Evaluating the College Decision

For many households, college decisions are a cause for celebration. At the same time, college represents one of the largest expenses and sources of financial stress in our lives, on par with retirement or buying a home. These feelings are amplified by the current market environment as investors adjust to high interest rates and a less certain path of Fed rate cuts, more stubborn inflation, and stock market volatility. Naturally, these financial concerns can raise questions around college planning and decisions. What long-term perspectives on investing in higher education should investors and their families consider? 

It’s well known that the cost of college has risen far faster than inflation over the past 40 years. The accompanying chart shows the average level of tuition and fees after adjusting for inflation – i.e., increases shown on the chart are above and beyond inflation – according to the National Center for Education Statistics. For example, the average cost of tuition and fees alone for the 2022-2023 school year was $35,248 for private four-year institutions and $9,750 for public universities.

Tuition figures can vary greatly depending on the institution. Students and their families can also expect other expenses beyond tuition and fees such as the cost of room and board which average over $13,000 a year. At the most expensive colleges, the total cost of attendance can be around $85,000 per year for a total four-year cost of $340,000 or more. The cost of two-year colleges has not risen as much but has still outpaced inflation. These ever-rising costs are one reason many have grown disenchanted with higher education.

Despite rising costs, there is clear evidence that, on average, college graduates earn more and are more likely to be employed than those with lower levels of education. The accompanying chart shows that, according to the Bureau of Labor Statistics, the unemployment rate for those with a college degree was just 2.2% in 2023 compared with 3.9% for those with a high school diploma alone. The median annual earnings of college graduates was $74,650, significantly higher than the $44,950 median for those with a high school diploma alone.

This pattern continues for increasing levels of education including master’s, professional, and doctoral degrees. These figures are the primary reason college is still seen by many as the best path to financial success. Of course, these statistics only show overall trends and do not consider individual circumstances, including opportunity costs and the choice of college major.

For example, economic theory would suggest that current low unemployment rates and wage gains may make the opportunity cost of spending four years in college less attractive when compared to gaining work experience, on-the-job training, two-year colleges or trade schools. This calculus is reversed during economic downturns when the opportunity costs are lower, thus driving up the application and attendance rates of college and professional degree programs such as business school, medical school and law school.
 
Another long-term concern among investors and economists is the aggregate level of student loan debt across the country, which now exceeds $1.6 trillion according to the NY Fed's Consumer Credit Panel. This has become a hot button issue across the country and in Washington. The White House, for instance, has announced a new plan to forgive student loan debt for 30 million Americans, with $146 billion in debt relief approved through executive actions so far. Given the size and scope of this challenge, the topic of higher education and student loans will likely continue to be a divisive political issue.

When it comes to student loans and individuals, the ability to repay these debts varies greatly by college major. The accompanying chart shows the average level of earnings for those with a bachelor’s degree only. It may come as no surprise that science, engineering and business degrees have generally resulted in the highest annual earnings, compared to degrees in arts, education and humanities fields. These figures are averages across all professionals, not just new graduates, and thus capture the long run earnings potential of each major.

In closing, note that the actual specific outcome from an investment in education depends a great deal on the individual and their individual circumstances. Success comes in many forms and isn't always measured in money. Individuals who are successful with a college degree would likely be successful without one and vice versa. The key to making a good investment decision in education is to see it as such. A particular degree from a particular college can be evaluated compared to other alternatives while considering the characteristics and history of the person planning to earn the degree. A good College Decision involves understanding the odds and probabilities of success, while not expecting exactly the average outcome.

Disclaimer

Svane Capital LLC (“Svane Capital”) is a registered investment advisor with the States of Texas, Oregon, and Louisiana.  The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital’s prior written approval. All statements are current as of the date written and do not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2.

All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.  Any subsequent, direct communication by Svane Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Svane Capital, please contact the securities law administrators for those states in which Svane Capital maintains registration or notice filing. Svane Capital current written disclosure statement (Form ADV Part 2A) discussing Svane Capital business operations, services, and fees is available from Svane Capital upon written request and at the bottom of this web page.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital prior written approval.  All statements are current as of the date written and does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

This information was produced by, and the opinions expressed are those of Svane Capital as of the date of writing and are subject to change. Any research is based on Svane Capital proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Svane Capital does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof.  Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein.  There are no material changes to the conditions, objectives, or investment strategies of the model portfolios for the period portrayed.  Any sectors or allocations referenced may or may not be represented in portfolios of clients of Svane Capital, and do not represent all the securities purchased, sold, or recommended for client accounts.

