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This Month’s Newsletter

Random Musings in Our Random New World                                                  Join our Monthly Newsletter                July 2020                                                                                              

Carl W. Hafele, CFA, CPA

Co-CIO, Principal

Whew! What a first half of 2020. The stock market plummeted nearly 35% early on, the Fed commenced buying bonds and we are all “masked up” from COVID. Rather unpredictable and some unprecedented events.

I decided to look at our thoughts and writings in our newsletters in the first six months, all available on our website at In summary, it’s like looking back in prior times of crisis and the result is a simple “shake of the head.”

  • In January, I questioned if the 2020’s would be roaring or boring, and suggested we will probably be in between due to a supportive Fed, okay valuations and a secular bull being tested by social programs’ growth. Sure wasn’t boring!
  • In February, my partner Trip reviewed the prior four decades regarding earnings, inflation, PE’s and stock returns. The conclusion was diversification – the numbers 1, 2 and 3 rules of investing – is not dead.
  • In March, my partner Mark shouted out that all should call their mortgage broker and take advantage of the rates available in the COVID crisis. I also wrote two pieces in the midst of the meltdown. One was regarding perspectives on crises, concluding your long term asset allocation targets are so important and should be driven by your risk tolerance, and don’t sell now! Another crisis period piece discussed S&P earnings and multiples – important to know in a super crazy period of investing.
  • In April, I also discussed the history of bear markets. Currently, the 2020 bear thus far looks like a painful “big” bear, but not a 2000 and 2008 “polar” bear or The Great Depression.
  • In May, Trip discussed the dual rescues of the Fed and our government and the resulting stock market rebound. The Fed has spent trillions of dollars supporting the financial system and the government has given us the CARES Act and PPP. Both are designated to keep us out of another Great Depression. As a long-time student and professor of economic history, I concur with most of the 2020 moves.
  • In June, Mark clearly emphasized that the stock market upward trajectory versus corporate earnings downward trajectory is unsustainable. The market is effectively saying the worst of COVID is behind us, the economy is reopening quickly toward pre-COVID levels, unemployment will plummet and profitability restoration is just around the corner. His conclusion – this doesn’t feel normal.

So where are we now? The bullish case above includes the intervention of the Fed and it potentially buying / supporting all assets – including equities! Is this the end to free market capitalism or just a temporary intervention? Perhaps until a COVID vaccine is available to all and then test if the markets can stabilize without intervention? The only truth we know is this is a brand new territory.

The bear case has many more elements. Profitability will be reduced for years including some industries like retail, hotels and travel fearing an existential threat. Some say it will be 2023 before we return to 2019 profit levels. Current price/earnings levels are high but not yet to levels seen at the 2000 peak. Social unrest is an additional huge economic drag on top of COVID. As the economy slowed, tax revenues have plummeted and expenditures have skyrocketed, making the deficit for fiscal 2020 undoubtedly our largest ever. And, oh, an election is just months away – one must choose now between capitalism and (near) socialism. Sad.

Nothing in history resembles this period in time. Deep recessions were common every five years when manufacturing and agriculture dominated the economy. Enter unemployment insurance, two-income families and a collapse of jobs in cyclical industries and farming. This reduced the length and depth of recessions – voilà! But now, over 85% of wage earners are in the service sector. COVID has killed confidence for spenders (particularly the richest ones), which is limiting the economic recovery compared to the most recent recessions. Thus, government gifts to most to boost consumption, which is 70% of our economy.

Our conclusion? There has never been a better time to have a diversified portfolio. This includes exposure to the traditional asset classes of stocks and bonds accompanied with diversifying strategies of real estate and hedge funds.


Carl W. Hafele, CFA, CPA, is Co-Chief Investment Officer and Principal at Lanier Asset Management. He is also an instructor in Finance and Economics for the MBA program at Bellarmine University.

June 2020: Does Anything About This Feel Normal To You?

May 2020: Can the Rebound Last?

April 2020: The Big Bear of Q1 2020

March 2020:  Where's the Bottom?

March 2020: A Perspective on Crises

March 2020: Is there Any Good News Out There?

February 2020: Is Diversification Dead?

January 2020: The Roaring (or Boring?) 20's Are Here!

December 2019: Providing 'Alpha,' The Holy Grail of Investing

November 2019: The Search for Yield: Chapter 2

October 2019: Given the Current Rate Environment, How Has the Search for Yield Changed?

September 2019: What is the State of your State?

August 2019: Volatility is back, but is it the end of the world?

July 2019: Is This the Year 2000 All Over Again?

June 2019: Concerns of an Economic Slowdown?

May 2019: Benefits of Hedge Fund Investing

April 2019: Yet Another Burden On The US Economy

March 2019: Capitalism vs. Socialism: The Debate is Alive and Well

February 2019: What Are the Most Important Factors for Investing in a 401k Plan?

January 2019: A Look Back and a Look Ahead

December 2018: The Inverted Yield Curve - In Layman's Terms

November 2018: A False Sense of Security

October 2018: Reflections From Over Four Decades

September 2018: A Decade of Assisted Recovery

August 2018: The Entitlements Train Wreck - Possible Solutions?

July 2018: Is Wage Growth In This Country Improving Over Time?

June 2018: The Impact of Corporate Tax Reform

May 2018: Kentucky Derby Talks - Bulls vs. Bears

April 2018: How Much Longer Can Interest Rates Stay So Low?

March 2018: Policies For Economic Growth

February 2018: Volatility

January 2018: So What's In Store For 2018?

December 2017: Tax Cuts and Jobs Act: Good or Bad for Me? It Depends.

November 2017: Whack-A-Mole - D.C. Style

October 2017: Should You Consider a Robo-Advisor?

September 2017: Alternative Investments - What and Why?

August 2017: The QT Quandary

July 2017: Quality of Life Influencers (Cont'd)

June 2017: Quality of Life Influencers

May 2017: Repatriation Myths and Realities

April 2017: Time to Invest in International Equities?  Let's Take a Look...

March 2017: Valuation - A History Lesson

February 2017: The Prince of Darkness

January 2017: Mountains of Debt - Does it Matter Anymore?

December 2016: Trumponomics: Reagonomics' Twin?

November 2016: Found Money

October 2016: Marrying Theory and Practice

September 2016: Do You Have a Sharpe Portfolio?

August 2016: Be Careful of High Dividend Stock Strategies

July 2016: "Die Younger" is Not a Strategy

June 2016: Blame Tina

May 2016: Would You Rather:  Tax Cut or Tax Increase?

April 2016: Father Time Demands Your Attention

March 2016: What Has the Last Year Taught Us?

February 2016: Winners and Losers of the Oil Battle

January 2016: Diversification Improves Returns and Lowers Risk

December 2015: Synergy and the Art of Building High Performance Portfolios

November 2015: Take Control...or the Government Will For You

October 2015: A Note from Our Dean of Business

September 2015: Double Espresso at Midnight

August 2015: An Allocation to Hedge Funds - Essential!

July 2015: Another Greek Tragedy?

June 2015: What Does Financial Planning Mean To You?

May 2015: The Active vs. Passive Battle

April 2015: Out on an Island – Preparing for the Fed Rate Hikes

March 2015: To Fee or Not to Fee?

February 2015: European Central Bank Tries QE – Will it Work?

January 2015: 2014 Recap