The Daily Mission

A rising spirit of the times. You fed up yet?

J Pow wraps Jackson Hole Fed meeting with some thoughts

An update on the US $ and it’s hegemonic role as the world’s preferred reserve currency

The U.S. is 26% of the global economy, as measured by annual GDP.

US$ is still 58% of global reserves. It was already declining pre-Covid & pre-UKR War. Despite the massive $$ creation, mismanagement of Fed debt, and abuses of the dollar, it’s still in place for years ahead. 

I don’t see how it’s unseated without at least these conditions being present:

1. The emergence of a strong, proven, gold-backed alternative reserve currency, which will also require significant trust, deeper and more liquid capital markets than the U.S., and an open capital account (those last two are critical).

2. An emerging dominant world economy that has sufficient working population AND population growth, that can produce most of its own food, energy resources, and is protected by natural borders.

3. The ability for the lead country of that alt system to project power globally at a moments notice which would require:

A. both superior naval & air power

B. superior satellite & recon capabilities 

C. a fleet of nuclear powered air carriers

D. a fleet of nuclear powered deep sea subs

E. deep experience operating elite units in counterinsurgency scenarios

4. Given all of the above conditions, there would need to be a major war resulting in an uncontested unseating of the current reserve status position country

In addition to all of the above, it would require the development of global financial centers of trade to rival the West. For instance it might require Shanghai, Singapore, Hong Kong, and Dubai to collectively displace New York, London, and Tokyo. And all would have to be "off" of the US$ as primary mode of exchange/trade settlement, and reserves.

Remember that trade is settled and reserves are held primarily in US Treasuries, as they represent a nearly risk-free option. We have by far the deepest, most liquid capital markets and transparency.

What happens from here though with the amount of Fed debt we're racking up through PRINT+CTRL & Spend is up for debate. One could argue that a certain amount of "inflating our way out" will occur, as has been the pattern throughout history (American Revolution, Civil War, World War II).

I have also noted the following order of events proposed recently by an anonymous (but learned) financial pundit:

1) Credit downgrade so nations dump US treasuries

2) Rapidly raise rates

3) Restrict swap lines causing US dollar shortage

4) Stage "incident"

5) Dollar skyrockets

6) Panic spreads to financial system

7) Nations collapse

8) Print trillions & buy your cheap debt

Let's call that last sequence "just for fun". 

It's one that I'll save and reflect on later.

Welcoming all ideas, opinions, challenges, arguments, etc.

A note on mortgage rates & inflation

This is where mortgage banking and residential real estate overlap w/macroeconomics & money mgt. 

First, a disclaimer. I am not a real estate agent or broker. 

However, understanding some basics around calculating risk, probability, and applying to personal money management/financial decisions:

1. I wouldn't be buying a house right now until prices adjust from the shock of the RATE OF CHANGE of the moves in rates. Understand the magnitude.

2. I would not be taking out 3/1 or 5/1 ARM's (Adjustable-Rate Mortgages) for a 25-50bp (basis points) discount (0.25%-0.50% discount) banking on the idea that mortgage rates have to be lower in 3-5 years (b/c Fed is going to pivot & lower rates ad infinitum).

Inflation: We don't know what the 3-10 yr effect on inflation will be, given this massive shift in globalization, supply disruptions (see the latest in rice & grains) + moves in oil production + geopolitical unknowns in the face of current cold & hot wars on multiple fronts w/multiple "adversaries".

It's simple thesis to believe that "well, we tamed inflation! rates will go down now. time for deflation!". And it's a thesis that serves one's own book (aka the need to be right, aka intertwined with ego).

We're likely to see a higher inflation print for July given higher prices in things like copper, oil, grains (data will come in Aug, so let's revisit). And while probability has inflation cooling again + the possibility that we could get Fed rate cuts into '24 if economic conditions continue to weaken (stock markets are not "the economy"), we cannot rule out continued inflationary pressures later. No, this is not the 1970's. However, inflationary periods tend to move in waves. Think of head-fakes and rebounds.

I would not stake a 3/1 or 5/1 on paying this higher fixed rate thinking that you're saving money for now and surely getting a lower adjustable in a few years.

This also leads to the sort of money behavior that says "well if we just stretch this budget to afford...". Lenders will factor your lower payment into your DTI (Debt-To-Income). But thus can get you into trouble by spending above your means.

