Letters category: Letters

For most of us, the words “bank failure” immediately trigger the same recent memory: the financial crisis of 2008. That was a year no investor could ever forget. The year some of the largest, most storied financial institutions in the world — think Lehman Brothers, Bear Stearns, and others — collapsed, never to return.

Similarly, for anyone who has studied history, the words “run on the bank” immediately trigger images of the early days of the Great Depression. For others, it’s perhaps scenes from It’s a Wonderful Life.  (Or Mary Poppins, if you prefer.)  Dramatic moments now consigned to the waste bin of time. Surely not something that could happen in this day and age.

But on Friday, March 10, all these words — bank failure, bank run – happened to the Silicon Valley Bank in northern California. It’s an event that has many investors, scarred by the memory of 2008, wondering if the same thing could happen to other banks.  An event that has only added to the fearful mood currently pervading the markets.

As you probably know, when the news broke on Friday morning, all three major indices immediately tumbled, capping off a rough week for the markets.  So, we want to briefly explain what’s going on with this semi-obscure bank and why it spooked investors.  Then, we want to go over what we can learn from it.

Prior to collapsing, Silicon Valley Bank was the 16^th largest in the country, holding approximately $209 billion in assets.¹  If you’ve never heard of it before, it’s probably because the bank specialized in lending money to start-up companies; the kind of fledgling tech firms Silicon Valley breeds each year.  Now, it has the dubious distinction of being the largest bank to fail since 2008.¹

So how did a bank this large fail so suddenly?  Truth be told, it’s a tale that anyone who lived through 2008 also remembers well: The bank simply made too many bad decisions at precisely the wrong time.  During the pandemic, tech companies saw a surge in business.  This led to a host of new, hopeful tech companies popping up, each flush with venture capital.  As a result, banks that specialize in serving these types of companies enjoyed their own surge: A surge in deposits.

Silicon Valley Bank (SVB) was one of these banks.  But while business was booming, this was also when the problems started.  You see, like most banks, SVB only keeps a fraction of its deposits in-house at any given time.  The rest is lent out or invested.  In this case, SVB purchased tens of billions of dollars in U.S. Treasury bonds.

To be fair, there was a certain logic here.  Treasury bonds are historically seen as one of the safest investments in the world.  Given the market uncertainty we saw during the pandemic, the bank probably thought it was being prudent with customers’ money.  Unfortunately, the bank forgot one important detail: While Treasurys don’t usually see the kind of volatility that stocks or other securities do, they are vulnerable to a very specific kind of risk.  The risk of rising interest rates.

While this was going on, the economy started changing.  Inflation skyrocketed.  Interest rates, in turn, rose to the highest levels in decades.  That meant all those Treasurys purchased when interest rates were low were suddenly far less valuable.  (Newer government bonds pay far more in interest than those purchased before the rate hikes began.)  At the same time, those tech companies that profited during the pandemic saw business – and their stock prices – fall.  For SVB, that meant fewer and fewer deposits coming in.  Suddenly, SVB was faced with a nightmare scenario: A lack of liquidity and a lack of new funds.

None of that might have mattered so long as customers didn’t start withdrawing their money.  Of course, that’s exactly what happened.  Faced with their own economic distress, all those tech companies – and their executives – started asking for their money back.  Given that they only kept a fraction of that money in reserve, SVB had no choice but to sell its investments at a major discount.  The result was a major loss of nearly $2 billion, which the bank revealed earlier in the week.¹

When news of the situation got out, customers began panicking.  This led to a classic, seldom-seen-but-much-feared scenario: A run on the bank.

In the days that followed, the bank was unable to stop the bleeding.  So, on Friday, the government stepped in and took control of the bank’s remaining $175 billion in customer deposits.²

Okay.  That’s the story.  But why the impact on the markets?

Aside from being eerily similar to 2008 – a bank makes risky financial decisions at the exact wrong time and crumbles – the situation has investors wondering if there are other banks out there that might soon experience the same problem.  No surprise, then, that shares of banks with similar business models have fallen sharply over the last two days.

But it’s more than that.  Right now, investors are gripped with fears of a recession.  On the surface, that may seem counterintuitive, as most areas of the economy remain in decent health.  But until the economy cools down, inflation will continue to run hot…which means the Federal Reserve will continue to raise interest rates.  (Indeed, the Fed chairman announced on March 8 that he expects rates to rise “higher than previously anticipated.”)³

With each rate hike, the threat of a recession grows larger.

Right now, investors are hyper-sensitive to anything that looks like the first sign of a recession.  And the failure of a major bank certainly qualifies.  Hence the turmoil we’ve seen in the markets this week.  Hence the volatility we may keep seeing.

So, what can we learn from this?  To our minds, there are a few lessons:

1. When making investing decisions, always prioritize your long-term goals. In the wake of the pandemic, SVB made too many short-term decisions that locked up its long-term options.  We will never do that.  Here at Hudock Capital Group, our approach will always be to take the slower-but-surer path to your financial goals.  We will always emulate the tortoise, not the hare.
2. Never forget the importance of liquidity. We are not a bank.  We are human beings, and human beings must contend with the unexpected.  That means we sometimes need quick access to our money.  That’s why we will always invest, save, and plan accordingly.
3. Hold to our long-term strategy and never invest based on stories or emotions. Right now, too many investors are trying to divine when a recession will strike.  They are overreacting to every headline.  We won’t do that, either.

We are experiencing a time of uncertainty in the markets.  Such times are rarely fun, but they’re not unexpected.  The good news is that our team continues to have confidence in both our long-term strategy and the road you are taking toward your financial goals.  We will continue to monitor the markets very carefully and keep you updated on what’s going on.

