totally self-aware in order to make that solid determination.
A number of clients over the years have not agreed with our advice and for these families, in most instances, we performed less well. Fundamentally, we must be philosophically aligned with our customers in order to determine the most prudent route to achieving their goals.
We can be very non-traditional in what we view as these very unusual times. We feel the greatest opportunity lies in seeking extraordinary managers. This mandate is an important differentiating factor in our quest. Further, the integration of the managers appropriately into your portfolios is our challenge every day.
Finally, we feel there is a place for some super safe investments that protect capital in extraordinary times. Balance, measured risk, reasonableness – these are the qualities with which we approach our portfolios. We want to protect our clients in any weather conditions.
Whether or not (bad pun!) you agree with our methodology, it’s our sincere belief that this personalized model for achieving a diversified investment allocation is the most “reasonable approach”.
As Thornton Wilber wrote, “Money is like manure; it’s not worth a thing unless it’s spread around encouraging young things to grow.”
As the weather improves, you will notice a lot of school kids working hard during their summer breaks. Many of these young women and men are working so as not to accumulate loads of student debt. My best financial advice is to tip these young people well! It’s the patriotic thing to do – especially since the season begins in earnest post Memorial Day.
G-d bless our soldiers and G-d bless America!
Seymour W. Zises