3/1's and 5/1's can work if you're not planning to live in the home longer than those time frames. And you can refinance, although you should factor in the fees/costs associated.

Wait it out if you can. Prices haven't fully realized the shock of more expensive lending. Many people are sitting in their homes with low mortgage rates and have no options as replacement. More inventory is coming in the form of new builds. And then we have the issue of investment homes that were purchased for short-term/AirBnB rentals, but are sitting empty most of the time not generating revenue. People took out HELOC's to purchase them.

If you can't wait, find a payment that works at fixed. You can refinance later if rates come down considerably.

Others will disagree & take issue. There's no right or wrong way. It depends of course on your situation.

You have 28 months before the 2018 TCJA (Tax Cuts & Jobs Act) sunsets.

▶ If it expires, we roll back to prior tax brackets 📈

or

▶ It could be extended and remain as-is

or

▶ It could be replaced w/a new act and higher tax rates 📈

2/3 of outcomes lead to higher taxes ❗ 

Roth conversion? 

Maybe. 

▶ Depends on your tax situation, your current income bracket, your ability to pay the taxes on the conversion, your understanding of all conditions that apply including the NIIT(Net Investment Income Tax) if it raises your MAGI (Modified Adjusted Gross Income).

▶ Depends on your future vision of taxes. Will they be higher or lower 10, 15, 20 years from now?

▶ Depends on whether you anticipate being in a higher or lower tax bracket based on income. Are you advancing in your career and expecting to have a higher standard of living, thereby taking more in income from assets in retirement? Is your income projected to stay relatively flat, with adjustments for inflation? Are you looking to take less in income when you get older? Take from non-taxable sources first, then taxable?

Remember that partial conversions can be done. For instance, if you have a $200,000 Traditional/Rollover IRA and you want to convert part of it. The amount you convert will add to taxable income. So you'd work with the #'s and determine what you're comfortable moving this year and next that doesn't cause a serious impact to you by moving you into higher tax brackets. If you have say $1mm in Trad IRA $$, it's going to be a more careful calculation, as a $200-250k conversion could put you into the highest tax brackets at 35-37%.

Consider that the biggest jump in the current tax bracket happens for single filers right at the $182k mark. That's for MAGI. It's a 6% jump. A tax torpedo if you're not careful. Does not apply to married couples filing jointly, as you can see.

In short, work the math. Keep yourself from jumping too much in terms of tax bracket, with the addt'l amount from a Roth conversion, because the amount you pay at a higher tax rate on that conversion could work toward negating the incentive.

Nevertheless it may work out for you to do partial conversions this year and next, in advance of the tax situation changing in 2025.

How Much Is Enough? "The Psychology Of Money" Series Chapter 3: Never Enough. When Rich People Do Crazy Things.

There are different ways to measure wealth. In this case, we’re talking about money and assets.

You can look at income.

You can look at overall wealth, or holdings, or assets.

You can also zero in on cash deposits. 

After all, cash is king when you need it. When the prices of goods and services go up. When you have to feed your kids and get them school supplies. When opportunities arise and you hope to level up your own state of financial security.

A massive move happened from 2019 to 2022, according to official data from the Federal Reserve Bank of St Louis, via their FRED data system.

When we look at all of the cash deposits held by individuals in the US., we see something extraordinary. Knowing that it happened is one thing. Explaining it is another.

I’m also going to zoom way out and give some #’s over the years. I isolated these for 10 year periods, starting in 1989, then 1999, then 2009, then 2019, then the end of 2022 since that’s the last batch of data. And of course it gives us a pre-and-post forced shutdown/lockdown view.

Looking into this was inspired by the work of James Eagle, who creates excellent visuals of econ and market topics, usually in graphics and video form. I encourage you to follow him on Twitter, LinkedIn, or Instagram.

So first, the #’s. And if you’d like references to the charts I’ll put those in the description section. They are screen shots from James Eagle’s work.