In the meantime, please let us know if you have any questions or concerns.  We are always here for you.  Have a great month!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Silicon Valley Bank Closed by Regulators, FDIC Takes Control,” The Wall Street Journal, March 10, 2023.  https://www.wsj.com/articles/svb-financial-pulls-capital-raise-explores-alternatives-including-possible-sale-sources-say-11de7522

² “Silicon Valley Bank Fails After Run by Venture Capital Customers,” The NY Times, March 10, 2023.  https://www.nytimes.com/2023/03/10/business/silicon-valley-bank-stock.html

³ “Fed Chair Powell says interest rates are ‘likely to be higher’ than previously anticipated,” CNBC, March 7, 2023.  https://www.cnbc.com/2023/03/07/fed-chair-powell-says-interest-rates-are-likely-to-be-higher-than-previously-anticipated.html

If you’re a big fan of St. Patrick’s Day like we are, you will wake up on the 17^th, daydreaming of what’s to come. You can smell delicious, corned beef, cabbage, and the faint richness of Guinness floating in the air. You can almost taste it. Everywhere you look, you’re seeing green. Shamrocks on clothing, grand banners, even the milk! Everyone seems to be in a giddy mood, there’s an electricity in the air, you feel it. You’re looking forward to the parade tonight where you’ll watch and listen as the space fills up with laughter and smiles.

We know we’re not the only ones dreaming of the festivities. Countless people honor St. Patrick’s Day. In fact, this holiday gets observed on an international level – over 200 countries take part in the celebration! Can you believe it? We love learning how countries show their pride for the Irish holiday and wanted to share a few with you.

Chicago, Illinois –Every year since 1962, Chicago dyes the river a beautiful bright green before the St. Patrick’s Day parade. It’s quite the spectacle, everyone comes out to watch the magic of the river changing colors. The recipe for the magic dye is a well-guarded secret; perhaps leprechaun trickery is involved?

Sydney, Australia – Australia currently holds the title for the largest St. Patty’s celebration in the southern hemisphere. Not only is the Sydney Opera House lit up with green lights, the town gets a full makeover! The entire area is transformed into an Irish village with food, music, and even a children’s parade. They’ve earned those bragging rights.

Montserrat – Outside of Ireland, this small island is the only country where March 17^th is a national public holiday. There, the festival spans over a 10-day period! It both commemorates the slave freedom fighters’ rebellion of 1768 and acknowledges the Irish ancestry of many of its inhabitants. It’s a unique celebration blending two heritages with traditional masquerade costumes, steel drums, goat stew, and a freedom run.

Rio de Janeiro, Brazil – The massive 98-foot Christ the Redeemer Statue gets a glowing transformation for the holiday. The emerald lights illuminate the statue in honor of St. Patrick’s Day. At night, the local Irish pubs host special events that include live music, trivia, and fun giveaways.

As you can see, St. Patrick’s Day is a worldwide phenomenon!  Hopefully this letter was able to give you a little glimpse of how the event is observed around the globe.  Now that we’ve gotten you into the spirit of St. Patrick’s Day, you can feel confident celebrating the holiday however you wish. Maybe you can even start up some new traditions of your own. Whatever you decide, may the luck o’ the Irish ever be on your side!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Napoleon.  Franco.  Julius Caesar.  History is filled with examples of generals who became dictators.  But there’s one shining example of a general who didn’t, and we celebrate his birthday every February.

We’re referring, of course, to George Washington.

Future historians would have hardly batted an eye had Washington proclaimed himself king after defeating the British.  Nor would they have been surprised if, after being elected president, he simply kept the office for life.

But Washington was not that type of man.

The Newburgh Conspiracy

March, 1783.  The fate of the future United States hung in the balance, though few probably realized it at the time.  That’s because a conspiracy was in the works – a conspiracy, some historians believe, that would have led to a revolt against the government if left unchecked.¹

It’s not hard to understand why.  Despite numerous promises from Congress, the Continental Army had not been paid in months, A few days before, an anonymous letter began circulating among the officers, announcing a meeting to discuss all the ways they’d been wronged.  Then, a second, much more serious letter appeared.  The Army, the letter said, should officially condemn Congress for their inaction.

Whispers began to flit through the camp.  Perhaps condemning was not enough.  Perhaps the Army should turn away from the British and refuse to fight altogether.   Others went further.  Perhaps the real enemy was in Philadelphia.  Perhaps the Army should go there – and seize the government.

There’s no question the whispers reached Washington’s ears.  It’s impossible to know if he was tempted, even for a moment.  Could anyone blame him if he seized power for himself?  It had been done before.  It would be done again.

But instead, Washington sat down to write a message of his own.

A fateful meeting

On March 15, the officers assembled for a meeting in Newburgh, New York – and found Washington there to preside over it.  They were surprised.  Some thought Washington actually agreed with the anonymous letter, since he had not officially canceled the meeting.  Most thought, at the very least, that he was unlikely to attend.

But attend he did.

In an instant, Washington could tell the situation was serious.  His officers’ faces showed that plainly, as many failed to show the respect they usually did for their commander.  Undeterred, Washington read the remarks he’d written in the days before.  The Army should be patient, he urged, and avoid doing anything that caused discord.

“Let me entreat you, gentlemen, on your part, not to take any measures, which viewed in the calm light of reason, will lessen the dignity, and sully the glory you have hitherto maintained; let me request you to rely on the plighted faith of your country, and place a full confidence in the purity of the intentions of Congress.”¹

The officers were unmoved.  They expected this.  In fact, one of the anonymous letters had predicted Washington would preach “moderation and forbearance.”²

Seeing their stony faces, Washington moved onto Plan B.  He produced a letter from his breast pocket.  The letter was from a Congressman, but just as Washington was about to read, he hesitated.

For a long moment, Washington stared at the letter, unspeaking. The officers looked at each other.  Then, slowly, Washington produced something else from his pocket, fumbling at it with trembling fingers.

It was a pair of eyeglasses.

“Gentlemen,” Washington said, “you must pardon me, for I have grown not only gray but blind in the service of my country.”³

The officers were stunned.  They had never seen Washington wear glasses before, nor admit to any disability.  One by one, they bit their lips.  Lowered their heads.  And began to weep.

