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Why Is Gold Going Up?

Gold is making headlines in 2020, as its performance leads most other asset classes year-to-date and investors are starting to take notice. In particular, Warren Buffet’s recent purchase of a gold mining stock has caught the attention of the media. Those who only think of gold as a “safe-haven” investment have been surprised by its strong performance even as the stock market rallied from its March low. But fundamentally, we believe that gold is not an investment at all. Instead, it’s just another form of money like the U.S. dollar or the Euro. So, if it’s not an investment, what’s driving this big rally in gold? While the answer can be complex, we’d argue that there are two main areas on which to focus when it comes to understanding the price of gold: the money supply and investor sentiment.

Read the full article by clicking the image below.

 

Mid-Quarter Newsletter – August 2020

Our Investment Philosophy

The last several months have been extraordinary to say the least and there are still so many unknowns in terms of the financial markets, our economy, and what our world will look like post-pandemic. As a firm, we have undoubtedly adapted how we communicate with our team, other business professionals, and our clients. Throughout all of these changes, the element of our business that has stayed consistent is our investment philosophy. At Morton Capital, we’ve always taken a different approach to investing—one that we believe is the best way to provide the returns our clients need for their lifestyle while trying to protect them from the swings of the market. Our beliefs have remained the same since our founder, Lon Morton, started our company almost 40 years ago and we take great pride in carrying on his legacy.

As we continue to communicate virtually, our Investment Team recently created a video that speaks to how we design portfolios to help our clients get the most life out of their wealth. Watch the video to meet the team and learn a little more about us.

Watch our Investment Approach Video here.

 

Financial Advisor Success Podcast & RIA White Paper
Featuring our COO, Stacey McKinnon

Our Chief Operating Officer, Stacey McKinnon, was featured on a recent episode of Michael Kitces’s Financial Advisor Success Podcast. Michael is a well-known speaker, writer, and editor in the financial services industry. In the episode “Scaling an Advisory Firm by Finding New Talent Outside the Financial Services Industry,” Stacey and Michael talked in-depth about how Morton has grown and evolved as a firm in recent years. Stacey touched on our culture of trust initiative in 2017, our non-traditional approach to hiring talent from outside the industry, and the way we’ve restructured our compensation model.

Stacey also co-authored an RIA white paper with the CEO of PFI Advisors, Matt Sonnen, called “The New RIA Workplace.” The industry report explores the changes firms have had to make to their businesses since stay-at-home orders began. It also shares the pros and cons of both office and remote work environments, how leaders and managers are maintaining company culture during these times, and what the office of the future could look like.

Click here to listen to Stacey’s podcast with Michael Kitces and read the RIA White paper here.

 

Why Is Gold Going Up?

Gold is making headlines in 2020, as its performance leads most other asset classes year-to-date and investors are starting to take notice. In particular, Warren Buffet’s recent purchase of a gold mining stock has caught the attention of the media. Those who only think of gold as a “safe-haven” investment have been surprised by its strong performance even as the stock market rallied from its March low. But fundamentally, we believe that gold is not an investment at all. Instead, it’s just another form of money like the U.S. dollar or the Euro. So, if it’s not an investment, what’s driving this big rally in gold? While the answer can be complex, we’d argue that there are two main areas on which to focus when it comes to understanding the price of gold: the money supply and investor sentiment. Read the Full Article here.

 

A Conversation About Change with Chris Galeski
Featuring Retired PGA Tour Player Peter Tomasulo 

Chris Galeski, Wealth Advisor and Partner at Morton Capital, speaks with Peter Tomasulo, retired PGA Tour player and Director of Investor Relations at Lyon Living. In this 30-minute video interview, they reflect on their former sporting careers, life lessons, family, and the triggers and milestones that opened the door for transition and career change.

 

Watch the video!

Scaling An Advisory Firm By Finding New Talent Outside The Financial Services Industry, hosted by Michael Kitces featuring Stacey McKinnon

Michael Kitces sat down with our own Stacey McKinnon on his Financial Advisor Success podcast to discuss:

  • Morton’s non-traditional approach to hiring talent from outside the financial services industry to grow and scale. How Stacey has developed hiring practices to spot talent from outside the industry.
  • The in-depth interview process that Morton Capital uses to evaluate both prospective job skills and culture fit over a series of five to six meetings, and the career track that Morton has created to give everyone in the firm upward mobility to grow their careers over time.
  • The growth and evolution of Morton Capital itself as a multibillion-dollar RIA. The way the firm restructured its compensation away from traditional revenue-based approach to better align everyone on the team, the way Stacey helped the firm reduce the tendency to micromanage as the business grew by helping everyone across the firm build stronger relationships and what they dubbed a year-long culture of trust initiative, and how the Morton team now structures its weekly firm-wide education sessions every Thursday morning.

