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We Need to Have a Talk

When your parents said these words, you knew you were in trouble. If your boyfriend or girlfriend say these words you are about to get dumped. Either way, these words preface a longer explanation of why your behavior is disappointing and why if your behavior doesn’t change there are going to be consequences. We need to have a talk with the stock market. “We think you’re a good market, but your behavior is unacceptable. You go up and down 2%, sometimes 3%, in the same day. Sometimes you decide to bounce back and sometimes you don’t. You don’t even give us a good reason why. You have no consideration for your investors. This wild lifestyle of yours is worrying us all half to death. Is there something wrong? What do you have to say for yourself?”

“All you ever do is talk about the bad things I’ve done. You never talk about all the good things. I rose to a record high last month on September 20th. I’m up over 350% since the start of this bull market. Even though I went down 10% since September 20th, I’m still only slightly down on the year. Every time I’ve done this before it’s created buying opportunities so what’s the big deal? I still have record earnings growth (22.6% YOY) and record revenues, and now my valuation at 15.2X earnings is even more appealing. Don’t you trust me?” “We just worry about you, that’s all. We are afraid there is something else going on. Is it interest rates?” “Yes. The stupid Fed keeps raising rates and threatening to be more and more aggressive in slowing down the economy even though there are no signs of inflation. It’s not fair.”

“We agree it’s not fair not but sometimes life is not fair. Just focus on your earnings and you will be fine. The Fed might be acting stupidly but there is nothing you can do about that. If they don’t stop soon we will need to make some changes." "Okay" "Good talk” Rather than overly focus on the day to day moves, now is a good time to focus on our process. The reason we preach a diversified approach to investing is because it limits the volatility of our investors’ portfolios. We frequently explain both the mathematical reason (compounding) and behavioral reason (sticking to your plan) why controlling volatility is important. https://www.greenportcapitaladvisors.com/single-post/2018/04/10/Why-volatility-matters Currently the Core Portfolios are fluctuating about 50% less than the S&P 500 on a daily basis. It’s still unnerving but this allows us all to stick to the plan. We don’t think this is the end of the bull market. We are watching our models closely and the models suggest this is another pullback within a secular rise in stocks. We think the Fed will eventually increase rates to a point where they cause a recession and kill the bull market. We don’t think that time has arrived yet, but we are watching very closely. In the meantime, we are sticking to the plan. We will rebalance portfolios at month end to their current tactical weightings. As always, please call us or drop by with any questions or concerns. Thanks The GreenPort Team

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