Although it seems like a massive understatement, these are difficult times indeed. I’m now talking with clients and others every day who are seriously planning to move. There are conversations about lost jobs, frustration with kids going to school online and a sense that, simply put, this isn’t the area it used to be. It’s the years of fires too, of course, but I think it’s also a realization that a time of upheaval can present an opportunity for change.

The gloominess of all this has been compounded in recent days by a worsening outlook, not necessarily for the markets, but for how long it might take to get back to normal.

First came two interviews (at least that I heard) with National Institutes of Health chief (and Dr Fauci’s boss), Francis Collins, M.D. He was apparently making the media rounds talking about where we’re at with the virus and his outlook. When pressed by the interviewers he talked about the strong possibility that we won’t be back to “normal” until late next year, maybe longer. He seemed like a level-headed non-political guy, so his timeline guesstimate felt like a body blow. Another year plus?! He was clear about not making a prediction but merely suggesting a reasonable expectation amid a highly uncertain situation.

Add to that an unchallenged portion of a question during last week’s presidential debate. The moderator asked the candidates about government officials saying that mask wearing and social distancing might last into 2022. Neither candidate rejected the premise, leading me to assume that both generally agree with that potential timeline.

Where am I going with all of this? The longer outlook for the new normal, or whatever we want to call it, and the changes being contemplated by many of you, is making me reevaluate certain aspects of my business. I wanted to share a few of the thoughts with you today.

To Zoom or not to Zoom

It’s becoming clear that we need to double down on meeting virtually. While not being as satisfying as meeting in person, it definitely gets the job done. The technology continues to improve and so does our (mine and yours) comfort level with using it. Zoom is by far the most popular choice. I had been using the platform some years back when it had some useability issues and security concerns and I switched to something more professional. This was pre-pandemic, of course, and Zoom has been investing heavily to beef up security. Given how popular it is and my want to make things easy for you, I’ll go ahead and sign up for the business version of Zoom. This lets us choose between multiple platforms and, assuming Zoom proves better for you, we’ll just stick with it.

Popup meetings using video or just phone

We’ve always been able to chat via phone or exchange emails, but I’m wondering about the concept of popup video calls. This is an impromptu call where we could use screensharing and video on the fly if needed. I have the technology already, but there hasn’t necessarily been a reason to make this as efficient as possible. The goal is to be on the phone with you and then start using the technology within a minute or two. Again, ease of use is key.

The elusive in person meeting

Another big question is what, if anything, to do about my office. My building is still not open and won’t be until Sonoma County is in the “yellow” tier of the State’s phased reopening plan. Like you, I don’t know how long that will take. I’m planning to keep my office for the foreseeable future, but it’s unclear how valuable the space will be if fewer folks want to (or need to) meet in person.

I used to do house calls when I was first getting started with my practice and maybe I should consider offering that in the future. Part of the reason I enjoy my office is that all the technology I use to serve you is readily available. But ironically, I already have most of the technology to make things portable, I just haven’t really tried to leverage it yet. Maybe this will be better and more convenient for everyone. Time will tell.

If we move, can you still be our advisor?

Fortunately, most states have what are referred to as de minimis rules that allow me to keep working with you wherever you are so long as I have fewer than six clients there. Maybe if more than five of you move to Idaho, for example, I’ll need to register as an investment advisor in that state. It’s only paperwork and some relatively minor fees to get that done. So, the simple answer is yes, I can continue to work with you wherever you are. Maybe I’ll even come visit.

I won’t be making major changes like shuttering my office anytime soon. These are just some of the thoughts percolating in my brain these days. As I think about all of this, I’m also reconfirming some fundamentals. This is my profession and I love what I do. I also intend to do it for a long time and my outlook is fundamentally positive. I just want to stay flexible in how we work together because the environment is likely to be in flux for some time to come.

Have questions? Ask me. I can help.

Someone, or many people, once said that if you get the fundamentals right everything else eventually falls into place. Doing so doesn’t guarantee the task will be easy, but I think we can all agree that getting the fundamentals wrong makes things a lot harder.

Unfortunately, most people don’t realize they’re getting the fundamentals wrong until times of stress (market, economic, and so forth) or, as has been the case for certain local investors in recent months, until there’s nothing to be done to fix the problem.

Case in point is the recent uncovering of how a highly regarded real estate fund based in Marin turned into a massive Ponzi scheme. The promise of higher returns led many folks to put far too much of their life savings into this deal and now they find themselves between a rock and a hard place. The details of the scheme are available online, so you can look it up if you like.

While there are several investing and planning fundamentals imbedded in this financial tragedy, let’s look at one of the most fundamental: understanding the difference between, and the importance of, liquidity and marketability. A lack of personal liquidity is one of those problems that isn’t until it is and then it’s a big one. And it’s easily overlooked when times are good, even by some of the most intelligent folks around.

