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Look Out Below!!
- marycoupland5
- Mar 15
- 5 min read
By Mike Adams
Times like these do not scare us out of the market. We’ve been here before and undoubtedly, we will see such volatility again.
Yes we have a new administration that has proposed tariffs, an idea which contributed to the Great Depression of the 1930s.
Yes we have a new administration that has taken a rapid chaotic approach to cutting government costs.
Yes we are probably going to see a stagflation like we experienced in the 1970s.
Yes we believe our client portfolios are set to do well over the next few years. In the past 20 years we have made one to two block trades per year. We will continue to do that as companies and markets evolve.
If you are not a client how do you think your investments will fair? If the purchasing value of the dollar drops 70% as it did in the previous stagflation will you be able to maintain your quality of life?
We know that every investor has unique expectations, goals, risk tolerances. We custom build every portfolio to suit the client.
In Thinking Fast and Slow, Daniel Kahneman describes an experiment assessing investors’ propensity for risk. Participants were given $20 and asked to decide whether or not to invest $1 each of 20 successive times. A coin was to be flipped each time and if it fell heads, the investor made money, but if tails, the investor lost. Every time the investor won, they got back $2.50 (a profit of $1.50 plus their original $1.00) and when they lost they lost their $1.00. It is in the best interest of the player to bet every single time. If heads are flipped half the time, the investor ends the game with $25.00. In fact, 87% of the time, the investor would do no worse than break-even and most often make money. Only 13% of the time would the investor lose money.
But instead of playing every time, investors would only continue to play 40% of the time after a tail showed and they lost money. Even though the odds did not change and they still had better odds of making money than losing money, 60% of the time they would not play after they lost money. It got worse as time went along. In the first five rounds, 70% of the investors played the next round. But as the rounds continued, the pain of losing that $1.00 when a tail was flipped made more and more investors stop playing.
It is only by examining the study from our vantage that we can see that the best strategy is to play 100% of the time. However, this is indicative of what happens in the real investment world. When the market declines, investors lose their nerve and want out rather than viewing it as an opportunity to buy low and sell high. A number of studies show staying in the market during up and down times produces superior results to those managers who try to move in and out of the market. We do not see that changing.
If “location, location, location” is the winning formula for real estate the equivalent for stocks is “earnings, earnings, earnings”.
There are times when the computers and money managers disregard the earnings as they did in 2022 and 2023. The gurus of that period were so focused on the inverted yield curve and the Federal Reserve they downplayed the impact of earnings.
Our clients saw their accounts down during that time. But when that changed at the end of last year the accounts soared producing a 56.8% actual 2024 return for the composite of the AFC client stocks. That also meant that composite surpassed the S&P 500 total return from inception in 2005!
Check the returns our clients have seen over the years. Fewer than five percent of money managers produce the returns our clients have seen. We know of no financial advisor who has done as well.
But there have been up years and down years. I understand the emotional response of many investors when so many so-called gurus are peddling bad news.
It is true our clients have experience greater volatility than those clients of other advisors. But check the curves. On which curve would you rather experience? Would you rather have $ 5 million with greater volativlity or $1 million with smaller up and downs?
For which clients do you imagine will fare better in stagflation? Which will better survive retirement? For which clients will the quality of life be unaffected by the inflationary destruction of up to 70% or more of the purchasing power.
The best time to invest with Adams Financial Concepts was yesterday. The next best time to invest is today.
Join our Free webinar March 27th:
Every day you put off taking action to talk to us about how you can experience returns similar to the ones our clients are experiencing. Time is not on your side. Everyone’s needs and tolerances are unique to them. We do not believe in a cookie cutter approach to investing.
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Note:
1. “One in Two Voters Worried About Retirement and Finances, Finds Balckrock”, Investment News, February 24, 2025
Disclaimers:
1. Past performance is no guarantee of future performance.
2. AFC uses the S&P 500 with dividends reinvested as the comparable index for all accounts.
3. AFC Managed Accounts returns include all active accounts as well as all closed accounts with the same objective: to beat the S&P 500 over the longer-term (10 years).
4. Adams Financial Concepts (AFC) Managed Accounts results are net of all fees and expenses. The results are net, net, net.
5. AFC Managed Accounts do not include the results of the Incentive Profit Sharing Accounts.
6. The performance presented is that of actual client accounts and includes all equity Growth Accounts with one quarter or more. These are not hypothetical, models or back tested.
7. Portfolios are concentrated in as few as 8 equities. Since William Sharpe received the Nobel Prize for showing there is no significant difference in volatility risk for portfolios of 8-9 stocks as compared to 300 stocks. In other words, AFC subscribes to the Mark Twain philosophy of putting all our eggs in one basket and watching the basket.
8. AFC Managed Accounts include capital gains and losses, both realized and unrealized, but do not include the impact of taxes on capital gains.
9. “I’m always fully invested. It’s a great feeling to be caught with your pants up.” – Peter Lynch AFC accounts are always fully invested.
10. AFC accepts that there will be times when there will be periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare us out of the market.
11. Eugene Fama shared the Nobel Prize in 2013 based on showing fewer than seven percent of professional money managers do as well as their index and fewer still beat the index. “Luck versus Skill in the Cross-Section of Mutual fund Returns”, Eugene Fama and Kenneth French, The Journal of Finance, October 2010.
Article Written By:
Mike Adams, President & Principal
Adams Financial Concepts LTD
1001 Fourth Ave, Suite 4330, Seattle WA 98011
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