October 7, 2022

Dear Friends:

Lessons from a Navy SEAL

David Goggins is called by many “the toughest man alive.”  The Navy SEALs are one of the most elite military units on the planet and Goggins is the only person to go through SEAL training 3 times (including two Hell Weeks).  Why three times?  Because the first two times he had medical incidences, once with pneumonia and the other a broken leg, which forced him to go all the way back through the program!


How did he do it?  In addition to being prepared and having a resourceful, positive attitude, in his words “I just got up every day and persevered. If you keep doing that eventually you will get significant rewards because few others do.  A successful warrior isn’t necessarily the smartest or the most resourceful”, although that helps, he says. A successful warrior is one who says “I am going to be here today, tomorrow, and the day after that”.


In the stock market, we in the midst of a tough “Bear Market” (with stock averages all down well over 20%). Adding to the pain in stocks, the bond market (typically considered a more conservative/less volatile investment) is down 16% as the Fed has raised interest rates and inflation has spiked.  Thankfully we have limited some of these declines in our EFinancial Alliance portfolios for both stocks and bonds by keeping bond durations/exposure to interest rates much lower than normal and equity allocations slightly below target. However, declines of any kind are and can be painful.


This is where persistence and optimism come in.  As Calvin Coolidge said, “nothing in this world can take the place of persistence, talent will not.”  Although the market has now been down in 3 consecutive quarters, this is the nature of markets and sometimes we all need to remember to focus on what we can control such as pursuing a high savings rate (living within our means), patience, and optimism that the global economy will create value over time.


Many of you know the famous Sir John Templeton quote: “Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria.” With many investor sentiment indicators showing extreme levels of pessimism among investors, this could bode well for better market conditions especially over the long term. Resist the seduction of Pessimism. History shows that the average 5-year return after a 25% or more drop in the S&P 500 index is over 80%.  That is over a 12% compounded annualized return in the subsequent 5 years after a drop like we have seen this year.  Although this is not guaranteed and we could likely have more volatility in the near term, we believe there are many attractive investment opportunities that we will be looking to take advantage of in our portfolios.  Heed the advice of the world’s toughest man and reap the benefits!


End of Year Tax Planning

Roth conversions and other tax planning options can yield big benefits long term, particularly now as lower values can rebound tax free at lower current year tax bills then they would have if converted at higher levels.  We will be reviewing portfolios for these opportunities as we approach year end.


As always, please reach out if you have any questions or concerns and thank you for your partnership!





Mitch Anderson                                           Destin Tompkins