FOY FINANCIAL, INC.
ST. PETERSBURG, FLORIDA

There are Weather seasons, Calendar seasons, Business seasons, Political seasons, and last but not least, there are Bull Market and Bear Market seasons. This is not an exercise best left to a radio talk show, or a TV 'investment game show guest,' or a self-proclaimed locker room genius. It is a job for an experienced, accountable, fiduciary investment professional. It's harder to qualify under those parameters than you might expect. But we are out there, ready to answer the hard questions, eyes wide open. It has been in place since 2009 and, like most things that are that long-in-the-tooth, it has had a complicated journey. It is larger than politics. The critical drivers are far more complex, although partisan politics continue to push the day-to-day headlines and public sentiment. Multi-year business cycles/seasons are still comfortably in the driver's seat. Our current Bull Market in equities is a great example, especially over the past twelve months. Equity indexes have advanced in a remarkable fashion over the past twelve months. The move has been broad, but it has NOT been all-inclusive. If you were unfortunate enough to own positions in energy and/or real estate securities over the last rolling 12 months your portfolio has NOT grown at the 17% rate of the S&P 500 Index and the Russell 3000 Index. Over that same period of time the Morningstar US Energy Sector Index fell -3.4%, the Dow Jones Utilities Average only gained +3.6%, and the Dow Jones US Real Estate Index fell by -1.8%. So why would anyone waste their time and their portfolio dollars on these sectors when there were so many wonderful choices! Identify not only what IS working, but what is NOT working. This means that you have to be paying attention to the entire toy box all of the time. Unfortunately, most people don’t have the time or the resources to be this discerning. So they make decisions to either 1) choose a professional to assist them, 2) pick and choose on their own and hope they get lucky, 3) resign themselves to owning the whole toy box with its sub-par results. Obviously we have a strong opinion on the most effective solution. This is one of the most important ways that we help investors manage risk. It’s worth the price of admission all by itself. Hopping a bus to your destination is a pretty straight-forward process. Determine which bus is headed in the right direction, wait for it to pull up and stop, confirm the bus, and step inside. But what if the bus isn’t clearly identified, and what if it doesn’t come to a complete stop? What if the bus stops short, or long? What if the bus doesn’t stop at all, but slowly moves forward, or even backward? The net result is that you can become so consumed by the first detail of the journey that you compromise the destination, or miss it all together. Investing busses are often covered with garish advertising and promises of future performance. There may even be someone on the upper deck announcing the next amazing feat to be seen! And how much will the ticket cost, in fees and commissions, in opportunity cost if you wait too long, and with the investment risk that your bus must might break down or turn around? We have a process that helps clarify these situations. I started in this business in 1980, with double digit interest rates, double digit inflation, and single digit equity market returns. Needless to say, it was a challenging time to ‘get on the bus,’ but I learned a great deal. The 90’s was a different lesson entirely. There was so much negativity in the 80’s that we were halfway through the 90’s before investors realized that things were actually getting better with the U.S. economy as well as the global economy. And investors started clamoring to get on the bus. The 2000’s were distinguished by two of the worst Bear Markets in the history of the U.S. stock market. So far this decade we have been experiencing single digit returns until last year. Investors remain suspicious. This does not feel like the late 90’s to me. It feels way better than that. We are riding one of the longest Bull Markets in history and it hasn’t even gotten crazy yet. This statement quickly launches into a philosophical versus practical debate about inputs, reality, and behavior. Before I disengage most of the readers please know that I am going to focus on practical applications, not philosophical postulations. And we are going to be talking about not just trusting your senses but trusting your instincts, which includes your personal experience and biases. Our senses provide us with a first perimeter of information, primarily for defensive reasons. The same holds true for our instincts. Self-preservation is a primary instinct that should always be appreciated and nurtured. While we are fortunate to not be living in the wild, defending ourselves against the weather and natural predators, we must continue to maintain those capabilities in the present environment. Sights can be too bright, sounds can be too loud, smells can be too strong, and touches can be too violent. When we receive information that is intense and may represent a threat it is important to rapidly interpret so the best immediate course of action can be taken. That is basic self-preservation. When we receive information that is conflicting it is important to interpret, isolate, and filter to assist in making the most appropriate decision and reaction. We are bombarded with information about financial markets, insurance, and health care. It is one of the last, great door-to-door sales prospecting venues. Instead of knocking on our front doors, or calling us on the telephone, they assault our senses on television screens, computer monitors, and emails. The sales pitches come from retiring actors and game show hosts and convincing strangers with fabulous smiles and disturbing messages. This happens on the professional front as well, as we are presented with opinions and forecasts and prognostications that boggle the mind. Who is right and who is wrong? Who can you trust?