Joel’s Published Column Archive

The Financial Crisis 10 year Anniversary

In 2008 our country’s entire banking and financial system came to a screeching halt as we realized that the exotic debt instruments that had been created to finance the housing bubble, were possibly, a little too exotic. These Collateralized Debt Obligations, were packaged up and sold to large banking institutions as “Sure Things”, and in the end, caused the bankruptcy of multiple different financial firms.

The Stock Market, as Measured by the S&P 500*, dropped from a high in October of 2007 of 1576, to a low of 666 in March of 2009. That was a total decline of almost 58%. I am convinced the only thing that was able to keep the stock market from going even lower, was that the Government approved a tax payer bailout of the financial industry. The Government vowed to never allow tax payer bailouts of the financial industry every again, as the “To Big to Fail” mentality won out over the moral dilemma of using American Citizens tax money to pay for the greedy mistakes of the financial industry.

Well, happy 10 year anniversary!

The crisis officially ended last month on March 9th 2009! I want to personally thank each and everyone of us, for the donation of our tax dollars, that was used to temporarily fix the crisis. Although I say these things tongue and cheek, I have to admit, that the bailout that was done 10 years ago, has allowed for us maintain a functioning banking system, save the U.S. Dollar, and make it so that our bank accounts stayed secure and in place. Without that bailout, life today would like dramatically different than it does now, and I shutter at the thought of what might have been.

We have learned a lot, and let me stress again, A LOT, of lessons from the 2008 financial crisis. One of those lessons is that, the world only ends once and 2009 wasn’t it. It also taught us that the resolve of the financial industry and the governments willingness to act in the best interest of it’s constituents were both very underestimated.

With the financial world put back together, and President Trump’s economically positive tax plan, our financial markets have found footing in the hope of brighter days to come. Our Employment situation is the strongest it has been in 50 years according to the BLS and we continue to have strong economic numbers. If I wagered a guess about what the next 10 years brings, I would say it will be wrought with crazy attention grabbing headlines, followed by periods of volatility, and then periods of sustained economic growth. The occasional recession, followed by an expansion, then another recession and another expansion. The American capitalistic spirit will continue to drive innovation. Think about life 20 years ago… 1999, and someone approaching you and tells you that you are going to be able to “download” a 2 hour movie, and watch said movie on my cell phone. That everyone you know is going to be connected and addicted to their phone and a “virtual interaction platform”. That you would be able to use your phone to order and pay for anything you want and have it be delivered by a brand new book seller called “Amazon”.

I hope you are catching my overarching theme here. In the very long term, it is going to take more than a financial crisis to stop the innovative spirit of America. As long as we promote a competitive environment in which hard working people are rewarded for creating, perfecting, and adding over all value to our citizens, we will never cease to be the best country to live in.

Mixed Signals and Interest Rates

To say that the investing climate over the last four months has been challenging, would be an understatement. The volatility that exploded onto the scene from October 1 through December 24 was more than a little concerning. We saw the blended averages go from solidly positive on the year as of the end of September, to losing 20% from that recent high as measured by the S&P Index 500.* What is most unique about this sell-off, is that I could argue that it was brought on by stronger than expected economic data and jobs reports.

According to the Bureau of Labor Statistics, we had 4.2% economic growth in the second quarter of 2018, and followed that up with 3.5% growth in the third. We have yet to hear how the fourth quarter performed, due to the government shutdown. Although I don’t think it will be as robust as the first or second quarters, I think the number will remain very positive. We haven’t had 4.2% economic growth since 1997 – that was 21 years ago! With 3.9% unemployment, the work environment is the best that it’s been in decades.

So, why all the volatility and decline in stock prices? I point clients and readers to the Federal Reserve and their mixed signals regarding rising interest rates. Since 2008, the economy had been growing at a very slow rate. This encouraged the Federal Reserve to lower the rate to 0%, and they have kept it at that level or just slightly higher to encourage easier business conditions. All through the last decade, the stock market got used to the fact that bad economic data was “good news” because interest rates would stay low. This is a slightly perverted view of the economy, given that historically, and by definition, good economic news has always been viewed as “good news.” Well, now we find ourselves in a pickle. The economy is great, but now, that means that interest rates should go up to help balance out the risks of rising wages and inflationary pressures, as too much money chases around not enough goods. Investors have gotten used to the low interest rate policy that the Fed implemented when trying to nurse our economy back to health. We could equate it to someone who is addicted to a substance, having that substance being taken away from them. This action is typically accompanied by withdrawal symptoms and fits of rage. This, in my opinion, is exactly what the stock market did in the fourth quarter, when Fed Chairman, Jerome Powell, indicated that he was looking to raise interest rates four times in the next nine months! Why was Chairman Powell going to raise rates? Because the economy was doing so well and inflation was starting to set in. Then, our addict (the stock market) went into fits of rage, and became very volatile.

