First Weekend Off for a While
It's the weekend and Ive got some time to think for the first time in a while. So here are some of those thoughts. Take 'em or leave 'em. Let's start with financial services.
Financial services encompasses a wide range of enterprises and activity ranging from banks providing checking accounts and mortgages to brokerage firms gathering assets to "manage," to little guys helping people plan for retirement. These come in all sizes and shapes. Our firm is in that decidedly "little" category.
Despite our size we try to help people in some way, shape, or form. Not every enterprise focuses on this "helping" thing. It goes beyond just providing a service or services. Frankly, it's personal, which means it entails connecting with people in a way that tries to get beyond commercial nature of your relationship (i.e., being paid for the services you provide). While some large organizations endeavor to incorporate a "high touch" approach that can approach that personal level, my experience has been that smaller firms do this better. The best do it because the owner(s) actually care about people.
Why are we talking about all this?
Well, as already mentioned, I've got some time to breathe - and therefore to think - this weekend. It's the first weekend "off" - more or less - in quite a while. Also, my business is considered part of the financial services industry. That's reason enough I think. So here's some more specifics related to the business.
For one thing, our firm has been assiduously researching and experimenting with more effective approaches to providing our professional services for a number of years now. Besides the general desire to do things better, this effort has been driven by what we'll call the "blow back" from the 2007-2009 financial crisis. By "blow back," we're referring to the unintended consequences of the Federal Reserve's responses to that crisis. The perception that the world faced "financial collapse" (whatever that might mean) drove them to take extreme measures.
We won't get into the details here of what they did, except to say that the consequences were equally extreme. Along with a bloating of the Fed's own balance sheet came a "bloating" of values. The prices of stocks and bonds rose to levels previously rarely seen. Those of us who thought "values" were a key to deciding whether to invest your money in an item (stock, bond, commodity, etc.), found ourselves looking at items that seemed - to put it mildly - overpriced. And those historically high prices simply continued rising. And so it seemed that value - at least value gauged by historical prices - would not suffice as a useful measurement to decide whether or not to invest in an item. With that in mind, the natural question arises: What do you use besides value when you want to decide how to invest your money? The search for an answer consumed us for a number of years.
It was a particularly frustrating time in that we don't take action for the sake of taking action, like some of our confreres. Not that we don't understand professional colleagues who habitually take an "active" approach. Many clients want to see "action" in their accounts - especially if they're not "keeping up" with the general stock market. When you lag the S&P, you're "under-performing" to use the common industry lingo. Again, we won't get into what we think is problematic about that approach here. On the other hand, it's worth pointing out that when activity serves as a kind of "window dressing" to one's professional endeavors, the results can sometimes be less than stellar. Said 2007-2009 financial crisis served as a good, but alas mostly forgotten, example of this.
We did OK during the crisis because of an approach that considered values, among other things. Which brings us back to the issue of needing an approach not based on values, given how things have gone after the Fed's massive buying up of assets to bolster the financial system (really more to save big banks from going under, by the way). We think we've found an approach that should work OK now. And we like it because it should work just fine if and when things get back to normal.
By the way, as for things getting back to normal, we're not holding our breath. While the Fed has stopped massive buying of government paper, it's plan to divest itself of the trillions it holds on it balance sheet has only begun. Whether it continues as planned will depend on how markets ultimately react. So far, so good. Although some became nervous during the recent drop in stock prices and rise in bond yields. That shake-up hasn't proved to be so bad - so far. And even if there's a further drop in stock prices to "test the lows" of the recent downswing, it would be a major surprise if that led to a full-fledged bear market at this time. No bear market, and things should chug along.
Okay, enough for now. Having a few minutes to breath, I'd prefer some deep inhales and exhales at this point.
Financial services encompasses a wide range of enterprises and activity ranging from banks providing checking accounts and mortgages to brokerage firms gathering assets to "manage," to little guys helping people plan for retirement. These come in all sizes and shapes. Our firm is in that decidedly "little" category.
Despite our size we try to help people in some way, shape, or form. Not every enterprise focuses on this "helping" thing. It goes beyond just providing a service or services. Frankly, it's personal, which means it entails connecting with people in a way that tries to get beyond commercial nature of your relationship (i.e., being paid for the services you provide). While some large organizations endeavor to incorporate a "high touch" approach that can approach that personal level, my experience has been that smaller firms do this better. The best do it because the owner(s) actually care about people.
Why are we talking about all this?
Well, as already mentioned, I've got some time to breathe - and therefore to think - this weekend. It's the first weekend "off" - more or less - in quite a while. Also, my business is considered part of the financial services industry. That's reason enough I think. So here's some more specifics related to the business.
For one thing, our firm has been assiduously researching and experimenting with more effective approaches to providing our professional services for a number of years now. Besides the general desire to do things better, this effort has been driven by what we'll call the "blow back" from the 2007-2009 financial crisis. By "blow back," we're referring to the unintended consequences of the Federal Reserve's responses to that crisis. The perception that the world faced "financial collapse" (whatever that might mean) drove them to take extreme measures.
We won't get into the details here of what they did, except to say that the consequences were equally extreme. Along with a bloating of the Fed's own balance sheet came a "bloating" of values. The prices of stocks and bonds rose to levels previously rarely seen. Those of us who thought "values" were a key to deciding whether to invest your money in an item (stock, bond, commodity, etc.), found ourselves looking at items that seemed - to put it mildly - overpriced. And those historically high prices simply continued rising. And so it seemed that value - at least value gauged by historical prices - would not suffice as a useful measurement to decide whether or not to invest in an item. With that in mind, the natural question arises: What do you use besides value when you want to decide how to invest your money? The search for an answer consumed us for a number of years.
It was a particularly frustrating time in that we don't take action for the sake of taking action, like some of our confreres. Not that we don't understand professional colleagues who habitually take an "active" approach. Many clients want to see "action" in their accounts - especially if they're not "keeping up" with the general stock market. When you lag the S&P, you're "under-performing" to use the common industry lingo. Again, we won't get into what we think is problematic about that approach here. On the other hand, it's worth pointing out that when activity serves as a kind of "window dressing" to one's professional endeavors, the results can sometimes be less than stellar. Said 2007-2009 financial crisis served as a good, but alas mostly forgotten, example of this.
We did OK during the crisis because of an approach that considered values, among other things. Which brings us back to the issue of needing an approach not based on values, given how things have gone after the Fed's massive buying up of assets to bolster the financial system (really more to save big banks from going under, by the way). We think we've found an approach that should work OK now. And we like it because it should work just fine if and when things get back to normal.
By the way, as for things getting back to normal, we're not holding our breath. While the Fed has stopped massive buying of government paper, it's plan to divest itself of the trillions it holds on it balance sheet has only begun. Whether it continues as planned will depend on how markets ultimately react. So far, so good. Although some became nervous during the recent drop in stock prices and rise in bond yields. That shake-up hasn't proved to be so bad - so far. And even if there's a further drop in stock prices to "test the lows" of the recent downswing, it would be a major surprise if that led to a full-fledged bear market at this time. No bear market, and things should chug along.
Okay, enough for now. Having a few minutes to breath, I'd prefer some deep inhales and exhales at this point.
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