Certain portions of this material (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Svane Capital (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Svane Capital, or from any other investment, tax, or financial professional. Svane Capital is neither an attorney nor accountant, and no portion of the material content should be interpreted as legal, accounting or tax advice. Svane Capital recommends clients and prospective clients consult their tax professionals before enacting strategy or recommendation perceived to have been made in this material.  Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Svane Capital of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Svane Capital) or product referred to directly or indirectly by Svane Capital in its material, or indirectly via a link to an unaffiliated third-party material, will be profitable or equal the corresponding indicated performance level(s). The standard deviations, information ratios and allocation targets may be higher or lower at any time.  There is no guarantee that these measurements will be achieved.  The information provided should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.

Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results.  The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. Past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.  The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills, and inflation, such as fees (including sales and management fees), expenses or tax consequences.

Always has been

The original source of energy for all economic activity was the perfectly placed nuclear fusion reactor in the sky, also known as the sun. The nuclear fission reactor in the earth’s core that provides over half of the earth’s heat is critical too, of course. Through photosynthesis, sunlight generates vegetative growth, which powers the food chain, and ultimately human muscle power, which is the starting point for economic growth. An overwhelming majority of economic growth throughout history has been a direct or indirect result of increased energy consumption and improved energy efficiency.

Prior to the Industrial Revolution, economic growth was essentially zero (other than the increase in economic activity due to population growth). People burned wood for heat and cooking and relied on muscle power, wind and water mills to grind grain. Agriculture technology harnessing animals to plows added energy above and beyond what humans could supply themselves to food production. Wind power and shipbuilding technology allowed that production to be moved from place to place efficiently over water. The economic output grew very slowly, and this growth mostly allowed for population growth. Savings were essentially non-existent because almost everything produced was quickly used and life didn’t change much from generation to generation.

Growth began to happen rapidly in the mid-1700’s with the invention of the coal powered steam engine that powered manufacturing facilities (think textile mills) and long-distance travel over land (trains). Because of this usage of the new source of efficient power, productivity growth exploded. And along with productivity growth, standards of living began improving rapidly. The key element was that finding, mining, and burning coal allowed each human to use vastly more energy than before. This meant that capital could grow from savings (the difference between production and consumption) because less energy went into the finding, mining, and transportation of coal than the energy produced by the burning of that coal. As coal use and and production increased the cost of producing it fell and more technologies using it were developed. Coal’s share of global energy usage grew from 1.7% in 1800 to 47.2% in 1900.

The concept of investing a smaller amount of energy into building a power plant and producing the fuel for that plan in order to get a larger amount of produced energy out of the plant is known as Energy Return on Energy Invested (EROEI). EROEI has powered most economic growth. As humans have been able to invest energy in the production of more energy standards of living have increased. In 1859 the first commercial oil well was was built in Pennsylvania. The internal combustion engine lead to automobiles and the small-scale deployment of this massively efficient energy source. The invention of the Bunsen burner created new opportunities to use natural gas. Pipelines were built and gas took over more and more power market share in home heating and cooking. The development of electricity and the power grid allowed for efficient real-time transfer of power from one location to another. But importantly, electricity isn’t a source of energy but rather a form of energy that allows for long-range and almost instantaneous transmission of energy. This is sometimes overlooked in our current infatuation with electric vehicles (EV). EVs use electricity, but that electricity must be produced. Often that production is anything but green.

Returning to energy driven economic growth, most real economic growth (the per capita increase in productivity) can be explained by the substantial increase in energy return on investment. It's likely the most underappreciated concept in all of economics.

A high EROEI means that we don't have to reinvest much energy in order to get more energy. The massive surplus in energy results in accumulated wealth in society, namely capital. Energy return on energy literally drives our capitalist economic system. Human power is roughly 100 Watts. When agriculture and domesticated animals were first employed, that 100 Watts turned into 700 Watts per animal. But when steam powered tractors arrived and were soon replaced with 700 horsepower tractors, a mind-boggling improvement in productivity resulted.