Washington, they realized, had worked as much, struggled as much, and suffered as much as any of them.  Yet he would not condemn or overthrow Congress.  He would not seize power for himself.  He would not destroy this experiment in liberty, only scarcely begun.

And so, the officers voted – to express “unshakeable” confidence in Congress and loyalty to their country.  The conspiracy was over, and the nation saved, all because of a man who would not be king.

This Presidents’ Day, we hope we can take a few minutes to ponder our country and the life of the man who fathered it.  We hope we can remember George Washington.

Happy Presidents’ Day!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Washington puts an end to the Newburgh Conspiracy,” History.com, December 13, 2009.  https://www.history.com/this-day-in-history/washington-puts-an-end-to-the-newburgh-conspiracy

² “George Washington’s Tear-Jerker,” New York Times, February 14, 2010.  https://www.nytimes.com/2010/02/15/opinion/15miller.html

³ “Newburgh Conspiracy,” Wikipedia, https://en.wikipedia.org/wiki/Newburgh_Conspiracy

If there’s one thing we’ve learned over the years as a financial advisor, it’s that it’s never too late to dream a new dream…or achieve one, either.

Recently, we read a story that proved just how true this is.  Allow us to introduce you to a man named Manfred Steiner.

Back in late 2020, Steiner earned a Ph.D. from Brown University in physics.  As you know, graduating from college is a great achievement.  Graduating from an Ivy League school, even more so.  Earning a Ph.D. in one of the most difficult and complicated subjects known to man?  That’s just staggering.

But none of that is what makes Steiner’s story so noteworthy.  What’s noteworthy is that he did it all at the age of 89.

You read that right.  A Ph.D. in physics at 89 years old!!!  (That sentence probably deserves a few extra exclamation marks.)

When Steiner was young, he dreamed of being a physicist.  But his family urged him to be a doctor instead, so he earned his medical degree and became a hematologist.  He even served as the Head of Hematology at Brown’s medical school.

Steiner’s career was long and fruitful, and like many people, he decided to cash in his chips and retire at age 70.  Thankfully for him, and for the world, Steiner understood that retirement isn’t the end of a journey.  It’s the start of one.

More specifically, retirement is a chance not only to do what you’ve always wanted to do but be what you’ve always wanted to be.  And Steiner still wanted to be a physicist.  So, he set about becoming one.  It was a lifelong goal, and he still had a long life to live.  Back to Brown he went, taking one or two classes each semester.  (Because, hey, retirement is also about relaxing.)

In a few years, he earned his bachelor’s degree – but he wasn’t finished.  As he puts it, “I thought, ‘Why not continue now? I might as well get a Ph.D.  It’s always been my dream.  I wanted this.’”¹

So, he kept taking classes.  Kept reading books.  Kept doing homework.  Kept writing papers.  Kept passing tests.  (No word on whether he availed himself of the other joys of college life – we suspect he was too busy.)  Slowly but surely, he mastered the science of physics.  Until, finally, nineteen years after retirement, he wrote his dissertation on “Corrections to the Geometrical Interpretation of Bosonization”. ¹

We confess, we don’t know what that means – but it was the final step in earning his PhD.  (A dissertation, by the way, is more than just a simple essay or research paper.  It’s an original work that “contributes knowledge, theory, or methods to a field of study”.  Meaning that, in years to come, other students may well study Steiner’s writings to increase their own knowledge!)

In some ways, we think that’s the coolest thing of all: That no matter how old you are, you can not only achieve your goals, but can also add to the collective knowledge of the world.

“I was elated,” Steiner said after receiving the honor.  “I mean, I made it!  I really made it.” ¹

So, what is the world’s newest octogenarian physicist going to do now?

Simple: Do physics!

As Steiner says, “I’ve reached what I’ve always wanted.  Now, I want to do it.  I know I’m going to be 90 soon, but physics is what interests me, and this is what I want to end my life with.” ¹

***

Every January, many of us set new goals and make new resolutions.  Some people question the point of this endeavor.  After all, not everyone succeeds in what they want.  But whether we’ve tried something and failed…

Or if we once had a goal but were forced to put it aside for other concerns…

Or if we simply didn’t dare to dream at all, because the star we sought seemed too far away…

It is never too late to start.  It is never too late to dream.  And it is never too late to do. 

Manfred Steiner proves it.

So, as we enter a New Year, go and dream that dream no matter what it is or where you are in life.  There’s no doubt in our minds you’ll achieve it.  After all, why not?

It’s just physics.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “89-year-old retiree earns Ph.D. in physics from Ivy League school,” CBS News, November 22, 2021.  https://www.cbsnews.com/news/manfred-steiner-89-retiree-physics-phd-ivy-league-school/

² “Dissertation vs Thesis: Key Differences,” Wordvice, https://blog.wordvice.com/dissertation-versus-thesis-key-differences-3/

When we were kids, we used to focus on what we would get every Christmas.  What presents would we open on Christmas morning?  What surprises would we find in our stocking?  What items would Santa actually deliver from our list?  Had we been good enough that year?

As we got older and started families of our own, our focus began to change.  Instead of looking forward to what we would get on Christmas, we started taking more pleasure in what we could give.  The real joy, we found, was seeing the expressions on our loved ones’ faces as they opened their gifts and saw what we had lovingly made or bought for them.

We think this is a very natural progression.  Most people, we imagine, go through the same transition as they grow up.  The pleasure of getting replaced by the joy of giving. 

Over the years, however, we’ve found that giving is about more than just buying the latest gadget or putting something special in a box.  We’ve found that the real joy of Christmas is in showing and sharing our love to and with the people around us.  Family, friends, neighbors, our team, our clients…all the little things we can do, and all the little things they do for us, is what really makes Christmas special.  Sometimes that little thing might be a gift; other times, it might be a service.  Sometimes it might be a kind word; other times, a shared activity or time-honored tradition.  Either way, with each passing year, giving around Christmastime has become what we look forward to most as getting recedes into the background.