In my opinion, the Fed Chairman was right in his assessment, and interest rates need to go higher. As the economic doctor, he decided that was the best route to keeping our patient in good order. Here is where the mixed signals have come from. The first time that Chairman Powell had an opportunity to actually raise the interest rates in January, like he had said he was going to, he decided to hold off. This is where the Fed is now talking out of both sides of its mouth, trying to do what is right AND keep the stock market happy. This is a dangerous game, and the Fed needs to ensure that their decision-making is independent of both stock market fluctuations, as well as President Trump’s constant insulting rhetoric.

When it comes to the economy, I believe that we still have much brighter days ahead. Eventually, our markets will return to more normal conditions where good news is again viewed as “good news.” Until then, I encourage investors to develop a plan and stick to it. Tough markets don’t last, but tough investors do.

The “New” New Year’s Resolution

I was just reading an article on huffpost.com, that by Valentine’s Day, 92% of all New Year’s Resolutions have been broken. In light of that statistic, I thought it would be valuable to send out an encouraging word and some thoughts that may help you get back on the horse and finish what you’ve started.

I applaud New Year’s Resolutions

Any time someone wants to change, better themselves, create new behaviors – I’m all for it! Craig Groeschel, one of my personal all-time favorite pastors, states that “successful people do often what unsuccessful people do occasionally.” In our instant gratification society, we have a very difficult time with small, incremental changes. During that first week of January, we hop on the treadmill three times, eat healthy, then step on the scale the following Monday, see that we’ve actually gained a pound and lose our minds. We scream “this doesn’t work!” and head to the fridge to eat a half-gallon of ice cream.

Before we set any “new” New Year’s Resolutions

I want you to try something different. Instead of focusing on the goal for yourself, like losing 20lbs or getting out of debt, focus first on who you want to be. Once you’ve determined that, you can start to change your decision-making process. Here’s the trick, you have to make all future decisions based on you actually being that person. Here’s an example: If you want to be a healthy, fit person who feels great about themselves, you have to start by believing that you are that person now. The sum of all of your past decisions had formed you into who you used to be.

The person you ARE is constantly being created

Once you have decided who you want to be, you can start making decisions based on who you are becoming. I know it sounds a little “new-ageish,” but the mind is in control of your decision making and you have to retrain your mind to realize that you have already changed. Once you grasp this concept, you will be able to see the world and view your decisions through your new lens.

Let’s say you’re a smoker and your New Year’s Resolution is to quit. When someone asks if you would like a cigarette, don’t answer, “I can’t. I’m trying to quit smoking.” By speaking those words, you are admitting that you ARE a smoker and training your brain for failure. When someone asks you if you’d like a cigarette, you answer “No thank you. I don’t smoke.” You see, the OLD you used to smoke, but that isn’t who you are anymore.

Remember, even though the first step to succeeding at making meaningful change in your life is to shift your mindset, don’t be discouraged if you don’t see instant results. It is the million little changes you make that will achieve the long-term difference. You didn’t gain 30 extra pounds, get into financial trouble or sabotage your relationships all over night. Getting out of debt, getting back into shape, having better relationships will take time.

Successful people do often, what unsuccessful people do occasionally

State who you want to be. Write it down. Believe it is who you are … and repeat. This is one recipe for making meaningful, long-term change and keeping those New Year’s Resolutions. I know it’s the middle of February; but that means there is a 92% chance that you’re in a great spot to make your “New” New Year’s Resolution.

Experience Matters: Get an Internship!

Many of the articles I write for our My City Readers relate to an older generation of investors and are often not applicable to the younger generation. This article is a departure from the usual subjects, but in the end pertains to the financial world in that it offers advice for achieving success in a future career.

As the job market has been red hot as of late, we have had the opportunity to work with a few different college students in different capacities. A common theme has emerged with our most dynamic and successful student interactions. Experience in the field that they are attempting to enter post-college gives them a significant advantage above other students entering the same field.