Energy based productivity resulted in in excess savings. The excess savings could then be reinvested into more tractors, more machinery. Innovation and economic growth took off. This exponential ramp in economic growth is something that we modern homo sapiens take for granted. It's why we think our investments should earn a return. It's why we anticipate wealth compounding and expect leisurely retirements. It's all about the productivity miracle that energy return on invested energy allowed. But it's only a modern phenomenon and definitely not something we should take for granted.

There is a concept relating economic growth to harnessing more and more dense forms of energy. This is referred to as "climbing the energy density ladder". Consider the improvements of shipbuilding as the power source transitioned from oars (muscle power), to wind powered ships, to coal powered ships, to oil powered ships, and then ultimately to nuclear aircraft carriers and submarines. Successful energy transitions have always climbed the energy density ladder. The graphic below demonstrates both the concept of energy density and also the astonishing superiority of nuclear energy by comparing the various "amount of stuff" with the same amount of energy among different fuel sources. 

Environmental goals are generally the reduction of CO2 and other greenhouse gasses along with less detrimental impact of all kinds on our natural environment (pollution, impact on various species, unsightly and intrusive industrial installations). Let's put all politics aside and consider these as generally worthy goals. The problem is that we simply won't get there without some incredibly sophisticated energy policies. It's not enough to just wring our hands over CO2 emissions and pretend we can all just make do with less energy. If we want to put coal out of business, we need to build natural gas pipelines, not block them. If we want to put natural gas out of business, we need to build nuclear.

Of course, we ultimately need many sources of energy and will for a long time. Renewables have their place and natural can play a key role in leveling the flow of electricity when renewables vary. But every wasted campaign and every malinvested dollar brings us farther away from the goal of smart, environmentally-friendly and economically-pragmatic energy production. Historically, if you put policies in place that make people poorer, they vote people into office that reverse those policies. Moving toward much less energy density makes people poorer. Some low carbon technologies (e.g. burning biomass) have a horrible pollution side affect with massive health costs.

Usage and wastage of land and materials to create energy must be a key consideration as well. To produce 1,000 megawatts, a solar plant would need ton host about 3 million solar panels deployed over 75 square miles. Since the sun needs to be shining, solar plants operate only about 25% of the time. A 1,000 megawatt windfarm requires 430 massive wind turbines filling 360 square miles (and the wind must be blowing, so these only operate about 34% of the time). A 1,000 megawatt nuclear facility can be built on less than 1 square mile and can run at capacity over 92% of the time regardless of weather.

I've admittedly spent few words on the drawbacks of nuclear energy. Critics of nuclear power point to the challenges of safe plant operation and waste disposal. Perhaps a topic for a future newsletter, but while I certainly acknowledge that these are big political and public perception problems right now, I do not believe either are technological problems. Nothing is perfect nor perfectly safe, but nuclear energy has demonstrated a remarkable safety record and even the worst possible accidents at nuclear plants were less destructive than other industrial accidents. Nuclear energy actually releases less radiation into the environment than any other major energy source and the entirety of nuclear waste produced over the past 60 years could be contained in a football field sized area approximately ten feet deep. Scientists now estimate that about 90% of that nuclear waste could be recycled.  

The current arguments and disagreements about nuclear power, whether it is safe, and whether it is environmentally friendly, are both the challenge and the opportunity. I think it is likely that nuclear power (fission first and then ultimately fusion), will be the answer we are looking for and will power environmental improvement and economic growth in the coming decades and centuries. I think we're going to figure out how to demonstrate safety and environmental benefits that will become increasingly obvious. After all, hasn't nuclear energy shone down on us every morning and warmed healing hot springs since the dawn of time? Nuclear is the answer. It always has been.

References:

https://www.world-nuclear.org/information-library/energy-and-the-environment/energy-return-on-investment.aspx

https://blogs.scientificamerican.com/observations/nuclear-fission-confirmed-as-source-of-more-than-half-of-earths-heat/

https://www.thegwpf.org/content/uploads/2018/05/Paunio-EnergyLadder.pdf

https://www.energy.gov/ne/articles/infographic-how-much-power-does-nuclear-reactor-produce

Disclaimer

Svane Capital LLC (“Svane Capital”) is a registered investment advisor with the States of Texas, Oregon, and Louisiana.  The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital’s prior written approval. All statements are current as of the date written and do not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2.