Recently, a friend shared a story with us that we think illustrates this feeling.  It’s an old folk story, one of the many collected and published by the Brothers Grimm back in the 1800s.  Unlike some of their stories, this one is not a dark, cautionary tale, but a light and cheerful one. It’s a simple fable that perfectly encapsulates the warmth and spirit of Christmas.  We hope you enjoy reading it as much as we did.

The Elves and the Shoemaker

There was once a shoemaker, who worked very hard and was very honest, but as times were hard, he could not earn enough to live upon.  Despite his efforts, at last, all he had in the world was gone, save just leather enough to make one final pair of shoes.

Then he cut his leather out, all ready to make up the next day, meaning to rise early in the morning to his work. His conscience was clear and his heart light amidst all his troubles; so, he went peaceably to bed, left all his cares, and soon fell asleep. In the morning he sat himself down to his work, when, to his great wonder, there stood the shoes already made upon the table. The good man knew not what to say or think at such an odd thing happening. He looked at the workmanship; there was not one false stitch in the whole job.  All was so neat and true that it was quite a masterpiece.

The same day a customer came in, and the shoes suited him so well that he willingly paid a price higher than usual for them; and the poor shoemaker, with the money, bought leather enough to make two pairs more. In the evening he cut out the work, and went to bed early, that he might get up and begin betimes next day; but he was saved all the trouble, for when he got up in the morning the work was done ready to his hand. Soon in came buyers who paid him handsomely for his goods, so that he bought leather enough for four pair more. He cut out the work again overnight and found it done in the morning, as before; and so it went on for some time: what was got ready in the evening was always done by daybreak, and the good man soon became thriving and well-off again.

One evening, about Christmas-time, as he and his wife were sitting around the fire chatting, he said to her, “I should like to sit up and watch tonight, that we may see who it is that comes and does my work for me.” The wife liked the thought, so they left a light burning, and hid themselves in a corner of the room and watched what would happen.

As soon as it was midnight, there crept in two little naked elves.  They sat themselves upon the shoemaker’s bench, took all the work that was cut out, and began to ply with their little fingers, stitching, rapping, and tapping away at such a rate, that the shoemaker could not take his eyes off them. And on they went, till the job was quite done, and the shoes stood ready for use upon the table. This was long before daybreak, and then they bustled away as quick as lightning.

The next day the wife said to the shoemaker, “These little elves have made us rich, and we ought to be thankful to them, and do them a good turn if we can. I am quite sorry to see them run about as they do, for they have nothing upon their backs to keep off the cold, and it is nearly Christmas. I’ll tell you what, I will make each of them a shirt, and a coat and waistcoat, and a pair of pantaloons into the bargain, while you make each of them a little pair of shoes.”

The thought pleased the good cobbler very much; and one evening, when all the things were ready, they laid them on the table, instead of the work that they used to cut out, and then went and hid themselves, to watch what the little elves would do.

About midnight in they came, dancing and skipping, hopped round the room, and then went to sit down to their work as usual; but when they saw the clothes lying for them, they laughed and cried and danced, and seemed mightily delighted.

Then they dressed themselves in the twinkling of an eye, and danced and capered and sprang about, as merry as could be; till at last they danced out at the door, and away over the green.

The good couple saw them no more; but everything went well with them from that time forward, as long as they lived.

We love this story and all its characters, who think only of giving, never getting – and in doing so, get more than they could have ever hoped.  And we love this season and all the feelings that come with it!  So, on behalf of everyone here at Hudock Capital Group, we wish you a very Merry Christmas and a Happy New Year.  May your holidays be as magical as the shoemaker’s, filled with goodwill and good cheer.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

On October 3, 1789, President Washington gave the nation’s first Thanksgiving Proclamation.  In it, he both specified the exact day the nation should come together in gratitude and suggested some of the things Americans had to be grateful for.

Washington released a second Thanksgiving Proclamation in 1795.  After this, only one president – James Madison in 1815 – would proclaim an official day of thanksgiving for the next 67 years.

It was Abraham Lincoln who established Thanksgiving as a national holiday.  His Thanksgiving proclamation in 1863, not only kickstarted the holiday, but established a tradition observed by every single president since.

Over time, the annual presidential proclamation has come to be much more than an official announcement of the date of Thanksgiving.  It has become an ode to “liberty, freedom, human dignity, community and democracy.”¹  It has become a reminder of how these values are the pillars on which our country stands.  It has become a celebration of America itself.

And it is a wonderful way to remember why we celebrate the way we do.

In honor of this Thanksgiving, we invite you to read one such presidential proclamation given by President Theodore Roosevelt in 1907.²  While much has changed in our nation since then, one thing has not: The importance of giving thanks for what we have by helping those who have less.

We’ve attached a copy of Roosevelt’s proclamation.  We hope you enjoy reading it as much as we did – and we hope you have a very happy Thanksgiving!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Evolution of the Thanksgiving Proclamation,” University of California Santa Barbara, https://www.presidency.ucsb.edu/analyses/evolution-the-thanksgiving-proclamation

² “Proclamation 776 – Thanksgiving Day, 1907,” Theodore Roosevelt, https://www.presidency.ucsb.edu/documents/proclamation-776-thanksgiving-day-1907

Thanksgiving Day, 1907

By the President of the United States of America

A Proclamation

Once again, the season of the year has come when, in accordance with the custom of our forefathers for generations past, the president appoints a day as the special occasion for all our people to give praise and thanksgiving to God.

During the past year we have been free from famine, from pestilence, from war. We are at peace with all the rest of mankind. Our natural resources are at least as great as those of any other nation. We believe that in ability to develop and take advantage of these resources the average man of this nation stands at least as high as the average man of any other. Nowhere else in the world is there such an opportunity for a free people to develop to the fullest extent all its powers of body, of mind, and of that which stands above both body and mind – character.

