June 15, 2024
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June 15, 2024
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Linking Northern and Central NJ, Bronx, Manhattan, Westchester and CT

So, you are undoubtedly wondering why the writer of a financial column is borrowing a song title from the rising singing sensation Joey Newcomb. I do not know Joey personally, but his mom, Sara Gordon, lives across the street from me in Edison, New Jersey. But this has nothing to do with investment advice or the financial markets. So, allow me to explain.

For many readers and investors, 2022 was a pretty awful year for portfolio performance. And perhaps you are not looking forward to opening that envelope with your 401K plan statement or brokerage account statement. For the clients at my firm, it has also been a generally down year. Yet I am heartened and satisfied with our results. Thus, it is perhaps a propitious time for me to be thanking Hashem.

 Déjà Vu

The last time we had a similar boom and bust cycle was in the late 1990’s and early 2000’s. Dot.com stocks were in the midst of a speculative frenzy before they took a dramatic dive. In the midst of that runup, Rabbi Ronald Schwarzberg, who was then the Rabbi of my shul in Highland Park, gave a shiur in which he warned attendees that people need to have some hubris even as their portfolios were growing rapidly. He quoted Psalm 24 which begins: “LaHashem Haaretz Umloah” (“The earth and all that fills it belong to G-d”). Rabbi Schwarzberg cautioned that even though we may have success in life, Hashem is really in charge. And for many investors and traders who became drunk on success at that time, boy was he right!

Many of those highflying stocks were eviscerated in the 2000-2002 bear market. Sounds familiar, right? As Yogi Berra would say: “It’s Déjà vu all over again.”

 Annus Horribilis

I remember when Queen Elizabeth declared in 1992 that the year was an “annus horribilis” or a horrible year for the royal family. Among other unfortunate events that year, Prince Charles and Princess Diana separated and Windsor Castle had a devastating fire. In her eloquent and charming British elocution, Queen Elizabeth lamented that 1992 was “not a year on which I shall look back with undiluted pleasure.”

As far as this past year is concerned, for many it was a “annus horribilis” as stocks and bonds both generated significant double-digit losses. For those who were overexposed to the “FANG” stocks (Facebook, Amazon, Netflix and Google) and many other former market darlings, losses of 30% and more were not uncommon.

 The Return of Sanity

In previous columns we warned that the valuations of many high-flying stocks were divorced from any tangible and time-tested measures of value. At the same time, we did not believe it was time to give up on stocks. With our laser focus on traditional value metrics, our portfolios were well prepared for the coming damage in the more vulnerable sectors.

We were also early in warning about the scourge of rising inflation and the normalization of interest rates. Our fixed income investments going into 2022 were defensively positioned and we were largely prepared for the turbulence in the bond market as well.

I have explained to many of our clients that in fact we had a good year. To be sure, no one does cartwheels when their portfolio has declined. But I believe that one of the keys to successful investing over the long term is identifying and executing strategies that help limit losses when the occasional bear market strikes.

 Giving Credit Where Credit Is Due

Any investment advisor or portfolio manager will experience challenges over market cycles. But after experiencing many market cycles, I believe that disciplined portfolio management and rigorous research and analysis are indispensable to long-term success. Limiting losses in a bear market gives the investor the opportunity to generate healthy portfolio growth over the long term.

So, while I would like to give credit to our disciplined investment process, I would be remiss if I did not give credit to Hashem.

 My Bakashot in Shemona Esrei

When I daven my shemona esrei, I try to connect with each of my bakashot. The first bakasha is “ata chonein l’adam daas,” translated as “You graciously endow man with wisdom.” I think about the daunting task of making the best decisions for my clients’ assets. Each of these decisions can have a meaningful impact on their financial futures. Thus, I pray that Hashem helps me make the right decisions each and every day. And when we achieve success in navigating difficult markets, I thank Hashem for enabling us to achieve that success.

When Hashem helps us achieve success in life, it is incumbent on us to give credit to the Master of the Universe for his partnership with us as we engage in all our endeavors. We say modim and thank Hashem for answering our prayers. We say: Thank You Hashem!

 Confucius Says…

One of my favorite aphorisms is attributed to Confucius and goes something like this: “Choose a job you love, and you will never have to work a day in your life.” I would never suggest that being an investment advisor and portfolio manager does not require a tremendous amount of time and stress. But I do believe that I have the best job in the world. So, thank you Hashem!

 Thanking Hashem by Giving Back

Having completed two full cycles of daf yomi, and now completing Mesechet Nedarim this past week, I have learned the importance of refraining from taking nedarim. So, I will make a pledge with the cautionary statement “bli neder.” As Hashem has helped me build my business into a credible and successful enterprise, I am pledging to continue to show Hashem my thanks by increasing my giving of tzedaka, particularly to worthy charities here in the Central and Northern New Jersey area. I will be asking clients for suggestions and I look forward to reporting back to you on the success of this initiative.

The views presented are those of the authors and should not be construed as personal investment advice or a solicitation to purchase or sell securities referenced in this market commentary. The authors or clients may own stock or sectors discussed. All economic and performance information is historical and not indicative of future results. Any investment involves risk. You should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice. All information is obtained from sources believed to be reliable. However, we do not guarantee the accuracy, adequacy or completeness of any information and are not responsible for any errors or omissions or from the results obtained from the use of such information.

Jonathan D. Caplan, a former Wall Street executive, is president and founder of wealth management firm Caplan Capital Management, Inc., with offices in Highland Park and Hackensack. He holds a BA from Yeshiva University and an MBA in finance from New York University Stern School of Business. You can find other recent investment articles by Jonathan at www.caplancapital.com/blog.

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