Letter to Stakeholders, December 2023

Monday, December 11th, 10:03 am EST. November, a month to remember; and as long-term investors, also to forget. November’s gains in the stock and bond markets reversed the October losses, and (approximately) took your statement balance back to July highs. July’s returns piled on to a first half of 2023 that was supposed to be bad for markets. Instead, market declines began in the second half of August through October. But now we are within full swing of what’s called a “Santa Clause Rally.”

Here Comes Santa Clause

The “Santa Clause Rally” was initially defined as the time period just before December 25^th through early January. The phrase was coined by Yale Hirsch, an early stock market prognosticator who was one of the first to use seasonal trends to predict whether stocks would be up or down in a given month. His son has digitized his “Stock Traders Almanac” so for 60 years people have been predicting how the stock market will go based on trends, vacations, weather and seasonal timing (like “the holidays”). Sometimes they are right and sometimes they are wrong. We’re of course happy your portfolios have bounced back from the October lows of 2023. It looks better than the alternative. But we’re still focused on the long-term investment strategy we’ve built for beyond your next decade.  So celebrate this month’s statement, then forget it.

Questions about how your money is invested for the long-term? Just call me: 571-595-3988 (or write: Jason@JasonHowell.com).

Alternative Candidates

No, I’m not talking about our presidential elections next year – thought that would be fun – but instead alternative candidates for your investment accounts. As we shared with many of you during our “Fall Check-Ins” Doug and I are constantly evaluating the conventional investment theory wisdom. With interest rates possibly staying “higher for longer” and the “correlation” – i.e. sameness – of domestic and international stock performance, finding the “holy grail” of diversification just in public investment markets is likely to get harder going forward. The upside? Technology and regulation are making it easier (read: possible) to invest in private companies and institutional debt. These were formerly called “alternatives” because only institutions themselves and multimillionaires could gain access to them. That’s changing.

There are many choices for “alternatives” but two candidates are standing out for 2024: venture capital and private credit/debt. Venture capital by definition is investing in new, typically technology-based companies that aren’t yet profitable but have a “big idea.” These ideas will either fail completely or possibly grow ten times (or more in value). It would be possible but difficult to invest in just one of those companies and expect success. But investing in 25 to 30 of those companies at once, alongside institutions who invest in venture capital for a living, highly increases the success probability. We’re evaluating Blue Ivy Ventures as a partner to help us do just that.   

Whether it was the regional banking scare of last Spring, the highest interest rates since February of 2000 or the 2008 Great Financial Crisis (GFC), access to credit (debt) has been changing and I have found this particularly interesting. In the news, the new word “de-banking” or “debanking” either means the move of lending from traditional banks to non-bank institutions or (inappropriately?) closing bank accounts to mitigate perceived reputational risk. Regarding the former, non-bank entities providing access to credit is growing rapidly. To gain access to private credit and possibly private infrastructure investments, we’re evaluating CAIS as a partner. More to come!

First Generation Wealth & Family Businesses

Since our inception we have served families who were first in their families to accumulate – or be on the path to accumulating – substantial wealth. In January I will complete a 6-week online cohort with Columbia Business School Executive Education on Family Enterprises and Wealth. This will add to our firm’s tacit knowledge on family governance and philanthropy, especially for large, complex, family owned businesses.  

We look forward to our continued service to you (and new relationships too) in 2024!

Happy Holidays!

Jason J. Howell, CFP®, CPWA®, CSRIC®

President

Jason Howell Company is a family wealth management firm that diversifies the portfolios and untangles the emotions associated with first generation wealth and family business. We help couples overcome financial imposter syndrome and family businesses diversify their risk and implement family governance structures.

Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA  have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome."  Successful entrepreneurs are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing wealth. We empower them to get organized, build a team of advisors and make decisions.

Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. We uniquely solve the typical problems that come with family owned businesses.

Our clients trend a little older - Baby Boomers (born 1946 - 1964) and Gen-Xers (born 1965 - 1980) - but we're starting to see more Millennials (born 1981 to 1996) who don't want to wait until it's too late. They earn impressive incomes and have accumulated a good bit of savings. As bona fide experts themselves, they expect fiduciary expertise from people they hire. They are just not sure about the "big box" brokerage firms that advertise one thing and seem to do another. 

First generation wealth success stories and family business owners realize that they:

• Need to “do something” with the cash in their checking/savings
• Need to diversify their portfolio away from the family business
• Need an investment strategy for “up” and “down” markets
• Need a plan to mitigate market, credit, inflation, and political risks
• Need to start tax planning instead of just tax paying
• Need to be sure they are choosing the right work benefits
• Need to reduce financial miscommunications between partners
• Need to separate business finances from personal finances
• Need to plan for money while alive and for what happens after death