Be sure to listen to the end, where Stacey shares the challenge she faced in her own career journey when she had to decide whether to pursue an advisory or operations path, why the word “because” is so crucial in leadership conversations, and why Stacey believes the key to future success for advisors isn’t simply about finding a niche or specialization, but immersing yourself into a community of people that you can serve and with whom you have shared beliefs.

To access the show’s notes or read the transcript please click here.

About the Host:
Michael Kitces, Buckingham Wealth Partners, Head of Planning Strategy.
He is also a co-founder of the XY Planning NetworkAdvicePayfpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Guest:
Stacey McKinnon, Morton Capital, Chief Operating Officer

How Business Owners Can Find Opportunity in Chaos

While 2020 may seem like a difficult time to be a business owner, there are hidden opportunities to grow in the chaos, especially if you think of opportunity as the ability to make positive changes in your business regardless of what’s going on around you. Below are five things that every business owner should consider in this environment to capitalize on potential opportunities for growth.

Click here to read the full article.

Author:
Wade Calvert, Morton Capital, Wealth Advisor & Partner

Leadership in a New Workplace

As businesses prepare for a return to work in the coming month, one of the most important questions that every leader must be ready to address is: How do we operate differently to ensure that our people are still engaged and motivated? Beyond questions surrounding how to resume regular operations, we must first consider how we’ll successfully lead our teams through the drastic changes in their work environment.

Click here to read the full article.

Author:
Dan Charoenrath, Morton Capital, Direct of Operations

Quarterly Commentary – Q2 2020

Welcome to Wonderland

Adults and children alike are familiar with Lewis Carroll’s classic story, Alice’s Adventures in Wonderland, where the intrepid Alice ventures into a fantasy world that mixes the ridiculous with periodic insights into the human condition.  The story is one of the most well-known examples of the “literary nonsense” genre, which combines elements that make sense with others that do not.  In thinking about how to explain current events, certain anecdotes from the story offer some striking similarities.  If we lived in Wonderland, we might accept a market that is optimistically rising in the middle of a pandemic. But given that we do not live in Wonderland, we are staying consistent with our investment philosophy of risk management, true diversification, and cash flow, which has shown its resiliency in the first half of 2020 despite the wild roller coaster ride in the broader markets.

As the magnitude of the pandemic started becoming clear in early March, the financial markets fell into a bear market.  From its high in mid-February, the S&P 500 Index lost almost 35% in a span of five weeks, as volatility exceeded the turbulence of the Great Financial Crisis in 2008 and 2009.  Both the Federal Reserve (Fed) and the federal government reacted to the market downturn with aggressive policy responses that exceeded any other historical response (more on this later).  The extraordinary stimulus fueled a robust recovery in equity prices, though limited for the most part to larger companies in the United States.  From its low in late March, the S&P 500 Index rallied close to 40% to close down only 3.1% for the year by the end of the second quarter.  While other stock indices had a strong second quarter, most are still meaningfully negative on the year.

The table below summarizes the second-quarter performance for selected indices.

 

“Curiouser and Curiouser” 

After tumbling down the rabbit hole, Alice invents the word “curiouser” to try and describe the simultaneously fascinating and nonsensical world in which she finds herself. Our reality today bears similar attributes to this world of make-believe. All the economic news pundits out there keep talking about the different letter shapes that the economic recovery could take. Will the precipitous drop in economic activity be followed by an equally strong rebound, creating the ideal V-shaped recovery? Will economic growth flatline for some time, creating more of an “L” or, ultimately, a “U”? While the debate is still rampant as it relates to the fundamentals of the global economy, stock prices are looking more and more like a “V” as illustrated in the below chart of the S&P 500’s recent performance.

 

Fastest Stock Market Fall and Recovery in History

There is a real danger of confusing this stock market rebound with an economic recovery. While many stock prices have had a V-shaped recovery, valuations and underlying fundamentals tell a completely different story. Corporate earnings have been almost cut in half from pre-crisis levels. While unemployment has slowed its rise, it remains meaningfully elevated. Though numerous cities in the United States started to reopen a few weeks ago, spiking virus cases are sending many back into lockdown. These challenging fundamentals have made us wonder whether the “V” in stocks will turn into a “W” and retest previous lows.

