Happy New Year!
January 5, 2022
I was pleased with the execution of our process at August Wealth in 2021, and I was generally pleased with our results. Overall, our goal was to grow wealth, and protect purchasing power while being mindful of market volatility and individual risk tolerances.
As is usually the case in my approach to markets over the years, the Christmas and New Year period are “working” holidays for me because they usually present some opportunities for both thought and action.
We have a healthy respect for the unknown, new information, flexibility, and the path less traveled.
I am going to keep this short, but after the rebalancing of trades we have done this week, it made sense to communicate with everyone. If you have questions, please reach out to the team or me. Here is what is influencing my risk and reward calculations as we start 2022 (keep in mind these are only my perceptions):
Mortality and hospitalization risk from Covid compared to the number of cases is low. The pandemic as a genuine health issue may be ending in the next couple of months.
The ways in which society has altered their assessments of risks and desires has changed dramatically. Expectations that it is optional to teach in person, work in person, care for the mentally and physically ill only if you test negative for Covid has quite significant implications for society and markets.
Money remains extremely plentiful, demand remains high, but supply remains more constrained than originally anticipated.
Excessive gambling in crypto, meme stocks, sports betting, Robinhood app, etc. may not be a productive contribution to young people’s intellectual and spiritual development. Economic wealth may be wasted (non-productive) as a result.
Money flowing into goods, services, and financial markets does not look likely to recede unless someone intervenes.
The Fed has explained they will be slowing the pace of accommodation and the risk they act more aggressively in removing accommodation is growing.
My perception is that investors (and gamblers) are more comfortable with risk (perhaps given the strong finish to 2021) in markets at a time when they should be slightly less so.
Market uncertainty is rising, and I suspect volatility will rise with it.
Reduced Real Estate
Reduced smaller cap growth indices (public proxies for private equity)
Increased Metals and Mining
Increased Front End Treasury Holdings (to explore opportunities in volatile markets)
Please know that I am not “bearish” nor am I trying to time the market; that is not what we do. I am reducing risk in portfolios (methodically and slowly, as we have done over the past year) as the cycle becomes more mature. I must respect new information and risk as it presents itself, but our goals and focus remain on building long term wealth.
There are many reasons I remain very constructive and positive on many companies, the US economy, and many international economies. Technological change is happening faster than ever before, and that change is growing at an exponential rate. Our brains have a difficult time understanding exponential change (and compound interest), let alone how life will be altered in the coming five to ten years. It seems clear to me that:
Change will be dramatic.
We are unlikely to know which companies will win or lose. What’s the game plan?
Economies in stable political environments grow over time.
Work hard at your mission (work and save).
Implement a low cost diversified growth strategy to protect your purchasing power and increase wealth over time.
Same Mission, same message, new year.
The famous poem by Robert Frost is on my mind this month. I hope you enjoy it:
"The Road Not Taken" - by Robert Frost
Two roads diverged in a yellow wood, And sorry I could not travel both And be one traveler, long I stood And looked down one as far as I could To where it bent in the undergrowth; Then took the other, as just as fair, And having perhaps the better claim Because it was grassy and wanted wear, Though as for that the passing there Had worn them really about the same, And both that morning equally lay In leaves no step had trodden black. Oh, I kept the first for another day! Yet knowing how way leads on to way I doubted if I should ever come back. I shall be telling this with a sigh Somewhere ages and ages hence:
Two roads diverged in a wood, and I, I took the one less traveled by, And that has made all the difference.
Joseph Cardello, Principal August Wealth Advisors, LLC 51 Riverside Avenue, First Floor Westport, CT 06880 Direct (916) 461-9451 toll free (800) 985-9477
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA August Wealth Advisors.
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