top of page
Writer's pictureTeam WEIL

What's Our Philosophy When the Stock Market Is Crazy? (4Q15 Newsletter)

January 15, 2016

To: Customers & Friends

From: Christopher Weil & Company, Inc. ("CWC")

The stock market is experiencing one of its periodic schizophrenic episodes. There are reasons — but these reasons do not appear to be much related to the overall structural integrity of the U.S. economy. By most metrics, our economy is still headed in the right direction. This is not to say that there are not significant economic issues to be dealt with. My “favorite” is the problem of employment. Unemployment is down, which is good, but favorable employment statistics mask the fact that many people have simply pulled out of the workforce, and many more who are employed are working at lower wage service sector jobs, jobs for which, it turns out, they are overqualified. These people “should” be working elsewhere for higher wages.


One reason the market has been spooked has to do with the dramatic fall in oil prices. Be careful what you wish for. Wouldn’t it be fantastic if the U.S. could become energy independent? Voila, the shale oil and gas revolution. So, a massive increase in domestic supply and a corresponding decrease in price. It should be added that the price declines have been abetted by improving auto MPGs, increasing use of renewables, the prospect of Iran coming on line and the insistence of Saudi Arabia to keep to its usual production levels. Bad news for oil and gas producers, the businesses that service them and their employees. Bad news for investors in oil/gas and related sectors. But consider the benefit to consumers. Suppose a two car family drives 20,000 miles in a year. Suppose an average of 25 MPG, an “old” gas price of $4.00 per gallon and a “new” gas price of $3.00 per gallon. Do the math and you will find that this household has $800 more to spend each year.


There are countless economic consequences of what is effectively a “raise” for gas-users. For example, a population of, say, 1 million people (each conforming to the numbers above) have just added $1 billion to their annual purchasing power, at least so long as oil prices remain more or less at present levels. As consumer spending represents about 70% of GDP we have a situation in which the debit of pain on the supply side is matched (more or less) by the credit in pleasure among consumers and among those businesses who are beneficiaries of consumer spending. (Another way of thinking about this — based on data from the U.S. Energy Information Administration — is that for every dollar drop in the cost of a gallon of gas, gas consumers as a whole save about $135 billion per year.)

And then there is China. One way of taking in what is happening is to recall that China has, until lately, absorbed about 36% of the rest of the world’s exports. You know what happens to a company when one customer, accounting for a big percentage of its sales, downsizes? China is the customer. Thousands of companies around the world are, directly or indirectly, its suppliers - and suppliers for whom China has been, in many cases, their biggest customer. There is inevitably pain, retrenchment and shakeout.

And then there are the U.S. presidential elections adding to the general air of anxiety. I can understand why candidates for political office want us to believe that things are awful, especially if they can, at the same time, convince us that electing them is the best way to make sure the awfulness goes away.

And yes, there are some pretty awful things going on. The Middle East, terrorism, mass migrations — the list goes on and you are familiar with most or all the entries.


I want to remind you, however, that there has never been a day in the history of humankind when something awful was not going on somewhere. And I want to remind you that one of the most dramatic, yet unsung, achievements of recent years has been the emergent ability of nations (not all, certainly, but many) to manage awfulness with increasing effectiveness. “Increasing effectiveness” is a relative term. In many places where we look (and not just outside the U.S.) there is still great pain, suffering and destruction. But it is true that awfulness is being managed more effectively now than in the past.

The traumas of today are awful for those caught up in them. But despite the noise made by politicians, the media and commentators of every stripe, the traumas of today pale in comparison with, say, World War I, or the Russian Revolution, or the Holocaust, or World War II, or China’s Cultural Revolution, or famine in Bangladesh, or the Rwandan genocide. So, yes, the Union still stands, and the economy still stands, and our investment policy still stands. Good companies, owned for the long term, continue to be at the core of any prudent plan of asset allocation.


----------------


I have never been a fan of New Year’s resolutions: too much enthusiasm up front, too much foot dragging and too many lapses over time.

In theory, like most people, I am all for (constructive) change — while in fact, again like most people, I tend to favor behavioral patterns that are familiar and comfortable.