There is a general perception out there that all this economic damage is temporary and will be reversed as soon as there is a vaccine or we get the virus under control. Unfortunately, though, we are already seeing more permanent damage to the economy in the form of spiking bankruptcies—and we are only a few months into this crisis. Many of these bankruptcies are big-name companies that most of you likely know: Hertz, J.Crew, Neiman Marcus, JCPenny, Cirque du Soleil, Pier 1 Imports, and 24 Hour Fitness. Most of the bankruptcies so far have been consumer-related companies, which does not bode well since the consumer accounts for two-thirds of all economic growth! With so much bad news on the actual economy, it is definitely “curiouser and curiouser” that the stock market continues to march higher, day after day, almost in defiance of reality.

 

The Stimulus Rabbit Hole

In the absence of improving fundamentals, the U.S. government’s aggressive response to the COVID-19 crisis seems to be the driving force behind the stock market’s recovery.  The below graph puts the current stimulus and policy response in context with spending that took place in previous crises.

These numbers are in today’s dollars, or, in other words, they are adjusted for inflation to make them apples to apples. And these numbers do not factor in the additional stimulus that is likely coming in the ensuing months. The CARES Act infused $2 trillion into the American economy and included assistance to businesses, states and localities; 159 million stimulus checks to individuals and families; and extra payments of $600 a week in unemployment benefits to tens of millions of Americans. The Fed entered the fray as well by employing their main tools designed to stimulate economic growth: lowering interest rates and buying bonds (with the goal of keeping long-term interest rates low). The Fed very quickly lowered short-term rates to zero and then launched a bond-buying campaign that is expanding its balance sheet to a parabolic degree. Already, the Fed has added $3 trillion to its balance sheet, pushing it up to an all-time high of $7 trillion, and it has all but promised to continue throwing money at the problem and do whatever it takes to get the economy back on track. The challenge is that with each economic bump in the road, it seems to be taking more and more extreme policy responses to keep the economy on track. As the Red Queen tells Alice, “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

By injecting massive stimulus, governments are once again contributing to speculative investor behavior that has further decoupled asset valuations from underlying fundamentals. This manifests itself in various forms, one example being the massive run-up in the stock prices of a handful of technology companies. The five largest stocks in the S&P 500 are Facebook, Amazon, Apple, Microsoft, and Google. Toward the end of May, those five stocks were up 15% for the year while the other 495 stocks in the index were down 8%. While some of these companies have held up well or even prospered in the current crisis, their stocks are still escalating at a pace well beyond their current earnings growth trajectories. Not surprisingly, the increase in the stock market (coupled with Americans getting stimulus checks and no longer having professional sports to bet on) has corresponded with a spike in new accounts being opened at brokerage firms like Charles Schwab and E*TRADE. These new traders not only speculate on the darling tech companies, but have also jumped into distressed names. There has been very high trading volume in companies like Hertz, which declared bankruptcy in late May and subsequently saw a jump in its stock price from $1 up to $5, before it fell back down again, as these inexperienced day traders jumped in and out of a stock that is very likely worth $0 at the end of the day. Perhaps Alice would have been able to empathize with these traders when she declared, “Why, sometimes I’ve believed as many as six impossible things before breakfast.”

 

We Refuse to Play Croquet with a Flamingo

Investing in broader markets today, we can relate to how Alice must have felt playing “croquet” with the Queen, where the balls were hedgehogs and the mallets live flamingos. The rules of the game keep changing, but rather than give into the nonsensical, we are more determined than ever to find investments where the fundamentals still make sense.

An example of one such investment is the allocation that we made during the second quarter to a mutual fund that invests primarily in bonds backed by real estate. At the height of the volatility this year, these bonds traded down dramatically as certain holders were forced to sell to generate liquidity. The fundamentals, however, did not justify such dramatic price declines. When we dug deeper, we found that many of the bonds were backed by seasoned home mortgages that were outstanding prior to the 2008 crisis. These loans survived that crisis and now have 12 to 15 years of payment history, lower balances since they have been amortizing over time, and typically higher home values since real estate prices have appreciated. Pools of these mortgages had average loan-to-value ratios of approximately 55-60%, meaning that home prices would have to take major hits before the loans would be at risk of impairment. Because of the dramatic price declines these bonds saw earlier this year, they now yield income in the mid-single digits and have the potential for double-digit total returns as prices recover in the future.

