Covid Destroyed the Crystal Ball
Happy New Year and cheers to a healthy 2022! What a ride we’ve all experienced in the past 24 months. We trust and hope you enjoyed the Christmas and New Year celebration, while reflecting on what you’ve been through and what you’ve accomplished. We are looking forward to the New Year even with some of the carryover issues we’ve dealt with in the past. Maybe this will be the year of normalcy.
Looking back, it’s hard to believe we’ve all improved financially. NOBODY has gotten the pandemic correct in terms of economic predictions destroying the Crystal Ball. While financial health is important, our own physical and mental well-being is far more significant going into the New Year.
Like normal, we’ve been inundated with beginning of the year newsletters informing us what exactly is going to happen in the financial markets (sarcasm). While they all include the normal disclosures of how they draw conclusions, we know after 34 years of experience, they are simply nothing more than highly paid opinions. The predictions include:
10 Best Stocks to own in 2022
Inflation: What to Expect in 2022
Cryptocurrencies: 2022 returns will be better than 2021
Omicron: How it will impact the market and the economy
Build Back Better Plan and the Effect on your personal taxes
As mentioned, NOBODY predicted the past 24 months correctly. From car manufacturers, real estate agents, employment agencies, local, state and national politicians, financial experts; there’s not one that knew the pandemic would be helpful to assisting you in building your wealth.
While we’ve read all of the latest predictions, you really must ask, “why bother?” They were not correct before, what makes us believe they will be correct going forward? We agree! There is no reason to waste your time. For you long-timers, for the past 34 years, we have always referred to the investment media as “noise”. Time is precious and we encourage you to spend your time where it matters most to you.
To that regard, let’s summarize 2021 differently. Let’s talk about what we’ve learned from you, our clients, last year.
To all KFM Staff: What one thing did you learn from one, a group, or all of our clients in 2021?
You Never Know: I learned that I can unknowingly have a positive impact on our clients and their family members. From sharing that I once wrote personal letters to my family for Christmas presents, this information was shared with Linda Thompson and inspired John and her to do the same for their family members. It was a really great feeling to learn that something I shared without really thinking about it ended up sparking joy in other people’s lives.
Connection: Whether it’s with friends, family, or your financial advisor, being able to connect, share, and listen seemed more important in 2021 that it ever had before. Perhaps it’s the “classic you don’t know what you have till it’s gone” idea, but hearing clients stories of seeing the people they care about for the first time in a year/s really drove home how thankful I am for the people I get to connect with and to seek out more time with them.
Saving: Over the past 12 months I have grown to realize none of us at KFM would have a job if it were not for the fact that each of our clients learned how to spend less than what they made. They made sacrifices over time to make sure they saved for their financial futures. As the news (and social media) continue to provide “get rich quick” tips, the one strategy that I know has impacted every single client has been that magical secret of saving money. I tell my children all the time, everyone actually knows the “secret sauce” but it’s simply a function of discipline should they choose to use it. We welcomed more new relationships into KFM in 2021, and through that process it made me realize all of our clients are heroes for putting themselves in a position to live their lives comfortably by making sacrifices early on in their careers.
Giving: 2021 was a year of record giving by clients. Despite the pandemic, financial donations reached a historic high. This is something we DO NOT track, but it is not something we could miss. When this company started 34 years ago, the priority has always been helping clients achieve financial security. In doing so, a biproduct has been generosity towards a multitude of philanthropic causes. Needless to say, it has been inspirational to all of us at KFM.
Friendships: One of our clients lived on the same cul-de-sac for 50 years. One of the relationships/friendships she made had a large group together for their 95th birthday. It is impressive to see the longevity of that friendship. It reminded me that you never know where an interaction will go, where a conversation will lead or what kind of impact you may have on someone. I have to remember that for the interactions we encounter daily.
Physical: The importance of staying active. Seeing the difference between clients who have stayed active and enjoying life vs. the ones in isolation. Seeing the difference in the mental health as well as physical. Those continuing to do ‘What Matters Most’ are definitely making a lasting impression.
To all KFM Staff: What New Year Advice can we provide you for 2022?
What Matters Most: I would encourage clients to do what matters most. Do the things they love. Don’t isolate. Be careful, I’m not suggesting throwing caution to the wind, but engage in life. Turn off the TV. Get busy, be active, see friends and family where possible. Live your life. To those doing that, keep going!
Set Goals: Start by making a goal for January. Then make a goal for February, and so on for the months of the year. Making an annual goal seems too big and unattainable. Breaking it up into smaller chunks works better for me. If you don’t achieve the goal, start fresh the following month.
Be positive and optimistic: The last two years have been difficult, filled with a lot of bad news and negativity, but there is still a lot of good out there. I encourage everyone to seek out the good.
