Tom’s Week in Review January 3-7, 2022

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

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Transcript:

Tom Vaughan:

I’d like to start off the first week, you know, the first part of this show, with just a summary of what I saw happening in the market this week, I thought this was a very interesting week for a couple of reasons. Number one, you know, the first couple of days were pretty good look like we were going to really start to go, and then Wednesday, really big downturn, and Thursday and Friday, so far, really have just been kind of sideways hanging into that downturn area. On Wednesday, the minutes for the Federal Reserve came out. And so that meeting was held back in December 15. And they had a, you know, post meeting, you know, summary of what they talked about. And they talked about how they’re maybe going to raise rates a little bit faster, cut back on their bond purchases a little bit faster. And so the market reacted to that back in December. But what came through in the minutes that wasn’t talked about, was this concept of letting their balance sheet potentially shrink. So when they buy these bonds, it stimulates the economy, and they were buying $120 billion, you know, a month, but they end up on their balance sheet. And so one of the other ways they can slow down the economy, theoretically, is to, you know, shrink that balance sheet by letting bonds expire, or even selling some bonds. And so that wasn’t expected. And the market reacted to that pretty aggressively. And that’s one of the issues that’s going to happen here, in my opinion.

I believe that this year will still be a positive year altogether, you know, maybe that 8% to 12% range on the S&P 500. But these types of years when the Federal Reserve is starting their tightening cycle, although they can be positive years often are kind of volatile years, because of what we just saw on Wednesday, there’s just this huge, enormous, you know, attention that’s being paid what the Federal Reserve says. And every time they say something that they see as sort of a tightening issue, then boom, the market reacts to that. Because the more they tighten the object is to slow down the economy, the more they slow down the economy, the more earnings could start to fall. And the potential for a recession becomes a little bit higher if the Federal Reserve isn’t careful. And so that’s what the market responds to. And that’s kind of what’s happening here as far as that goes. So my Outlook this year, strategy wise, is to buy companies or categories where I feel like they have pricing power. So for example, in our targeted indexes, one of the things we’ve been buying his Apple, because I think Apple has the ability to increase their price to a certain degree, and still maybe produce similar earnings, which is what you really need to keep the stock growing. Besides the fact that they’re buying back their own stock at you know, $90 billion rate and those types of things. But that huge cash flow, they don’t rely upon debt. And so you look for things like that. And a lot of those sold off this week.

And so we know, we bought some more, you know, Microsoft, and Apple and Google, all have really unbelievable, you know, name recognition, kind of scenarios where it’s going to be more, more possible, they can maintain their price. I think semiconductors as a group is another one, just because there’s such heavy demand for semiconductors, even if the economy starts to slow down a little bit because of interest rate increases, or because, you know, the bond market becomes a competitive threat, there’s still gonna be a lot of need for semiconductors. And it’s difficult for those to ramp up really quickly. So that I think they control the pricing power. So that’s one key thing, I think. The other one is that when you have these kind of volatile years, like this, will look almost like a sideways year, I think in the end, you know, 8% versus the 27% we just had, it’s gonna feel like a sideways day that year, that’s for sure.


We use what’s called opportunistic rebalancing. So we have our portfolio, we have our pie chart, and we buy that pie chart. And then whenever we have these big down days, we go in and rebalance again. And that allow us to kind of sell whatever was holding up the most, and buy some of the stuff that kind of came down. So we just did that on Thursday after the drop on Wednesday, you know, buy a little bit more Apple a little bit more semiconductor a little bit more S&P 500. For example, in some of the accounts, we only do this in the IRAs because of taxes and what have you so but those, those are strategies that I think are important to to employ. The last thing that I would really look at for a year like this is one of the things I see is a lot of people are marching down a path as if they know for sure what’s going to happen. We’re going to have inflation, we’re going to have a bad bond market. We’re going to have all of these things happen. And I can say for certainty that most projections are actually wrong. And a lot of times people are going down a path that doesn’t actually materialize.

And right now, I’ve never seen a year like 2022 is playing out so far. We have the Omicron variant, we’ll probably have some other variants. We have supply chain issues. We have labor issues. We have inflation with this pent up to And, and it’s an election year and that midterm. So there are so many crosscurrents that are going to happen here. So really trying to stay very, very diversified. With a very big indexes, like the Vanguard Total Stock Market Index, which owns most of the market, the Vanguard, you know, S&P 500, those types of things make up, you know, 75% of our stock market exposure, just because there’s so many current, it’s hard to tell where things are going to go. And then really don’t react to predictions and make your portfolio say inflation proof. Because it could go exactly the opposite way, take the smaller pieces of the portfolio, which is what we’ve done, and try to make them inflation proof. I think Apple, hopefully is inflation proof, at least to a certain degree, you know, semiconductors, real estate tends to do as doing well right now, too. So you know, those types of areas are worth watching, and react to that. So instead of building a portfolio around prediction, build a broad based portfolio and react with a smaller piece of the portfolio to kind of what you see happening. That’s been a strategy that I’ve used, you know, many years in a row here that’s been much more effective than then trying to guess where things are gonna go. So anyway, that’s what’s happening. We’re at the beginning of the Fed tightening cycle. Usually the market does, okay, there. So keep that in mind. There usually is some gains, but it can be more volatile. And we’ll just have to be aware of that and figure out ways to take advantage of it as far as I’m concerned. So anyway, that’s what my summary is for the week. Thank you very much for listening today. And I look forward to talking to you about this again next week.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.