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I don’t know about you but I’m running out of words to describe the times we’ve been enduring these last months. Challenging? Uncertain? Scary? Apocalyptic? Whatever we call this, it’s just plain tough to handle. And with the new local fires emerging it seems inappropriate to write about anything financial right now.

We’re ending the quarter this week and next Tuesday I’ll post my regular update. Until then I wish you and your family safety and good luck. These are (insert your own descriptive term here) times indeed, and we’re all going to have to dig deep to get through them.

While it may be small consolation with everything that’s going on, know that we’re still hard at work for you and are available to help whenever you need it, wherever you are and wherever we are.

Have questions? Ask me. I can help.

Black Monday, October 19th, 1987, is a stock market event that’s long been an example of how fast things can go wrong when investors behave badly. There were a variety of reasons, structural and otherwise, for why it happened the way it did, but the bottom line is that investors really freaked out and selling begat more selling.

The anniversary yesterday seems especially poignant as we’ve seen so much uncertainty and volatility this year. Many investors simply panicked back in March and have felt left behind in recent months as markets rallied. Others who didn’t panic felt a sense of relief at how things have played out so far. But now many see risk rising again as our economic recovery slows and we edge closer to the election. No rest for the weary, right?

I think days like Black Monday are important to remember, either from personal experience or by study, because they lend perspective about what it takes to be a long-term investor. As the old saying goes: If it were easy everybody would do it. During a (hopefully) long investment horizon there will be lots of bad days mixed in with the good days, but it’s the slow build of value over time that truly matters. And the slow build can still happen, even if you feel like you’re working yourself out of a hole.

To illustrate this point let’s look at a brief research note about Black Monday from my partners at Bespoke Investment Group. They touch on how bad the market environment was at the time and how, in the decades and all the market events since, stocks and bonds still generated good returns for long-term investors, even if their timing was horrible. This will be helpful to remind ourselves of in the coming months.

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Before we begin, I just want to say that I hope you and your loved ones are well, all things considered, and that your home has survived the recent fires. Its tough out there right now and natural disasters don't help matters at all. One day at a time. Now, on to this week's post...

During the third quarter (Q3) we continued to climb out of the pandemic-induced hole we found ourselves in earlier this year. Broad economic numbers improved, stocks performed well, and bonds held steady. But our economic and financial recovery has continued to be uneven and this adds risk to the outlook.

Here’s a roundup of how major markets performed during Q3 and year-to-date, respectively:

• US Large Cap Stocks – up 9%, up 5%
• US Small Cap Stocks – up 5%, down 7%
• US Core Bonds – 0.4%, up 7%
• Developed Foreign Markets – up 5%, down 7%
• Emerging Markets – up 10%, down 1%

Tech stocks continued to lead the way during Q3, with the largest companies getting larger. According to Bespoke Investment Group, the five largest stocks in the S&P 500 (Apple, Microsoft, Amazon, Google, and Facebook) now account for nearly 23% of the index’s value. This is radically different from ten years ago. Back then only Apple and Microsoft made the top five and were joined by Exxon (then the largest company), Berkshire Hathaway and Walmart. Those top five made up only 11% of the index’s value in 2010. Now we’re relying more heavily on so-called Big Tech to drive market performance, making diversification harder.

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Last week we looked at some of the issues related to relocating amid all the uncertainty we’re facing. This is a popular topic these days. We focused on the question of selling your home here and transferring your equity to the new location, often leaving you with a good amount of cash.

We also touched on the idea of renting in your new location. Although this is likely anathema to many long-time homeowners (myself included), renting for a while has its benefits. The idea is to give yourself space to figure things out, investigate the new area and decide where you really want to be before pulling the trigger on buying a home. It takes time to determine which side of town you like best, the traffic patterns, where the nice parks are, and so forth. And since many housing markets around the country aren’t as active as ours, you’ll want to avoid feeling stuck in a hastily bought home in a less-than-ideal location.

Zillow, for example, says that on average nationally it takes about two to three months to sell a home (including the escrow period). Our area typically takes less than two. But beachy areas in Florida and South Carolina can take four months or more. Also, some of these markets are currently categorized as “hot” but are expected to flatten out or decline over the next year. So, while it’s possible to sell for a profit if you realize you made a mistake, it’s more likely you’ll need to hang onto your new home for a while. I think it pays to be cautious by trying to rent before buying unless you already know the area.

But what to rent and how? While it might seem obvious, this isn’t a time to think about being on vacation. If you need a vacation, take one. You’ll want to rent as if you’re living in the area full time. This means finding a rental that’s like a home in your target purchase price range and, ideally, even in your target neighborhood. In other words, no beachfront condos with amazing views unless that’s what you’ll be buying.

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