August 2017

  • September 2017 Investing Success is About Patience

    Investing Success is About Patience

     

    Many would argue that Ted Williams was the best hitter in the history of baseball.  The Boston Red Sox leftfielder finished his 19-year professional career with a lifetime batting average of .344 and an on-base percentage of an incredible .482.  This was despite taking time off in the prime of his career to fight in World War II and the Korean War.

     

    He also won the Triple Crown, meaning he led the league in batting average, home runs, and runs batted in.  He did it twice.  To put that in perspective, there’s only been 16 Triple Crown winners in the history of baseball, and two of those belong to Williams.  And to cap it off, Williams was also the last Major League Baseball player to bat .400 in a season.  It’s safe to say that Ted Williams knew a thing or two about hitting a baseball.

    Interestingly, we can apply a lot of his baseball success to investing.  Both baseball and investing are activities in which it pays to study and be patient.  Williams was probably born with better eyesight and better reflexes than you or me.  But that’s not why he was the greatest hitter in history.  Williams was the best because he was willing the approach the game analytically, study his opponents and – perhaps most importantly – practice.

    More than a half century before Billy Beane used statistical analysis to revive the struggling Oakland Athletics (as recounted in Michael Lewis’ book Moneyball), Williams might have been the first quantitative analyst in professional sports.

    Williams carved the strike zone into a matrix: seven baseball lengths wide and 11 tall.  His “happy zone” (where he calculated he could hit .400 or better) was a tiny sliver of just three out of 77 cells.  In the low outside corner of the strike zone (Williams’ weakest area) he calculated he’d be a .230 hitter at best.  The “happy zone” will vary from batter to batter, but Williams understood exactly where his was, and he wouldn’t swing if the pitch was outside of his zone.

    The point of this story is that investors need to have the same self-awareness to know when the market is favoring their specific trading or investing style.  When it is, it makes sense to swing for the fences.  When it’s not, you don’t have to swing at all.

    Williams was notoriously patient and disciplined at the plate, which is why his on-base percentage was so high.  He had control over his ego and his emotions and wouldn’t swing because the defense, or even the spectators, were taunting him.  With investing, it might be easier.  You can watch pitches go by until you see one you like.  As Warren Buffett famously said, “There are no called strikes in investing.”

    While professional investors have enormous career pressure to look like they’re “doing something,” individual investors don’t have to worry about a boss firing them.  They can afford to be patient and wait for a perfect investment setup.  With the stock market at all-time highs, bargains are becoming fewer and fewer.  The next time you are tempted to chase returns, think about that and wait for the pitch in your “happy zone.”  Thanks for reading.

     

    Nick Massey is President of Massey Financial Services in Edmond, OK.  Nick can be reached at www.nickmassey.com.  Investment advice offered through Householder Group Estate and Retirement Specialists, a registered investment advisor.


  • August 2017 News and Investments-A Bad Combination

    News and Investments – A Bad Combination

     

    You can hardly pick up a newspaper or turn on the news these days without hearing something about “fake news.”  Most of it is an attempt to make the media the bad guys.  Sometimes they are, but mostly not.
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    I think that generally the media tries to find the truth, even it can sometimes be a little, or a lot, biased.  The biggest problem, in my opinion, is not with the media but more with special interests promoting their cause or point of view.  This is particularly true with investment or economic news.

    The media does everything and anything it can to create controversy and gripping news stories to satisfy the audience’s need for drama.  In business news, reporters and journalists, anchors and stations find the most bullish analyst and pit him/her against the most bearish.  In politics, they talk to the more conservative politician, then the more liberal.  They do this all day, every day.  If they didn’t, they’d be out of business soon.

    The result is confusion.  If you were to just listen to the media all day, you’d have all these conflicting arguments and no idea what to do with any of them.  Each special interest or company is just trying to promote their point of view or product.  They’re not about the truth.  Instead, they want to market themselves or their cause.

     

    They are the true marketers of fake news.  They find selective facts to bolster their argument.  Even worse, market analysts tend to pile into trends late and get out late.  They’re the worst type of “talking heads” to listen to when it comes to investment advice.

    Sure, I listen to and read the news daily to keep up on interesting articles and experts that I can bring to you in my newsletters; or use to help determine major investment trends.  But I don’t believe what most of these people say, or take them at their word.

    I want to know and tell the truth to my readers and clients.  Sometimes I even tick a few people off when I say things they don’t want to hear.  But that comes with the territory.  Would you rather I lie and tell you what you want to hear; or would you like the real story instead of “fake news?”

     

    I’m not suggesting that you stop reading the newspapers or listening to the news.  Just remember that much of it is entertainment with many people just piling on to a trend until it suddenly goes the other way.  Then everyone piles on to that new trend.  Markets are cyclical.  I will always remember what one of my mentors told me 40 years ago when I was a rookie in this business.  He said that, “When almost everyone agrees on something, the show is about over and things will soon go the other way.”  Words to live by.  Thanks for reading.

     

    Nick Massey is President of Massey Financial Services in Edmond, OK.  Nick can be reached at www.nickmassey.com.  Investment advice offered through Householder Group Estate and Retirement Specialists, a registered investment advisor.


  • July 2017 Will Seasonality Work Again This Year?

    Will Seasonality Work Again This Year?