1989

Top 1% held 7.6%

Next 9% held 44.5%

Middle 40% held 34.5%

Bottom 50% held 13.3%

1999

Top 1% held 20%

Next 9% held 28.5%

Middle 40% held 38.8%

Bottom 50% held 12.2%

1999 was when the major world protests around the WTO, or World Trade Organization, like the Occupy movement, about the 99% and 1% began. These protests were mainly situated around Seattle. It was also the beginning of more pronounced divisive, identity politics that would carry through to today. Said differently, there are many economic issues, commonalities, shared by a large # of people in this country. It is the divergence of social views, and the focus on them, the exacerbation of these differences that keeps stoking division.

2009

Top 1% held 18.5%

Next 9% held 30%

Middle 40% held 40%

Bottom 50% held 11%

2019

Top 1% held close to 19%

Next 9% held 36%

The middle 40% held 35%

And the bottom 50% held 10%

2022

Top 1% hold 30.5%

Next 9% hold 35.5%

Middle 40% holds 27.5%

Bottom 50% holds 6.5%

(more in episode) (link to article w/graphs included)

Some highlights

-> 8 stocks have driven 90% of the S&P 500’s return (but that may be changing)

-> Cost at the fuel pump is up

-> Inflation up just a bit. CPI came in today at +3.2% YoY, so a little bit higher than the June YoY #. We’ll go over those #’s in minute.

-> GDP is up. That’s on $1.5 trillion of government spending. Think of 3 big factors that affect GDP: consumption, investment, and gov’t spending. It’s that last item that has really juiced GDP of late. With the debt ceiling raised, another $1.5 trillion in govt green moved into the system. We mentioned this in our mid-year review and outlook, whereby gov’t spending could be the wild card that boosts the GDP print.

-> Property loans are so unappealing now that banks want to dump them.

-> Consumer sentiment was up in July

-> Credit card use is up substantially

-> US Consumer Credit has reached $1 trillion

-> This at a time when APR’s on credit cards are up

-> Retail sales are way down

-> Home sales way, way down

-> Fitch downgraded the whole US Government

Part Tres Mid-Year Review & Outlook 2023; Warning: Content May Be Boring.

Part Deux Mid-Year Review & Outlook 2023; Warning: Content May Be Boring.

A few points from the latest in jobs. Stuff you won't hear from financial media.

Having skill at something, anything boosts self-esteem and gives a person a backup job.

Consider risk management and what it takes to recover from a deep loss.

Consumers are getting squeezed, cash levels are growing short, credit card usage is way up at a time when the average APR is 21%, and we now know that globally consumers, and not manufacturing, are carrying the economy.

The global economy seems to be cruising on one engine as it relies on services for momentum. Meanwhile, we’re in an industrial & manufacturing recession as factories slow production.

We’re seeing contraction across major economies in the latest #’s with the US index hitting its low for the year so far. And the euro-area has reached its lowest level in more than three years.

As consumers have shifted their focus to services, the goods side of the economy now finds itself with excess inventories. And interestingly this is happening while we’re seeing purchasing power decline in many world economies.

Add in big interest-rate hikes by the Fed and the ECB in a very short timeframe and consider what that has done to make capital raising and spending much more expensive. We’ve talked about this in content and on podcasts many times. The cost of capital has gone up significantly in the short period of time and this WILL have ramifications. Just as a pandemic put the brakes on the global economy by the decision-making of large central governments, so too will the magnitude of change in the cost of capital hit global markets. These things have lag time.

8 stocks are responsible for 90% of the return this year while everything else is flat to negative. And a subset of those have run up to pretty extended levels of valuation. I was in the industry during the sunup of the tech boom and Y2K. Back then every portfolio manager owned Cisco, and every happy hour had people talking about owning it in their Scottrade account.

Liquidity goes up, asset prices go up. Liquidity comes out, asset prices deflate. But, but we also had that bank run thing in March, remember? And the mini-bailout of those banks. So, another liquidity pop into markets.

We’re seeing that cool off, and more money being drained from the system, albeit money flows are still higher than they were pre-pandemic. 

By now you may have heard that becuae the debt celing was raised, and because money from the Treasury was used to backstop bank failures, Treasury Secretary Yellen will be refilling the TGA, or Treasury General Account, and that has an effect of pulling more liquidity from markets. Add to this that there will be significant Treasury Bill (or T-Bill) issuance in the coming months, and at yields that we haven’t seen in a generation. 

