Asking the Right Financial Questions

Posted by John Charles Kernodle on January 27, 2021  /   Posted in Newsletter

Any time we experience a significant event in the U.S., I often hear the question, “How will the markets react?” At these moments, the talking heads will go on TV and attempt to reassure investors that they have access to the investing Magic 8 Ball. They know how the markets will react, and they’re more than happy to tell you about it.

The problem is that the talking heads and the financial press aren’t asking the right question. We already know how the market will react. At some point, they’ll go up. At some point, they’ll go down. That’s how markets work. Attempting to predict what the markets will do next ignores investing fundamentals people like Benjamin Graham, Warren Buffett, and John Bogle have tried to pound into investors’ heads for decades.

The questions that matter are your questions. How much can you reasonably save in a year? How close are you to retiring? How do you want to use your money? Do you have others dependent on you for their financial security? All these questions share a common theme: It’s about you.

They also get to the heart of what matters most to individual investors. And yet, the financial press prefers to talk about an unknowable future that can’t be forecasted. Because markets can’t be predicted, it gives each round of “experts” more opportunities to pontificate. That’s why there’s a big difference between someone who tries to predict the markets to earn a headline and what we do at Strathmore Capitol to help you and your family. In fact, I think it’s fair to say it’s the exact opposite, and I hope it’s a philosophy that comes through every time we discuss your investment strategy.

The questions we care about answering are your questions. We use those answers to ensure we provide investment advice that fits your needs. The big question of the day for us isn’t what the markets might do next week but whether we’ve answered your questions in a way that helps you feel confident about reaching your goals.

There’s a reason that investing disclosures must include the line, “Past performance is no guarantee of future results.” No matter how good someone thinks they are about predicting what the market will do, there are no guarantees. But that hard truth doesn’t fit neatly in a headline. That’s why it’s so frustrating to hear people focus on questions that go beyond things investors can control.

As advisors, we want you to ask questions. But the right questions will have nothing to do with something so superficial as, “How will the markets react?” Instead, we’ll work with you to ask the questions that help secure your financial future.

With the start of a new year, I also want to wish you and yours a safe and healthy 2021. The last year has been a difficult one for us all. But I’m confident we’ll see good things happen during the next 12 months, and I look forward to answering your questions.

The Election Matters Little to Your Portfolio

Posted by John Charles Kernodle on October 10, 2020  /   Posted in Newsletter

It’s only October, and I suspect we know that 2020 will appear in history books for many reasons. From a global pandemic to our 2020 election, we’ve seen story after story flood our timelines and try to snag our attention. Today, I want to focus on a question we’re hearing more often at Strathmore Capital Advisors: “How will the presidential election affect the stock markets?”

I understand why this question is top of mind for many of you. You’ve worked hard, set goals, and made it a point to create a financial plan. The uncertainty of a presidential election can feel like it will undermine your efforts. But here’s the critical point I want to leave with you today.

The noise about this election has been loud and never-ending for months now. However, who we elect as president is just one of many, many factors that contribute to what we see happening in the market. So, while the talking heads continue to suggest that everything hangs in the balance with this election, the connection between the outcome and the stock markets is weak at best.

History tells us something much different. Consider the length of a U.S. president’s term. At four years (or eight years over two terms), we’re talking about a small window of time. The ability of any individual president to affect the long-term direction of the markets remains questionable.

For instance, if we go clear back to President Truman, we see a steady uptick in the value of stocks across both Republican and Democratic presidencies. Of course, we’ve seen markets wiggle and jump around since 1945, including several recessions and market corrections. But that movement creates the very value we’re trying to capture by investing in stocks.

The key point remains: We have no reason to think that who wins the election this year will matter more to the markets than the winner of any prior election.

I know that 2020 has proven a challenge for us all. But for this issue, I believe the more important point remains. A successful financial plan depends in large part on things within our direct control. We can’t predict what the markets will do or how people will vote. We can control how much we save, how much we invest, where we invest, and how we behave. All those factors matter so much more in the long-term than what happens in November.

That said, I do encourage you to vote. We’re very blessed to live in a country that guarantees the right of its citizens to select its elected leaders. But as you cast your vote, please know that the outcome will remain only one of many factors that we’ll weigh in the future to help you make the best financial decisions possible.

Picking Winners and Losers

Posted by John Charles Kernodle on September 10, 2020  /   Posted in Newsletter

Our world looks a lot different than it did seven months ago. Some of those changes are probably temporary. But other changes may prove more long-term or even permanent. One of those changes that sticks out is the work-from-home (WFH) trend.

