Hello, my name is Kirk Spano. I am the founder of Bluemound Asset Management, LLC. My goal is to help you navigate a rapidly changing world so that you can protect and grow your financial freedom.
Today’s global economy and financial markets are experiencing seismic volatility. As I have dubbed it in the media,“slow growth forever,” is the new normal.
Over the coming decades, we will continue to see the global economy evolve in fits and bursts. While change can be scary, smart risk management can help us embrace the long-term opportunities.
Browse this site and learn about my approach. Then, contact me today, to talk about your goals, before the rush during the next inevitable bear market.
Before I get started with what to pay attention to in 2015, I would just like to say Happy New Year and take a look back at 2014.
In my January 2014 letter I stated that “While I am not convinced we have any major asset bubbles that are easy to identify, there are massive risks to global economics, some of which that are hidden in plain sight that concern me greatly.” Those risks have only grown over the past year.
2013 proved to be a profitable year for investors. The S&P 500 rose 29% and set new record highs. Global balanced indexes, more representative of most people’s portfolios also did very well returning about 20% despite a tough year in China which lost 9%.
The high return of the stock market had an expected effect on people. Many investors started to chase returns and look to be more aggressive after years of being risk averse. The result was that 2013 saw the most money from retail investors flow into stocks since 2000. I discussed this in a November article on MarketWatch titled “How Bad Will New Investors Get Hit.”
The problem with this of course is that the stock market has more than doubled since 2009 and the economy has not done nearly as well. In becoming more aggressive now, investors are betting that the economy will improve enough to justify a continued rise in stocks.
Interestingly, I find very few people who actually believe the economy is improving in a substantial way.
I am among those who believe that economics are not keeping up with stock market returns. One needs only look at the fact that the Federal Reserve has printed far more money than the economy has grown the past few years to understand that growth is largely illusionary.
Happy New Year! The new year will be a lot like an old year. Not 2012, but quite likely a lot like 2011, marked by increasing volatility and possibly a correction, before we begin a new leg higher in the markets. I reserve the right to be off by a year, but given a host of reasons covered in my year opening article for MarketWatch — Prepare for Zero Real Growth in the U.S. in 2013 (please read it) — it is time to err on the side of caution again as other investors decide to get back into the markets after several years.
When I discuss volatility, many people react with disgust or disjointed irritation about what they perceive as a high level of volatility in the markets. Over the past fourteen years there has certainly been volatility, but in the past year, volatility has been very low. Most people are not aware of this.
In 2011, we saw the year begin with a low volatility uptrend, see volatility spike into a correction, then volatility diminish and support another rally. As I discussed on MarketWatch the first week of January 2012, Your Major Risk in 2012 is Missing the Upside, I believed 2012 would be a pretty good year despite common perceptions that market volatility was a major risk.
Today, now that the Mayan calendar has recycled and we have survived, let’s take another look at volatility.
2012: Another Year the World Won’t End
Throughout 2011 we heard proclamations of doom and gloom from market pundits to gold traders to vote seeking politicians to assorted snake oil salesmen to the converts of ancient Mayan religion. Each has a version of a coming apocalypse, some including hyperinflation, 50% unemployment, widespread famine, world war or complete destruction of the globe due to galactic forces beyond our control. In my estimation, each is about as likely as the other to occur, that is, not very likely at all.
If you will recall, on several occasions back in 2007 and 2008, I discussed the vast financial problems that the globe faced. Today and recently, those who missed the actual financial collapse are running around telling us about a coming new bigger and badder financial destruction to come. To put this as plainly as possible, they are very late to the party.
While it is possible, if not probable, that the global economy and financial markets will operate on very uneven paths for an extended period, the big financial debacle has already occurred. Could we see another stock market drop of 30%? Absolutely. Is real estate likely to keep falling in the short term? Probably. Will governments continue to politic us into migraines and slow solutions? What else is new.
But, and this is important to observe, there are forces out there that are creating balance as you read. The slowing of developed economies is being offset by growth in developing economies. The forces of deflation and the forces of inflation are nearly balanced on aggregate (though as any shopper can tell you are uneven from item to item). The slow methodical approach of Germany and the European Union to gradually fix Europe is neutering quick clicker finger traders who are betting on financial turmoil in the hopes of making a fast get rich strike.
All in all, despite being unsure of things a year or so ago, I am quite confident that my newfound optimism is well placed.
Bluemound Asset Management, LLC is a fee-only Wisconsin Registered Investment Advisor • 855–445-4321
Kirk Spano works with clients throughout Wisconsin, as well as, accepts clients nationally.
All information herein has been prepared solely for informational purposes, contains no guarantees of any kind and is not an offer of case specific advice. Opinions subject to change.