August 2024

“What has been is what will be, and what has been done is what will be done,
and there is nothing new under the sun.” -Ecclesiastes 1:9

Recently I remarked that the capital markets are starting to feel normal again. Volatility is back. That may sound like a bad thing, but it is what makes this all work. For the first time in years, it seems like the market is getting back to its historical norm. That may seem scary for some, but as far as I am concerned it makes it much more manageable.

The key to creating wealth is ownership. That is one of the truths of wealth creation that we espouse in our investment philosophy. We talk about it almost any time we get the chance. It is not just ownership of random things, but rather ownership of high-quality productive assets purchased at reasonable prices. This often means investing in some of the greatest companies in the world. When the media talks about the market and stocks, it often sounds akin to a casino and is disconnected from the businesses we own. To wit, I wanted to share with you a short list of some of these companies from a popular index and their accompanying revenue. In other words, if these were all lemonade stands, this is the amount in annual lemonade sales each of them would have. (Hint: we like companies that can sell a lot of proverbial “lemonade”).

Walmart $611 Billion
Amazon $514 Billion
Exxon Mobil $414 Billion
Apple $394 Billion
United Health $324 Billion
CVS Heath $322 Billion
Berkshire $302 Billion
Alphabet $283 Billion
McKesson $264 Billion
Chevron $246 Billion

These companies sell a lot of “lemonade!” I can say that my family has done business with every one of them. You probably have too. That is one of the characteristics we look for.

Stop paying attention to the stock market. “The stock market” is an abstract phrase without clear definition. It includes all the companies, good and bad, profitable or not, that trade on an exchange or are public. Many are not even companies and do NOT fit our wealth creating definition of high-quality, productive assets. The stock market has nothing to do with our wealth creating strategies. Instead, we seek to be lifetime owners of superior businesses.

Sometimes it feels yucky, like when you see your balance go down temporarily. As human beings, we have this thing called emotions. It’s part of why Collins and Krank exists. When our account balance goes down quickly on assets we have targeted for growth, the caveman part of our brain kicks in and shoots fight or flight chemicals into our bloodstream. We want to react, run, protect, escape. That is part of being human; however, it does not lend itself to great investment results. Wouldn’t it be great if you had a filter to keep you from letting that caveman part of your brain make bad financial decisions? Enter Collins and Krank, brain filter. That is literally part of our job.

We listen to your fears and angst. We understand. We recognize those yucky feelings as normal. (Yes, that is the technical term for those feelings.) After hearing you out, we remind you and the modern part of your brain that you have a plan. Together we have developed a continually evolving Goal Plan for your life. We have planned for negative market moves. We have carefully constructed investment strategies with imbedded risk management characteristics to weather the storms and move toward your objectives. You already know this. In fact, it is likely why you chose to partner with us for your family’s wealth plan. When something unexpected or scary happens, no matter how educated, sophisticated, and good looking you are, your little old caveman or cavewoman brain takes over for a bit. It’s okay. It’s called the amygdala, and that is its job. It has kept us alive for hundreds of years. That is all it does. It doesn’t even know what a stock or a bond or money is.

Embrace calm. You are with the right team; you have a plan. Stick with the plan. Last week saw many people freaking out about the market volatility and making what are likely bad long-term decisions. Volume was up on the exchanges. For much of the morning, retail investors trying to go it alone were confronted by the sobering fact that once again you get what you pay for. Several discount brokerage platforms routed them to error pages at the peak of the market selloff. 1-800 numbers were not being answered. When they were, there was nobody to stop the unwitting, go it alone investor from doing the wrong thing. According to Daniell Verbrigghe, a writer for Financial Advisor IQ, Charles Schwab, Fidelity, Vanguard, and Morgan Stanley's E*TRADE were among the firms that experienced outages. When Jeff and I chose to partner with Raymond James, the robustness of the trading systems was one of the many things we looked for. We experienced no problems with our systems.

Embrace market declines as organic, necessary, and the direct cause of the spectacular long-term equity premium. If equities were not volatile (prone to wide swings in both directions), they would not provide us the returns that they do over time. They would be like bonds. We have many investors for whom growth is not their primary objective. They want to preserve what they have. We don’t talk about preservation strategies as much because they are kind of boring, but that is their job. They are meant to be boring, in both directions.

For growth investors, the volatility shakes out the weak holders giving the rest of us the opportunity to buy their shares at panic prices. It lets us reinvest our dividends or dollar cost average our accounts acquiring more shares in productive assets at reasonable or bargain prices. The temporary declines set us up for the next big run and the long-term joy of ownership and continued wealth creation. Smile and enjoy.

Sincerely,

Brien Krank

Financial Advisor, RJFS

Senior Portfolio Manager

Managing Partner – Collins and Krank

Hear me on the radio Wednesday mornings from 7:35 to 7:55 on 1100am The Flag and 970am WDAY.

Opinions expressed are those of Brien Krank or of the author in the attached articles and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Individual investor’s results will vary. Raymond James is not affiliated with Nick Murray or First Trust.