A great democracy like ours, a democracy based upon the principles of orderly liberty, can be perpetuated only if in the heart of ordinary citizens there dwells a keen sense of righteousness, and justice. We should earnestly pray that this spirit of righteousness and justice may grow in the hearts of all of us, and that our souls may be inclined ever more both toward the virtues that tell for gentleness and tenderness, for loving kindness and forbearance, one toward another, and toward those no less necessary virtues that make for manliness and rugged hardihood; for without these qualities neither nation nor individual can rise to the level of greatness.

Now, Therefore, I, Theodore Roosevelt, President of the United States, do set apart Thursday, the 28th day of November, as a day for general Thanksgiving and Prayer, and on that day I recommend that the people shall cease from their daily work, and in their homes or in their churches, meet devoutly to thank the Almighty for the many and great blessings they have received in the past, and to pray that they may be given the strength so to order their lives as to deserve a continuation of these blessings in the future.

Imagine this scenario.  You get an email that appears to be from your bank.  You open it and read a message riddled with misspelled words that direct you to “click the link below.”  You click on the link and are taken to a page that looks almost exactly like the website you’re used to visiting.

Almost.

This type of scam is what’s known as phishing, and hopefully, it’s never happened to you.  Or, if it has, hopefully you recognized the warning signs and knew to stay away.  Unfortunately, many people don’t recognize those signs, and fall prey to a particularly insidious form of fraud that can be very damaging to your finances.

To help you understand more about what phishing is, and how you can protect your finances from it, we have prepared a special list.  It lists some of the common ways hackers try to “phish” for your personal information and provides some common-sense rules that will help increase your cybersecurity.

Tips to Protecting Yourself from Scammers…

Contact Information

Make sure the contact information you’re using to send money has been enrolled by you at the financial institution and is linked to your account before sending money to yourself.  Scammers may contact you pretending to be your financial institution telling you that they noticed suspicious activity on your account.  They may ask you to send money to yourself to “reverse” the payment.

Personal Information

If you receive a call from your financial institution asking you to provide personal information or to transfer money and you aren’t sure if the call is legitimate, it’s best not to provide any information and to call the phone number on the back of your debit/credit cards or on your bank statements.

Utility Companies

If a utility company calls to tell you that your electricity payment is past due and wants to collect a

payment, it’s best to call your utility provider before making the payment via phone.  Your utility providers will send you letters or emails before a situation gets serious.

Support Specialists

If you need support from a company such as Comcast or Amazon, be sure to call the company using a reliable number.  Scammers may pretend to be support specialist from well-known companies in order to gain access to your information. Never click on a link that they provide or download an app that they suggest.  Remember, they’ll never cold call you.

…and How Hudock Capital Group Keeps Your Information Safe

Network Security

Hudock Capital Group employs an IT Technology Specialist to manage systems internally.  We utilize a multi-faceted security approach to our network, email, hardware, and software.  Some of these security measures include, but are not limited to, enterprise-level site firewall that is monitored and kept up to date by a third-party technology provider, up-to-date anti-virus/anti-malware solution, data protection backup via Carbonite, controlled access to data, multi-factor authentication, and systems to provide for updates and fixes for Windows and other third-party application.

Practice Management Security

Hudock Capital Group uses Redtail Technology as the firm’s practice management software.  Redtail Technology is a “Cloud” based service where software and data are centrally hosted and accessed by the firm using a web browser and internet connection.  Redtail Technology uses the secure Amazon Web Services (AWS) infrastructure to provide a secure platform.  Additional information regarding the security specifications of AWS can be found by visiting https://aws.amazon.com/compliance/shared-responsibility-model/.

All data transmitted between our vendors and the firm is encrypted via HTTPS.  Hudock Capital Group also uses Smarsh Encrypt when sending sensitive information via email.  This service sends an encrypted email which requires the recipient to log into a secure website to open the email.

Employee Training

All employees at Hudock Capital Group receive regular security awareness training on cyber security topics such as phishing, creating strong passwords, ransomware, suspicious emails, and mobile device security.  Staff computers and email are password-protected and monitored regularly for malware.  Additionally, all employees must complete a background check prior to employment, agree to the firm’s confidentiality policy, and receive training on how to handle sensitive client information.

We hope you find this information helpful.  Additional questions regarding data security can be directed to Wayne Dieffenderfer, Chief Compliance Officer, by calling the office or emailing wdieffenderfer@hudockcapital.com.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

With Independence Day just around the corner, we’ve recently been thinking about all the things there are to enjoy about our national holiday.  The celebration itself is great—it’s a time for fireworks and baseball, barbecues and patriotic music.  That’s exactly what John Adams, one of the signers of the Declaration of Independence, predicted when he said:

“I am apt to believe that [Independence Day] will be celebrated by succeeding generations as the great American Festival.  It ought to be commemorated as the day of deliverance by solemn acts of devotion to God Almighty.  It ought to be solemnized with pomp, shows, games, sports, guns, bells, bonfires and illuminations, from one end of the continent to the other, from this time forever forward.”  – John Adams¹

But we think what we’ve enjoyed most about the holiday is that, for one day out of the year, we all truly come together as Americans.  On the Fourth of July, there are no longer any Democrats or Republicans, liberals or conservatives.  No race, religion, or region matter anymore than another.  Our opinions and philosophies can wait until the 5th.  As the glint of fireworks reflects in our eyes, as we gaze at the Stars and Stripes waving in the wind, as we listen to the strains of The Star-Spangled Banner, the only thing matters is that we are Americans … and that we are all created equal.

There’s a wonderful story from our country’s history we feel everyone should know.  Let’s go back to July 3^rd, 1826.  On that day, two men were both lying on their deathbeds.  One was in Quincy, Massachusetts, the other in Monticello, Virginia.  The first was John Adams, 90 years old.  The other was Thomas Jefferson, 83.  As these two men spent their final hours, it’s all but certain that their thoughts were on two things.  The first was that the anniversary of their famous signing was but a day away.  The second was on each other.