All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.  Any subsequent, direct communication by Svane Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Svane Capital, please contact the securities law administrators for those states in which Svane Capital maintains registration or notice filing. Svane Capital current written disclosure statement (Form ADV Part 2A) discussing Svane Capital business operations, services, and fees is available from Svane Capital upon written request and at the bottom of this web page.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital prior written approval.  All statements are current as of the date written and does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

This information was produced by, and the opinions expressed are those of Svane Capital as of the date of writing and are subject to change. Any research is based on Svane Capital proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Svane Capital does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof.  Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein.  There are no material changes to the conditions, objectives, or investment strategies of the model portfolios for the period portrayed.  Any sectors or allocations referenced may or may not be represented in portfolios of clients of Svane Capital, and do not represent all the securities purchased, sold, or recommended for client accounts.

Certain portions of this material (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Svane Capital (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Svane Capital, or from any other investment, tax, or financial professional. Svane Capital is neither an attorney nor accountant, and no portion of the material content should be interpreted as legal, accounting or tax advice. Svane Capital recommends clients and prospective clients consult their tax professionals before enacting strategy or recommendation perceived to have been made in this material.  Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Svane Capital of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Svane Capital) or product referred to directly or indirectly by Svane Capital in its material, or indirectly via a link to an unaffiliated third-party material, will be profitable or equal the corresponding indicated performance level(s). The standard deviations, information ratios and allocation targets may be higher or lower at any time.  There is no guarantee that these measurements will be achieved.  The information provided should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.

Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results.  The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. Past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.  The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills, and inflation, such as fees (including sales and management fees), expenses or tax consequences.

The Upside

“Invert, always invert”

— Carl Jacobi

"Man muss immer umkehren" (loosely translated as “invert, always invert.”) was a favored problem-solving approach for mathematician Carl Jacobi. It has proven to be good advice for thorough investigations of  various topics. We'll apply it today to the concept of investing risk management.

We usually think of risk as the possibility of something bad happening. As an investor this could be the possibility of losing money. Let's invert and consider risk as the possibility of something good not happening. For an investor this could be the risk of not getting a return, or not getting enough return. 

Investor A has a $100,000 portfolio but is worried about a recession and the continuation of a bear market (downside risk) so sells half of portfolio.

Investor B also has a $100,000 portfolio but is mainly worried about missing the next bull market (upside risk) so continues to hold her portfolio in full.

If the bear market continues (say for another loss of 25%), Investor A feels smart. He's guessed correctly. His portfolio has only declined to $87,500. Investor B has lost the full 25% to $75,000. 

If the market then goes into a bull market (let's say it doubles as would be typical), Investor A waits until he is "back up again" to become fully invested. He catches half of the bull market and his portfolio increases to $131,250. Investor B stays invested. She ends the bull market with a $150,000 portfolio. 

Investor A reduced his downside risk by $12,500 in the bear market. He also did not receive $18,750 of the upside that Investor B received.

This scenario is common. The $18,750 is real money. Investor A never gets it and can never spend it. Upside risk is as real as downside risk although it is often "out of sight, out of mind".  

In real-time, bear markets are quite scary. In hindsight, they look like little blips on the price chart (see last month's letter). Ben Carlson quoted a response to his A Wealth of Common Sense blog post from an investor who actually experienced the 1987 crash, with his life savings on the line:

     As one who was actually invested in 1987 (and since 1973), I still have vivid memories of that market crash. It is oh-so-easy to look today at a long-term chart having a tiny blip and say “So what! . . . of course the market recovered . . . those who sold were fools.”

     In 1987, market news was nothing like it is today. We had no Internet. We had the next day’s WSJ and Friday’s 30-minute Lou Rukeyser’s Wall Street Week; we subscribed to a few stock newsletters (delivered by snail mail) and Kiplinger and Money magazines . . . that’s about it.
     Therefore, though I heard about the crash on the radio as I drove home from work on Black Monday, I was not prepared to find my wife in tears . . . her first words were “You’ve lost our retirement!” (Reading it does not convey the impact of hearing it.)
     In real time, the crash was a VERY big event. Fear for a changed future was the natural response. Talking heads were saying “This worldwide event could last for years; our children will have a lower standard of living than we have.”
     Long story short— she insisted we sell everything the next day (which was also a significant down day); we eventually re-entered the market. 
 

We modern investors feel the same naturally negative emotions investors always have during bear markets. It is the price we pay for maintaining our future upside!

