A Diversified Approach Is Normally Suitable Episode 79

We had an opportunity to spend last weekend in the mountains at Lake Lure. We had a great time! Lake Lure is about an hour north of Spartanburg in NC, and it’s where Dirty Dancing was filmed in 1987.
It’s a rural town that has very few commercial businesses, so it has a small town vibe. On Saturday, we went over to the neighboring town of Chimney Rock and had lunch and Amelia was able to pan for gemstones. She loved finding gems in her bucket of dirt! She may have enjoyed playing in the mud more…
Amelia is pictured below holding a rock she found while panning for gems.
Amelia mining for gems
It’s always nice to be able to get away and reset. It’s easy for me to go, go, go, but taking a breather is normally a good thing. And we were able to make some memories.
What a Billionaire Is Saying
Charlie Munger is a 97-year-old billionaire and the vice-chairman of Berkshire Hathaway. You may recall Munger and Warren Buffett are primary controllers of Berkshire, and they’ve obviously both been around for a long time. Below is the view from outside of condo where we stayed over the weekend.
view of lake
Munger was recently interviewed and stated that the stock market today is “crazier than the dotcom boom.”
From the article, “He said many companies were now trading on the US share market at prices that represented 35 times earnings – making it much harder for ordinary investors to make money on the market. It is hard to get results which could be called normal results in investing.”
This may be why CEOs and insiders have sold a record $69 billion of their stock according to a recent CNBC article. The key takeaways from the article are:
  •  Looming tax hikes and lofty share prices encourage many to take profits.
  •  As of Monday, sales by insiders are up 30% from 2020 to $69 billion, and up 79% versus a 10-year average, according to InsiderScore/Verity.
  •  The selling is likely to increase even more as December is often an active month for sales due to tax planning.
The Result
The government continues to use extraordinary measures to stimulate the economy. The Federal Reserve has not given a clear indication of when interest rates will be increased or when the $105 billion of money printing per month will end. The government uses the newly created money to buy bonds and presumably equities.
These drastic measures seem misplaced given the seemingly robust economy we have. But these measures may be creating an illusion of economic vitality. The challenge becomes, how do we invest in this economy?
Lake view
A Possible Solution
Our philosophy is to have a diversified approach that includes:
  • Investments that cannot lose principal.
  • A bucket of money that is in the market and has active portfolio management.
  • And a smaller portion that is more aggressively invested to combat inflation.
Obviously, the suitability of this approach will vary from person-to-person, but having your portfolio performing different tasks is prudent. This approaches allows us to attempt to earn a consistent return in different types of markets.
We don’t know what the future holds, but we can act as wisely and rationally as possible with the information we do have. At times, it can be hard for us as humans to remove our emotions from our finances. Sometimes stepping away from our situation and attempting to view our situation from a macro perspective is helpful.
From a Scriptural perspective, things related to money are clearly an important aspect of our lives. It’s actually one of the most mentioned subjects in the Bible, and I believe that it’s because we humans find great comfort and security in our finances.
Most of us work all of our lives saving and storing up for retirement, so it makes sense. But I want to challenge you to think about why you were blessed with the money you have. Is there a greater purpose for your resources that maybe you haven’t thought of yet?
Until next week,
David C. Treece,
Financial Advisor
Did you miss one of our last newsletters?
Controlling Our Emotions: Click here
Have You Considered Adding Alternative Fund? Click here
Do You Have an IRA or 401k? What you need to know: Click here
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