Letter to Our Clients - December 2012

December 2012


Dear Friends:

It has been quite a while since my last letter. During that time the markets have been remarkably calm, despite the world and the US lurching from one crisis to another. Since clients have been seeing most of their month-end statements meeting expectations, and since I did not feel that I had anything new to say, I decided not to send out one of these letters until now.

There are now four topics I would like to discuss.

1. Our office remodeling that we started negotiating in February and which we thought would be completed by July took until October to complete. It was worth it. If you live in or around Portland, or if your travels will bring you to the Portland area, we encourage you to call us so that you can come to see how we have grown in space and eye-appeal.

Our team has also grown. There are now eight of us. Each of our team members is remarkably competent, and equally important is how much we enjoy working with each other, and with you! I am thrilled with our team because of the quality of client service and investment management that we can bring to you. In addition, we now have back-up at every position. If I may use a sports analogy, it is as though we have two “first-teams.” This gives me tremendous peace of mind, and I hope it does you as well. We encourage you to log onto our website, click on “About Us,” and see our updated photos and biographies. The site is www.advancedwealthmanagement.com.

Since I have now been in the financial services world for over 30 years, people often ask: “When will you retire?” I ask back: “What is your definition of retirement?” Often they will say: “When you get to do what you want to do.” My answer is: “Then I must be retired – because I am doing exactly what I want to do.” Dorothy and I enjoy traveling to scenic spots, and I continue to attend several conferences a year, usually with Ted or another member of our team. In addition to my travels, I have a very active social and outdoor life. Ultimately, though, my passion is to continue to work with clients and help them achieve their financial objectives. Because of my good health and family history of longevity, I believe I can do this for at least the next 15 years.

Even so, bad things happen, so we have in place written contingency plans. Ted and Linda are both shareholders in the firm, and we are now at a point where our team could meet your needs if I were unable to work. Hopefully this will not be tested, but I did want you to be aware of the plans we have taken.

2. The current crisis is the famous “Fiscal Cliff.” What will happen if Congress does not extend the Bush tax cuts? Will the stock market collapse? Will the economy go into recession? Will … this or that?

It is interesting, with all the crises of the last 12 years, that the 1000 largest US companies are, generally, the most profitable they have ever been, and have the strongest balance sheets ever. With all the predictions of catastrophe because of an Obama election in 2008, and again in 2012, it is interesting that the US stock markets have outperformed the stock markets of the rest of the developed world. Even with our problems, the US economy appears to be healthier, more stable and more competitive than the economies of almost all other major countries.

I recently read a statement I like: “A problem without a solution is not a problem – it is a condition.” This, I think, well describes where we are today.

Technology, aging populations due to increased longevity, health care issues, weather conditions, decaying infrastructure, the rise of emerging markets, terrorism, regional wars, all these and more have created conditions which, I believe, cannot be solved by any one candidate, political party or economic theory. We will always be lurching from one crisis to the next. This is normal. The world has changed, and will continue to do so. We cannot go back to some previous “good old days.” My reading of history is that, no matter the period, “the good old days” were never that good, and even if there was such a time, it is impossible to reconstruct it.

In spite of this there is reason for optimism. There are lifestyle choices and economic opportunities which make the US the envy of the rest of the world. A key is to pay attention to who is shaping your outlook. If friends or your media choices are always painting the future as doomed, you will likely be pessimistic and maybe even fearful. In our office, in addition to the many other sources of news and commentary, we read the Wall Street Journal, the New York Times, the (London) Financial Times and The Oregonian. Each of these will accentuate news items based on their world views. We have learned to pay attention to the facts that the experts are using to come to their conclusions, and from these facts we draw our own conclusions. This is not the same thing as saying that we are contrarians, because sometimes the majority is correct. But, we will not embrace an approach just because everyone else believes in it. We encourage all of you to also keep an open mind to the many opinions that come to you, including those from us, so that whatever decision you make will come from a well-informed process.

3. As I indicated earlier, investment returns have been positive for the last several years, in spite of the very negative predictions of many political and financial experts. I think the more negativity there is, the better are the prospects for positive stock market returns. I suggest that you should worry when the experts say “it is now safe to invest in the stock market.”

However, we are entering what I call a “silly season” of stock market behavior. There is uncertainty about 2013 tax laws, especially as it relates to dividend-paying stocks. Many financial professionals are urging their clients to sell now and pay their capital gain taxes at current rates. This could well cause the stock market to drop in December, even with no other meaningful developments. This kind of activity ignores investment fundamentals, and we discourage selling for its own sake. However, if the tax issues concern you, please call us. And if a potential drop in stock market values concerns you, again, contact us immediately. While the markets are still in positive territory for the year, the time to be more conservative is BEFORE the markets start to drop. Becoming more conservative might help you be more comfortable during times of significant volatility. However, since we can never predict when is the “right” time to buy or sell, being conservative to avoid downward fluctuation can also be harmful to your long-term financial health.

4. Here is one last thing. Commonwealth has changed the software we use to manage your accounts, and in the process they have dramatically upgraded the information available to you on-line. If you have not logged in to view your information, we encourage you to do so, and to contact us if you need assistance.

As always, we are grateful for the opportunity to work with you. Some of you have been with us for approximately 30 years! Those who do not yet have such a long history, we look forward to a relationship that will reach 30 years or more!

We hope your Holiday Season is a healthy and happy one.

Thanks, and best wishes,

Robert Haley, JD, CFP®, AIF®