Another example of sticking to the fundamentals is our allocation to gold. We have had an allocation to gold for some time but increased our target to this asset in late 2019. While we, of course, had no insight into the upcoming pandemic, we were increasingly concerned with the lack of discipline being exhibited by governments. This lack of discipline has only been magnified in the current environment, increasing our conviction in gold as a true store of value in an environment where more and more money is being printed every day. We think that this is an environment where the fundamentals support a strong outlook for gold.

We continue to look for other opportunities with solid fundamentals, but many of the investments that are currently on our radar are less liquid than those found in public markets. Even prior to the recent crisis, we were finding that willing investors could trade market risk for some degree of liquidity risk (i.e., an inability to immediately sell for cash). We believe these less liquid assets have the potential for more consistent long-term returns based on the fundamentals and offer investors an alternative to exposing themselves to the irrationality of investing in Wonderland. However, the amount of liquidity risk that is appropriate is going to vary for each individual’s portfolio. As we pursue a number of these new strategies in the coming months, we would strongly encourage you to revisit your financial plan. Your plan is essential in determining how much liquidity risk is appropriate for your personal situation. It is also a great time to revisit your risk tolerance and ask yourself how much volatility you are comfortable within your portfolio. We just went through a roller coaster ride in the stock market; if you found yourself nervous and losing sleep over it, it may make a lot of sense to take some risk off the table now that asset prices have had a strong recovery.

Please do not hesitate to contact your Morton Capital wealth advisory team if you have any questions or would like to review your portfolio or financial plan in more detail. As always, we appreciate your continued confidence and trust.

Morton Capital Investment Team

 

 

Disclosures

This commentary is mailed quarterly to our clients and friends and is for information purposes only.  This document should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class, and should not be considered investment advice. This memorandum expresses the views of the author and are subject to change without notice. All information contained herein is current only as of the earlier of the date hereof and the date on which it is delivered by Morton Capital (MC) to the intended recipient, or such other date indicated with respect to specific information. Certain information contained herein is based on or derived from information provided by independent third-party sources. The author believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information. Any performance information contained herein is for illustrative purposes only.

Certain private investment opportunities discussed herein may only be available to eligible clients and can only be made after careful review and completion of applicable offering documents. Private investments are speculative and involve a high degree of risk.

The indices referenced in this document are provided to allow for comparison to well-known and widely recognized asset classes and asset class categories. Q3 returns shown are from 06-28-2019 through 09-30-2019 and the year-to-date returns are from 12-31-2018 through 09-30-2019.  Index returns shown do not reflect the deduction of any fees or expenses. The volatility of the benchmarks may be materially different from the performance of MC.  In addition, MC’s recommendations may differ significantly from the securities that comprise the benchmarks.  Indices are unmanaged, and an investment cannot be made directly in an index.

Past performance is not indicative of future results.  All investments involve risk including the loss of principal. Details on MC’s advisory services, fees and investment strategies, including a summary of risks surrounding the strategies, can be found in our Form ADV Part 2A. A copy may be obtained at www.adviserinfo.sec.gov.

Mid-Quarter Newsletter – May 2020

The Birth of the Federal Reserve

Global central banks and their unconventional monetary policies have been in the limelight since the financial crisis in 2008. Given the unprecedented actions of the Federal Reserve (aka the Fed) recently, we wanted to give you a closer look into why the U.S. central bank was created and how its mandate came about.

Early attempts to establish a central government bank started as far back as the birth of our country in 1789, but none of those attempts made much headway. By 1860, the need for reliable central financing was clear, as there were nearly 8,000 state banks, each issuing their own paper notes. Thus, the National Banking Act was passed a few years later, which created a uniform national currency and only allowed nationally chartered banks to issue bank notes. The act didn’t, however, create a strong central banking structure. As the industrial economy expanded, the weaknesses of the nation’s decentralized banking system became more pronounced, leading to serious consequences. The 1907 Bankers’ Panic—a three-week financial panic that occurred during an economic recession, where liquidity dried up at local and state banks, causing many of those companies to go bankrupt—fueled a much-needed reform movement.

After six years of debate and negotiations, the Federal Reserve Act was signed into law on December 23, 1913, establishing the Federal Reserve System. Sixty years later, in the early 1970s, unemployment and inflation levels began to rise, reigniting fears of an economic recession. In 1977, Congress enacted the Federal Reserve Reform Act, which explicitly set price stability as a national policy goal for the first time. The very next year, Congress passed the Full Employment and Balanced Growth Act, which established the second policy goal as full employment. Today, price stability and full employment are referred to as the dual mandates of the Fed.

