WEALTHTRACK Portable

Our focus this week: The challenge facing most of us!

 

Nobel Prize-winning behavioral economist Richard Thaler recently called the drawing down of money in retirement “way harder” than the saving phase because of the uncertainty of how long we will live.  He is proposing adding 401(k) funds to social security to increase monthly payouts. 

 

This week’s guest, Mark Cortazzo, wholeheartedly agrees with Thaler about the difficulty of the spend-down phase and says another largely unrecognized danger is portfolio volatility, which can mean the difference between solvency and insolvency at the end of life.  He has the research to prove it. 

  

Cortazzo has done a number of studies showing how the accumulation phase of investing assets for retirement if done regularly and systematically over many years can make just about anyone feel like a genius.  However, once the withdrawals begin, what the pros call the decumulation phase, it’s a whole different ball game. What worked so well in building up a nest egg can be a disaster when taking it apart.

WEALTHTRACK #1548 broadcast on May 17, 2019.

https://wealthtrack.com/avoiding-disastrous-mistakes-the-danger-of-portfolio-volatility-in-retirement/

Market volatility is back.  The roller coaster trade negotiations between the U.S. and China are lurching downward again causing a multi-day market sell-off rivaling declines in December of last year.

The much bigger question is how stable is the world financial system?  A decade ago in the midst of the global financial crisis, it appeared to be on the brink of destruction.  Massive and unprecedented monetary stimulus by central banks and fiscal stimulus by governments stabilized financial markets and supported banks and businesses. There was a huge unwinding of debt in the financial, corporate and household sectors.

Fast forward and the U.S. which was the epicenter of the financial crisis has led the world out of it. Since 2009, we have experienced the longest bull market in our history and are just weeks away from setting a record for the longest economic expansion.

Two economic thought leaders assess the still challenged stability of the global financial system. WEALTHTRACK #1547 broadcast on May 10, 2019.

Short term interests remain steady. The Federal Reserve decided to keep its benchmark federal funds rate at the same 2-1/4 to 2-1/2 percent range it had since January when it put its previous series of rate hikes on hold.

 

Two percent is of course the Fed’s target rate for inflation. Fed Chair Jerome Powell described the Fed’s view of price weakness as “transient” but said if it continued it would be “something we would be concerned about.”   

 

As far as the stock market is concerned growth is back in a big way and it continues to outdistance value.  Tech is providing the leadership. According to Strategas Research Partners the S&P 500 technology sector has risen 27% so far this year versus the market’s 17.5% gain.  And the famous FANGs are part of that tech dominance.  

 

Last year’s fourth quarter rout had decimated shares of the extended FAANG family.  Facebook, Amazon, Apple, Netflix and Google parent Alphabet all suffered significant declines. They have made up for much of that lost ground this year.  

 

FAANG stock fever seems to be increasing globally as well.  Owning the tech giant group was considered to be the second most crowded trade, i.e. most popular, in the financial markets along with their Chinese equivalents, known as the BATS: Baidu, Alibaba, and Tencent.  Of note, shorting European stocks was voted the most crowded trade.

 

The FAANGS will continue to flourish, even in a late cycle market says market-beating portfolio manager Howard Ward who owns them in his GAMCO Growth Fund.

WEALTHTRACK #1546 broadcast on May 03, 2019.

This summer will mark the longest economic recovery in U.S. history. The bull market already made it into the record books for longevity in August of 2018. The S&P 500 and the NASDAQ reached new record highs just this Tuesday.

Rather than a cause for celebration many economists, business leaders, consumers and investors have viewed these unparalleled achievements as cause for concern.  Their thinking: this must mean the end is near.

This week’s guest is not in the end is near camp. Anything but!  She has been a believer in the U.S. economy’s recovery capabilities since it emerged from the global financial crisis.  Nancy Lazar is Co-Founding Partner and Head of the Economic Research team at Cornerstone Macro, a leading independent macroeconomic investment and policy research firm she launched in 2013.  Lazar was one of the first economists to recognize what she dubbed, “America’s Manufacturing Renaissance,” the re-emerging competitive advantage of the United States as a manufacturing base once again. And as China’s economy slowed and America’s strengthened, she saw the U.S. assuming a key role in driving global growth once again, a role ceded to what many concluded was China’s unstoppable ascent.

WEALTHTRACK #1545 broadcast on April 16, 2019.

Remember the expression, “Follow the money” from the Deep Throat character in ALL THE PRESIDENT’S MEN? We are following the money for you. We also want to, “Show you the money,” Tom Cruise’s mantra in JERRY MAGUIRE.

We can do both with one investment approach. Socially responsible investing, also known as ESG (for Environmental, Social and Governance), sustainable or impact investing. It is attracting massive amounts of investor dollars - follow the money - and is performing as well if not better than non-ESG investments - showing you the money!

