Thoughts and musings from my desk to you.

Profound Power Of The Unrealized Gain

Unrealized gains have a benefit that doesn’t show up in percentage return.

Money managers and hedge funds hang their hats on their trading prowess and the glory of periodic home runs. Any success they have provides good cover for the high expenses endemic in the business.

Inflation? Yes, Then No.

Twenty-five years ago, I had an archery deer lease in Refugio County, Texas. One time, I headed down there after a long day at work and arrived at Two-J’s Restaurant just at closing time. The place was empty, but they seated me anyway and promptly delivered my order. The waitress asked me what I did for a living and then pressed me about my economics degree. After pondering a bit, she returned a short time later and pulled up a chair. She then asked me a profound and now poignant question: “How come the government doesn’t just print twice as much money and make it so that I can have more?” I replied, “Because with two times the money and the same amount of productivity, each one of your dollars is then worth 50 cents.” She seemed to understand.

Advisory Practice Evolution

Gil penned a piece describing the evolution of his billion-dollar advisory practice in Financial Advisor Magazine!

“Many advisors get stuck in the path of least resistance methods and never evolve to scale.”

“Over my nearly four decades as an advisor, I’ve seen quite an evolution in my practice. There was a day when I would take on new clients with $2,000 IRAs, and I would buy securities for them as their whims dictated. I figured out what they thought worked, and I aligned my recommendations to their biases. My goal was to amass assets and aligning with client predispositions seemed the path of least resistance. But I began to realize that my practice would have no common themes if I allowed it to develop this way.”

Predictably Irrational Investing

The field of economics has long assumed that people make decisions that optimize their own utility, and to derive the greatest benefit for themselves. However, psychological studies show that we humans do not do this, but rather we often make irrational choices, and we do so predictably. In this case, irrational investing choices.

Don't Overvalue Dividends

Gil published a piece in Advisor Perspectives entitled "Don’t Overvalue Dividends."

“My advisory firm is a big fan of stocks that pay dividends. Segment’s tax-efficient rising dividend portfolio is our most popular strategy. But if you dig into the numbers, the dividends our holdings pay are not huge. This is because we manage for total return, not maximum cash flow.

We buy stocks with a mind toward dividend sustainability and a history of payment hikes. This contrasts with normal bias toward dividend shopping, where one would simply buy the highest-yielding companies as though nothing else mattered.”

The Great Inflation Debate

Signs of inflation abound with chip shortages, car shortages, and sky-high lumber prices, among others. Many forecasters are predicting 70s style inflation or even stagflation. Given the similarities in Jimmy Carter’s and Mr. Biden’s policies, it’s a valid concern.

Death and Taxes

Everybody has heard the old saying that nothing is certain in life except death and taxes. But not everyone knows how death and taxes are inextricably linked.

Emotional Investing Mistakes

Investing is an emotional art form with very little science, although Wall Street does a great job of creating the illusion of scientific certainty with their expensive strategies. Even if they were scientifically advantageous, it’s all moot if clients make emotional mistakes.

Investing is All About Perspective

As investors attempt to navigate choppy waters, we often come to realize how difficult it is to predict the future. Most tend to project today into tomorrow and more dangerously, we tend to act today based on what we feel about tomorrow.

Smart Money? Maybe. Brilliant Money. Never.

Like all industries, there is a pecking order in the investment arena, a hierarchy if you will. At the top of the financial pyramid are the hedge fund and private equity businesses.