The Fed, along with other global central banks, has responded rapidly and forcefully to the current pandemic crisis. Central bankers clearly want to prevent the pause in economic activity from turning into a permanent solvency crisis and wave of defaults. Many will argue that the Fed’s response goes beyond its mandates—a stance that will be debated for many years to come.


How Business Owners Can Find Opportunities in Chaos
By: Wade Calvert, Wealth Advisor and Partner

While 2020 may seem like a difficult time to be a business owner, there are hidden opportunities to grow in the chaos, especially if you think of opportunity as the ability to make positive changes in your business regardless of what’s going on around you.

Click here to read the article below to learn about five things that every business owner should consider in this environment to capitalize on potential opportunities for growth.


Leadership in a New Workplace
By: Dan Charoenrath, Director of Private Investment Operations

As businesses prepare for a return to work in the coming months, one of the most important questions that every leader must be ready to address is: How do we operate differently to ensure that our people are still engaged and motivated? Beyond questions surrounding how to resume regular operations, we must first consider how we’ll successfully lead our teams through the drastic changes in their work environment. Every person in your organization has been profoundly impacted on an emotional, mental and financial level over the past few months—therefore, it’s unreasonable to expect that we can continue to communicate, direct and inspire them in the same way that we always have. Leading an individual through change can be challenging in and of itself because, by nature, change is uncomfortable for everyone.


Read the full article by clicking here!


New Partners

We are pleased to announce that Wealth Advisor Chris Galeski and Compliance Manager Menachem Striks have become partners at Morton Capital.

 

 

 

 

 

 


Follow Us On Social Media

This year we have focused on updating our social media pages to stay connected as well as provide you with timely tips, videos and advice to help you get the most life out of your wealth. Please click the social icons below to keep up with us on LinkedIn, Facebook, Instagram and Vimeo!

We welcome you to visit our new COVID-19 resources page on our website as well, where you can find trusted and helpful information related to financial planning and replay our entire Staying Connected During COVID-19 webinar series.


Welcome New Team Members: Amber and Benjamin

Amber McBride
Paraplanner

Amber graduated from California State University, Channel Islands, where she studied psychology. She always knew that wherever her career took her, she wanted to help people and solve problems. Before coming to Morton Capital and joining the Financial Planning Team as a paraplanner, Amber worked as a senior paralegal at a law firm specializing in estate planning, trust administration, and tax planning, where she gained nine years of experience. During her downtime, she enjoys traveling, hiking, live orchestral music, and spending time with her family.

Benjamin Markman
Private Investments Administrator

Benjamin Markman joined Morton Capital in July 2019. As a Private Investments Administrator, Benjamin plays a critical role in managing the coordination and administration of a variety of alternative investments. He graduated from the University of Oregon with a Bachelor of Science degree in business administration with a concentration in finance and a minor in economics. Benjamin holds a Series 65 license and is currently studying for the CFA® Level I exam. In his downtime, Benjamin enjoys exercise, playing piano, and chess. 


Oh Babies!

Our MC Family just grew by three! Wealth Advisor and Partner Chris Galeski and his wife, Briana, welcomed a baby girl, Aila Grace, on March 16. Client Service Administrator Carly Powell and her husband, Andrew, welcomed a baby boy, Anderson Eric, on March 27 and most recently, Private Investments Administrator Patrick Garcia and his wife, Pauline, welcomed a baby boy, Presley Grayson, on April 29. We congratulate all three couples on their growing family. Fun fact: this is the first child for each family.

Whitepaper – The New RIA Workplace

Our industry, our country, and the entire world was turned on its head in March as local and federal governments began to institute widespread stay-at-home orders. While some RIAs were caught flat-footed from a technology perspective, the RIA industry has been luckier than many brick-and-mortar establishments that needed to completely shut their doors during this unprecedented time. With most custodial systems, financial planning tools, CRMs, performance reporting technology, and data file servers now in the cloud, many RIAs did not miss a beat when employees fired up their internet-connected computers from home and logged into their typical applications.