With much uncertainty in the global economy and markets, the idea of getting yield at an essentially risk-free-rate has a strong appeal.

Meanwhile central banks are still signaling that they will keep raising rates in an attempt to to control inflation. This is further exacerbating the inverted yield curve. You can find more discussion of that in previous podcasts. 

US two-year yields are over 1% above the 10-year Bond rates as of today. 

The S&P 500 has experienced a down week, and it is possible that the economic gravity is setting in. S&P Global US manufacturing PMI dropped to 46.3 in June, well below the 50 mark that signifies the dividing line between expansion and contraction.

But, the consensus now is that the US will dodge a recession this year. 

We probably align a bit more with Bloomberg’s Chief U.S. Economist, Anna Wong, who “Amid the most rapid Fed hiking cycle in four decades, Bloomberg Economics has long forecast a recession in the 2nd half of 2023. With the economy exhibiting a bit more momentum at mid-year than anticipated, we now think a downturn is more likely to begin later in the 2nd half than earlier.”

China also continues to show economic contraction, which is a major force upon demand for raw good and natural resources. According to the probabilities we follow, the GDP growth rate of China is going to be cut by half.

The question now is, how much will the consumer keep things afloat via services spending.

These are the 12 Steps we use in planning:
1. Live on less than you earn. This is rule #1. Full stop. Nothing can happen beyond this until it’s upheld through lifestyle and budgeting.
2. Make sure you have enough insurance coverage for all needs.
3. Make sure you can cover basic deductibles.
4. Set aside the first 1 month of emergency cash reserves, while making minimum payments to high-interest debt.
5. Max out your employer match. You won’t get the opportunity again for this “free” money.
6. Continue setting aside cash reserves until you reach 3-6 months, depending on the career you’re in and how long you would anticipate needing to find a replacement position.
7. Increase the amount you are paying toward your high-interest debt, and accelerate payoff.
8. Max out your Roth IRA and HSA contributions.
9. Shift focus to hyper-accumulation of wealth - this can be done through maxing your 401k to create a mega-backdoor Roth scenario, and can also include using life insurance for wealth building and intergenerational wealth transfer.
10. Focus on prepaid future expenses, such as college planning.
11. Focus on paying off low-interest debt, such as your student loans and primary mortgage.
12. Diversify into other “real” assets, or fund a future business.

Some have asked our view on crypto.

Crypto market cap, minus BTC and ETH, is -60% since cycle peak in Nov 2021.

BTC still trades like a high-beta asset. 

(Comments on Bitcoin further below, if you want to TL;DR and jump ahead)

🔹 I would not feel comfortable in a fiduciary role commenting on crypto, positive or negative, beyond what I've posted and put into a podcast to say that we're not in.

🔹 The amount of additional analysis needed at this point, not just to understand:

1. what it is that is being traded, but how it's trading

while having to...

2. add "CYA" (Cover Your *ss) provisions

and being able to document prove...

3. plenty of "KYC" (Know Your Customer), 

not to mention...

5. the regulatory actions currently being taken (and proposed/anticipated)

and...

6. lack of trust in trading platforms, several of which have imploded in dramatic fashion

🔸 Makes it time, cost, energy, and risk prohibitive for us. That's a 6x-no, when the daily focus is on actively risk-managing your hard-earned assets, most often employing investment vehicles where transparency and liquidity are key.

That said, in regards to Bitcoin...

We have at times engaged Bitcoin as a trade. Here is the thinking...

Bitcoin has traded like a high-risk, high-beta asset, further out on the risk spectrum than emerging markets. It's important to view it through this lens, b/c you want to understand how institutional money would view it. When institutional money moves, it can create large waves.

Based on 120-day BTC correlations:

🔸 Correlation to gold is high. That’s fine.

🔸 Negative corr to USD. That’s fine.

🔸 Nil/zero corr to 10Y breakeven. Ok.

🔸 An interestingly negative corr to VIX.

⛔ But… waiting to see if corr to Nasdaq will ⬇️ over time. 

(Corr to S&P is also high, but corr to Nasdaq is even higher.)

That’s the issue.

Until then, it’s a trade. 🤷🏻‍♂️

I see it as investing in a growth opp. So a % has to be taken from other growth opps for it to make sense. It's an opportunity cost.

➡ If and when correlation to stocks starts to decline. 