References:
https://awealthofcommonsense.com/2017/10/what-the-charts-dont-tell-you/
https://www.hussmanfunds.com/comment/mc221016/
finance.yahoo.com

Disclaimer

Svane Capital LLC (“Svane Capital”) is a registered investment advisor with the States of Texas, Oregon, and Louisiana.  The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital’s prior written approval. All statements are current as of the date written and do not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2.

All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.  Any subsequent, direct communication by Svane Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Svane Capital, please contact the securities law administrators for those states in which Svane Capital maintains registration or notice filing. Svane Capital current written disclosure statement (Form ADV Part 2A) discussing Svane Capital business operations, services, and fees is available from Svane Capital upon written request and at the bottom of this web page.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital prior written approval.  All statements are current as of the date written and does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

This information was produced by, and the opinions expressed are those of Svane Capital as of the date of writing and are subject to change. Any research is based on Svane Capital proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Svane Capital does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof.  Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein.  There are no material changes to the conditions, objectives, or investment strategies of the model portfolios for the period portrayed.  Any sectors or allocations referenced may or may not be represented in portfolios of clients of Svane Capital, and do not represent all the securities purchased, sold, or recommended for client accounts.

Certain portions of this material (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Svane Capital (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Svane Capital, or from any other investment, tax, or financial professional. Svane Capital is neither an attorney nor accountant, and no portion of the material content should be interpreted as legal, accounting or tax advice. Svane Capital recommends clients and prospective clients consult their tax professionals before enacting strategy or recommendation perceived to have been made in this material.  Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Svane Capital of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Svane Capital) or product referred to directly or indirectly by Svane Capital in its material, or indirectly via a link to an unaffiliated third-party material, will be profitable or equal the corresponding indicated performance level(s). The standard deviations, information ratios and allocation targets may be higher or lower at any time.  There is no guarantee that these measurements will be achieved.  The information provided should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.

Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results.  The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. Past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.  The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills, and inflation, such as fees (including sales and management fees), expenses or tax consequences.

The Upside and Downside of Money Creation

We are currently seeing a tug-of-war play out in bond markets. Inflationary forces are battling policy makers and a multi-decade entrenched disinflationary mindset. The gyrations of the interest rate scuffle are affecting every asset in the world with particular impact last week. The ultimate long-term outcomes will be driven by mass psychology, politics, and policy. The exact timing and magnitude of the swings, and the path taken by the eventual transition to more systemic stability are all unknowable unknowns.

In a fractional reserve banking system, money is created by lending. At the heart of the financial system sits the central bank which creates a digital entry of a certain number of dollars and then lends those dollars into existence by depositing them into an account. For example, when the US Treasury issues a bond that is purchased by the US Federal Reserve (Fed), the Fed creates some digital dollars with a keystroke. It then deposits those dollars into the Treasury's account and now holds the Treasury Bond as an asset in exchange. The US Government has just added to its debt and now has cash to spend. That cash didn't exist before the keystrokes that created it via an accounting entry and then made the initial deposit transfer.

What happens in the economy as a result of money creation depends on what happens next with the newly created dollars. Specifically who gets the new money, if it is spent, and how it is spent. The money might not be spent at all. In the aftermath of the 2008-2009 Great Recession, this was largely the dynamic. The newly created money often replaced assets that had lost all or most of their value. By purchasing those assets with newly created dollars, the Fed allowed the system to deleverage without experiencing a deflationary collapse. You could picture it as if the Fed went door to door handing out money to people who had just lost money in the market and were frightened. The recipients chose to keep it in their basement safe rather than spending it. Therefore it wasn't out in the economy competing with other dollars and bidding prices up. The money supply went up, but little consumer price inflation was experienced in the economy.

“Everyone loves an early inflation. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle.”

— Jens O. Parsson, Dying of Money

Over the subsequent decade plus, the situation began to slowly change. As the Fed created money and bought bonds this artificial  buying pushed up the price of bonds (lowered interest rates) and made bond holders wealthier. Some of the bond holders whose bonds were bought by the Fed now had cash and needed to reinvest. They bought other securities and bid prices up and lowered interest rates further. The initial money creation went to banks and other financial institutions who were "bailed out" of busted assets. The new money replaced bad assets. Then the money began to flow to those who already had assets. This generated investment returns for asset holders. drove down interest rates and drove up stock, bond, and real estate prices. Asset inflation also contributed to increasing economic inequality. Newly created money bid up asset prices rewarding the wealthy owners of assets who then recycled their returns into the markets in a benevolent spiral for investors. While not showing up in most measure of consumer price inflation, capital markets were warped and the rich got richer as a direct result of Fed monetary policy. The corruption of capitalism commenced.