The Intern’s Journey

Looking back at my internships in the financial world revealed to me how they guided my path through my college and career. While I was a sophomore in college, I attempted to get an internship with Merrill Lynch. I was practically laughed out of the building. When I had inquired about the internship, I was dressed in khakis and a polo shirt. I had no idea that a suit and tie was a requirement, even when just poking your head in to inquire! This was just one of the things on my long list of educational tips that my internships eventually taught me.

A few months later, I landed an internship with a friend-of-a-friend’s father, who owned his own boutique financial planning firm. This was not a paid internship, but it got my foot in the door and what I learned about the financial industry with Dean Oliver as my mentor, was priceless.

The next spring, I was able to secure an internship with Smith Barney (now Morgan Stanley). This was a minimum wage-paid position, and I gained even more insight into the field that fascinated me. The following winter, I was able to leverage these two internships to apply for a full-time personal banker position at Huntington Bank, which allowed me to become fully-licensed in securities while I was still a senior in college.

After a few years working for the bank in their investment company, I was able to get a full-time financial advisor position back at Smith Barney. In 2009, my wife and I started our own financial planning firm, LaGore Wealth Management. Lastly, in 2012, I rejoined my original mentor Dean Oliver, forming Oliver LaGore VanValin Investment Group.

Transition to Employee

Being successful in the transition between student to employee can be quite arduous. If you are currently a college student, I can’t stress enough the importance of getting experience in the field that you wish to enter. There is no easy road to securing employment, but showing potential employers that you have the discipline and dedication to study their industry, is a great place to start. It may be difficult finding an applicable internship for your field, but volunteering, as well as accepting an unpaid internship, may very well provide you with the experience you need to start your climb up the corporate ladder.

The New Year has just begun

Start 2019 off right by searching for your summer internship program. Employers will be impressed by your forward-thinking and ability to plan ahead. No one is going to care more about your future than you do. Happy New Year!

So the Mid Terms Happened . . .

So many investors are asking, “What’s going to happen after the midterm elections to the markets and the economy, if the Democrats take back the house?” Although I had to return my crystal ball to the store (because its past accuracy has been sketchy at best), I’d still like to offer my opinion. So, here are my guesses:

First Guess – I think the Democrats have a very good chance of taking back the house for two reasons. First, there are over 30 Republican congresspeople retiring, which takes away the incumbent factor. Second (and this is totally, 100 percent my own opinion), I think that female Democratic voters between the ages of 21-45 are going to show up at the polls in droves to ensure that their voices are heard, and that a repeat of the 2016 election doesn’t happen. I think this demographic could run this election. Historically, midterm elections are boring and hardly anyone shows up, when compared to general or presidential elections. This one could be very different.

Second Guess – I think the economy is moving along at a very fast pace and this is going to continue through the end of the year, no matter who is in charge of Congress.

Third Guess – If the house goes back to the Democrats, Trump could view this as an opportunity to become the most effective president in history.

Please, follow me down this rabbit hole … Trump has used the Republicans for about all they were good for – corporate tax reform. He tried healthcare reform and had no success, so he knew he had to get something done with the current Congress. President Trump has already announced that he wants to do an even bigger and better infrastructure spending bill than President Obama wanted to do – a spending bill that the Republicans are by no means going to allow him to pass. He wants this infrastructure spending bill because he knows it will continue to goose the economy and spur even more hiring. I believe President Trump could very well run the entire Obama playbook with a Democrat-run Congress. I could easily see him attempt to negotiate with the Democrats for his massive infrastructure spending bill, by giving them the ultimate in Democratic desires. He may be willing to give them universal health care, immigration reform and common-sense gun control, in return for his infrastructure spending bill (which, of course, includes his wall).

So, to answer the question “What’s going to happen after the midterms?” I think the economy will continue going great; but, next year is going to be a year of massive volatility. Spending may start to slow after the initial spending frenzy due to corporate tax reform. Once President Trump completely turns on his party’s policies and starts working with the new Democratic House, the economy could pick up again and we could see “1990’s-like” economic growth during the 2019-2025 timeframe. This could be one huge economic party if it plays out at all like I think it could. Bottom line: Stay diversified and stay invested. It’s going to be a bumpy ride! Remember, tough markets don’t last – tough investors do.