➡ And if it holds value and doesn’t dip wildly.

➡ And if use-cases grow...

Then I would revisit the story.

⛔ But if it starts to trade with high volatility again, I’d pause.

If BTC is truly what its proponents say, it would, in theory, be in such high demand that the price will be high enough that these current levels won’t matter. 

🔑 The key (for us, b/c of how portfolio mgt is approached) will be correlation. That is when institutional money would start treating it differently. If that doesn’t happen, you may not be missing out on anything.

If it does happen, you’ll still have time, because of demand due to it proving itself.

Think of it in terms of asymmetric risk/reward. How much downside risk are you taking (given that it could go to zero/become irrelevant), versus the upside potential of a similar risk-profile idea. Put it out on a risk spectrum and determine what you are comfortable with owning in terms of that risk.

As always, we're open to ideas and opinions that completely flip this thinking upside down.

Have you ever looked at a situation, or a person, and wondered if and how luck plays into success?

Luck is real, as is risk. And these two factors show us the reality that every outcome in life has forces that exist in addition to, and beyond our individual effort.

Fact is, they both play a role in life and must be respected. We don’t know how much luck plays into anyone’s success. As Housel says, “when judging others, attributing success to luck makes you look jealous and mean. Even though we know it exists. And when judging yourself, attributing success to luck can be too demoralizing to accept.” (end quote)

If we try too hard to pick apart what is due to luck and what is due to risk, versus what is do to the decisions and actions a person takes we find it far too complex. As I like to say, you’ll never truly understand another person’s situation fully. The influences, motives, all of the variables that went into a person’s upbringing and adult life.

We’re all trying to learn what strategies work best, with money, business, getting wealthy (or financially independent). We try to make it simple by looking at what someone did and copying it. By reading a checklist of these 5 things or 7 things or 50 things that one must do. But we can’t see clearly what was brought forth by decisions and repeatable actions and what things have been affected randomly by luck and risk.

“The difficulty in identifying what is luck, what is skill, and what is risk is one of the biggest problems we face when trying to learn about the best way to manage money.”

And remember along the way, nothing is as good or as bad as it seems.

This is a quick market note for today, given the news on global banking, risk, and signs that we could be seeing a sovereign debt crisis unfold.

Here’s a pertinent take from J. Kyle Bass this morning. If you don’t know Kyle Bass, he is the Dallas-based Hayman Capital hedge fund manager who first came to public prominence for shorting the subprime fallout. Since then he has become a nearly unmatched financial analyst on China.

One of his tweets this morning in regards to the global banking situation is as follow:

“First, banking crisis globally. Then “country runs” for countries with poor balance-of-payment situations and highly-levered banking systems. The U.S. will be a safe haven when things move into “country runs”, which is just around the corner. Over a decade of zero rates, followed by reckless rate hikes will break many banks and countries. EM’s (Emerging Markets) are going to be smashed, along with highly-levered DM’s (Developed Markets)”

In 2008 we had the failure of 25 banks with $373 billion in combined assets.

So far in 2023 we’ve had the failure of 2 banks with $319 billion in combined assets, and more banks globally coming under stress.

To make the right comparison we need to look at the dollar figure accurately.

The $373 billion in 2008 is ballpark equivalent to $521 billion in 2023 dollars.

More to drop on this in the coming days. Thanks.

When the cost of capital goes up, and quickly, things break.

We've reached that point.

Money in-and-of itself is just a tool. It’s a thing that is supposed to represent the exchange of energy that you put into work for its return. I personally believe that huge piles of cash stored away is a disservice in that it’s not being invested or put into flow, whereby more money can be made, people can start businesses and be funded, etc.

Money should not be the cause of losing your closest relationships. If this is the case, then one or both parties might want to rediscover and reprioritize their list of what they value most.

You’re not crazy. That person sitting next to you, as much as you want to believe it, probably isn’t crazy. Truth is, we’re all new to this. And we have outsized expectations that were set FOR us, not BY us. Give yourself some grace. Give a little then to your spouse, partner, parent, child. None of us were equipped with the tools. But together, we’re gonna get better.

Earnings are continuing into further decline. 86 of 100 companies in the NASDAQ 100 are calling for in aggregate earnings decline.