“It is a disturbing flaw...to equate sound money to relatively contained consumer price inflation. After all, asset inflation and Bubbles are this era’s greatest threats to monetary stability and sound money more generally. Unfettered “money” and Credit is the root cause. Massive monetary inflation and fiscal deficits are categorically incompatible with sound money. And unsound money is incompatible with social and political stability. Inequality, speculative Bubbles and manias, resource misallocation, wealth redistribution and destruction, and deep economic structural impairment are all consequences of years of unsound money. An insidious corruption of price mechanisms over time jeopardizes the very foundation of Capitalism. And as Capitalism decays Democracy flounders. Society frays, while insecurity, animosity, anxiety, and the forces of distrust are left to fill the void. And as we continue to witness, the consequences of unsound money incite only more perilous inflationism.”

— Doug Noland, Credit Bubble Bulletin

When money gets created, buying power increases. What happens to prices at that point depends a great deal on the specific demand (what types of things, services, and experiences people want) and available supply. In the rebuilding post-WWII West, population was rapidly expanding and quality of life improvements mostly resulted in demand for things that were manufactured and built. Families were growing and they upgraded to two cars and increased average home sizes. They then filled those homes with TVs, microwaves, refrigerators, and air conditioning. So the money creation ran up against real material constraints. The result was consumer price inflation.

Conversely, in recent decades, demographics have resulted in slower population growth. Much of the population of wealthy countries already had enough house, cars, and refrigerators. experiences (social media, streaming music, video games), technology (PCs, mobile phones) were relatively more sought after. Technology led to fairly elastic supply (i.e. each unit of social media costs very little in terms of money or resources). Wealth and retirement security continued to be sought after, but as we've seen, that demand funnels money into financial assets and not real assets. So the combination of demographics and technology in recent decades resulted in money supply growth primarily going into financial assets and having a resulting muted impact on consumer prices.

In 2020 the dynamics shifted. Following the market crash at the outset of the COVID related economic shutdowns, governments and central banks jumped into market support in a huge way. Initially the money propped back up asset markets by bidding stock and bond prices up (as covered in last summer's newsletter The Dirt and The Hole). But with unemployment benefits, stimulus checks, forgivable PPP loans to small businesses, and the anticipated coming infrastructure spending much of the newly created money is being spent in the economy rather than being mostly confined to asset markets. This is new and is potentially a big deal. Keystroke conjured dollars are now competing directly with pre-existing dollars for the supply of food, metal, energy, unfinished and finished products of all types. About one forth of all of the dollars ever created were created in the last 12 months.

This new money buying things has spiked commodity prices. According to Bloomberg (Gerson Freitas Jr.), “Commodities rose to their highest in almost eight years amid booming investor appetite for everything from oil to corn. Hedge funds have piled into what’s become the biggest bullish wager on the asset class in at least a decade, a collective bet that government stimulus plus near-zero interest rates will fuel demand, generate inflation and further weaken the U.S. dollar as the economy rebounds from the pandemic. The Bloomberg Commodity Spot Index, which tracks price movements for 23 raw materials, rose 1.6% on Monday to its highest since March 2013. The gauge has already gained more than 60% since reaching a four-year low in March 2020.”

As commodity prices rise, the threat of inflation (in consumer prices now, not just in quantities of dollars) has gained attention. Over the past several weeks, this attention has resulted increasing interest rates. From last week's Credit Bubble Bulletin (Doug Noland) "Ten-year Treasury yields closed out a tumultuous week at 1.41% bps, pulling back after Thursday’s spike to a one-year high 1.61%. Ten-year Treasury yields are now up 49 bps from the start of the year and almost 100 bps (1 percentage point) off August 2020 lows. More dramatic, five-year yields jumped 16 bps this week to 0.73%. Surging yields are a global phenomenon. Ten-year yields were up 12 bps in Canada (to 1.35%), 30 bps in Australia (1.90%), 28 bps in New Zealand (1.89%), five bps in Germany (-0.26%), and five bps in Japan (0.16%) - with Japanese JGB yields hitting a five-year-high."

