The Transparent Advisor

  by Danno  Remember, if you look at the S&P 500 on a... Daily basis, you can expect it to be down about 47% of the time. Monthly basis, you can expect it to be down ~37% of the time. Quarterly basis, you can expect it to be down ~31% of the time. Annual basis, you can expect it to be down ~25% of the time. 5-year basis, you can expect it to be down ~12% of the time. 10-year basis, you can expect it to be down ~6% of the time. 20-year basis, you can expect it to be down ~0% of the time. Here is the update to JP Morgan's outstanding graphic on annual max drawdowns in the S&P... Notice how the biggest falls seem to be followed by the biggest bounces?...  This is normal in stocks.  What's weird is years like 2021 where it's smooth sailing and we only have a few 4%-5% selloffs.  What's also weird is that stocks and bonds are both doing very poorly at the same time through the first 9 months of this year.  That will change soon enough.  As a reminder, here is the S&a

by Danno June has picked up right were April and May left off... terrible! We are officially in a "bear market" as of the close of business on Monday (defined as being down 20%+ in the S&P 500).  Second one since the start of 2020.  And this one is tricky because Bonds have been getting beat up too, as the Fed raises rates in an effort temper the amount of Demand and inflation in the economy.     The markets be like... Folks still in their peak earning years who understand that stuff is "on sale" be like... Recent retirees who just got done saving money every 2 weeks for 40 years be like... My job is to be like...    It's not a reason to panic, but it's certainly enough to get your attention. Back in 2020 the S&P went down 35% in 6 weeks, and rebounded in a V-shape, almost as quickly. We were worried about deflation & a depression, and the Fed stepped in to provide support.  This one is not like that.  This one has been going down for 5 1/2 month

  by Danno So we took the kids to Disney around April of 2013.  Maya was about 6 1/2 and Zoe was almost 5.  Let's just say that trip wasn't exactly at the top of my list of fun things to do. We did the "Breakfast with the Princesses", of course which I'm pretty sure my wife enjoyed more than the kids.  We were on track to enjoy all the most boring rides ever, waiting in line for 45-60 minutes for each one of them.   Neither kid wanted to do any of the fun rides, and obviously you can't leave the kids alone or wait in line for 45 minutes for me to do a fun ride by myself.  Finally we were at Animal Kingdom one day and I was able to get Maya to reach a little bit.  I explained to her that these rides are all designed to be safe.  What makes them fun is that they make you a little bit uncomfortable.  If you can try something that's just a little bit out of your comfort zone, and then you come to the end of the ride safe and sound, you'll have so much more

by Danno April was a hellish month in the financial markets.   In fact, all of 2022 has been.  A flat-out beating.  That's me on the left. When you talk about the averages or expected returns, it sounds so comfortable.  "Oh, I can make 8%-10% per year?... Great, sign me up."  But "average" almost never happens.  Ups and downs, ups and downs, ups and downs.  Every asset class does this at different speeds, at different times, and for different and unpredictable reasons. And it's uncomfortable. Right now all things are down except commodities.  But what's especially getting killed right now is very long-term assets, which disproportionately benefitted from lower interest rates & the first year of COVID.  Long-term US Treasuries are 30% off their all-time highs, and down almost 20% already this year!  I don't know if that's ever happened before!  And that's only 4 months! The Russell 2000 Growth (SmallCap Growth) is off 33% from it's hig

by Danno Q1 was a wild ride for investors globally.  Don't be surprised if that continues for a little bit. To reiterate from last quarter...   " We can't know what 2022 will hold, but I'm pretty confident it isn't going to be as smooth as 2021." If you look at the S&P 500 on a... Daily basis, you can expect it to be down about 47% of the time. Monthly basis, you can expect it to be down ~37% of the time. Quarterly basis, you can expect it to be down ~31% of the time. Annual basis, you can expect it to be down ~25% of the time. 5-year basis, you can expect it to be down ~12% of the time. 10-year basis, you can expect it to be down ~6% of the time. 20-year basis, you can expect it to be down ~0% of the time. Here is the update to JP Morgan's outstanding perspective on annual max drawdowns in the S&P... This is normal.  What's weird is years like 2021 where it's smooth sailing and we only have a few 4%-5% selloffs.  What's also weird this

    by Danno "Without the bitter, baby, the sweet ain't as sweet." ~Brian Shelby (actor Jason Lee) in Vanilla Sky (2001) ( YouTube link ) Without the market risks, there would be no market return.  Assuming you are well diversified, more stocks/risk means more return over the long-term, and more volatility over the short-term.  If you can't handle that, you might need to tweak your allocation.  Stocks got whacked again yesterday, and that never feels good. It was a bitter day. We're basically back to where we were 12 days ago, and where we were in Summer 2021.  But instead of staring at your account and panicking and looking for nuclear bombs in the sky, let's just chill out a little and look at data.   1st: 12 days ago we then went up 6%-8% in the following 2 days.   2nd: This volatility started in Q4 2021 when the Fed began shifting the expectations about raising interest rates.  In my opinion, for now, this is still more important to the stock market than w

by Danno So apparently Ukraine matters.... who knew?!? Strictly as an investor, the really short version of this blog today: -If you are still in your peak earning years and making money like crazy, the highly technical term for this is a "buying opportunity".   -If you are retired and not earning anymore, this is called a "rebalancing opportunity".  The End.   If you wish to continue reading, you may want to leave your sensitivity training at the door... The last time I wrote on here was January 30th.  I ended with "What happens next is almost always a surprise. What's important to acknowledge is that you don't know what happens next, and to have an investment approach that will work over the long term regardless of what happens next." This Russia-Ukraine thing is not without precedent, and this is no time to panic.  Markets are down because inflation is cooking for the first time in 4 decades, and the expectations have been ramping up that the Fe

  by Danno So we've all been through this once-in-a-lifetime experience over the past 2 years.  Pandemic.  Economic "shutdown"... kinda.  Daily deaths higher than 9/11... allegedly.  Income and wealth disparity at or near record levels.  Riots in streets.  "Insurrection". Racial tension. Political tension. Inflation. The most recent pandemic comparison we have is the Spanish Flu of 1918-1919.  What came after that was the "Roaring 20's", and the stock market did this... (from macrotrends.net) Fine, it's only a sample size of 1, but it's kind of the only comp we have to work with.  I gotta believe that the Spanish Flu damn near shut down the economy. I gotta believe that lots of people lost their jobs. I gotta believe that people changed their behaviors. I gotta believe that people rethought the way the world worked.  I gotta believe there were supply chain disruptions. I gotta believe there were 2nd and 3rd and 4th strains of the virus. I g