Mortgage originations (purchase applications) are down 41% YoY. That’s the worst in 28 years.

The yield curve continues to signal trouble ahead.

Rates are continuing to go up.

Corporate bankruptcies are rising.

Credit is continuing to contract.

The bad news on employment is that more layoffs have been announced in areas such as tech and finance.

The good news on employment is that there are many job openings being reported, and wage growth in lower-wage, hourly jobs is increasing, and increasing rapidly. That’s good to see because it’s been much needed. Younger people, and people with less experience are able to be paid much more now.

Social Security Cost Of Living Adjusments kicked in for January at just over 8%, raising incomes for many.

Spending is still strong. Although personal spending is hotter than personal income growth. Savings rates are declining, and use of credit cards is increasing. Take what you will from all of that.

Another half-percent rate hike is on deck for March. The Fed isn’t pausing, let alone pivoting or cutting.

We don’t believe there’s a soft landing ahead.

Why The US Consumer Thinks The Way They Do: The Psychology Of Money Series (Postscript)

Our intro to a series inspired by The Psychology Of Money by Morgan Housel. We share insights from his book as a read-along. Outside of direct quotes and paraphrasing, the additional views and comments contained are our own. We are not involved with Morgan Housel, his firm, or his publisher. We have no conflicts of interest regarding his book. We receive no compensation of any kind for recommending it. We simply found it to be inspiring and useful and wanted to share it with you in the interest of helping to create a more educated, financially secure public. Seriously, read this book. We're giving it to our current clients, and each new client when onboarding.

Your start to 2023: The madness of crowds, market makers, greed, short-squeezes, Fedfakes, & 0DTE options (those b*strds! they killed the market!)

We heard you speak via Spotify Wrapped and found out that we were in the top 15% most shared. Whoa! In the words of Ron Burgundy, "I don't believe you". Alas, here we are. Tripling down for 2023. Or tripping down. IDK. More content. More unique series. More somewhat possibly moderately above average stuff. Please listen and share. So my kids can be fed. Thank you.

Thoughts on where we are in markets and economy Sat Oct 15th 2022

Stronger job reports = equities going lower.

Weaker job reports = equities going lower.

Meanwhile, people continue the myopic, binary-outcome argument about "when does the Fed pivot?"

Not only is a Fed "pivot" not occurring, even if it did it's not resuming a secular bull market in stocks.

➡️Especially not in the pandemic story stocks.

➡️Especially not in high-beta (high-risk), and high P/E's.

➡️Especially not in the worst credit, junk bonds, and the pile of excrement that exists across a decent portion of private equity/private investments.

✍🏼 Weaker jobs reports would show further deterioration in our economy.

✍🏼 Stronger jobs reports provide more fuel for the Fed to continue on a hawkish path and raise rates further.

✍🏼 They've made clear that they have to impact demand, inflation and by doing so it impacts the job market negatively

The Fed is interested in slowing the job market and slowing wage inflation.

The higher the Fed Fund Rate goes, the more the cost of capital goes. What does that mean? It means the cost of anything of leverage, of loans, of purchases, of levering up for any type of investment goes up. And not just by a fraction.

Simultaneously, the higher yields go, the more appealing the "risk-free rate" zone on UST's becomes. Because yields are

So if you're holding high-beta stocks with a high P/E (that’s price to earnings ratio) and we’re experiencing higher market volatility and deteriorating economic data, what are you going to do?

You might look over and see US Treasuries yielding more than they have in 15 years. Short term T-Bills (3mo, 6mo, 1yr maturities) up through the 5-yr UST is over 4% now. It hasn't been this high since mid-2007.

To be serious about investing, you must understand the bond market, and understand the effect on risk assets when we have a rate-of-change move of this magnitude, this quickly, at a time when we've arguably been in the "everything bubble" of risk assets.

The rate-of-change in Fed rate-hikes is rapid. One of the fastest moves in history. That means everything has to re-price.

1. We’re in an everything bubble - zero rates pushed money into ever-riskier areas, seeking return, creating the everything asset bubble
2. We’ve started the hikes from zero, which is a shock to the system
3. We were in an ultra low or zero rate environment for a long time - this was a big buildup and will take some time to work through, in terms of repricing risk
4. We now have more complexity affecting markets, in the form of financial instruments known as derivates. And we have widespread availability of options. Everyone can trade options now, whereas say in the tech bubble and market crash of 2000-2002, options trading wasn’t available for most people.

