Introducing the Fictionary!
On the 7/12/2019 edition of Stock Talk, Chris Perras introduces a new educational tool up on Oak Harvest’s website, www.oakharvestfg.com, entitled “The Fictionary”! Chris explains what the Fictionary is, how it can benefit investors, and also goes over a new “I don’t want to invest now because…”!
Chris Perras: Hey, there. This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, and welcome to the July 12th edition of our weekly Stock Talk Podcast, keeping you connected to your money. This week’s episode is going to highlight a new educational section on our website that we are titling, Fictionary, your Oak Harvest guide to financial terminology used commonly in the financial press. Before we get into that topic, as we first laid out early in the year, the S&P 500 now sits at a new all-time high record of about 3,000. This has occurred during the normal Summer Rally period of early July through early August.
Our second-half outlook, which we first laid out almost four weeks ago, can be found in both audio and written form on our website by Googling ‘Oak Harvest Financial Group second half outlook’. Now, onto the topic of the week, Fictionary. Besides being a financial fiduciary for our clients, the team at Oak Harvest prides itself on being educators for our clients and the people interested in our services. I have managed money for over 25 years. My career has been pretty unique in that, during that period, I’ve had the fortunate opportunity to manage money for a very diverse group of end investors with very different goals and objectives.
Pension funds have very different goals than mutual funds. Mutual funds have very different goals than hedge funds. Hedge funds have very different objectives than high-net-worth clients, who have different objectives than retirees looking for their money to last them through the rest of their life or leave a legacy to family, foundation or church. Each one of these groups tends to use different terminology in describing the investment and financial world.
In this new section of our website, found under the investment management ideas and insights sections, we will define and explain some of these commonly used terms by the financial press, as well here at Oak Harvest. I’ve entitled this section ‘Fictionary’ for two reasons. First and foremost, it will be an educational resource as a financial dictionary for our readers, hence the term ‘Fictionary’. Secondly, it’ll be a place that the team at Oak Harvest tries to dispel some of the fictional terms that the financial press is littered with.
Definitionally, fiction means a literary work based on the imagination and not necessarily on fact. It also has a slightly darker meaning that tilts towards outright lies and untruths. The Fictionary section on our website will try to serve the dual purpose of educating our readers, as well as factually dispelling some of the mistruths that have become too common, mentioned, or spread by the financial press. For example, the term TINA, spelled T-I-N-A, has become a commonly used acronym for ‘There Is No Alternative’.
The term TINA is used multiple times every day on a well-known, trading-oriented show, on a well-known financial network. The term TINA has become an almost daily excuse used by commentators to rationalize why stocks are trading at new all-time highs in light of a slow or weakening economy. The implication by most people using this term is that with interest rates so low, money is being forced into buying stocks and paying higher prices than they should otherwise be paying.
The implication is that the stock market is overvalued. There was a bubble out there and investors are being unwise, investing at these levels. It is used with a definite tone of negativity and consternation. The reality of the matter is, TINA isn’t happening. It is pure fiction. There is nothing factual behind people using this term. It is a fact, mathematically based, that lower interest rates do help stock valuations. It is fact because the value of an equity investment is nothing more than a math equation. That equation is the net present value of the future free cash flows of a company, presently valued back-to-today at an interest rate.
The lower the interest rate one uses in the math equation, the higher the current value of that investment. It’s pure math. Lower rates can facilitate higher stock valuations. However, the term TINA is being used implying that with rates so low,
investors are plowing money into stocks because there’s no other good investment alternative out there. This is flat-out false. The money flow data, in and out of the markets, and asset classes doesn’t lie. Clearly, there are alternatives to stocks, and clearly year-to-date, equities have not been the beneficiary of TINA. If anything, bonds, yes, your boring fixed-income investments, have been the beneficiary of TINA, year-to-date.
Year-to-date, over $250 billion, with a ‘B’, has made its way into fixed-income investments, while year-to-date, over a $150 billion, with a ‘B’, has left equity investments. With that data in mind, someone please explain to me how anyone can use the term TINA with a straight face. Anyone? Anyone? Bueller? Bueller? On a final note, returning to our weekly segment on the podcast, the ‘I don’t want to invest now,’ rationale and excuse segment. This week’s new excuse I heard is, “I don’t want to invest now because we’re at new all-time highs.” Well, shock.
The stock market’s been at a new all-time high since mid-2013. That’s for over six years. Over that six-year period, the S&P 500 has practically doubled. That’s a 12% annual return. The team at Oak Harvest continues to find great long-term
opportunities for our clients, even at new all-time highs. Which, as our listeners know, we have predicted all year and we continue to see in the fourth quarter of this year through 2020. What matters most to the stock market isn’t new all-time highs. What matters most is a growing economy to help grow your money.
In closing, if you find this content helpful, please forward it to friends or have them give us a call at 281-822-1350, go browse our website and our new content at oakharvestfg.com. You shared your vision for your money with us during our meetings and we’re here for you. Our main job at Oak Harvest is to have you retire only once in your life. Many blessings. This is Chris Perras, Chief Investment Officer at Oak Harvest Financial.
Speaker 2: The preceding content expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, statistics, and sources are not guaranteed. Content ideas and strategies discussed may not be right for your personal situation and should not be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Investing involves the risk of loss, and past performance does not guarantee future results.
CFA®, CLU®, ChFC®
Chief Investment Officer, Financial Advisor
Chris is a seasoned investment professional with over 25 years of experience working with some of the most successful money management firms in the world. Chris has made it a point in his career to adapt as the market landscape changes, seeking to utilize the appropriate investment strategy for a given market environment. His transition from managing billions of dollars at the institutional level to helping individuals and families retire is guided by a desire to see first-hand the impact he is making in the lives of clients at Oak Harvest.