The editor of this magazine, my longtime editor and friend Evan Simonoff, asked me for a review of 2022. I have two words: “Good riddance.” And I’m pretty sure I’m not alone.
My professional view has certainly been clouded by personal issues. My 88-year-old mother, for instance, had an airtight retirement plan, and then Hurricane Ian came along and left her homeless. I’m sure everyone who hates the past year has their own personal reasons. Isn’t that the lesson of Covid-19—that work and home and family are integrated?
So with apologies to the strict business types, my “Year In Review” is going to be a mixed bag of observations—a look at potential trends and lamentable realities. I’ve made a list of 13 observations. Lucky 13. Take that, 2022.
1. Inflation. I’m starting with the most important. According to Ken Dychtwald, the founder of Age Wave, clients in a survey picked inflation as the runaway No. 1 worry this year. That’s significant, given that healthcare dominated these surveys for years with no real challengers. Inflation seemed dead, at least to those who weren’t looking at history, and such people are doomed to repeat it. I can remember my first year in the markets as an intern, when T-bills offered a 15% return (that’s not a typo) and the Consumer Price Index was 13.5% (also not a typo). A $1 million nest egg paid you $150,000 without risk or state taxes, with a modest real return. After the late Fed Chairman Paul Volcker slayed the inflation dragon in 1982 (my first year as an investment manager), the 30-year Treasury bond was the asset class winner, offering a 52% total return in that year alone. Those were some great memories. This year, not so much.
The drivers of the new inflation, however, are here to stay awhile. It can’t be combated by monetary policy alone, which is now totally hackable by any hedge fund anyway. The structural issues in our economies will take years to resolve. Expect more trouble ahead.
2. Airlines Are Not The Same. For my travel money, Delta has its act together and it matters. But there’s a newbie on the block, Avelo, that has made it easier to get to baby boomer retirement hot spots, and most every plane is full. Avelo has faced some growing pains, but I want it to keep going.
3. The Globalization Of Bad Things. As one CEO observed this year, “Who knew we’d have to factor in thermonuclear war as a business risk?” Americans have had to confront problems beyond our borders whether we like it or not. Even the most isolationist Red Stater has learned about global interdependency when trying to fix a truck or tractor dependent on a Taiwanese microchip. And don’t get me started on gas prices. Or the fact that we need baby formula and must know where it’s being made—or not made. Global problems also become ours in other ways. For instance, we face information theft, electronic invasions by non-U.S. actors who have hurt countless schools, utilities and ordinary businesses. No one is alone, or safe. There is no way off this grid. Best to plan for the worst.
4. There Is No Reason To Drink Bad Wine. I wanted to hate the Vivino wine app and the WSJ Wine club, but I love them both. Why? Because they offer convenience, convenience, convenience. And both offer good stuff for good prices. I never thought I’d drink a no-name something from a publishing company—and like it. So I go with the flow. Pun intended.
5. Sneakers With Business Suits Is Wrong On Many Levels. So are white-soled dark shoes. Attention, men: Larry Fink wears jeans and a sport coat and looks normal. But otherwise, we should not be mixing mediums. It’s OK to wear hats on Zoom, but only if your hat is a company lid or you are undergoing dermatologist-directed treatment for skin issues (me). And we should all check with other people other than ourselves to see if our Covid beards are working.
6. Most Retirement Planning Is A Fraud. The most important elements of a solid retirement plan require conjecture. How long will you live? What will your health be? What will markets and rates and inflation do to you? To base our clients’ retirement planning on a single scenario is just malpractice. Advisors I’ve spoken with say that you must plan according to your best guesses and then again with the potential train wrecks. It’s like flying, one said. You arrive at an airport, hopeful for your vacation, and then find out the flight is canceled. Now what do you do? Make a Plan B, a Plan C and a Plan D. Again, think of my mother, who at 88 was modestly covered for everything—until she was homeless. Luckily, she owned a share in a continuous care retirement community (or a CCRC, something you should be familiar with, BTW). That arrangement has given her access to long-term care. But many older people aren’t so lucky.
7. Mother Nature Is One Pissed Off Lady. While my mother and her neighbors faced Ian, much of the West has been besieged by wildfires. Atlanta is colder than New York City. Heat waves and drought have compromised our farms. Places you don’t think of as having much water have endured historic flooding. And we will never be rid of lethal viruses, 290 of which killed humans last year. I don’t care what your politics are, we need to be aware and better prepared for nature’s threats. She’s mad at something, and I suspect she’s trying to send us a message that we should take those threats seriously.
8. About The New Top Gun. I thought Top Gun: Maverick would be disappointing. I was so wrong. So is the decision to see it on your mobile device. It must be seen on the big screen.
9. Retirement Is About Protecting, Not Investing. We’ve all been hanging on for dear life as the markets retreat. But financial advisors have to accept that investments are only a means to an end, not the main event. A flash poll of advisors conducted in early 2022 by Financial Advisor magazine found that 85% of them looked to portfolio allocation when it came to reducing risk. Research by Dychtwald and Age Wave this year says that more than half our clients think “multiple” financial products are needed to address retirement funding needs. Very few people have enough money to make it through retirement. We do, however, have products and strategies that can help, including those provided by insurance companies, such as annuities, which many advisors look at with skepticism. We need to get over the stigma, especially because the clients don’t share our wariness. In this environment, we will likely see more products that provide those assured outcomes, such as the LifePath Paycheck secure income strategy from BlackRock.