Hans Blake, CFA, CPA

What Rising Interest Rates Mean for Retirement

June 29, 2022 by Hans Blake, CFA, CPA

Spending Money in Retirement with Christine Benz

Reading Time: 2 minutes On today’s Intelligent Money Minute, we continue our conversation with Morningstar’s director of personal finance, Christine Benz on the implications of rising interest rates on retirement. During this episode, Christine breaks down the impact of rising interest rates on pre-retirees, and what you can do to prepare in an inflationary environment. In particular, Christine lays out the history of bond valuations in 2022 and their price performance and durations during these inflationary times. Another consideration investors need to make are their time horizons. As Christine mentioned, be mindful of your liquidity needs and your time horizons. When we develop a portfolio for a client, we keep these two constraints in mind, as well as other factors such as tax location and risk tolerance. If you are wondering what kinds of risks are in your current portfolio, or where there may be an unforeseen risk you aren’t aware of, consider contacting us for a complimentary call or coffee. If it makes sense, we may perform a complimentary portfolio review for you so you can get an idea of the types and current risk level in your portfolio. Schedule a short discovery call or meeting We’ll be interviewing Christine on several podcasts regarding retirement strategies, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts.

Christine Benz Bio

Christine Benz is Morningstar’s director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. She holds a bachelor’s degree in political science and Russian/East European studies from the University of Illinois. Christine lives in the Chicago suburbs with her husband, Greg. She is an avid cook, a political junkie, and a long-suffering Chicago Cubs fan. Follow Christine on Twitter.

Summary of Fed Chairman Powell’s Comments to Congress

June 22, 2022 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

Today, Federal Chairman Jerome Powell addressed members of Congress to update them on the economy, inflation, and reasons for increasing the federal fund’s rate. Since your time is valuable, I have summarized and paraphrased the 2.5 hour meeting.

Background

As you likely are aware, the Federal Reserve announced that it would be raising interest rates 0.75 percentage points, following its June 14-15 meeting, bumping the federal funds rate to a target range of 1.50 to 1.75 percent.

The Federal Reserve has two mandates: maximum sustainable employment and price stability.

Summary Notes

After watching Federal Chairman Jerome Powell share his comments on inflation before the Committee on Banking, Housing, and Urban Affairs today, here is what I heard:

The Federal Reserve increasing the federal funds rate causes the following:

Demand for interest rate sensitive items to decrease (vehicles/ housing)
Asset prices in general to decrease
Dollar to strengthen

Recent record inflation started before the Ukraine invasion and blaming it solely on Russia is not fair, nor correct.

The Federal Reserve decreasing the federal funds rate does not really affect the price of gas (energy) and food.

Fuel at the pump is primarily driven by two things: 1) prices set globally by large oil producing countries and cartels and 2) the oil refinement spread to convert oil into usable products (such as gas at the pump). Neither is controlled, nor can be controlled by the Federal Reserve.

Employment is extremely tight—meaning that the portion of candidates to available jobs is low and the competition to hire them can be fierce. Chairman Powell said that currently, there are two job vacancies for every one person looking for work.

According to Chairman Powell, the financial conditions and markets have already priced in the future anticipated interest rate increases that the Fed has indicated they will be doing over the foreseeable future. He said that markets are reading the Fed’s response well. According to the schedule, the Fed interest rates will likely be around 3.0% to 3.5% by the end of the year.

Powell, after listening to several Congressmen and Congresswomen share their constituent’s concerns about inflation, had this to say the following which I have paraphrased: Inflation destroys public confidence. We are using our tools and the public should believe that we will get it down to 2% over time. We can help with the demand side and can slow down the demand of goods and services by raising the federal interest rates.

Consumers have healthy balance sheets and continue to spend due to their savings. Consumers make up a healthy portion of our GDP. No one is very good at forecasting recessions and can’t do it consistently.

Conclusion

The Federal Reserve Board and board members have a tough job ahead of them. Their goal is to get inflation under control by dampening the demand for goods and services to allow the supply side to recover post-Pandemic. If they raise rates too high or too quickly, it could send the U.S. economy into a recession. If they don’t do anything, inflation can remain elevated and get into American’s psyche.

