Month: July 2016

We’re moving – but not that far.

We have enjoyed the past seven years here at 24 Hamilton Street.  Our office has served us well.  Due to our expanding team, and Saratoga Hospital’s decision to utilize the entire building, we are moving across the street to 21 Congress Street.  Our new office will be located on the second floor, above Fed Ex / Kinkos.   The building itself is called 4 Congress Park Centre, not to be confused with the actual street address.  You’ll see 4 Congress Park Centre on the building’s sign, however it is not part of the mailing address.

There is a dedicated parking lot for our new building with gated access.  When visiting our office, please be sure to bring your parking lot ticket so we can validate it.

The finishing touches are being put on our new office and we are looking forward to the move on Wednesday, August 17^th. We will remain open during the move with no disruption to clients.

Our phone numbers, fax and email will remain unchanged.  The new mailing address as of August 17^th will be:

21 Congress Street, Suite 203

Saratoga Springs, NY 12866

We plan to host a reception in our new office space in September so stay tuned for more details.   If you have any questions, as always, feel free to reach out to us by phone or email.  We will see you on the other side … of Congress Street.

Let’s talk about records.

It’s a word with many different meanings.  It can be a verb (“Will someone please record this meeting?”), a noun (“Let the record show that I enjoy listening to records”), or even an adjective (“It’s been a record year for the Golden State Warriors basketball team.”)

As an investor, it’s a word you should treat with caution.

A few weeks ago, the U.S. government released their monthly jobs report for June.  The report surprised many economists who had expected low job growth.  Instead, U.S. added 287,000 new jobs, far exceeding predictions.¹  Wage growth was also up.

Since the report came out, the markets have been on a tear.  If you’ve been paying attention to the markets lately, you know that on July 12, the Dow^® hit 18,348 points, setting a new record.²  Another index, the S&P 500^®, had previously broken its own high only a day before.

How fitting that both these milestones should occur just before the Olympics, a time when the entire world watches to see new records set and old records broken.

But what exactly do these records mean?

Unlike the Olympics, seeing the Dow climb to unprecedented heights shouldn’t stir up a lot of emotion, either positive or negative.  Make no mistake, it is nice when the markets go up.  It’s especially nice given the fact that many pundits predicted a post-Brexit fall.  (In fact, the markets did fall immediately after the United Kingdom voted to leave the European Union, but the slide was brief and quickly reversed itself.)

But just because it’s nice doesn’t mean it’s time to break open the champagne.

You’ve probably heard us say this sort of thing before, but it’s always worth repeating: neither the Dow nor the S&P 500 are fundamentally any different just because they’ve set new records.  18,348 is just a number.  There’s just not much difference between, say, 18,348 and 17,931.  True, the fact that the former number sets a record makes for a nice story.  But successful investing is based on strategy and discipline, patience and prudence.  Not stories.

The reason we say all this is because it’s easy to get caught up in a story.  After all, the best stories provoke emotion.  The problem is that emotion makes a good servant and a bad master, especially when it comes to investing.

For investors, the two emotions to watch out for are fear and excitement, especially during times like these.  For example, take excitement.  It was only last year, in May of 2015, that the S&P 500 set its previous record high.  Many investors got excited and decided to jump on board the stock train only to watch in horror as the markets plummeted a few short months later.  For those investors, excitement got the better of them.

Fear, of course, can lead to even worse decisions.  Many investors get jittery when they feel the markets are getting too high, too fast.  As a result, they tend to “jump the gun” and sell the moment the markets even hint at falling, even though the next market correction might still be months (or even years) away.

So, to put it simply:

1. It is nice to see the markets going up, especially after last month’s Brexit scare. But …
2. Just because the markets are up now doesn’t mean they won’t fall sometime in the near future. After all, what goes up must come down.  That said …
3. Just because we know the markets will cool off eventually doesn’t mean we need to keep our finger poised over the “sell” trigger.

