July Newsletter to Clients

Enjoy this month’s edition that features stories of extraordinary fraud experienced by two of our clients, a mid-year review of the stock and bond markets and a terrific description of financial independence I read recently.

Please, please – if you read nothing else in this newsletter, please read this:

Recently two clients have experienced traumatic experiences with very credible-sounding scams attempting to steal significant amounts of money.

The first criminal called a client and told them they had mistakenly deposited $100,000 into the client’s checking account rather than the intended $1,000 and needed the money refunded. To make this appear legitimate, the criminal was able to infiltrate the client’s computer and display a fake – but real-looking – visual of the client’s checking account that showed the pending $100k deposit. The client, thankfully and appropriately, called Moneywatch and we helped them determine this was fraud.

The second criminal called a client pretending to be a representative of a Federal government agency and demanding payment for a penalty of $70,000. This person sounded credible and had very specific instructions on how to transmit the money. Again, when alerted, we determined this was a fraud attempt.

If you are contacted by someone you don’t know demanding money – please call us at 859-268-1117. If it’s legitimate, we can help you determine how best to make the payment. More important, we can help you determine if this is an attempt at fraud and help you avert financial disaster.

Despite some considerable downs and ups so far this year, the U.S. stock and bond markets have turned in perfectly respectable performances so far this year. And international stocks have performed spectacularly. Here are the details:

• The S&P 500 Index of large, U.S. companies returned 6.2% for the first 6 months of the year. This is particularly remarkable considering the index fell 18.9% from Feb. 19 through April 8;
• The MSCI EAFE Index of international companies returned 19.92% through June 30. Many clients own international stocks through the mutual fund T. Rowe Price Overseas Fund (TROIX);
• The Bloomberg Bond Aggregate Index of bonds returned 4.02% through mid-year. Dodge & Cox Income Fund (DODIX) is the mutual fund many of us own in this segment.

A recent article in the investment periodical Barron’s explained how the stock and bond markets are sending conflicting signals about the economy. I’ve described the stock market previously as the child bouncing on the bed before naptime and the bond market as the adult in the room expressing caution. That illustration applies here.

The U.S. stock market seemingly feels great about the economy. Not only has it continued to rise and hit new records but it’s the riskiest part of the market – think information technology companies like Nvidia and Oracle – that has led the way. So-called stable companies like utilities and consumer staples have taken a back seat. By pouring money into economically sensitive companies, investors are signaling they are betting on a brighter economy.

In contrast, yields on 1-year and 2-year U.S. Treasuries have declined. Lower rates typically mean greater expectations of rate cuts from the Federal Reserve and, if the Fed does lower rates, that sends a signal they believe the economy needs a boost.

Either the stock market or the bond market is wrong about the direction of the economy. As always, that is why we diversify your portfolios – and ours – to smooth out the ride.

I recently read a quote that I feel compelled to share because I think it hits the mark:

Financial independence means you are choosing to go to work because you want to rather than have to. You have the flexibility to make decisions that give you joy and excitement, rather than focusing on whether you can pay the bills for the month. When you reach that level where money is not the focus of your life’s decisions, that’s truly what financial independence is.

Thank you for your continuing confidence.