The threat of increasing price inflation and rising interest rates is a threat to the value of all assets that are based on current and future cash flows. As interest rates rise, the value of future cash flows falls. In particular highly priced stocks where investors are valuing the prospects of far-off future profitability, are vulnerable. We can expect interest rate increases at some point to be met by official attempts to control rates by creating money and buying more bonds (AKA yield curve control). This is where mass psychology comes into play. As long as investors collectively expect a low price inflation future and think that policy makers have things well under control, they will investment decisions that mostly align with the recent past. But at the point where confidence yields to concern, and investors collectively move to protect themselves, we could see a transition to a more ugly downside of the inflationary cycle.

“In the later inflation, on the other hand, the effects are all bad. The government may readily increase the money inflation in order to stave off the later effects, but the later effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and the ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.”

— Jens O. Parsson, Dying of Money

References:
http://creditbubblebulletin.blogspot.com/2021/02/weekly-commentary-regime-change.html?m=1
Dying of Money, Jens O. Parsson

Disclaimer

Svane Capital LLC (“Svane Capital”) is a registered investment advisor with the States of Texas, Oregon, and Louisiana.  The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital’s prior written approval. All statements are current as of the date written and do not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2.

All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.  Any subsequent, direct communication by Svane Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Svane Capital, please contact the securities law administrators for those states in which Svane Capital maintains registration or notice filing. Svane Capital current written disclosure statement (Form ADV Part 2A) discussing Svane Capital business operations, services, and fees is available from Svane Capital upon written request and at the bottom of this web page.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital prior written approval.  All statements are current as of the date written and does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

This information was produced by, and the opinions expressed are those of Svane Capital as of the date of writing and are subject to change. Any research is based on Svane Capital proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Svane Capital does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof.  Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein.  There are no material changes to the conditions, objectives, or investment strategies of the model portfolios for the period portrayed.  Any sectors or allocations referenced may or may not be represented in portfolios of clients of Svane Capital, and do not represent all the securities purchased, sold, or recommended for client accounts.

Certain portions of this material (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Svane Capital (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Svane Capital, or from any other investment, tax, or financial professional. Svane Capital is neither an attorney nor accountant, and no portion of the material content should be interpreted as legal, accounting or tax advice. Svane Capital recommends clients and prospective clients consult their tax professionals before enacting strategy or recommendation perceived to have been made in this material.  Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Svane Capital of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Svane Capital) or product referred to directly or indirectly by Svane Capital in its material, or indirectly via a link to an unaffiliated third-party material, will be profitable or equal the corresponding indicated performance level(s). The standard deviations, information ratios and allocation targets may be higher or lower at any time.  There is no guarantee that these measurements will be achieved.  The information provided should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.

Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results.  The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. Past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.  The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills, and inflation, such as fees (including sales and management fees), expenses or tax consequences.

The Dirt and The Hole

“[The] virus is like a huge sink hole in global economy. No one (not even anyone on this chat!) knows how big/deep it is. And every day world in lockdown it gets bigger and deeper. Policy makers also have no clue, but they have to do something, so they have started shoveling fiscal and monetary ‘dirt’ into hole. If hole bigger than dirt, we get deflation and you do the obvious. If dirt bigger than hole, you get . . . inflation. And if by complete dumb luck, dirt=hole, back to Goldilocks.”

— Unknown Fund Manager (The New Yorker April 20, 2020)

All models are abstractions and by extension all models are thus untrue. But, models can be useful in understanding and visualizing key aspects of reality. The Dirt and the Hole is a good model to use to answer the question, "What the heck is going on with the markets?" There is indeed a huge Hole in the economy caused by the lockdowns. There is also a whole lotta Dirt. So far governments and central banks have shoveled about $20T of monetary and fiscal Dirt into the Hole. This sum includes roughly $10T in the United States alone. 

The main initial goal of central banks and governments is to keep asset prices up so that the Hole doesn't grow explosively larger by bankruptcies and forced deleveraging. Explosive Hole growth is what we were seeing in mid-March when the stock indexes were bleeding 10% per day on several instances and oil traded at negative 40 dollars per barrel. Governments and central bankers don't have to fill the entire Hole themselves when it comes to keeping asset prices inflated. It is enough to convince the market that they will if needed. When that happens, borrowing, leverage, and speculation take care of the rest. Investors and speculators will rush to front-run government and central bank buying. This is what we've seen since mid-March and our portfolios continued to benefit during May.

