Letter to Stakeholders, November 2022
Read of just LISTEN to our letter here:
Monday, November 7th, 2:06 pm EST. We acted just like we promised. By now even your hairstylist knows that the reason the stock market and bond markets have been down this year is due to increased interest rates. In fact, the Federal Reserve Bank raised rates again last week. And so did the Bank of England. Central banks have raised rates worldwide to stem inflation but you – and your hairdresser – know this. As we alluded to last month and have promised throughout, when there’s an opportunity, we will act -and we have.
The Federal Funds interest rate hasn’t been this high since 2008. This actually provided an opportunity for your portfolio that we took advantage of this month. Rather than investing in just bond funds we are now investing you in actual bond instruments. Specifically, we got you out of funds so you could take advantage of a nearly risk-free rate of return of 4.25%. I have to say “nearly” because there is technically nothing without risk. Our textbooks however consider US treasuries as “risk-free” because they are backed by the full faith and credit of the United States government. Barring the end of the world – when we’d have bigger problems – you’ll receive a return premium over the amount of risk taken (nearly zero) in this new position in your portfolio.
This does not mean that you won’t see ups and downs in the US Treasury portion of your portfolio. There is always a market. But the big difference with investing in actual bonds, is you will receive interest income of 4.25% per year, then, when the bond “matures” (in 2 years), your principal is returned. When investing in actual bonds, your biggest concern is default of the bond issuer. In this case, we allocated your bond allocation to the US Government where there has historically been zero defaults and zero expectation for default. #GoUSA
With inflation taking up so much oxygen this year, it’s no surprise that the economy has emerged as the number one issue in tomorrow’s mid-term elections. As an investor, you see the economic effects of policy decisions and consumer sentiment immediately on your monthly statement. You must distinguish the reality from the noise.
One of the best places to make your own judgements on the snippets that journalists capture from politicians is to watch/listen to congressional hearings. The House Committee on Oversight and Reform recently held a hearing on “Power and Profiteering” regarding companies that may have implemented price hikes in excess of supply-side inflation. For a balanced view of the sources of inflation, this Time magazine article does a great job fact-checking the opposing partisan views.
Tomorrow you will have the opportunity to vote for your U.S. Congressperson. The economic issues are real but won’t likely be affected by your current representative or their opponent. Outsized prices over 2021 will likely continue through year-end. For your benefit, we have taken and will continue to take action on your portfolio’s behalf.
We face a wide variety of other national issues, and we’re glad you are the ones voting.
This month we are featuring the Arlington Community Foundation. The last time we featured ACF was April of 2021 during our speaker series featuring their now successful “Economic Cliff-Effect” solution. This week they are hosting their first in-person Spirit of Community event since the pandemic began. Community Foundations specialize in philanthropy for a local area -in this case, Arlington, Virginia. Like many communities in our area there are large wealth disparities. Community Foundations work as a hub for non-profit organizations where residents – and non-residents – can organize their philanthropy.
For some examples of the Arlington Community Foundation’s impact, click here.
Have a meaningful month,
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company is an independent, family wealth management firm run by two owners who believe you should feel good about money.
Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® are each married to patient wives and are dedicated to their kids. Jason and Doug have built a firm with a great reputation. The firm is based in Northern Virginia but serves clients (virtually) all throughout the United States.
Our clients are “first generation wealth” and can feel guilty about how much they make and how much they spend compared to how they grew up. They are also concerned about how their wealth affects their sibling relationships and their kids.
We facilitate feeling "good about your money" in three ways:
- Family Governance: We walk the principles through a process that gets them talking about what it was like to grow up with money, how they pay bills and save today and what they want their family legacy to sound like. This turns into a “Family constitution.”
- Sustainable Investing: We match the values derived from the “Family Constitution” to a sustainable investing strategy that incorporates an adaptive efficient market theory with environmental, social and governance factors
- Proactive Philanthropy: Many of our clients will have a little extra, even after they achieve their family’s personal goals. We show them how much they can afford to be giving while living to the people and causes they care about
To feel good about your money, just book an introductory call here: Introductory Call