The latest evidence comes from Morningstar. In its most recent “Sustainable Funds U.S. Landscape Report” Morningstar found that the ESG fund group “attracted record net flows in 2018,” its sixth year of “ever higher annual net flows” while non- ESG U.S. funds “collected less than half their historic annual… average” of the last 10 years. And sustainable funds relative performance remained strong, even in the challenging environment of 2018.

Environmental impact investing is attracting dollars and delivering results. Two experts share their investment strategies. WEALTHTRACK #1544 broadcast on April 19. 2019.

Great value investor Joel Greenblatt reveals his two secrets to investment success. He is living proof that active management can still work really well. Greenblatt is Managing Principal and Co-Chief Investment Officer of Gotham Asset Management where he co-manages hedge funds and several hedge fund-like mutual funds utilizing long/short strategies. His behavioral insight that the best investment strategy is one that both makes sense and that you can stick with.

The proposition that active management still works can be made on a case by case basis in the highly competitive stock mutual fund business, but it doesn’t hold up in general. In Greenblatt’s opinion: the investment flows to passive will continue, but there is a silver lining to this trend, which he will explain.

In an exclusive interview, great value investor Joel Greenblatt reveals his two secrets to investment success. WEALTHTRACK #1542 broadcast on April 05, 2019.

More at: www.wealthtrack.com

Yields on government bonds are falling across the globe. The yields on the benchmark 10-year bond in both Germany and Japan are negative for the first time in a couple of years. The European Central Bank, already announced it would hold its short-term rates below zero at least through December.

Here in the U.S., where economic growth is stronger, the Fed reconfirmed that it is on hold. The futures markets, however, are betting on a change in policy toward more easing. The Federal-Funds futures were recently pricing in a 40% chance of one rate cut this year, an expectation several Fed officials were quick to dismiss.

The bond market is signaling possible trouble ahead. For the first time since 2007 long-term interest rates, as measured by the yield on the 10-year Treasury note fell below short-term rates, as measured by the yield on 3-month Treasury bills. Known as an inverted yield curve it is considered to be a reliable indicator of recession.

This week’s WEALTHTRACK exclusive guest has long been warning of subpar economic growth globally and the risks inherent in this recovery. He has spoken about them numerous times on WEALTHTRACK. Back by popular demand is Robert Kessler, Founder, and CEO of Kessler Investment Advisors, a manager of fixed-income portfolios with a specialty in U.S. Treasuries for institutions and high net worth individuals around the globe.

Kessler is now telling clients that there is a recession dead ahead but his silver lining is that it provides an unusual investment opportunity.

WEALTHTRACK #1541 broadcast March 29, 2019.

The retirement crisis is real. 40% of older, middle-class workers and their spouses will fall into poverty or near poverty in retirement. Economist and retirement expert Teresa Ghilarducci says the U.S.’ 40-year experiment with do-it-yourself retirement is seriously flawed, but there are ways to fix it.

WEALTHTRACK WOMEN is featuring women who are making a difference in business and finance during Women’s History Month. Join us for career advice from three successful women entrepreneurs including S’well’s Sarah Kauss. Pension expert Teresa Ghilarducci provides timely retirement solutions. Award-winning wealth advisor Karen Altfest explains her women-centric approach.

More WEALTHTRACK WOMEN here: www.wealthtrack.com/women

While your local public television station holds its fundraising drives on weekends, WEALTHTRACK is focusing on new topics for our podcasts to help you improve your portfolios and finances.

Purpose matters, particularly to younger generations. In a recent survey of millennials by Deloitte, almost 87% of them said: "The success of business should be measured in terms of more than just its financial performance", and when asked what the primary purpose of businesses should be - 63% more of them said "improving society" than said "generating profit."

Younger generations are putting their money where their beliefs are. In its report “Impact Investing: at a Tipping Point? ” independent public charity, Fidelity Charitable found in its survey of affluent philanthropic individuals that 77% of millennials and 72% of Gen-Xers have made some sort of impact investments, that means in companies deemed socially responsible.

Doing good has become a global movement. Philanthropy expert Pamela Norley and Corporate Social Responsibility consultant Toby Usnik describe the new civic age. WEALTHTRACK #1536 broadcast on February 22, 2019.

If you were to name places in the world where you wouldn’t consider investing today what comes to mind? How about Venezuela where the economy is in ruins, the president discredited and the opposition mounting? Or a specific company in this country like Pacific Gas and Electric, PG&E for short, the California utility that filed for bankruptcy and bore the physical and legal brunt of the recent devastating California wild fires? Those are fertile ground for contrarian investors, or just traditional value investors who look for opportunities where others fear to tread.

Globe-trotting Eaton Vance bond manager Kathleen Gaffney looks where others are fleeing for higher total returns. WEALTHTRACK #1535 broadcast on February 15, 2018.

More at: www.wealthtrack.com