Where the model breaks down is in that final sentence referring to dirt=hole resulting in Goldilocks. The issue is that while the Hole is real, the Dirt is not. Economic activity involving the production of goods and the provision of services really face-planted. Planes stopped flying, cars and trucks stopped driving, factories shut down, and restaurants, bars, sporting events, and travel industries were decimated. On the other hand, the fiscal and monetary Dirt appeared out of thin air and doesn't represent real replacement of goods, services, and lost jobs. So the Dirt went into the Hole. The result was asset price levitation, or even increases in some cases. The future cost will be collected from all of us in some combination combination of taxes, inflation, and slower economic growth.

In an interventionist world as we have today, the value accrues to the holders of assets...the more leveraged, the more accrual of value. Meanwhile, everyone else in the economy pays. But they pay in the future and the link to the payment is obscured and widely misunderstood. If this sounds unfair to you, it is! This is why government and central bank manipulation is so corrosive for societies and economies. It is the opposite of capitalism and in fact slowly destroys capitalism and its benefits. Expect to see more social unrest, declining economic mobility, and increased wealth disparity as long as these policies continue. And continue they will, since these interventions have been applied so many times (think the Dotcom Bust of 2000, or the Great Financial Crisis of 2008-2009) and for so long that markets have come to expect them and policy-makers deem the consequences of not intervening in markets to be too painful to abstain.

But as investors, we have to make decisions based on reality not wishful thinking. It is what it is. We too must expect intervention and its consequences and do our best to align our portfolios with those realities. We know that because of interventions, what happens in the economy doesn't equal what happens in markets. So we continue to hold stocks that trade at reasonable valuations. We protect our portfolios from a bigger Hole with high quality US Treasury Bonds. And we protect them from too much Dirt (and the inevitable consequences of Dirt creation) with monetary metals and natural resource producers. 

Disclaimer

Svane Capital LLC (“Svane Capital”) is a registered investment advisor with the States of Texas, Oregon, and Louisiana.  The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital’s prior written approval. All statements are current as of the date written and do not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2.

All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with a tax professional before implementing any investment strategy.  Any subsequent, direct communication by Svane Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Svane Capital, please contact the securities law administrators for those states in which Svane Capital maintains registration or notice filing. Svane Capital current written disclosure statement (Form ADV Part 2A) discussing Svane Capital business operations, services, and fees is available from Svane Capital upon written request and at the bottom of this web page.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

The information provided by Svane Capital, or any portion thereof, may not be copied or distributed without Svane Capital prior written approval.  All statements are current as of the date written and does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation.  The standard fee schedules for Svane Capital strategies are shown in the firm’s Form ADV Part 2. 

This information was produced by, and the opinions expressed are those of Svane Capital as of the date of writing and are subject to change. Any research is based on Svane Capital proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however Svane Capital does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof.  Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein.  There are no material changes to the conditions, objectives, or investment strategies of the model portfolios for the period portrayed.  Any sectors or allocations referenced may or may not be represented in portfolios of clients of Svane Capital, and do not represent all the securities purchased, sold, or recommended for client accounts.

Certain portions of this material (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Svane Capital (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Svane Capital, or from any other investment, tax, or financial professional. Svane Capital is neither an attorney nor accountant, and no portion of the material content should be interpreted as legal, accounting or tax advice. Svane Capital recommends clients and prospective clients consult their tax professionals before enacting strategy or recommendation perceived to have been made in this material.  Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Svane Capital of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by Svane Capital) or product referred to directly or indirectly by Svane Capital in its material, or indirectly via a link to an unaffiliated third-party material, will be profitable or equal the corresponding indicated performance level(s). The standard deviations, information ratios and allocation targets may be higher or lower at any time.  There is no guarantee that these measurements will be achieved.  The information provided should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.

Due to differences in actual account allocations, account opening date, timing of cash flow in or out of the account, rebalancing frequency, and various other transaction-based or market factors, a client’s actual return may be materially different than those portrayed in the model results.  The reader should not assume that any investments in sectors and markets identified or described were or will be profitable. Investing entails risks, including possible loss of principal. The use of tools cannot guarantee performance. Past performance is no guarantee of future results. The information provided may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.  The charts depicted within this presentation are for illustrative purposes only and are not indicative of future performance. The data do not reflect the material differences between stocks, bonds, bills, and inflation, such as fees (including sales and management fees), expenses or tax consequences.