When Adams and Jefferson first met in 1775, it was as delegates to the Continental Congress during the American Revolution.  They had similar views and quickly became friends.  When Congress ordered a committee to draft the Declaration of Independence, both men were on it.  John Adams was the initial choice to be its author, but Adams felt that Jefferson should do it.  Adams told Jefferson:

“You should do it.  Reason first: you are a Virginian and a Virginian ought to appear at the head of this business. Reason second: I am obnoxious, suspected and unpopular. You are very much otherwise. Reason third: You can write ten times better than I can.”    – John Adams

Jefferson returned the compliment when he called Adams, “the pillar of [the Declaration’s] support on the floor of Congress, its ablest advocate and defender.”³  After the Revolution, the two continued to be close, with Jefferson often a guest in Adams’ home.  And they wrote to each other frequently, exchanging hundreds of letters.

Then each man decided to run for president.

During George Washington’s two terms, Adams had served as Vice President, with Jefferson as Secretary of State.  But after Washington left office in 1796, the two friends reached a parting of the ways.  For one thing, political parties began to make their first appearance.  Adams joined the Federalist Party, and Jefferson the Democratic-Republicans.  The philosophical differences between the two parties, and between themselves, were too difficult to overcome.  And politics were no less vicious in their time than they are in ours … in fact, they were probably more so.  Both parties frequently spread lies and slander about each other.

Adams defeated Jefferson for the presidency in 1796, but the rules at the time stipulated that the loser became Vice President.  This created an awkward situation.  As Adams’ presidency wore on, the two began to disagree more and more.  At one point, Jefferson actually left the capital and returned home, spending time drafting secret resolutions that were in direct opposition to Adams’ own.

The 1800 election was bitter and complicated, with Adams especially under attack.  When Jefferson emerged the victor, Adams left the White House in disgust.  He did not attend Jefferson’s inauguration, and one of his last acts as president was to appoint a number of Jefferson’s rivals into powerful positions.

It looked like the friendship between America’s two greatest statesmen had ended.  They exchanged almost no correspondence for the next ten years.

Then, after the urging of a mutual friend, Adams finally wrote a letter to Jefferson on New Year’s Day, 1812.  Jefferson wrote back a few weeks later, saying:

“A letter from you calls up recollections very dear to my mind.  It carries me back to the times when, beset with difficulties and dangers, we were fellow laborers in the same cause, struggling for what is most valuable to man, his right of self-government.”  – Thomas Jefferson⁴

The two exchanged several letters that year, mostly asking about each other’s health and habits.  In 1813, they wrote even more, with Adams writing a total of 29 letters.  Their correspondence continued for the rest of their lives, with each man penning thoughtful, detailed letters that touched on everything from politics and philosophy to religion and morality.  While their words were occasionally pointed, the body of letters they left was for the most part an amazing example of the kind of high-level dialogue that two people can produce when they emphasize respect and admiration for each other.  Adams and Jefferson came to realize that a difference in opinion did not mean a difference in character, and their letters reflect that.  Said Jefferson:

“I have thus stated my opinion on a point on which we differ, not with a view to controversy, for we are both too old to change opinions which are the result of a long life of inquiry and reflection; but on the suggestion of a former letter of yours, that we ought not to die before we have explained ourselves to each other.  We acted in perfect harmony throughout a long and perilous contest for our liberty and independence.  A constitution has been acquired which, though neither of us think perfect, yet both consider as competent to render our fellow-citizens the happiest and the securest on whom the sun has ever shone.  If we do not think exactly alike as to its imperfections, it matters little to our country which, after devoting to it long lives of disinterested labor, we have delivered over to our successors in life, who will be able to take care of it, and of themselves.”  – Thomas Jefferson⁴

If all of us could have the same attitude as Adams and Jefferson did, it would be a happier world.  But the point is that these two great men decided to focus on their friendship with each other rather than on their differences.  They were both Americans who cared deeply about their country.  For them, that was enough.

Back to July 3^rd, 1826.  Both men were old and dying.  They had written over 380 letters to each other over their lives, but there would be no more.  Yet their minds still went to the same place.  Each wanted nothing more than to live one more day, to see and celebrate the 4^th of July one more time.  The day that meant more to them than any other.  On the night of the 3^rd, Jefferson called his family in for the final time.  “I have done for my country, and for all mankind, all that I could do, and I now resign my soul, without fear, to my God.”  He fell asleep shortly thereafter, but woke once more before the night had ended.

“Is it the Fourth yet?” Jefferson asked.

“It soon will be,” his doctor assured him.⁶

Shortly before one o’clock in the morning, on July 4^th, Thomas Jefferson died.

John Adams lasted a little longer.  When told that it was the Fourth of July, he said, “It is a great day.  It is a good day.”  Not long after, he too passed away, unaware that his friend and rival had already preceded him.  According to his family, his last words were, “Thomas Jefferson survives.”⁶

That these two great founders, signers, presidents, and friends died within hours of each other is notable enough.  The fact that they died on the Fourth of July is more amazing still.  But the most astounding thing of all?

It was the 50^th anniversary of the signing of the Declaration of Independence.

This Independence Day, we’d encourage us all to remember the story of John Adams and Thomas Jefferson.  Remember the ideals they stood for.  Remember the friendship they had.  And remember the connection they shared—they were “fellow laborers in the same cause,” each working in the way they thought best.  Their opinions differed greatly, and after years had passed, they realized there would be no changing them.  But they recognized in each other what we hope we all can recognize: That we are all Americans, continually defending and working on a constitution that enables us all to be “the happiest and securest people on whom the sun has ever shown.”

On behalf of everyone here at Hudock Capital Group, we wish you and yours a happy Fourth of July!