     

    It’s that time of year when various analysts have been talking about the old Wall Street adage of “sell in May and go away.”  It comes from research that indicates the market has a statistical bias toward making most of its gain between November and May, and then going down or nowhere from May through October.  Some analysts say this strategy is quite “iffy” and can be ignored because it works in some years and not in others.

     

    But it is more than just a theory.  It is a proven fact in academic studies going back many decades.  However, it is important to know the difference between what this strategy is and is not.  Does it always work?  Of course not.

     

    It is not a strategy that provides precise buy and sell signals designed to identify market tops and bottoms.  It only indicates when the unfavorable season has arrived that is likely to see the market at lower levels by the time of the re-entry point in the fall.  However, a market correction does not take place in the unfavorable season every year.

     

    Many people like the strategy because in 70 percent of the years the market is lower at the re-entry point in the fall than at its exit point in the spring.  But the key is that in years when there is not a correction, you don’t lose money while out of the market.  You just make less in those years because you are in cash when the market makes further gains.  Some would argue that is an opportunity loss, but I would argue that missing out on a potential gain is a lot easier for some people to swallow than an actual loss from being in the market while it goes down.

     

    When there is a correction and the market has losses, sometimes substantial losses, a seasonal investor avoids it.  The seasonal investor then gets back in at lower prices and makes additional gains.  If you were in the market during the correction, you might need much of the next favorable season rally just to get back to even.

     

    Of course, there is nothing to prevent the market from falling during the favorable season, but that has been statistically far less likely.  Betting against it can be a losing proposition.

     

    It is no wonder, however, that Wall Street promoters hate it and deny its existence.

    What would they do if a significant number of investors or money-managers moved to cash for four to six months every year?  It would be pretty difficult for them to “feed the machine” they have created.

     

    What should you do?  You’ll have to decide that for yourself; but it certainly is something to consider when looking at your investment strategy.  With all the conflicting signals in today’s politically charged environment, I think the decision is even harder this year.  Thanks for reading.

     

    Nick Massey is President of Massey Financial Services in Edmond, OK.  Nick can be reached at www.nickmassey.com.  Investment advice offered through Householder Group Estate and Retirement Specialists, a registered investment advisor.


  • June 2017 What will be the Impact of America Aging?

    What will be the Impact of America Aging?

     

    The demographic profile of America is changing rapidly.  Back in 1950, a little after the baby boom was getting started, the US was recovering from World War II.  We were also starting to deal with a new enemy, China, on the Korean Peninsula.  The US was an exporting powerhouse that fortunately escaped the war with all of our production capacity intact.  One other plus was that our population was experiencing the largest baby boom in history.

     

    We were growing our wealth, expanding our military capabilities, and increasing our population.  Even after the ravages of war, we had a tremendous number of workers 20 to 49 years old, and an explosion of babies on the way.  We were a strong, young nation.  Anything seemed possible.

     

    The picture today is much different. Our demographics, and their impact on programs like Social Security and Medicare are undeniable.  We’re now an aging nation facing some big problems.  By 1970, the monster birth wave was over and had started to recede.  The next generation, GenX, was on the way, and their numbers were much smaller than the boomers.

     

    At that point, our demographics and social programs were still balanced.  President Roosevelt introduced social security in the 1930s, which relied on workers paying for retirees.  With so many workers in the system, the program ran a surplus.  Medicare, introduced as part of President Johnson’s Great Society in the 1960s, tacked on healthcare for the elderly. Again, the program relied on current workers paying for retirees.  Just like with social security, the age structure of the country made the program work - for a little while.

     

    As the boomers flooded the job market, a lot of extra cash built up in our entitlement programs because they collected a percentage of wages.  But by the 1980s, our long-term social program problems were coming into focus.  We had fewer children in the late 1960s and 1970s, so eventually there’d be fewer workers to support a growing number of retirees.  There were once approximately 45 people working for every person receiving social security.  Today the ratio is about 3 to 1.  Longer lifespans made the problem worse.  Congress tried to adjust Social Security in the early 1980s, but the reforms just put off the pain and didn’t solve the problem.  There was no attempt to fix the issues with Medicare.

     

    By 2010, the make-up of our society had changed even more.  We added the millennial generation, generally those born between 1981 and 1997, and will soon see the impact of what some are calling Generation Z.  The bottom line is that overall make up of groups 54 and younger today is much different than the age structure of the nation in the previous decades.

     

    Clearly, we are no longer a nation teeming with young workers far outnumbering the older generation.  More importantly, we don’t have the huge number of younger people who can bear the burden of their elders with a modest payroll tax spread across many workers per retiree as it was in the past.

     

    Instead, we’re a nation full of aging adults, whose employment statistics reveal more than meets the eye.  With the cost so high, will the younger generations be able to pay the taxes necessary to provide the benefits that boomers have coming to them, just as the boomers did for their parents?   One big looming question will be, “What exactly can, or will, a Trump presidency do in this demographic reality?”  I guess we will see soon.  It will be a challenge like none we have seen before.  Thanks for reading.

     

    Nick Massey is President of Massey Financial Services in Edmond, OK.  Nick can be reached at www.nickmassey.com.  Investment advice offered through Householder Group Estate and Retirement Specialists, a registered investment advisor.