We are moving toward (not yet, but moving toward) a time when we may see 5% US Treasuries, and overlooked stocks with low P/E's and attractive dividends. Ideas you're probably not familiar with and haven't considered. And the "story stock" time will be solidified as over when it manifests itself in risk/return.

If your investment language, following the noise from social media, has only been tech related you're going to have to sit and hold the stuff you paid a high price for, waiting for it to catch up and/or be acquired, merged away, etc.

As we finish out the year, be cautious with where you get your info. People with two years of trading at home have hundred of thousands of followers and make a living on giving hot takes.

✅ You are not BTFD ("buying the f'ng dip")

✅ You are not YOLO'ing

✅ You are not "missing out" (FOMO)

✅ You should not be playing Investment Hero right now.

Remember, this is your hard-earned capital.

Be smart with it.

Well, it’s getting real friends. Like the math said it would.

Now, what do we do with it.

First, we don’t panic. You were prepared , or you weren’t. If you were prepared, you’re sanguine. You’re accepting of the circumstances. If you weren’t prepared, that’s ok. Let’s talk about how you can approach this.

Second, turn off financial media. They’re only going to stoke emotions, resulting in things like (but not limited to) getting submerged in the FUD (fear, uncertainty, and doubt), the FOMO (fear of missing out), the YOLO (you only live once) and might be thinking you’re buying the bottom, Anchoring (which is gluing yourself to a price of something in our mind, instead of letting it go), and a host of other behaviors that are driven by emotions and can result in catastrophe.

We’re here to help you avoid that.

Let’s talk about math for a minute, and then we’ll talk about portfolio management, or investment management if you need clarification.

Math, in markets, is unfeeling.

It doesn't care about your wallet, your sales program, or your need to be right.

It doesn't care about your ego, or your fear.

It doesn't care about matching your analysis of averages, or a "time in the market" chart, or your overconfidence in "timing' the market.

It doesn't care how many analysts pound away at spreadsheets to try and produce an outcome, or match an expectation with a model.

It just does its thing, and represents a set of conditions with a set of prices at any given time.

🧩 It does have probabilities, though!

👉🏼 Math states what "is". And what "is" right now, from a macro perspective, is that we are in .

Things are going to work out after what we're going through.

We agree that most people make poor portfolio managers of their own money. Because they usually:

🔹 Buy or sell emotionally

🔹 Don't have specific risk rules in place

🔹 Or they have risk rules but deviate from them, based on emotion

🔹 Don't habe a process

🔹 Don't know how to properly diversify (different types of stocks doesn't equal diversification)

🔹 Don't understand correlation

🔹 Don't know how to measure risk

🔹 Don't have an idea of min/max position sizing

🔹 Don't have sufficient research

🔹 Don't understand macro and how it moves sectors and affects outcomes

🔹 Are missing at least one or more of the following: Knowledge/Skills, Access, Time, Inclination

For most people, IF they are not under active investment management/advisement, we agree that it's best to:

✅ Spend less than you earn

✅ Save what you can

✅ Set up a plan

Invest what you can

✅ Keep buying through all conditions

✅ Stay invested and let compounding work over time, using strategic investment allocations

✅ Then focus on maxing out your own skills to produce more income. It will benefit you more than the time you spend trying to research how to manage your portfolios.

This is not time to be an investing hero.

Titan hedge fund managers get burned.

You will, too.

🫣 Humility is the #1 trait of a good portfolio manager. And good managers will tell you about their mistakes, their losses. They don't hide those from you.

👺 Ego, pride, deception, ambition, and self-serving motives lead people to proclaim all of their winners and their prowess. But, it's bunk. Don't believe the hype.

How you are invested is important. How you determine your course for the coming years has never been more important.

If you have questions, do not delay. Seek guidance.

The "macro" ship is taking on water. We will find ourselves in a position to take advantage of market opportunities. For now, decide how much cash you want on hand.

A quick & relevant update on markets for Fri, Sep 23rd

None of what you see happening right now is a buy signal.

The dollar is ripping higher. This is not good for the global economy.

