Transcript
Hello, everybody, welcome to Wednesday, the S&P 500 was down .03%. Unfortunately, the asset classes that we really have a lot of focus on did a lot worse than that today a little bit like what happened yesterday, we’ve seen this before, back in September, for example, when things sold off. And you know, we made a few adjustments, but mainly the market finally came back around. So we’ll see what happens here. I’d like to spend a few minutes just talking about what I do to prepare for further downturn in the accounts that I manage. And I think hopefully, this will help, I actually look at these downturns as a huge opportunity. And it’s what gives me calm and what have you. And having a plan is the place to start, what is your downturn plan, and I’ll describe mine in a moment, and then not panicking. When things do actually happen, just go execute the plan. And that’s really important.
So first of all, one of the things that I would be doing in this particular situation, is making sure I have stop losses under all of my important areas. So clean energy is having a hard time right now situation in Texas, and there’s all kinds of crazy, you know, things about wind turbines freezing, they have wind turbines in the Arctic. So it really has to do with what the equipment is like, and it doesn’t get that cold, usually in Texas, so they don’t have the same types of materials, and, you know, kits built into these particular turbine. So, nonetheless, what we want to do here is make sure we understand that a lot of these clean energy pieces that we’re invested in are up 100 to 300%. In total, since, you know the last 12 months, and so, you know, again, the S&P 500, average is 11%. And we really want to make sure you know that when that thing gets stretched out that much, put a line in the sand. And so you know, that’s where we’re at.
Now, when it gets soft like this, when the markets gets, I tend to move those Stop Losses up even closer. And so I did, and one of them almost tripped today, but it stayed there. And I’m happy to keep these things, you know, hopeful they move up and continue on. But if they get triggered out, I got a whole bunch of other things that we could be looking at. The other things that I look at in a downturn as part of my plan is what’s holding up. So the S&P 500 did a lot better the last two days than we did in innovative technology, genomics, and clean energy and all these things that are really part of this, you know, new world and new growth that’s coming our way. And so, gotta go in and look, what caused the S&P to stay up, what portions of the market held up, is that a trend that’s worth looking at. So if I do get tripped out of a clean energy piece, should we be looking at value or some of these other pieces, you know, the virus count is coming down, the death rate is coming down, number of desperate days coming down, the vaccine is getting pushed out, there’s some great hope that it’ll leave me pushed out faster, I hear more and more from my clients that they’ve had one or two shots already.
So things are starting to prove there. And of course, when that does happen, a lot of these stocks that need the vaccine and the virus to go down or away, are going to start to move and we’re starting to see some of that. So that’s part of the calculation is when a market falls, you know what’s not falling, and where we might be able to take advantage of that. So for example, we bought Microsoft and Apple back in March 5, because when the market fell, they didn’t fall as much. And so I looked at that as a signal. And we made some changes into that. One of the other parts of the plan has to do with non-IRA, non-401k type plans so that our taxable accounts. Taxable accounts have the same model attached as an IRA account. But the IRA account is right on the model all the time, because I don’t have to worry about taxes or there’s no transaction costs, either at this point, no commission, so the not the taxable accounts, I have to take those, you know, kind of one at a time, and we have to worry about the taxes.
So if right now, because the market comes down, if I have anything at a loss, maybe that we just bought, I might sell it just to take the loss. And you know, we can always move into something that is working right now. But that loss then allows me to say, Okay, what do I have where I can take some gains and maybe net that out to zero, and I can move closer to the model, our IRAs or 6% higher rate of return last year on average, versus our non in our taxable accounts, mainly because the IRAs are on the model. So trying to get these taxable accounts closer to the model over a period of time, I think pays off, have to be very, very careful with tax on those but this isn’t a situation as part of a plan.
When the market does come down, it’s a really good opportunity to take a look at what you can do there. And so all of these pieces now, I also have a plan to put some inverse pieces into the portfolio, if the market really does fall apart, I’ve got some certain levels that it needs to get to before that happens. And what happens in an inverse is that they, you know, go up in the opposite direction is the market, I have an inverse, you know, in my possible portfolio that would go the opposite direction, the Dow opposite direction of the S&P 500, opposite direction of the, you know, NASDAQ 100, for example. And we can use any of those as part of this concept. And what this does is just kind of slows down the descent. Oftentimes, we used to use treasuries, especially longer term treasuries, I do not think that treasuries will do as well, in this situation, because they are already so low already. There’s, there’s, in terms of their rates, there’s not a lot of room to move for them to really skyrocket like we saw, you know, last year.
So I think the inverse is might be the way to go. So that’s part of the plan to lots of good things. I don’t know what’s happening here, for sure, you know, we’ll find out. I tend to be kind of reactionary and not predictive. And so, you know, I’m just looking at this and could be a whole big nothing could be the start of something. So we just keep an eye on it. But, you know, we have a plan. And I think it’s important to have that plan. I think it’s important not to panic. And I think it’s important to you know, execute that plan as it happens. So, I’ll keep you up on what’s happening. And I really look forward to seeing what’s going to happen tomorrow. Thank you very much.