It’s not often investors are able to see the inner workings of a truly brilliant trading strategy in a cutting-edge sector of the investment world, in this case cryptocurrency. Many unique investment strategies are often driven by “black box” quantitative machines using computer algorithms investors aren’t privy to lest their secrets be revealed. This obfuscation of strategy often comes with a correlated opaqueness of fees and expenses. 

I’m now happy to report about a brilliant new cryptocurrency trading system that has recently outperformed certain markets and many professionals. On top of that, they are live streaming their trading operations. It’s a brilliant coming together of trading strategies and social media for the modern era. 

Without further adieu, meet Mr. Goxx, the crypto trading hamster. You can read more about Mr. Goxx and his trading strategy here.  Of course I am not affiliated with Mr Goxx nor is this an endorsement of his trading strategy buy what is notable about Mr. Goxx the hamster is that as of September 27, 2021, his personal lifetime  performance since June of 2021 was up about 20%, outperforming many professional traders. 

Obviously, I’ve opened this report with a tongue-in-cheek summary of a real phenomenon, but it’s a reminder of one of the most fundamental tenets for long-term fiduciary investors. Investors often get swayed by short-term performance and intriguing new investment ideas, but it takes decades of data to separate luck from skill and often new ideas that seem solid turn out to be speculative gambling with huge amounts of risk. Yes, you can find professionals, and even hamsters, who can outperform the market for certain time periods, but luck, common sense, and intuition are not necessarily skillful methodologies that will keep investors winning over the long run.

Employee Stock Options: Leaving Money On The Table

In a recent study by Secfi, as of November 20, 2020, employees left $4.9 BILLION of money on the table by not exercising their stock options. Here’s a list of the companies with the most unexercised stock options.

One of the biggest reasons for this is the cost of exercising options, which can be a big burden from a cash flow perspective. Secfi found that on average it costs 2x annual household income to exercise options and taxes make up 85% of stock option exercise cost. In many cases, the longer you wait, the higher the cost. It’s a real shame so much wealth was left on the table for these families and their futures. I think many people think financial planning might be more appropriate when they get closer to retirement, but nothing could be further from the truth. If you’re young with stock options and other company benefits, it will often be helpful to start planning early. In fact, from a global perspective, it could be worth billions. 

There are some specific analysis tools and solutions for folks with employee stock options that can add real value. Feel free to contact me directly for more information.

The Fed and “Tapering”

Fed officials continue to signal they would favor tapering of bond purchases in 2021, in line with recent announcements from the European Central Bank. When and how remains to be seen. With ample speculation about the Fed, unemployment, and inflation, it might be a good time for a reminder about what Fed announcements can, and cannot, tell us about the future of fixed income markets.

Let’s start with what tapering is and why it is done. Essentially, tapering refers to the gradual slowing down of purchases of securities and bonds by the Fed. Essentially, the government has

been printing money and buying bonds (and other securities) that had the effect of lowering interest rates that are connected to other instruments like mortgages and corporate financing, which of course lowers borrowing costs.

At the Federal Open Market Committee meeting in July, Fed officials strongly suggested they would soon slow bond purchases, and they confirmed their intentions at the Jackson Hole Symposium in August. So you would expect to see interest rates rise. Interestingly, interest rates generally decreased during the last three months, as opposed to increasing like they did when the Fed announced tapering in the wake of the global financial crisis (GFC). This movement may suggest that market dynamics and participants in aggregate, not the Fed alone, determine the level and shape of the yield curve.

Without getting too deep in the weeds on yield curves and Fed policy, just remember there is much academic research that tells us there is no reliable way to predict future interest rates. As such, an announcement by the Fed or any other news relevant to the economy is never a definitive moment to reactively change a well-thought-out strategic investment plan.

2021 Q3  Index Review Through September 30

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2021, all rights reserved. Bloomberg data provided by Bloomberg.

Equity markets around the globe declined in the third quarter. With the exception of Emerging Markets, there really wasn’t much movement for the period, although there were some volatile days during the quarter and some news that appeared to project a more negative sentiment than the actual results. 

Longer term numbers through September 30, 2021 are shown below for your reference as well. 

1 Source: Secfi, as of December 11, 2020. Based on 773 individuals from 69 late-stage unicorn companies in California (65%), New York (10%) and other U.S. states (25%).

Morgan H. Smith Jr. is an investment advisor in San Diego, Calif. He is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the commission. Morgan only transacts business in states in which he is properly registered or is excluded or exempted from registration. A copy of Morgan’s current written disclosure brochure filed with the SEC, which discusses among other things, Morgan’s business practices, services, and fees, is available through the SEC’s website at www.adviserinfo.sec.gov.

Please note, the information provided in this document is for informational purposes only and investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services.

Nothing provided in this document constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation or an offer to sell (or solicitation of an offer to buy) securities in the U.S. or in any other jurisdiction.

All investment strategies have the potential for profit or loss; changes in investment strategies, contributions or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio. 

Cryptocurrencies are extremely new and nontraditional assets and a potential shareholder’s ability to evaluate the performance of cryptocurrencies may be limited. Digital assets, represented on a decentralized public transaction ledger that is maintained by an open source protocol, are substantively different from traditional assets and investments. Cryptocurrency is also not legal tender. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency, and regulation in the U.S. is still developing. Cryptocurrency exchanges may stop operating or permanently shut down due to fraud, technical glitches, hackers or malware. 

Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.

This document may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions; changing levels of competition within certain industries and markets; changes in interest rates; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of WorthPointe or any of its affiliates or principals or any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date they were made.