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An exogenous variable
  • February 24, 2022/
  • Posted By : admin/
  • 0 comments /
  • Under : Investing 101
Not 48 days ago, I wrote the following in our annual letter to clients and friends:

“In general, I think it most likely that in the coming year, (a) the lethality of the virus continues to wane, (b) the world economy continues to reopen, (c) corporate earnings continue to advance, (d) the Federal Reserve begins draining excess liquidity from the banking system with some resultant increase in interest rates, (e) inflation subsides somewhat, and (f) barring some other exogenous variable – which we can never really do – equity values continue to advance, though at something less (and probably a lot less) than the blazing pace at which they’ve been soaring since the market trough of March 2020…Please don’t mistake this for a forecast. [If it’s wrong] my recommendations to you will be unaffected, since our investment policy is driven entirely by the plan we’ve made, and not at all by current events (emphasis added).”

Exogenous means the variable or the event is coming from outside.

Russia/Ukraine is the exogenous variable du jour. The investment policy of goal-focused, plan-driven, long-term stock investors, like you and I, should be unaffected by it.

That concludes this memo’s core message; everything else is commentary.

Under the heading of commentary:

(1)  The Russia/Ukraine event has nothing to do with “democracy.” It has to do with energy, which is the lifeblood of the Russian kleptocracy. Russia supplies 40% of Europe’s heating fuel, in the form of natural gas. One of the two aging pipelines through which the gas is transmitted runs through Ukraine, which had lately evinced a growing yearning for increased ties to the West. Putin could never allow this. (See Lukas Alpert’s essay on MarketWatch.)

(2)  At around 4,100, the S&P 500 has experienced a drawdown about equal to its average since 1980.

(3)  At the risk of making a political statement: A great deal of good can come out of all this, if and to the extent that it leads both the United States and Europe to a significant reappraisal of their respective energy policies, to the detriment of Putin’s Russia.

My thoughts and heart are with the people of Ukraine and our US military personnel deployed in Eastern Europe.

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Chris Mullis, Ph.D., CDFA®
NorthStar Capital Advisors
704-350-5028 ext 7
chrismullis@nstarcapital.com
521 East Blvd, Charlotte, NC 28203
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Celebrating 16 Years • 2006-2022

 


When whales fight
  • February 15, 2022/
  • Posted By : admin/
  • 0 comments /
  • Under : Economy

As we consider the tensions driving recent market movements, a Korean folk saying seems apt:

“When whales fight, the shrimp’s back is broken.”

The idea is that bystanders get hurt when big folks duke it out.

What are the tensions? Who are the bystanders?

Let’s discuss.

An invasion of Ukraine may occur in the coming days or weeks.

Or it might not. It’s really impossible to say.

The U.S. has closed the embassy in Kyiv and warned of a dramatic buildup of Russian forces on the border with Ukraine.1

It’s unclear whether Russia is willing to diplomatically resolve security concerns about Ukraine joining NATO.2

However, a ground war between NATO and Russia would be extremely damaging, so it seems (hopefully) unlikely that Russian troops would actually invade.

Then again, they might.

That seesaw between high tension and relief is likely to add a lot of volatility to markets as investors digest the latest news.

The Federal Reserve may aggressively raise interest rates to fight inflation.3

With inflation at historic highs, some Fed officials worry that the central bank’s credibility — AKA, their ability to manage inflation and employment — is on the line.

Rate hikes are coming in 2022, but how many and how quickly? That’s up for debate by the Federal Open Market Committee next month.

Fed “hawks” want to raise rates quickly to try to bring inflation under control and increase consumer confidence and trust.

Fed “doves” want to carefully raise rates and watch the data to avoid damaging growth or spooking markets.

These are big decisions with big consequences for us, the economy, and markets.

While FOMC meetings are often dry affairs, the next one looks to have as much drama as an episode of Succession.

We’ll stay tuned.

Bottom line: there are a lot of factors driving market movements, so we can expect to see plenty of volatility in the weeks to come.

Given the Fed and geopolitical tensions at play, a pullback or correction would not be surprising, either.

What can we do when we’re facing major events we can’t control?

Take a deep breath, be grateful for all the good in our lives, and focus on our strategy.

(And email us with questions or concerns.)

Let’s hope for peace and clarity in the weeks to come.

We’re keeping a close watch and will reach out as needed.

Be well,
Your NorthStar Team

P.S. Looking for a mental break? Here’s an interesting TEDx talk on “The Science and Power of Hope.” It’s given by Dr. Chan Hellman, whose research focuses on the psychological power of hope to overcome adversity and create change.

Let us know what you think!

1https://www.cnbc.com/2022/02/13/stock-market-futures-open-to-close-news.html

2https://www.bbc.com/news/world-europe-60379833

3https://www.cnbc.com/2022/02/14/bullard-say-the-fed-needs-to-front-load-tightening-because-inflation-is-possibly-accelerating.html


How to make the most of life’s most important $$ lessons
  • February 8, 2022/
  • Posted By : admin/
  • 0 comments /
  • Under : Personal Finance
What’s the first big lesson you learned about money?

How did you learn it?

Many of us start learning about finance as kids.1

We watch those around us, and we learn by trial and error.2

That can teach us some important basics about finance. And it can open the door to learning some of life’s major lessons about money.

What are those lessons and when’s the best time to learn them?

When it comes to life’s lessons about money, you can’t always expect to learn them in school — and the sooner you know them, the better.

Those life-changing finance lessons are the focus of this month’s Visual Insights Newsletter.

Click here to see it!

The lessons we pick up about money can influence our choices, and they can stick with us for life.

No matter when you learn them, it’s never too late to find better ways to leverage them.

Go ahead and click here to check out the 5 powerful money lessons you’ll wish you knew sooner.

1 – https://www.businessinsider.com/personal-finance/why-we-need-to-teach-kids-about-money-2021-10
2 – https://youth.gov/youth-topics/financial-capability-literacy/facts


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