To learn more and to listen to our podcast on this subject, click here.

If you are still concerned about your portfolio and how much risk you may have in your portfolio, or whether you are on track to achieving your financial goals, please click here to schedule a no obligation coffee or call with us.

Chairman Powell’s Prepared Comments

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Why Knowing Your Risk Matters

June 16, 2022 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we welcome Aaron Klein the CEO of Riskalyze. During this episode, Aaron explains the importance of knowing your risk, and the multiple types of risks investors may need to consider.

At Intelligent Investing, we believe in looking at a clients’ risk in four ways:

Willingness to take on risk (your sleep at night factor as we call it)
Ability to take on risk—how much risk are you able to take based on your balance sheet and income statement.
Need for risk (which comes from the financial plan and your goals and time horizon)
Your portfolio’s risk—We strive to align these risks for our clients in an easy-to-understand risk number that we monitor over time.

As Aaron mentioned, we want to transform fearful investors who make bad decisions into fearless investors who make great decisions, and over time improve their financial picture. To learn more about our philosophy, be sure to subscribe to our podcasts so you can stay informed.

If you are interested in becoming our next high-net-worth intelligent investor or would like to learn more about our philosophy on risk management, click here. We’d be honored to have a brief confidential call or coffee with you to learn about your needs.

Aaron Klein Bio

Aaron Klein is co-founder and CEO at Riskalyze, the company that invented the Risk Number® and empowers the world to invest fearlessly. The company is headquartered in Auburn, California, and serves tens of thousands of financial advisors.

He is husband to Cacey Steward Klein, dad to Spencer (born in South Korea), and Emma and Teddy (born in Ethiopia). Aaron and Cacey cofounded Hope Takes Root, an initiative to use vocational training and life mentoring to change the future for orphans and at-risk kids in Ethiopia. He also sits on the board of Invest in Others.

The New Crypto Landscape for Investors

June 9, 2022 by Hans Blake, CFA, CPA

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In this episode of Intelligent Money Minute, we interviewed Matt Hougan, Chairman of Inside ETFs on the new crypto landscape for investors. Matt Hougan returns to the Intelligent Money Minute podcast to talk about all things in the realm of crypto. During this episode, Matt Hougan pulls back the curtain on the ever-changing landscape of cryptocurrency and how investors ought to examine it. Matt understands the natural interest of investors but heeds a cautionary warning to those with little understanding of crypto’s risk.

Like any asset class or new investment, smart investors will not rush into it and ask questions later, but rather spend time in due diligence to understand the benefits, the risks, and the potential.

As a reminder, the views and opinions expressed on the Intelligent Money Minute podcast are those of the interviewee and do not necessarily reflect the views of Intelligent Investing, LLC. Intelligent Investing does not imply any endorsement or approval of any of the investments mentioned on the podcast. This podcast is to educate the public, and the investment strategy and themes discussed may not be unsuitable for investors depending on their specific investment objectives and financial situation.

We are excited to be interviewing Matt Hougan, and we have several more episodes where we explore the ins and outs of ETFs, bitcoin, and blockchain, so be sure to subscribe to our podcasts to hear all the interviews.

Matt Hougan Bio

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Global Head of Research for Bitwise Asset Management, creator of the world’s first cryptocurrency index fund. Hougan is also Chairman of Inside ETFs, the world’s largest ETF conference. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system. Hougan is co-author of the CFA Institute’s Monograph on ETFs. He’s also a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable. For more resources from Matt Hougan click here.

Signs of Risk and Business Cycles

June 2, 2022 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Ed Peters on signs of risk and business cycles. During this episode, Ed talks about risk regimes that are out in the market and how they lead to different business cycles. We can’t know truly know when risk regimes are shifting, but we can keep an eye on converging risks. For the first time in a long time, we are seeing a rise in both real inflation risk and business cycle risk.