Working from home has undoubtedly required our teams to work harder, but at a high level it has been fairly close to “business as usual.” Clients are still being serviced: accounts are still being opened, wires are still being sent, model portfolios are still being implemented and rebalanced. Even those RIA owners who have historically been the staunchest opponents of remote work have had to admit that this forced experiment has gone better than anyone could have imagined. And as the stay-at-home orders have continued from weeks to months, many are questioning if the traditional workday will ever look the same. Much has been written and discussed about the technology advancements not just in our industry but in society at large, but for the first time, we are now examining the physical space we work in and what the physical office of the future will look like.

Click here to reach the full article.

Authors:
Stacey McKinnon, Morton Capital, COO
Matt Sonnen, PFI Advisors, CEO

Featuring:
Michael Kossman, Aspiriant, COO
Brandon McKerney, Columbia Pacific Wealth Management, Director of Operations

 

MC Stories – A 22-Year Love Affair with Alternatives

I met Lon Morton, the eponymous founder of Morton Capital Management, in 1984 when our family business was looking for a pension administration company. My father and I then started investing with Morton Capital in 1987, just three weeks before something called Black Monday, when the markets dropped about 50%. I remember calling Lon and asking, “What do we do now?” He said, “We do nothing.  Unfortunately, these things can happen, no one is able to predict it, but we are going to stay the course as markets tend to work themselves out.” With hindsight being 20-20, it was good advice as the markets did work themselves out and we had solid returns for the next few years.

I sold my company in 1996 and left in 1998, telling Lon that I was intended to retire at the ripe old age of 40. He firmly told me that I was NOT going to retire and that I was going to work with him at Morton Capital. We had worked together investing for many years, and he wanted to tap my experience in managing a company. Little did I know how wonderful a relationship and lifetime adventure it would turn out to be.

As luck would have it, I started investing my final company sale payout in the second half of 1998 and was met by a significant downturn in stocks. Disappointed, I came home to my wife and said, “I will never let the stock market be the sole dictator of our financial future.”  Thus, my love affair with alternative investments began.

With some effort, we survived the three years of the Y2K market crash and lived through the great financial crisis of 2008. Now we are faced with probably the biggest health and financial crisis in our lifetime: pandemic. With most of the world shut down, it will take all our combined resolve to overcome and beat the virus and get back to our normal lives. Having lived through a number of these disruptions in the markets, I firmly believe that our resolve and perseverance on the health side, and our asset allocation decisions on the financial side, will win the day!

Much of this is made possible by the incredibly hard work and dedication of the entire Morton Capital team. Being the senior partner, it is gratifying to see all our younger teammates working so hard and sensing the responsibility of service to our clients and making sure that they are okay. I have been fortunate to work with many good teams in the past, but there is no doubt that the current team at Morton Capital is outstanding. It makes me proud to be part of that diligence and compassion. I am even prouder of Morton Capital’s recent Give Back initiative: a community outreach to offer free consultations, advice, and guidance to help our community in this time of need. If you know of a friend or loved one in need of some direction, please see our Facebook or LinkedIn page for more information or just click here: Community Give Back Video

Before 2020, and after 22 years at Morton Capital, I figured I had mostly seen it all in the financial markets.  Leave it to a pandemic to prove me wrong!  But, the one thing that remains constant for me is my love affair with alternative investments and how they help round out my investments and exposure to a world where there are never any guarantees what will be coming next.

MC Stories – The Value of Diversifying, as Learned on a Farm

You may have heard about diversifying later in life when you started to manage your investments. I learned the value of diversifying much earlier, on the farm.

I grew up on a family-run farm in Iowa where we worked hard and played hard, together as a team.

On the farm, I learned that there is a natural cycle to things, and you can’t fight Mother Nature. If it’s winter and there’s a snowstorm raging around outside — that is a very good time to stay sheltered inside where you can be snug and warm and maybe enjoy popcorn and games with the family. It’s a very bad time to try to plant crops or expect anything to grow. But during those stormy winter days when our crops could not produce, my family figured out another means to survive. We took care of our milk-producing livestock and our hens who laid eggs – both of which gave us a nice source of income through the winter months. Then, no matter how long and cold the winter might seem, and no matter how dead those barren trees looked outside we knew we would be provided for until the harvest came. And as long as those trees had good roots, there would be a new cycle of growth.

When you apply these lessons to investing, you realize that it’s important to have diversified assets with some investments providing steady income and others providing longer-term, larger growth. And, all assets have a natural cycle. So, like Mother Nature, you can’t fight the cycles but you can be grateful for the growth cycle and patient during the “winter” as you wait for that next cycle of renewal.