Insights & Advice

Dalton — In mere weeks, giant gains and losses in the stock market erased about six months of gains. From its Feb. 19 high, the S&P 500 has corrected more than 10%, the seventh time it has corrected that much since the bull market started in 2009. That includes an 11-day correction, which ended in August 2011 and wiped out eight months of gains. In August 2015, it took six days to evaporate 11 months of gains. And it took only nine days in February 2018 to say goodbye to the prior three months of gains. Those corrections of 2011 and…

“Boy, that escalated quickly. I mean, that really got out of hand fast.” — Ron Burgundy Dalton — What in the actual $&#@ happened last week?! The Dow Jones Industrial Average and the S&P 500 dropped 12 percent and 11 percent respectively. Both indices suffered their fastest-ever corrections (a correction being defined as a decline of 10 percent). Last week was the worst for these indices since the financial crisis of 2008. The media’s reason behind the sell-off was concerns about COVID-19, referred to as the coronavirus, and its impact on the global economy and corporate profits. Some companies, citing the…

Dalton — The physical impact of the coronavirus (a.k.a. COVID-19) is immense. And I don’t mean just the symptoms or the death toll of the virus. Businesses in China are struggling, with many workers unable to reach their factories and offices, disrupting global supply chains. The boost we were hoping to get from the signing of Phase I of the U.S.-China trade pact has all but evaporated. Listen, I am no infectious disease doctor. I won’t even try to suggest that I know anything about the likelihood of the coronavirus going global and becoming a pandemic. Currently I am investing…

Traditionally, many financial planners have used the income replacement ratio to determine how much money you will need to fund your retirement. The age-banding approach is an innovative strategy chosen due to its increased accuracy and lower initial money required to create an income stream throughout a 30+ year retirement. A hypothetical retirement will be divided into three separate periods. A different investment mix with different amounts of risk taken is then used for each period. Separating expenses into various bands allows your financial planner to develop a plan with both improved accuracy, and outcomes. Age banding is a relatively…

Family-owned businesses don’t do a good job building future leaders. When evaluating potential employees, owners of FOBs consider cultural fit above most other factors. Fitting in with the family is important — nobody wants to work with people they don’t like. But, choosing culture over competency will leave you with people you like (such as your family), but not necessarily people you can rely on to run all or part of your business. FBOs hire family because family is a “cultural fit,” and not always because the hired family members are the best candidates for the job. It’s up to…

Dalton — The price of balloons hasn’t gone up in 50 years, which is surprising considering inflation. In my Jan. 21 Capital Ideas column, “Pegging Inflation,” I wrote: “Oh, and another reason the stock market isn’t poised for underperformance is because the Fed doesn’t care much about inflation right now. The Fed dropped the federal funds rate three times in 2019, to a range of 1.50-1.75%, and Fed Chair Jay Powell said in October 2019 he’d need to see a ‘really significant move up in inflation that’s persistent, before we would even consider raising rates to address inflation concerns.’ More…

Dalton — Bitcoin has been up nearly 20% year-to-date. Tesla is up almost 40% year-to-date. Even big-cap blue chips like Intel are up about 5% year-to-date. A quick search on a screening website found 572 other stocks that were up more than Intel year-to-date. A lot of them, of course, are crazy-tiny volatile small-cap stocks, but many of those names I’d feel OK putting in my mother’s portfolio, if I bought individual stocks. As a general rule, I don’t buy a lot of individual stocks for myself or for clients of my firm, Berkshire Money Management. Our clients happen to…

Dalton — The stock market looks overbought, but it doesn’t seem as if it’s poised for disaster. That creates two questions, at least: Why do I think it’s overbought? And why don’t I think it’s poised for disaster? If you’ve been in the business for a while, knowing that the market is overbought is a bit of an art form. You can practically feel it. However, I like to think of myself as a man of science, so let’s back up my gut feeling. Since the Oct. 2, 2019, lows, the S&P 500 is up about 15 percent, which is…

Do you ever go home and your spouse asks, “How was your day?” and you reply, “I was busy all day but I feel like I didn’t get anything done”? Justina has those conversations all the time. Justina is the chief operating officer of a mid-sized, Berkshire-based manufacturer of contamination control devices. She is whacking moles all day long. Now that I look back, it’s a rather barbaric notion, but as a kid playing Whac-A-Mole at the arcade was a lot of fun. The point of the game was to wait for one of several plastic moles to raise its…

Dalton — When it comes to the stock market, whichever way the year starts is usually the way the year finishes. Mostly. And 2020 is off with a bang. Since 1950, the history of the S&P 500 during election years is that, 82% of the time, it ends the full calendar year in the same direction as the first five trading days. On Jan. 8, 2020, the S&P 500 closed its first five trading days up 0.7%, suggesting that the odds are ever in your favor for a higher stock market in 2020. Interestingly, this same metric, while still positive, is…

Dalton — The stock market kicked off the new year in record high territory, looking as if it shook off the summer’s recession scares, embracing some newfound economic momentum. I’m even shaking off some of my own 2020 recession concerns and thinking that we might have another year or so of breathing room before any stock market crash. Not that we’re expecting anything gangbusters for the economy, but 2% GDP growth, which has been the norm for this expansion, may very well continue for a bit longer. That level of growth should create enough jobs so that the unemployment rate will…

Dalton – For some folks, here’s what we used to do at Berkshire Money Management. When a client passed away, and the beneficiary of their Individual Retirement Account (IRA) was a non-spouse, we’d have the recipient of that inheritance place the money into what we call a “stretch IRA” account. Using a stretch IRA (an estate planning strategy used to “stretch” required distributions over a lifetime) allowed for the assets to have the advantage of growing tax-free for a longer time, as well as keeping the recipient in a lower tax bracket. The SECURE Act, which is part of a spending…