Yields/rates are soaring, with a high rate-of-change.

The downside/low-end mathematical range for equity markets is dropping.

You must understand the importance of bonds and currencies in determining what's happening in equity/stock markets.

This is something you won't often hear, won't be taught by media.

Volatility is jumping higher. And, confusing the signals further, some major banks/advisory firms are under scrutiny for manipulating the VIX (a standard measure of market volatility).

When the VIX goes over about 30-32, it's a no-fly zone for trading, at least for us. The higher the VIX goes, the more trouble equity markets are going to see. This is a hard-and-fast rule baked into our process.

We can’t say this enough. The cost of capital is going up. Think of that as the cost of borrowing, of leveraging up. Whether you are a commercial real estate developer, a corporation looking to secure more funding, a hedge fund, a residential home buyer. Anything and everything that touches money is affected by this.

Inflation remains high. And the chances of more geopolitical disruption are high. Do not look for a Fed "pivot". As we said at the end of July, anyone interpreting the Fed as being dovish or stepping back from their intentions on raising rates was going to set themselves up for a fall.

12 out of 19 members of the Fed committee expect the Fed Funds Rate to be between 4.50% and 5.0% by the end of 2023.

It continue to be a crazy time for markets and risk.

Everyone talking about, waiting on, looking for a return to "normal" in our economy & markets is looking in a rear-view mirror. We are not going back to what drove markets for the last 12 years.

Equally as hopeful, intrigued, and engaged as I am short-and- intermediate-term concerned.

We're already in a different time for considering how portfolio management is carried out, overall.

And the time is developing now where an entirely different analysis of risk and approach to planning/terracing/managing cash is in play. We haven't been in a time like this in decades.

*We cannot give financial advice broadly. This message does not specify positioning. We don't know your situation. Please seek guidance if in doubt.

Shame has no place in personal finance.

This goes for individuals, and especially couples.

The moment that shame starts to emerge, we wreck it. It is antithetical to our process.

Our work is to align and help redirect. Align in that we understand perspectives. Redirect as in helping people to rethink and rewrite their story.

Who of us has not made money mistakes? Most of us were not equipped with proper money tools. Families don’t understand. Schools don’t teach financial literacy. Or at least haven’t until recently.

I think that’s partially by accident, partially due to other reasons. People make great impulsive consumers and debt junkies, until the cycle is broken through education and practical application.

Also, how much you earn does not correlate with better decisions. In fact, it can be the success in position and increasing income that can fool us into a form of false security.

We’re all on a path of continual improvement.

1. Make household budgetary changes. It’s not easy, but it can be done. In other words, save more. Spend less than you’re earning. Self-discipline. Cash-flow planning. Think like a business. Create more margin.

2. Adjust risk in your investment portfolios. What worked for the last 12 years is not what works now.

3. Look for opportunities to ask for a raise. Or if you’re in a business development / sales role, you know what to do. Work smarter and harder.

4. Look for ways to improve your skill set to lead toward higher earnings

5. Start a cash flow business on the side, or if you are cash-strapped pick up a side hustle to earn some extra cash in the interim while we go through this transition.

6. Look for the current and coming opportunities for managing cash.

7. Look for ways to be more resourceful. Think with a thrifty mindset.

A quick description of The Daily Mission Podcast.

It’s time to get efficient. Don’t wait.

Current caution flags, and ideas on improving your financial situation.

Sometimes you just need time and space.

The Daily Mission is back from the wilds of the Sangre de Cristos to reengage with the world and all of its noise.

Let's talk about cash, inflation, and some ideas this year.

The US Dollar. Yankee Fiat. cash, bills, paper, greenbacks, moolah, scratch, dough, bread, cheddar. dead prezzies.

No matter what you like to call it, that dollar dollar bill is a wrecking ball, y’all. 

It's in high demand, globally. And that can create some pretty big problems in the short term.

Let's talk about why in short order.

What you think “should be” versus what “is” when it comes to investing, and why you should probably think more like a strategist and less like a tactician.

Two factors more than any other supported the growth of the hedge fund titan era:

Easy money for leverage, and getting paid under the carried Interest loophole.

But both of those factors are in the process ofd changing. And quickly.

It's been a crazy week in markets. Get the storyline you're not likely to hear from mainstream financial media.