Big Picture: Don’t Sweat the small stuff. At the end of the day when we are in the midst of it all. It all seems big. In the larger scheme of things, it usually ends up not being as big of a deal than we made it out to be. At the end of the day, we only have a finite amount of time here so make sure to prioritize the “big stuff”: Time, Family, Friends, Your Faith or whatever it is you value…make that the important piece of the big stuff. Oh, and hug your loved ones.
Gratitude: There’s a lot to be grateful for, even during the midst of adversity. Be mindful of your gratefulness. Let people know how grateful you are for them. Whether it be a coworker, boss, family member, friend or someone in customer service, if someone deserves to be noticed, let them know.
The KFM Team celebrating their holiday party last month
KFM Update
We hope you had a wonderful Christmas and New Year celebration with family and friends! If you were like us, it was better than 2020 (more family participation) yet still subdued over prior years. However, what a fantastic improvement from last year!
Even with the uptick from the newest variant, we are still able to meet in person if desired. KFM has plenty of space in our office to be socially distant for face-to-face meetings. Virtual meetings are here to stay and will always be an option should you prefer. With the uptick in Southern California traffic, even our locals are opting to save time utilizing Virtual Meeting. Your safety and comfort is our number one priority collectively with the safety of our team.
We are just in the beginning phase of planning for 2022. Just like the last two years, we hope the opportunity presents itself for more face-to-face. We are hopeful the KFM Putting Contest and Ladies Night Out will be back in 2022. Look for more information to follow throughout 2022.
Our Virtual education webinar was a great success. If you missed Filet Mignon or Beans and Franks back in November, please send an email to Kate at kcoogan@kempfm.com to request a link for the replay. The feedback was tremendous and we hope to hold additional virtual webinars throughout the year.
Your KFM Team is back in the office as well with occasional work from home days as our schedule allows. Next time you pay us a visit, the snack bar and coffee maker is back in business in the KFM family room. Make sure you let Kate know your favorite snacks before you arrive.
Just like all organizations, 2021 was a “wacky” year doing our best to avoid Covid. While we were mostly successful, the pandemic still played a role in working remotely anytime we had “close” calls. The most exciting news of 2021 came in December with the addition of a new granddaughter for Rob and Diane. It’s their second, and they are enjoying every moment of being grandparents.
Lastly, THANK YOU for the many recommendations to KFM in 2021. Looking back over the past 34 years, next to 2003, it was the second largest increase in new clients over that time. We cannot express enough appreciation for the opportunity to work with your friends and family. Your continued trust and confidence help our firm grow to approximately $220m under advisement through the end of last year.
Capital Markets
2021 was a great year for the capital markets. You will notice your quarterly statement has a nice increase for the quarter with the year-to-date gain well above our expectations for the year. The “Santa Claus” rally was legitimate, bringing with it a very strong finish for the calendar year.
Your KFM Investment Committee will be meeting mid-January to review the asset classes and investments held in our client accounts. As of this writing, we are excited to report it does appear all asset classes and holdings performed up to our expectations for the year. We will keep you posted as we meet this quarter during your update meeting.
Should you have any questions relating to the capital markets, your quarterly statement or custodial statement, please feel free to add that to agenda at your next update meeting. As a reminder, 1099-R’s (for non-taxable accounts) should be in your Client Portal by month end, while 1099-B’s (taxable accounts) will be available mid to late February 2022.
Legislative Update
It appears the Build Back Better plan is currently on hold. While we will continue to monitor all of the updated information throughout the year, it really means we get a break in discussing what “might” happen until there is more clarity from Washington D.C. So for now, enjoy the brevity of this section.
Crystal Ball Challenge 2022
It’s been a while since we’ve played Crystal Ball Challenge, where we guess where one of the capital market indices will be sometime in the future. One of the last times we did this was back in 2014. At the beginning of the year, we were asked to predict where the S&P 500 would be at the end of the year. Rob said “it will be either up or down,” Lissa said 2000 and Wyatt said around 2100. On December 31, 2014, the S&P closed at 2058.9. Lissa and Wyatt’s random predictions were pretty close!
This time, we are going to focus on the US Small Company Stock Index referred to as the Russell 2000 five years from now (December 31, 2027). The term Russell 2000 Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index. Here’s our completely random selections:
Wyatt: 3500
Lissa: 2710
Kate: 2780
Rob: 3501
You are more than welcome to participate. (preditcions have now closed.)
The winner will be provided a free subscription to the “Motley Fool” newsletter services. Just kidding. A Mastercard gift card in the amount of $50 will be awarded to the closest prediction.
We look forward to connecting with you virtually or in person over the upcoming weeks and months for your update meeting. As always, please feel free to give us a call or stop by the office anytime you are in the area.