Instead, our advice to you is that we continue doing what we’ve always done.  Our philosophy has always been to invest in good companies that will help you reach your long-term goals, while keeping an overall eye on the global economy.  It’s a process based on taking our time, thinking things through, and obeying the laws of common sense.

To put it another way, we’re investors, not traders.

Whenever there’s volatility in the markets, we’ve tried to be there to hold your hand and let you know that things will get better.  That’s part of our job.  It may seem strange, but another part of our job is to be there when the markets are up, to ensure we keep our eyes on the horizon and not get distracted by short-term storylines.  We hope we were able to accomplish that with this message.

As always, we will continue monitoring the markets.  In the meantime, please let us know if you have any questions.  Enjoy the rest of your summer!

Half way through – how do you feel?

If you were to ask people how they think the US Stock Market is performing this year, the sentiment would likely be mixed.  You probably wouldn’t hear “amazing”, “strong” or even “good” as we close out the first half of 2016.  Some people may even feel disappointed with the market’s performance.  However, if you look at the Dow Jones Industrial Average (“DJIA”) from January 1, 2016 through June 30, 2016, you’d see a 3% increase…annualized that would be a 6% upturn for the year.  This is not bad by any means.  So, why aren’t people pleased?  What is the reason for the disconnect?

The first two months of 2016 were certainly nothing to write home about.  By February 11^th, the DJIA was down 10%. That’s a bad year, let alone a bad month!  The BREXIT vote took place in late June and we saw the market pulled back 4.8% within several days as a response to what some call an unexpected result.  Yes, the market is up 3% as of July 1^st, however it’s been anything but a smooth, steady ride.

There are a couple of psychological principles or “traps” that investors may be experiencing.  The first one is the Recency Effect.  It is premise that a person will recall recent information or events better than information or experiences that were presented in the past.  The second is called the Negativity Bias, or the Negativity Effect.  This is the notion that, even when of equal intensity, things of a more negative nature have a greater effect on one’s psychological state and processes than do neutral or positive things.  In other words, something very positive will generally have less of an impact on a person’s behavior and cognition than something equally emotional but negative.

The most recent event that had a negative impact on the market is BREXIT, and we don’t think its long term effects have revealed themselves yet.  With that said, as of July 1^st, the DJIA did recover, within a few points, the decline it experienced after the vote.  The Negativity Bias would be one explanation as to why people are still focused on the downturn and not necessarily the rebound.

Whenever the market is volatile, and 2016 has had its share of volatility, it is critical to have a system that keeps the emotion and the psychological traps out of your investment decision making process. Without a non-emotional investment process that relies on unbiased data in place it would be easy to lose sight of the fact that the US Stock Market is up 3% at the halfway mark and is certainly not in “bear” territory at this point. In fact, there are some sectors of the US Stock Market such as commodities, energy and precious metals which have fared quite well. As professional investors we believe it is critical to acknowledge the psychological traps and mitigate their effects by using impartial data and a well thought out investment playbook that is reviewed and executed on a consistent basis. This allows us to make changes when they make the most sense according to the actual market numbers and not by how we (or anyone else) is “feeling” about it.

As you enjoy the upcoming July 4^th holiday, please take a moment to reflect on the sacrifices of those who have gone before, and give thanks for the blessings of freedom we enjoy. In spite of its shortcomings, this is still the greatest nation on earth.

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation or any nation so conceived and so dedicated, can long endure.  We are met on a great battlefield of that war.  We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live.  It is altogether fitting and proper that we should do this.

But, in a larger sense, we cannot dedicate—we cannot consecrate—we cannot hallow—this ground.  The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract.  The world will little note, nor long remember what we say here, but it can never forget what they did here.  It is for us the living, rather, to be dedicated here to the unfin­ished work which they who fought here have thus far so nobly advanced.  It is rather for us to be here dedicated to the great task remaining before us—that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion—that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of Freedom—and that government of the people, by the people, for the people, shall not perish from the earth.

The Gettysburg Address
November 19, 1863
President Abraham Lincoln