The tendency to hold on to the familiar and comfortable works against what you might call the spirit of the age, a spirit that favors, indeed champions, change. Witness the popularity of self-help books of all kinds and witness the resonance with which most people respond to words like “disruption,” “innovation,” and “creative destruction” when institutional, and particularly business, operations are being discussed. I think it’s fair to say that change is generally viewed (a few cynics, skeptics and Luddites excepted) as an unalloyed Good, wherein personal and institutional benefits far outweigh costs.

Arguably, the personal changes contemplated by New Year’s resolutions are hardly comparable to the Big Picture changes that are described as disruptive, innovative and so on. I’m not so sure. Based on my experience, I see what is at least a family resemblance between those who successfully manage needful personal change and those whose passion, vision, will and competence drive institutional change.

There is one obvious difference. Personal change involves you and perhaps a supportive spouse or partner, a boss, a friend. It is largely an individual undertaking. Institutional change involves any number of people, often including fellow workers, customers, investors, lenders, regulators, lawyers, patent holders and so on and on. It is largely a collective undertaking.

True, institutional change can be driven by one or a few entrepreneurial visionaries (not as often, however, as the Ayn Rand school of heroism would have you believe). But trust me, far more often than not there is a cast of thousands involved in these kinds of transitions.

All this is by way of introducing my 2016 New Year’s resolution, a resolution about which I am enthusiastic (as is par for the course) and on which I expect to execute without foot dragging (which is not). Unlike most personal resolutions, this one is going to involve, if not a cast of thousands, at least a cast of hundreds. And, like most personal resolutions, this one is going to involve a significant push beyond my comfort zone.

As my resolution arises from personal history I will, if you will bear with me, share some of this history before getting to specifics.


I sometimes joke that I get to have my name on the door because I was here first. “First,” in this case, means 1963 when I was first licensed in the securities business.

The original Christopher Weil & Company, Inc. (“CWC”) was founded in 1971 and sold to an affiliate of a New York Stock Exchange-listed company in 1985. In 1989, after serving time with my buyer, I formed a new company to re-start the business lines I had previously been involved with: liquid asset investment management, private investment formation (primarily real estate) and management and personal financial planning/advisory services.

I expected “new” CWC to be small (it was) and stay small (it didn’t). Over the years we have grown (despite not having an explicit growth objective) and today we have a staff of twenty-five.

Most of the functions that a very small handful of us were responsible for back in the day are now being performed by a group of people who, I am pleased to say, are in many ways more competent in what they do than I ever was. And just so you know, ours is a very complex business. A (partial) list of functions will give a flavor of just how complex: securities analysis, trading, technology, account management, private deal acquisition, asset and property management, HR, due diligence, compliance, regulatory relations, vendor relations, accounting/finance/tax and, the reason we are in business, client relations.

Anyway, CWC has arrived at a time and place where I am free to do whatever I choose to do on behalf of the firm. And the one thing I want to focus on, now that I am (mostly) not needed operationally, is client relations. I would love to see as many clients as I can and talk with them, not just about money and financial matters, but about all that is going on with family, work, health, retirement, volunteer activities, avocations, plans for the future, challenges — in fact, about as much of their life stories as they care to share. In my experience, great things emerge from these kinds of in-depth discussions. For many people, they can prove more than helpful.

So it occurred to me that a sensational (and demanding) 2016 resolution would be to meet every CWC client, personally or telephonically, during the next two or so years, have these discussions — and then write a book about the experience.


Writing a book is not a new dream for me. I have long wanted to write a book about personal finance, and more. I have imagined penning a book that would be both anecdotal and, to the extent I am capable, scholarly. I have wanted it to be personal and to offer material translatable into action items that will make the reader’s life more productive, healthier, more satisfying. I have wanted to fill the book with stories I have encountered from my years in business: stories of success (earned and unearned), disaster stories, comical stories, adventure stories, “war” stories, wealth and poverty stories. I had dreams the book would include the best of how-to, why-to and why not-to. I could go on.

You can see why this book — the book I have long had in the back of my mind — never made it off the runway: wildly ambitious, ungrounded, a veritable jumble sale of incompatible elements and a recipe for failure.