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Letter from John Adams to Abigail Adams, July 3, 1776,” https://www.masshist.org/digitaladams/archive/doc?id=L17760703jasecond

² “Writing the Declaration of Independence,” Eyewitness to History, http://www.eyewitnesstohistory.com/jefferson.htm

³ “John Adams,” United States Senate, https://www.senate.gov/artandhistory/art/artifact/Painting_31_00005.htm

⁴ “To John Adams,” http://www.let.rug.nl/usa/presidents/thomas-jefferson/letters-of-thomas-jefferson/jefl213.php

⁵ “Thomas Jefferson to John Adams, 28 October 1813,” https://founders.archives.gov/documents/Jefferson/03-06-02-0446

⁶ “Thomas Jefferson – Final days, death, and burial,” Wikipedia, https://en.wikipedia.org/wiki/Thomas_Jefferson#Final_days,_death,_and_burial

The bear is back.

On Monday, June 13, investors began the week by digesting a new spate of bad – albeit familiar – news: Inflation continues to surge.  In response, the markets sank swiftly and sharply, pushing the S&P 500 officially into bear market territory.¹  (A bear market, as you may remember, is a drop of 20% or more from a recent peak.  In this case, the “recent peak” was all the way back on January 3 of this year.)  The markets rallied somewhat on Wednesday, June 15, when the Fed announced a 0.75% interest rate increase, but the revival was short-lived.  Two of the three major indices – the S&P and the NASDAQ – are officially in bear markets, and a third, the Dow, is just a short slide away.

Having helped clients navigate – and even take advantage of – several bear markets in our careers, we’ve found that looking solely at that 20% number can paint a picture of pure chaos in the markets.  But not all bear markets are the same.  Some are long, some are short.  Some come with economic recessions and others don’t.  Some catch investors completely unawares, while others come on more gradually.  For this reason, it’s better to focus on the reasons behind the number rather than the number itself.  When we concentrate on the cause instead of just the effect, suddenly a bear market doesn’t seem so abstract or bewildering.

Breaking Down the Bear

This current bear market is not a surprise.  It’s the result of a slow, gradual market decline that’s been going on since the start of the year, all driven by one thing: Inflation.  In fact, the NASDAQ has actually been in a bear market since March, and the S&P 500 threatened to tip over last month before recovering somewhat after the Federal Reserve raised interest rates by a half-point.  The hope was that this step – the first of its kind since the year 2000 – would start slowing inflation’s rise.

Unfortunately, a half-point was not enough.  On Friday, June 10, a new Consumer Price Index report showed that inflation rose even higher in May, to the tune of 8.6%.²  That’s the biggest increase since 1981.  In essence, the Fed’s half-point rate hike was like sticking your finger in a leaky dam when the water is threatening to spill over the top anyway.

That means the Federal Reserve now had a choice: Raise interest rates more aggressively and risk triggering a recession or continue on the same measured path and risk worsening inflation.  (To clarify, this has been the Fed’s choice for months; it’s just that now, the pressure to get it right is even greater.)  Both approaches come with short-term pain for the markets, which is why Friday’s news was the tipping point for a bear market.

On Wednesday, the Fed announced their choice, raising the Federal Funds Rate – the interest rate that banks pay each other for overnight loans – by 0.75%.³  That may not sound like much, but it’s the biggest single rate hike since 1994, and it will lead to rising interest rates across the board.  (Mortgage rates have already risen to their highest level in over 13 years.⁴)

The reason the Fed did this is because higher interest rates are a proven tool for fighting inflation.  Since higher rates reward saving over spending, the demand for goods and services tends to go down, forcing companies to lower their prices if they’re to attract new business.  Lower prices, of course, means lower inflation.

The Fed’s move was expected, and many economists feel it’s warranted.  Why, then, have the markets continued to fall?  Because now the economy is on the clock for a possible recession.

You see, higher interest rates are a double-edged sword.  Higher rates mean higher borrowing costs and more expenses for both individuals and companies.  If rates rise too high, too fast, it could trigger nationwide layoffs, a plunge in housing prices, and more.  Given that the Fed hinted that another 0.75% hike was on the cards in July, such a scenario is not out of the question.³

When the Fed announced the rate hike on Wednesday, they also revealed something else: Their economic outlook for the rest of 2022.  The Fed’s hope is to achieve what’s called a “soft landing.”    This is where economic growth slows, but a full-blown recession is avoided.  There’s some justification for this hope.  After all, if you remove inflation from the equation, the economy is actually in pretty good shape.  The unemployment rate is at 3.6%, which is almost back to where we were in January 2020 before COVID hit.⁵  And consumer spending – the bedrock of our economy – remains strong.  It was to shore up the economy that the Fed dropped interest rates in the first place.  Now, the thinking goes, that mission is complete, which means it’s time for the Fed to pivot to the second prong of their “dual mandate”: stabilizing prices.  (The first prong is stable employment.)

Unfortunately, soft landings are historically difficult to achieve, and the most recent data suggests an economic slowdown may already be happening.  Consumer sentiment is dropping, retail sales numbers have dropped slightly over the last month, and while the economy continues to add jobs, it did so at a slower pace in May.³  Even the Fed admits that the unemployment rate will likely go up over the next few years.  (Moving from 3.6% to 4.1%, according to their projections.³)

Time will tell whether a new recession is on the horizon.  For now, though, fears of one have driven stocks into a bear market – and that is the real issue we need to concern ourselves with right now.  How we handle feelings like fear will play a big role in determining how well we navigate these turbulent times.

You see, news of a bear market is an unpleasant headline in a year that’s been full of them.  But in my experience, the real danger during market conditions like these is not the bear itself,

but the way people respond to it.  Because, when you think about it, headlines are written to seem big, grand, even epic.  They’re designed to get your attention.  What they are not designed to do is give advice specific to you.  So, let’s talk about what a bear market does and does not mean for your investments, your financial plan, and your financial goals.