This movement isn’t new to our current situation, but the widespread adoption, for at least the short-term, happened faster than expected. Some companies are talking about bringing workers back to the office during 2021, but other companies are making big structural changes. For instance, Pinterest paid $89.5 million to cancel the lease on its new San Francisco office.

Pause for a moment and consider that a company considered it more cost-effective to spend almost $90 million to leave an office space. Other companies, including Apple, Facebook, and Twitter, plan to continue offering WFH options for employees even after social distancing needs come to an end.

So, why should this matter to you? It’s a classic example of the domino effect. When one big trend starts to take hold in the economy, it affects other areas of the economy, too. Changes in how and where people work have affected and will continue to affect the different industries. For example, travel (airlines, hotels, rental cars), food (restaurants, grocery stores), clothing (business attire, casual wear), and digital services (video conferencing, internet providers) are just a few of the industries that will experience both positive and negative outcomes.

When we see a systemic change like this one (42% of the U.S. labor force now works remotely), how on Earth could anyone predict the winners and losers? The short answer: You can’t. That’s why Strathmore Capital’s investing strategy focuses on owning a broad and diversified portfolio of the global markets.

We don’t know yet how much business travel will return to “normal” or if people will continue to do more video conferencing. We don’t know how quickly restaurants will return to full, in-house dining. Plus, if fewer people are working in offices, what will happen to the business lunch?

There are hundreds of other examples of what might happen, but you get the idea. There’s a lot we don’t know about what the future holds, and WFH is just one of those variables. But utilizing a disciplined, long-term investment strategy means you don’t have to guess how any single variable will affect your portfolio. It leaves you with more time to focus on the goals that matter most to you.

Please know that no matter what trends may hit the headlines next, we’re here to help answer your questions and make sure your portfolio continues to match your goals. At Strathmore Capital, we’re committed to helping you navigate both the ups and downs that come our way.

There is value in having a financial plan and working with a close-knit team to stay on track. Please let us know if someone you know might enjoy speaking with the professionals at Strathmore Capital Advisors.

Don’t Overreact to the Movements

Posted by John Charles Kernodle on July 10, 2020  /   Posted in Newsletter

With the first half of 2020 behind us, it seems like a good time to reflect on where we’ve been and where we think things might go. The goal isn’t to armchair quarterback what’s happened or consult a crystal ball to determine what might happen next. Instead, I want to focus on two things:

1) Why an investment philosophy matters

2) What we can control

Let’s pretend for a moment that your “strategy” for investing in 2020 relied only on news reports. Think about how you would have reacted to the following:

  • In six months, we’ve seen three of the worst 25 losses and two of the largest 25 gains for the S&P 500.1
  • In 16 trading days, the S&P 500 plummeted 20% from its peak, creating the fastest bear market in history.  It took only 3 more trading days for the S&P 500 to plummet 30%.2
  • There have been 35 daily gains or losses of 3% or more this year.  Over the past 5 years, there have been just 11 moves of 3% or more in total.3
  • From 2015-2019, we didn’t experience a single daily gain of 4% or more. In 2020, we’ve already seen it eight times, with five of the days hitting 6% or higher.4

See the problem? With all that conflicting information, making investment decisions becomes really difficult. That’s why we’re such big supporters of investing based on long-term prospects and protecting portfolios with easy-to-understand strategies, like avoiding unnecessary fees and expenses. It’s not fancy. It won’t make big headlines. But it will, over time generate results.

This leads to the second point. We don’t know what the rest of the year holds. We have zero control over what the markets will do next or what might happen in the world. But we can control what we do.

It starts with remembering that you’ve adopted a financial plan for the very purpose of helping you deal, both emotionally and strategically, with the ups and downs in the market. Even if we weren’t in the midst of a global pandemic, investors will still have to deal with the widespread civil unrest and a presidential election cycle. The fact remains that markets move, and sometimes, they’ll move over little things just as fast as big ones.

Our goal is to not overreact to those movements. That goal becomes much easier when we have the foundation of a proven investment philosophy combined with a willingness to focus on what we can control.

We can’t afford to get distracted, and that’s why at Strathmore we’re always available to chat. Sometimes, a quick conversation is all it takes to get refocused.

We look forward to speaking with you sometime soon.

Take care and stay safe. We’re here for you if you need us.

Best Regards,

John Charles Kernodle


Ben Carlson, “Is This The Most Volatile Year Ever?”, A Wealth of Common Sense, June 12, 2020
Beth Kindig, “Algorithms sped up selling, leading to the fastest bear market in stock market history”, Market Watch, March 26, 2020
Ben Carlson, “The 2020 Stock Market By the Numbers”, A Wealth of Common Sense, June 7, 2020
Ben Carlson, “The 2020 Stock Market By the Numbers”, A Wealth of Common Sense, June 7, 2020

Good Fundamentals

Posted by John Charles Kernodle on April 22, 2020  /   Posted in Newsletter

When we rang in the New Year almost four months ago, I doubt anyone could have predicted the current situation. As we get used to things like picking up groceries curbside and keeping six feet between us and the next person, I think it’s important to address the elephant in the room.

When will things go back to “normal?”

It’s essential to recognize that our new normal probably won’t look the same as the old normal. That’s true for every crisis that’s touched our country (see the changes made since September 11, 2001, and the Great Recession of 2008-09). But I believe we can count on the fundamentals providing us with a path forward.

Those fundamentals include people wanting to work, wanting to build businesses, and wanting to provide for their families. All these activities lead to the exchange of goods and services between individuals and companies. This activity creates the necessary value to justify investment for today and into the future. That investment builds a foundation for a diverse and robust economy.

When you talk to any of us at Strathmore, you won’t hear us panic about recent events or the decline in the financial markets. Instead, we’ll focus on a) your financial goals, b) our long-term plan for the achievement of your goals, and c) your portfolio as the long-term funding for that plan.

It’s this long-term approach that allows us to remain calm and optimistic about the future.  We understand that each crisis that preceded the coronavirus pandemic got resolved, economic activity began growing again, and the value of a globally diversified portfolio resumed its long-term upward trend.

That’s why we believe it’s so critical to understand the fundamentals. While the world around us will change, those fundamentals will be our guide. We are a nation that will come back from the extremes of today to shape our new normal into something better.

The same holds true for our markets and investments. This, too, shall pass.

We don’t know the day, the week, or even the month. But we do know that the fundamentals haven’t failed us before, and we have every reason to believe they’ll pull us through to the other side.

Just like before, we’re here to listen and to answer your questions.  We welcome all questions and value any opportunity to speak with our clients. Stay safe and my best to you and your family during a difficult time.

We’re Here to Help

Posted by John Charles Kernodle on March 19, 2020  /   Posted in Newsletter

The COVID-19 (Coronavirus) pandemic continues to change our community, state, nation, and world on a daily basis. Part of our compliance program here at Strathmore Capital Advisors involves us being prepared to provide our services under less than normal circumstances.

The key goal of our Disaster Recovery Protocol (DRP) is to make certain our business is not interrupted due to an emergency that would force our office to close for a period of time. We have tested our DRP and are confident in our capabilities to execute our plan and continue to provide service as usual.  In addition, we have made the decision to cancel all face-to-face meetings until further notice. However, we are available for meetings via telecommunications.

We will continue to be available to answer any questions that you may have.  We are committed to maintaining a seamless level of service through this disruption. Please refer to the contact information at the bottom of this correspondence if you have any questions or would like to arrange a meeting.

We look forward to meeting with everyone again as soon as possible.  Please stay safe and take care of your families, friends, and community during these extraordinary times.

What We’re Seeing in the Market

Posted by John Charles Kernodle on March 02, 2020  /   Posted in Newsletter

It’s been a difficult week in the market. We saw the biggest, one-week sell-off since 2008. The elephant in the room is the Wuhan coronavirus. But somewhere on the periphery sits the reality that the market probably needed an excuse to cool off from its epic run of 2019.

We don’t claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. We are reasonably certain that many (or perhaps most) of the world’s leading virologists and epidemiologists are working on it. It’s our opinion, but we believe that their efforts will ultimately succeed.

If we go back in time to similar outbreaks in this century, it’s a reasonable opinion. Just consider the following:

  • SARS in 2003-04, also originating in China
  • The bird flu epidemic in 2005-2006
  • In 2009, a new strain of swine flu
  • The Ebola outbreak in the autumn of 2014
  • The mosquito-borne Zika virus outbreak in 2016-17

On the first day of the SARS epidemic, the S&P 500 closed at 855.70. Seventeen years and six epidemics later (including the current one), the S&P 500 closed at 2,954.22 on Friday, an increase close to 3.5 times higher. I’m confident that you see where we’re going with this and why we consistently discuss developing a plan and asset allocation model that will allow us to remain consistent through any market environment.

What’s an Investor to Do?

Posted by John Charles Kernodle on February 04, 2020  /   Posted in Newsletter

Let’s play a game. The rules are simple. I’m going to share three headlines, and you guess when these news stories appeared.

1) “The Stock Market’s Dangers Are Easier to See Now”
2) “American Exceptionalism May Be Ending — At Least in Stocks”
3) “Dow Tumbles Nearly 800 Points as Trade Jitters Return”

Here’s a hint. It wasn’t 2008.

No, it was a lot more recent. In fact, all three of these headlines appeared the first week of December 2018. At the time, the pessimism around the market and the general economy made it seem we were on the verge of another recession. The “smart bet” seemed to be cash out, stuff the money under the mattress, and hunker down until the worst passes.

Except all that pessimism came to naught. Instead, it was another year of double-digit returns for the U.S. stock market.

What’s an investor to do?

For years now, we’ve made it our mission at Strathmore Capital to help answer that question. The answer isn’t exciting enough to make headlines. In fact, it’s so simple, some folks don’t believe it can work. It’s only three steps.

1) Identify your financial goals through a well-constructed financial plan
2) Invest in a diversified portfolio that fits your goals
3) Stay disciplined

None of the steps are that complicated. They do require focus, a willingness to ask questions, and a commitment to follow through—even when the headlines suggest the end is nigh. Ultimately, we’re the buffer against the noise. Of course, we love helping folks figure out #1 and #2, but time after time, #3 seems to be where we help people most often.

When financial advisors first start out, I suspect many of us think it’s all about the numbers. Get the mix of investments right, and the bottom line will take care of itself. But a week, a month, maybe even a year, goes by and the phone rings. The anxious voice on the other end wants to know if the talking head on CNBC is right and a bear market is just around the corner.

That first phone call won’t be the last. Something will happen, either personally or in the larger world, and the very human response will be to DO SOMETHING. But if folks have clear goals and a low-cost, diversified portfolio in place, one of the hardest things we help our clients do is…nothing.

A year ago, it seemed so logical, so rational, to step away from the stock market. All the signs (at least the ones highlighted in the news) seemed to point to one, obvious outcome. You were ignoring the “facts” if you didn’t understand that the U.S. was a headed to a recession.

Here’s a fact that history seems to confirm. Attempting to guess what the market will do next is a fast track to frustration and unhappiness. I can’t (and won’t) attempt to predict what will happen during 2020. But I do know that for 15 years we’ve helped dozens of folks reach their financial goals by putting our clients first and choosing to think about wealth differently. That’s an outcome I’ll put up against any headline.

I’m sure I’m right

Posted by John Charles Kernodle on November 12, 2019  /   Posted in Newsletter

“I’m sure I’m right.”

At some point in our lives, we’ve all said something similar. We’re convinced beyond a reasonable doubt that what we think we know is correct — until it isn’t. A big part of that certainty comes from something very human: confirmation bias.

We all have it to some degree. At different moments in our lives, and on a wide range of subjects, we seek out information that appears to confirm what we “know.” Along the way, we ignore (usually subconsciously) anything that contradicts what we “know.”

Then, we’re shocked when what we thought we knew turns out to be something different.

No surprise, it happens a lot when we talk about money and investing. For instance, I’m pretty sure I’ve heard just about every variation of, “I’ve found an amazing investment opportunity that’s guaranteed to generate huge returns.” But when I start asking questions, even general, high-level ones, the answers tend to skew in the direction of folks ignoring contradictions in favor of data and details that reinforce the amazing opportunity.

What makes this bias so tricky is that even very smart people can still get caught in the trap. It’s not a case of intelligence, but one of being human. That said, there are some good reasons to challenge ourselves to push back against the comfort zone of assuming we’re right.

Let’s start with the basic understanding that we like being right. Who doesn’t? But I believe that our desire to be right should be the start of our search and not the end. History shows us though that it can be tough.

In January 1920, Charles Ponzi opened a new firm, Securities Exchange Company. Promoting postal reply coupons as an investment tool, Ponzi convinced people they could make huge returns in excess of 400% buying cheap coupons in countries like Italy and reselling them in the U.S.

Convinced of Ponzi’s scheme, often by other happy investors, everyone from policemen to bankers started piling into his firm. By June, folks had invested $2.5 million. The numbers just went up from there with a million coming in per week, and then a million per day. But there was a catch (there’s always a catch): Ponzi still hadn’t figured out how to sell the coupons. He was paying off investors using other people’s money. There was no real investment, but that didn’t stop people from wanting to believe it was real.

During the height of his scheme, Ponzi made $250,000/day, and one newspaper even went so far as to imply that investing with Ponzi returned 50% after only 45 days. The day after it appeared, thousands descended on Ponzi’s office wanting to invest. However, only weeks later, it all came crashing down. Other reporters and financial authorities started asking questions about how Ponzi’s investment actually worked, and before long, his past as a convicted forger and other prior bad acts surfaced.

Investors panicked, and their demands for money toppled the scheme and collapsed six banks in the process. Investors ended up with 30 cents on the dollar with losses of $20 million or $256,759,000 in 2019 dollars. Almost 90 years later, Bernie Madoff pulled off an even greater heist, costing investors around $18 billion.

These schemes work because people want to believe they work and go searching for information that confirms their beliefs. In our search to be right, we sometimes ignore information that tells us something else. Who wouldn’t want to earn huge investment returns with little risk? But that shouldn’t stop us from considering ALL the relevant information — both the good and the bad — available to us.

It’s not easy, and in fact, it can be downright uncomfortable at times. But confirmation bias can trick us into making or sticking with bad decisions. And when those decisions involve money, the consequences can be life-changing.

My advice is pretty simple, if not always easy. Challenge yourself to ask, “Why might I be wrong?” Then, go looking for the answers. If nothing else, it may help you see additional angles you hadn’t considered that reinforce your original position. In the end, I think we’d all prefer to be really right instead of really wrong even though we’re sure we’re right.

Understand What’s Happening Now

Posted by John Charles Kernodle on July 24, 2019  /   Posted in Newsletter

For 121 months, the U.S. economy has grown, and grown, and grown. It represents the longest run of economic growth since 1854. In real terms, that translates into hundreds of thousands of new jobs and double-digit returns in the stock market. But more than one economist (and history) predicts that we’ll experience a recession — eventually.

What’s a smart investor to do?

Here’s a hint. It doesn’t involve tea leaves or crystal balls. Instead, it starts with recognizing that investment markets don’t come with expiration dates. In fact, the worst thing you can do is try to predict what will happen next and base your investing decisions on those guesses. You might get it right once or twice, but long-term, it’s a path to financial frustration.

Instead of focusing on what might happen next in the markets, it can be helpful to better understand what’s happening now. We’re at a critical point in the history of the world. Within the last thirty years, we’ve seen the introduction and mass adoption of technologies that were once the stuff of science fiction.

Our world has gotten both smaller and bigger over those same years. We can travel to countries thousands of miles distant in a matter of hours, while modern companies have built global production chains spanning continents. All these changes combine into a world economy that looks nothing like it did even 50 years ago, let alone 100.

Understanding that the fundamentals of our economy have shifted drives the critical discussion around our need for diversified investment portfolios. Back in the day, it wasn’t uncommon for someone to only own stock in, say, AT&T or Coca-Cola. Certain companies were “safe” investments. The general public also didn’t have an easy way to access markets, so there wasn’t a widespread interest in buying and selling stocks like we see today.

All of this leads to a question that we’ve heard more than once: “Is this time different?” In other words, should you be doing something different because we’re on track for record-long growth?

The short answer: No — assuming you’re doing what you’re supposed to be doing.
So, what should you be doing? You’ve heard me say it before, but the good stuff that works doesn’t change:

  • Save as much as you can
  • Follow a well-diversified investment plan that considers where you’re at today and where you want to go tomorrow
  • Avoid making bad decisions based on headlines and fear

Some folks refer to these suggestions as the Sunday School answers — they’re the easy answers that everyone gives. But funny enough, just because everyone knows them doesn’t mean everyone is doing them.

Over the coming weeks and months, there will be plenty of talk about a lot of economic issues, including the 2020 elections, trade negotiations, and business regulation to name a few. And depending on how long U.S. growth continues, I expect pundits will get louder as they try to outguess each other predicting the next recession.

But I’ll leave you with my prediction. At some point, something will happen that affects the U.S. and possibly the global economy. What that thing will be and when it will happen, well, I’ll leave that to the pundits. But what you can expect from me, and the folks at Strathmore Capital Advisors, is a willingness to help you ignore the noise and navigate the ups and downs of our ever-changing world.

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