Hightower Podcast: Collective Wisdom

Jimmy Hausberg, managing partner at The Hausberg Group in Beverly Hills, Calif., says that people staying safe at home during coronavirus but watching the market plunge and the economy grind to a halt are wondering if they're seeing the start of the next Great Depression, and they need to be working with their financial counselors to address concerns, stay calm and to develop a tactical plan that protects their short-term interests while also looking at the long-term potential for a rebound and the investment vehicles and sectors that will lead a comeback.

Long-time HighTower money manager Andy Morse of Morse, Towey and White Group in New York acknowledges that the market's response around the coronavirus pandemic is unlike anything he's seen in his long career, but he notes that it resembles past events enough for him to know that calm and patience and adhering to strategies pursued before real trouble started will pay off in the end. He notes that the market's big gains in 2019 triggered the purchase of hedges and fixed-income that have already softened the blow, and that time will leave investors ultimately talking about the future recovery as much as the current downturn.

Adam Thurgood, managing director and partner at HighTower Advisors Las Vegas, says that investors shouldn't be shaken from diversification and other measures just because it looks like it's not working when the market has a terrible day. Even gold moved down big in the market's huge drop on March 9, he notes, but precious metals -- as well as high-quality corporate bonds and other safe havens and diversifiers -- did their job and held up well over the market's entire 20 percent drop from a high on February 12 through the March plunge. You're not defending against a bad day, Thurgood noted, but against bad conditions long-term.

Roger Shaffer, managing partner at Shaffer Wealth Management in Alpharetta, Ga., says that the financial-planning process doesn't change during times of market strife, and notes that investors and their advisers must focus on process and their ultimate individual goals in times of uncertainty. By focusing on personal needs and where they are in their own lives -- rather than falling into the news cycle and reacting to what the market is doing -- Shaffer says individuals can more easily ride out and profit from market turbulence.

Matthias Kuhlmey, chief development officer at highTower Advisors, returns to Collective Wisdom after a lengthy absence to give his take on worldwide investing, noting that he believes interest rates will be lower for longer because the global economy can't digest high rates now or in the foreseeable future. With the economy facing deflationary pressure, Kuhlmey said investors must find compelling market valuations and balance it with the personal investment policies and philosophies that push forward in spite of slowing economic forces.

Matt Harris, head of the outsourced chief investment officer division at HighTower Advisors, said the market's is showing technical signs that mild trouble lays ahead, noting that the recent strength of the Standard and Poor's 500 index compared to its moving average -- where the benchmark is 11.5 percent above the average, which has occurred less than two percent of trading days over the last decade -- generally results in a two to five percent decline in two weeks to three months from when it first occurs.

Jim Ewing of Ewing/Cona Wealth Management in Marlton, N.J., says that the long current market rally appears to be overbought, which isn't necessarily a reason to expect a protracted downturn, but it should inspire investors to be more cautious. To that end, Ewing notes that many investor portfolios have grown fabulously over the last few years, gaining in size but moving away from their underlying financial plan. He suggests that investors wanting to respond to current market conditions look at rebalancing to see if it is both necessary and more likely to give them a comfortable portfolio for riding out the market's upcoming volatility.

Jimmy Hausberg, managing partner at The Hausberg Group in Beverly Hills, Calif., said that headlines like the coronavirus outbreak or even news of the presidential cycle shouldn't be ignored, but he noted that investors should use those events as a chance to review their portfolio rather than trying to capture short-term profits in ways that can derail long-term strategy. Hausberg's approach is defensive, more focused on avoiding the mistake rather than trying to enhance profits around news events.

Jake Falcon of Falcon Wealth Advisors discusses how investors should pay attention to the news, but should not be buying or selling the hot names that are ancillary to the headlines, for example companies that could profit from coronavirus, issues affected by political tensions, and even trendy newsworthy industries like cannabis and marijuana. Instead, Falcon urged opportunistic investors to use news events that create dips and downturns as buying opportunities for more mainstream securities.

Collective Wisdom revisits a recent discussion with Adam Thurgood of HighTower Las Vegas about how inventors can balance current risks with their own risk tolerance, noting that the proper ways to play defense right now could well involve investing internationally and adding gold and holding additional cash in the portfolio, rather than stretching for yield through fixed-income and dividend plays.