But suppose I drop the “old” book idea and, instead, pursue my 2o16 New Year’s resolution, keeping really good “field notes” for each meeting. By the end of this odyssey, I would have a book, or at least all I would need for a book — and one that would be grounded, contemporary, personal and focused on how “we” live now. And the “we” would consist of what is really a wildly diverse group of people. Diverse as to age, gender and financial status, and, equally important, diverse as to the configurations of wealth. The common thread between the CWC clientele, I would hope to find, is the comfort level most feel as to our competence, integrity and steadfastness in the face of what is often a troubled world. This book would incorporate all the kinds of stories I have wanted to write about because the people I will be talking to have lived these stories. I am certain it would be a book rich in personal histories, in triumphs and tragedies, in ideas that stimulate and ideas that warn.

I can do this. CWC has about five hundred individuals, families and small businesses with whom we do business. If I devoted three days a week of a forty week year to these meetings (to allow for vacations, emergencies, holidays, etc.), that would mean about 6 or 7 personal and telephonic meeting per week. (You can now understand what I meant earlier by “a cast of hundreds” not to mention having to “push beyond my comfort zone.”)

There are a number of issues to be dealt with in order to make all this work.

  1. Planning and scheduling (a bear, but made easier by the presence of my efficient assistant, Mary Hastings).

  2. Personal versus telephone meetings? I favor personal meetings and will go out of my way to opt for these.

  3. Probably informal agenda, as the real “agenda” will be what people have to talk about and what is important to them.

  4. Meet with every client? My inclination is to do so even where we (Robert, Matthew, Tyler, Joe, John, Danny and myself) believe we already have a good understanding of client circumstances and attitudes. You never know all you need to know and something worthwhile comes out of every meeting. But let me add a caveat. I am mindful of the magnitude of this project. I am committed to it but there could be any number of circumstances which might cause a disruption. So I reserve the right to modify the plan if, for some reason, I find I am in over my head.

  5. Will every client want to meet with me? Most will, although I expect a few will say “can’t we just keep it to financial issues?” Whatever the response, however, clients should know that this is not just about Chris and his book. Much more importantly, it is in the best interests of every client to have trusted third-party professionals knowledgeable about family circumstances; financial, of course, but also about family histories, attitudes, intentions, relationships and estate plans.

  6. There is no question about the need for anonymity. To the extent personal data gets transferred from confidential company files to a book then names, ages, geographies and personal circumstances will be altered so as to completely disguise the people involved.

  7. Do I restrict this undertaking to clients only? Probably yes. An exception might be where family members refer me to friends or relatives interested in the project.

  8. Costs? None. This is a labor of love. You might even score a meal out of it.

I welcome any thoughts you may have about all this. And if you feel that you would like to go to the front of the line and not wait for me to schedule a meeting, just call me now.


Chris Weil



Information contained in this publication is obtained from sources believed to be reliable; however, no representation as to accuracy and completeness of this information/data can be provided. Data used may be based on historic returns/performance. There can be no assurance that future returns/performance will be comparable. Neither the information, nor any opinion expressed herein, constitutes a solicitation by us for the purchase or sale of any securities or commodities. This publication and any recommendation contained herein speak only as to the date hereof. Christopher Weil & Company, Inc., with its employees and/or affiliates, may own positions in these securities.


All investments involve risk, including the risk of losing principal. It is vitally important that you fully understand the risks of trading and investing. All securities trading is speculative in nature and involves substantial risk of loss. Further, the investment return and principal value of an investment will fluctuate; Upon liquidation, a security may be worth more or less than the original cost. Past results do not guarantee future performance.


Investment in mutual funds is also subject to market risk, investment style risk, investment adviser risk, market sector risk, equity securities risk, and portfolio turnover risks. More information about these risks and other risks can be found in the funds’ prospectus. You may obtain a prospectus for CWC's mutual funds by calling us toll-free at 800.355.9345 or visiting www.cweil.com. The prospectus should be read carefully before investing. CWC's mutual funds are distributed by Rafferty Capital Markets, LLC—Garden City, NY 11530. Nothing herein should be construed as legal or tax advice. You should consult an attorney or tax professional regarding your specific legal or tax situation. Christopher Weil & Company, Inc. may be contacted at 800.355.9345 or info@cweil.com.

735 views0 comments

Comments


bottom of page