The Perspective of the Investor | Part 1

Today and tomorrow, we will be presenting excerpts from the latest client letter by Hewins Financial President Roger Hewins.

Why owning businesses can pay off even in difficult and uncertain times

There are sound reasons for investing in equities even in troubled times. Though the economy may be poor and no relief in sight, in times like this the long-term investor may actually experience one of those sudden, infrequent bursts of large equity returns that make up the bulk of the long-term return on equities. Miss one of those and you will pay for the rest of your life, it’s that simple.

As always, we will not bury you with statistics and technical analysis; there is plenty of that elsewhere (and we will point you to some). Our goal here is to give you useful summary information, and some guidance/wisdom, the best we can find, in order to support your discipline and sound decision-making. We believe these are essential to your success – the rest matters far less.

Is it time to panic yet?

Or at least seek shelter until after the election and the Fiscal Cliff are resolved?

This is our last quarterly letter before the election, and as we come down to the wire in a very close race, with both the Presidency and the Senate very much in play, we can’t help but wonder if disaster looms. The much heralded “Fiscal Cliff” awaits, with massive tax increases and meat axe cuts to government spending in many areas. It will hit January 1 if no action is taken, and there is widespread consensus that it would push our weak economy back into recession.

Even the election is not simple in terms of outcome and results. The President could be reelected with both houses of Congress in Republican hands. Faced with four more years together, will they succeed in crafting a compromise this time? Unclear. Even a Republican house alone can stop the administration from forcing anything through; compromise will be required.

Likewise, even if we have Republicans in control of Congress and the White House, absent the kind of 60-seat Senate majority the Democrats had from 2008-10, compromise would be required to get results. Otherwise we could face more gridlock, the Fiscal Cliff, ballooning national debt, continuing and perhaps worsening unemployment.

So why not wait to invest? Because markets are way ahead of you, ahead of events. They anticipate. By the time we see good results developing the markets will have rallied already, and we will have missed it. We are more likely to finally get back into equities just in time for the correction. Whiplash!

Another Wall of Worry

Wes Wellington of DFA just wrote a short article with this worrisome title, Another Wall of Worry. He notes that over the last 12 months (through the end of the quarter), as we suffered through the steady drumbeat of bad news, the world equity markets rallied nicely, a phenomenon often called “climbing a wall of worry.” The S&P 500 (last decade’s stinker in terms of equity returns) was up over 30%. He then provides two full pages of doom and gloom released during this period by the usual suspects, from Bill Gross to Nouriel Roubini. Giving bad advice as usual. I was tempted to say “as always,” but even a stopped clock is right twice a day, a good thing to keep in mind.

Check back in tomorrow for part 2 of the latest President’s letter.

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Roger Hewins
Roger Hewins

President

Roger Hewins is the President of Hewins Financial Advisors, based in North Palm Beach, FL. Roger has more than 30 years of experience in investment management, helping bring the sophisticated financial advice typically reserved for large institutional clients to everyday investors, from high-net-worth individuals and families to small businesses and retirement plans.

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The Perspective of the Investor | Part 1

time to read: 2 min