Cory Bittner, chief operating officer at Falcon Wealth Advisors in Mission Woods, Kansas, says that while investors may read and hear annual forecasts that they want to take to heart, they shouldn't do too much to take those predictions into their portfolio. Forecasts help advisors and customers frame discussions about a portfolio and expectations, Bittner said, but if a client is so dedicated to an outside outlook that they're forcing big changes to previous investment decisions or going against the financial planner's core reasoning, they're exposing weakness in the advisory relationship.

Given increased tensions between the United States and Iran and other current events, this week's episode revisits a recent chat with David Bahnsen of the Bahnsen Group, discussing the junction of politics, current events and personal finance. Bahnsen notes that investors need take a dispassionate view of how current events can and will impact the market, while also maintaining a personal balance because ignoring politics altogether while investing can be costly in its own ways

At the end of the year, we revisit the start of the year, when three veteran financial advisers -- Richard Flahive of HighTower Westchester, Laurie Kamhi of LCK Wealth and Jake Falcon of Falcon Wealth Advisors -- discussed the questions they most wanted to hear from clients and prospective clients about their finances and financial goals. Kamhi's question involved expectations that both the adviser and client have for the relationship and the year ahead, Flahive suggested discussing the fiduciary relationship and Falcon hopes clients will ask about what they and their planners can and can't control when it comes to the markets, returns and more.

Matt Harris, head of investment strategy at HighTower Wealth Management, said that both the current 'feel' of the market plus some technical signals -- where risk-on sectors are outperforming safe-harbor peers, for example -- are making it look like the market has more room to grow in 2020, though he did suggest there may be heightened volatility as a result both of election-year-politics and 'concentrated trades,' where the major market interest has been in specific areas that may now trade with more vigor and action.

Jeremiah Reithmiller of Sarian Strategic Partners and Steve Tresnan of Tresnan Ferst Wealth Advisors cite data showing that fixed income is no longer the same kind of buffer for equities in troubled times. But in this re-broadcast of a past Collective Wisdom episode, the two advisors come up with different solutions for balancing rate risk with the need to provide an equity hedge. While Reithmiller uses a traditional barbell-style strategy to give his clients balance, Tresnan looks more to private credit in order to diversify and achieve better balance.  

David Molnar of HighTower San Diego says that investors and advisory clients need to evaluate results based on progress toward goals rather than being focused primarily on investment returns. Focus solely on results, Molnar says, and you will miss out on the true planning and control benefits that come from planning, and that lead clients with advisers ultimately to have superior performance to do-it-yourself investors. 

Adam Thurgood of HighTower Las Vegas said that investors trying to match their risk tolerance to the market right now should not play defense by stretching for yield in today's low-interest-rate environment, noting that he does not suggest loading up on dividend-paying domestic stocks but instead wants to achieve greater diversification and return potential through international investments and some gold, offset by some additional cash holdings waiting for times to be pro-active in the future.

A year ago, the stock market shocked investors by cratering just after Thanksgiving, and while no one is calling for a similar event this year, Jimmy Hausberg of The Hausberg View in Beverly Hills, Calif., talks about the importance of keeping that decline in mind, investing as if the next downturn is on the way, even if the current landscape is dominated more by rumor and innuendo than by disturbing facts. Hausberg notes that reacting to headlines and news historically has been a bad way to invest, but that investors must be prepared to ride out the market swings caused by such non-events.

Jake Falcon of Falcon Wealth Advisors in Mission Woods, Kansas and the Upticks podcast discusses the effects of modern media on investors, how it often leads to ideas that disrupt a portfolio rather than enhance it. Falcon talks about the messages individual investors should be listening for -- where it feels like they are having a mini-meeting with an adviser rather than pursuing hot stock tips or the next big thing -- and how to balance the media and the message.

Andy Morse, senior partner at Morse, Towey and White Group in New York, said that investors can't believe that politics doesn't impact the market because earnings and policy are two factors that go a long way to driving the market. Morse said that interest rates have settled down -- even if future cuts and hikes are uncertain -- but that trade concerns continue to make it tough on manufacturers and farmers. While he expects trade issues to be resolved, Morse made it clear that he does not expect the economy and market to be overly robust going forward.