Risk comes in cycles and follows the business cycle. We can look for signs that different seasons are coming as Ed mentioned. Looking at credit rate risks, interest rate risks, etc… you can see risks rising and falling. It is never crystal clear, and not foolproof due to the fact there are exogenous shocks that can change the outlook overnight. At Intelligent Investing, we don’t want to be naïve, but we have faith in our future. We regard optimism as the only realism. There will always be something to fear, but we think that progress continues to increase. Think back to your childhood and all the technology that has changed since then. We want to maintain a positive outlook on life, even when things appear dark or grim. To learn more about our wealth management principles and philosophy, please visit our philosophy page.

Be sure to subscribe to our podcasts so you can stay informed. We’d be happy to sit down with you over coffee or a call to share our process and philosophy and how we manage risk for our high-net-worth clients.

Ed Peters Bio

Ed Peters is First Quadrant’s Managing Partner. In this role, Ed establishes the firm’s strategic direction, develops firm-wide initiatives, and chairs the Executive Leadership Team and the Management Operating Committee. Ed also contributes to First Quadrant’s research efforts, with a particular emphasis on market states, and manages the firm’s long-only multi-asset strategy. Prior to joining First Quadrant in 2008, Ed worked at PanAgora Asset Management, at various times serving as equity portfolio manager, Director of Tactical Asset Allocation, CIO of Macro Investments, and CIO. Other past work experience includes Interactive Data Corporation and Mutual Benefit Life. Ed holds an MBA from Rutgers University. He has published articles in multiple investment journals, as well as three books.

What is Riskalyze and Its Mission?

May 11, 2022 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we welcome Aaron Klein the CEO of Riskalyze. During this episode, Aaron explains how his company Riskalyze came to be, and what’s Riskalyze mission for investors and financial advisors. Riskalyze’s mission is to empower the world to invest fearlessly. It’s a very investor-focused mission, but the truth is everything Riskalyze does is through the lens of helping the financial help the end investor. Our psychology often sabotages us when investing. Riskalyze seeks to transform those sabotaged investors into fearless investors with the help of a qualified financial advisor.

Some innate investment behaviors are unavoidable. However, we want to help our clients harness their harmful emotional behaviors, including that mother of all behavioral finance biases- confirmation bias. At Intelligent Investing, if we can help empower you to invest fearlessly, we’d be honored to have a confidential call or coffee with you.

Overconfidence Videos

Aaron Klein Bio

How to Hedge Against Stagflation?

May 5, 2022 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Ed Peters on how to hedge against stagflation. In previous episodes, Ed stresses how correctly diagnosing the inflationary environment is critical to approaching an accurate economic solution. During this inflation series, Ed Peters defined reflation, deflation, and stagflation. Stagflation is defined as persistently high inflation combined with high unemployment and stagnant demand in a country’s economy. Outside of shorting, Ed explains the challenges a stagflation environment poses for any investor.

As Ed mentioned, the Fed has found itself in a tricky spot. A prudent investor will not want to guess and hope for the best regarding the Fed’s next move. On our next episode with Ed, we’ll talk about various risk regimes and what we should be aware of. Be sure to subscribe to our podcasts so you can stay informed. We’d be happy to sit down with you over coffee or a call to share our process and philosophy and how we manage risk for our high-net-worth clients.

Ed Peters Bio

Who is Aaron Klein of Riskalyze

April 27, 2022 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we welcome Aaron Klein the CEO of Riskalyze. Riskalyze is an investment risk software that powers the world’s first risk alignment platform that is built on top of a Nobel-prize-winning academic framework. During this episode, Aaron goes back to the beginnings of Riskalyze, and how he got inspired to create his risk analysis software.

At Intelligent Investing, our firm was built on the belief that improving investor behavior is crucial to long-term success. Unfortunately, we live in a society that has made almost a secular religion out of “investment outperformance,” and the average investor tends to misbehave and doesn’t just merely underperform the markets– they often underperform their own investments! The reason the average investor blows upwards of 60% of the return of the average fund over any given 20-year period is that he behaved inappropriately.