What a Bear Market Means

Have you ever been driving on the road and hit every green light on the way to your destination?  It’s a great feeling, isn’t it?  Well, that’s sort of what a bull market is – and the road is the journey to your financial goals.

A bear market is the opposite.

During a bear market, the road to your financial goals, for the foreseeable future, is like getting caught at every red light in a major traffic jam.  We’re still progressing toward your goals, but we’re inching instead of cruising.  Sometimes, we may not move at all for a while.  Sometimes, it may be necessary to take a detour and backtrack.  It’s not fun, but it’s also not the end of the world.  Because here’s what a bear market doesn’t mean:

Have you ever been caught in rush hour traffic, and the lane you’re in won’t budge?  Meanwhile, the lane next to you seems to be moving fine.  So, as soon as you see an opening, you merge into that lane – only to immediately slam on your brakes.  Now the new lane is backed up!  So, you try again…until you find yourself in the very lane that’s closed off and causing a jam in the first place.

This is what emotional, undisciplined investors do during bear markets.  They start frantically trying to change lanes, get off the road, or even abandon the car altogether.  As a result, they burn fuel, waste time, and end up making the situation worse – because they aren’t where they need to be when the road gets cleared and the traffic speeds up again.

They aren’t there when the bear market inevitably ends, and a new bull is born.

You see, history doesn’t show us how long a bear market will last.  Until now, we’ve had three bear markets in the 21^st century.  The first, in the early 2000s, lasted 929 days.  The second, amidst the Great Recession, lasted 517.  But the third, back in early 2020, lasted only 33.⁶  What history does show us is that bear markets are always temporary.  The markets always recover – and the recovery can be a generational chance to get in the next bull market on the ground floor.

Warren Buffett once said, “The stock market is a device to transfer money from the impatient to the patient.”⁷    If we can remember this; if we can remember what a bear market means and does not mean, we can not only weather this volatility…but turn it to our advantage in the long run.  Because while a bear market may signal the end of a bull, it does not signal the end of our investment strategy.  Your financial plan.  Or your journey toward your financial goals.  Because, at the end of the day, we’re prepared for this.  Our car is tuned up, and there’s plenty of gas in the tank.

A bear market just means we might have to sit in traffic for a while.

We will keep a close eye on what the Fed does and how the markets respond to it.  Expect to hear more from us on this subject soon.  In the meantime, please let us know if you have any questions or concerns about the road ahead.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Dow tumbles 876 points and stocks enter bear market,” CNN Business, https://www.cnn.com/2022/06/13/investing/dow-stock-market-today/index.html

² “Inflation rose 8.6% in May, highest since 1981,” CNBC, https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html

³ “Fed hikes its benchmark interest rate by 0.75 percentage point, the biggest increase since 1994,” CNBC, https://www.cnbc.com/2022/06/15/fed-hikes-its-benchmark-interest-rate-by-three-quarters-of-a-point-the-biggest-increase-since-1994.html

⁴ “Mortgage Rates Hit 5.78%, Highest Level Since 2008,” The Wall Street Journal, https://www.wsj.com/articles/mortgage-rates-hit-5-78-highest-level-since-2008-11655388013

⁵ “The Employment Situation – May 2022,” Bureau of Labor Statistics, https://www.bls.gov/news.release/pdf/empsit.pdf

⁶ “Stock Market Briefing: S&P 500 Bull & Bear Market Tables,” Yardeni Research, Inc. https://www.yardeni.com/pub/sp500corrbeartables.pdf

⁷ “Winning the Market with the Patience of the Wright Brothers and Warren Buffett,” Forbes. https://www.forbes.com/sites/investor/2018/01/30/winning-in-the-market-with-the-patience-of-the-wright-brothers-and-warren-buffett/

Happy Father’s Day!  As you know, Father’s Day is a chance to honor our fathers for their contributions to family and society.  That includes grandfathers, great grandfathers, and also men who serve in the role of fathers.  This is a chance to show how their hard work, sacrifice, and commitment have paid off.

Many words have been written about fathers.  Some of the greatest thinkers and writers have taken the time to pen their thoughts on fatherhood, most with much greater depth and skill than we have.  So, for this Father’s Day, we thought you’d enjoy reading some of the most famous quotes about fathers.  They’re some of our favorites, anyway.

Read them, and see if any of them describe how you view your father!

Here they are:

Ten Famous Quotes on Fathers

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around.  But when I got to be 21, I was astonished at how much the old man had learned in seven years.”

– Mark Twain

“Father! – To God himself we cannot give a holier name.”

– William Wordsworth

“It’s only when you grow up and step back from him—or leave him for your own home—that you can measure [your father’s] greatness
and fully appreciate it.”

– Margaret Truman

“One father is worth more than a hundred schoolmasters.”

– George Herbert

“My father gave me the greatest gift anyone could give another person …
he believed in me.”

 – Jim Valvano

“By the time a man realizes his father was right, he has a son who thinks he’s wrong.”

 – Charles Wordsworth

“I cannot think of any need in childhood as strong as the need for a father’s protection.”

 – Sigmund Freud

“A father carries pictures where his money used to be.”

– Anonymous

“The greatest mark of a father is how he treats his children
when no one is looking.”

 – Dan Pearce

“He was there when I didn’t understand, he was there when I was wrong, he was there when I cried, he was there when I lied.  For some reason, my dad was always there when I needed him the most.
His love was never ending.”

 – Michael Jordan

So, what would you say about your father if given the chance?  Perhaps this is the best thing about Father’s Day.  It’s not about buying a new tie or choosing a funny card.  Or at least, it’s not just about that.  It’s about the opportunity to reflect on what exactly our fathers mean to us.  A chance to ponder both who we are and what we want to be … and how our fathers impacted both.

On behalf of everyone here at Hudock Capital Group, we wish you and yours a happy Father’s Day!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant