In my honest opinion I Insightful Investing

By Jeffrey Moormeier | Dec 06, 2017

This is an opinion column, so here is my opinion. Lets talk about the stock market and politics.

I think the current stock markets’ run is far from over.  That is not to say it is a screaming buy either.

I am not an economist, I am simply an investment advisor, who for over thirty years has spent every day either investing in or giving advice about the stock market. And like most people, I have had my share of success and failure.

Investing by nature is risky business.  And uncertainty is risky.

There is an adage on Wall Street, “the market hates uncertainty.” And because we change our political leadership routinely, politics adds to this uncertainty.

More on this later.

When I approach an investment idea I am looking for a few things:

One, I am looking for ideas that I can relate to such as Starbucks, Costco, Microsoft and Boeing to name a few.

Next, I am looking for a positive environment.

I believe some environments are very harmful to investors.

On my website you can find my philosophy, “avoid bear markets.”

I don't have time to go into that here.

Suffice it to say that I don't believe in “buy and hold” for every investor, under every circumstance.

For some investors “buy and hold” is a very sound investment philosophy.

It is not for everybody. And it is most certainly not for everybody, all the time.

The last two bear markets declined, from top to bottom, 50 percent or more.

The Nasdaq market in 2000 to 2002 declined in excess of 70 percent.

And if you were retiring or planning on retiring during this period, losses like this may have changed your plans.  For those who could weather these storms, a buy and hold philosophy may be suitable.

Next, I am determining what actions I will take if I am wrong.

Let’s be honest, you can’t be right all the time.  I believe this is a major human flaw; the insatiable need to be right.  And this human weakness can lead to holding onto bad investment ideas until they utterly fail.  So I am prepared to admit I made a mistake, even before I make it.

I call this my exit strategy.  What is my exit strategy before I make any investment? This leads to the related topic of politics.

There is no question in my mind that those we elect and their policies effect businesses and the economy in general. Yet I am not convinced that the outcomes we expect are produced by the people we champion.

The economy is way more complex than that.

I have determined my predicting skills are really bad, I can’t see tomorrow.

In other words, I don’t know what I don’t know. And neither does anyone else.  So I try to protect myself from what I don’t know or can’t see.

I have had clients who thought one elected official (the president) would be good/bad for the economy and the markets in general and regardless of which side of the isle you are on, I believe it is a huge mistake to develop an investment strategy that is bias towards one party over another.  I am not saying that you should not believe in your “party choice” but I am saying you should be alert to see if they produce the outcomes you are looking for and recognize when you are right or wrong and specifically what are you going to do when you are wrong.

Here is where I believe my approach is valuable.

If I am comfortable with the ideas I have picked, let’s say Boeing, I trust the leaders at Boeing will navigate the environment created by whichever administration is in control.

I try not to let my bias get in the way of making money.

This has been harder than it sounds because I am passionate about what I believe, like many people.  For this reason I like individual stocks verses mutual funds. I most certainly own mutual funds.  But I enjoy owning individual stocks.

It is easy to align my “bias” with my investments.

For example, let’s say that I prefer “environmentally” responsible companies.

I can do my homework and find companies that reflect my “bias.”

In mutual funds I may not have that luxury.

Most investors are not this passionate about their views.  Some are.

Lastly, I try to let the smart people help me figure out the cause and effect of fiscal and monetary policy (simply put - fiscal policy is determined by congress and monetary policy is determined by the Federal Reserve).

As I said before, sometimes I am disappointed by the outcomes created by those whom I championed and our system is way too complex to hang our hats on our own limited abilities.

As an advisor I help people with very diverse views.

Developing an approach that respects this diversity is critical to helping people achieve their dreams and goals.

I want to take these last few words to say I hope you had a very nice Thanksgiving.

I spent it with my new grandchildren (two new ones this summer) and we are expecting grandchild number four in March.

Happy holidays and Merry Christmas to all!

 

Jeffrey Moormeier of JG Moormeier Financial is a Mukilteo-based financial advisor affiliated with KMS Financial Services, an SEC registered investment adviser. His column does not represent the opinions of KMS Financial Services, nor is it an official prediction or recommendation of any kind. The opinions expressed in this column are generalizations. For advise catered to your specific financial circumstances, contact Jeff directly at jeff@jgmoormeier.com or 425-931-8898.

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