Open Letter To My Clients - I am working through this. I am here for you.

Just wanted to reach out to touch base since our last chat. Lots of things have gone kind of sideways since then, so I wanted to make sure we're still on the same page with your investment strategy.

I know it is awful to watch your portfolio act like it's 2008 all over again. I get that. Nobody wants to watch their investments drop. But that doesn't mean we're in for a real 2008 redux, with a full-blown Great Recession, bailouts and all.

Things are different now. Banks do better diligence. There's far less debt sloshing around at risk of default, and tons of businesses aren't sleepwalking towards bankruptcy.

Unemployment is at 3.5%.  Wages are growing at 3.6%.  Through February the economy was accelerating and showing absolutely no signs of a recession.

I'd be lying if I said the coronavirus pandemic isn't a risk to economic growth and stock prices. But it is not an existential risk.

Right now, the indexes have given up all the gains of 2018 and 2019, but the S&P 500 is still up 25% for the past five years.  Let’s have some perspective.

Pick your favorite narrative:

 1) Stocks plummet 19% in just 2 weeks on global pandemic & oil collapse, 

or 

2) Stocks start 2020 by giving back 1/2 of the S&P500’s ~30% gains from 2019,

 or 

3) Stocks up ~10% since start of 2019 All true as of 3/9/20… Choose the best story for you.

At its most fundamental level, successful investing is simply a matter of managing your risk tolerance to maximize your returns. Bear markets are part of that risk element, and they happen pretty often. You'll get a 20% drop in the indexes roughly once every three and a half years. In the past ten years, not counting the Great Recession crash of 2007-2009, we've already had three "bear markets" where the indexes dropped 20%.

But since the end of the Great Recession, the S&P 500 is up by almost 300%. Until last week, it had posted total growth above 350%. Many investors have done even better with smart allocation strategies.

Bull markets don't last forever, and this latest bull run has already lasted longer than any other. It's easy to have a plan for a bull market, but an investor's true success lies in what they (and their financial advisors) do during bear markets.

We've been ready for something like this. It would be impossible to ride a bull market for 11 years and NOT prepare for the ride to end. We're ready for a temporary panic, and we're ready for a longer-term decline, should it come to that. I have specific strategies in place for further declines, and I'm watching the market very closely to see if it makes sense to adjust our approach to preserve your portfolio and counter negative cyclical trends.

I like to take my cues from Warren Buffett. He was born during the Great Depression, and he's lived through the price shocks of the 70s, the 87 flash crash, the dotcom bubble, and the subprime crash of 2008. He's not worried. He's already gone on record as saying the 1987 crash was scarier than anything that's happened in 2020.

The 1987 crash was over in two months, and after it was over, the U.S. stock market started one of the greatest bull runs in history.  Fundamentally we are poised for another long great run (with some corrections along the way.)  This irrational market is just waiting for some good news, and I do not want to be regretting missing the rebound.

I'll be available by phone or email if you'd like to discuss your portfolio allocations during this time, but I'd like to say again:

The last few days have been awful, but that's the price of entry for long-term investing. This isn't like the Spanish Flu, it's not like the Great Recession, and it's not going to cause hysteria and mass chaos in the streets.

In short, we'll all be fine. I'm on it.

Just reach out if you'd like to talk in more detail.