The Redfish 411 - December 2021

Hello everybody and welcome to another edition of red fish healthy wealthy and wise this is Brad Murrill it is 1:37 on the 15th of December and I think this is most likely unless something weird happens the last podcast of this year I believe we're on episode #24 so I'm looking to start out 2022 with kind of a benchmark podcast being episode #25 but we're not there yet let's stay on episode #24 what I wanted to do is real simple here is spend a few minutes with you kind of recapping the year that we had rather quickly but then spending most of the time on projections into next year because that's what everybody is talking about and that's what everybody asks me and frankly it's the most impossible question to answer but we'll get there so first let's go back real quick into 2021 first on the on the front here at the office this was a big year for us as we've increased our square footage by gosh 3/4 times what we used to have almost five times I guess than what we had so we've really increased our square footage quite a bit.

 

We've also increased our headcount tremendously as you may remember we brought on to Tawania Sykes who is the running the office I just refer her as queen T she's the one who's in charge you may think I am but I am not it is to one yet and she has just been an absolute superstar and having her here and taking care of everything that has to do with the office so that I don't have to do it we also brought in Tiffany Steadham and Tiffany she's currently studying her play office and then the two most recent hires, very excited these are on the side of Adolphus King who came from one of the larger accounting firms and he's now coming over here with us, he's going to help out Henry and doing tax returns and we also brought in Don Babbitt and Don will also be helping out with tax returns she's sitting for her CPA I believe in the springtime and Adolphus is sitting for the CPA exam probably in the fall to the latter part of 2022 but Don has an extensive background in bookkeeping from working with people who owned restaurants fast casual restaurants and McDonald's things like that straightening out all their books doing that to oil companies to finally spending a few years at the Klein Independent School district keeping the book looks for them so she's got a pretty amazing background and we're just we're blessed to have them both here as I think Henry last year he almost got overwhelmed we appreciate the business but it was almost the death of that boy and so we really beefed up the accounting side we're excited to have them on and then obviously the energy here in the office has increased quite a bit obviously we're busy but having more people running around like chickens with their head cut off trying to get everything done and completed for you has increased the energy level quite a bit.

 

As far as the markets are concerned we look back on 2021 the S&P 500 right now you know we're not we're not at the end of the year but we're up about 25% so we've had a whale of a Goodyear in the market especially when everybody was so scared and so nervous and honestly it's kind of a repeat going into this year but that may be just part of the norm but it seems like everybody was so nervous it was all COVID related last year and then we had delta variant and then we had italic ran and we had all sorts of different types of COVID that were coming around and that made the markets nervous so it was an extremely volatile year with a lot I don't want to call him corrections but we had a lot of up and downs in the 2% at lot 2% moves we had a 6% move to the upside in March a 4% down in may the first quarter was 2% it's moving up and down then we kind of ran through the third quarter up until about September the second where we reached 4500 boom down another I'm going to say maybe four or five percent possibly 6% and then right back up coming up in November we run right back up market drops market goes back it's itwas it was a really volatile year the leaders this year in the S&P 500 were really just five companies five companies as of right now made up about 35% of the total return in the S&P 500 those five companies well as of this chart was December the 9th one of these companies is falling off so we're going to make it 4 at what Tesla was on here but Tesla when Elon Musk started selling off some of his stock it really pushed the stock down a little bit I believe they're down 20 to 25% off their highs but NVIDIA Google Microsoft and apple were responsible for the lion share the lion share the return of the S&P 500 in 2022.

 

So let's look ahead I want to look people are always asking me as you can imagine hey what do you think the markets going to do where is it going to go etc and this is truly the hardest question that I can feel because I don't know all I can do and all that we do in this business is we look at the data and we try to think what direction the markets may go as a result of that data so I am expecting a pretty solid year COVID again is still going to be at the forefront of a lot of this talk maybe I should break down why COVID plays such a role so what we what we see with COVID is obviously we have this shut down and when you have a shutdown people are not going out and spending money we are a consumer driven economy we need people to be going out to be going to work to be earning money and then taking that money and spending the money that's how the beast operates so we need people to do that so when you lock in people they're not able to do that when you locked in people we saw unemployment jump and I believe we hit 14% at the high I don't have that number right in front of me but we saw unemployment jump So what the federal government started doing was sending out checks they were sending money to people saying here you go here you go here you go this will help pay your bills it was historic we saw more money in people checking accounts and savings accounts per person than we have seen since the 1950s these are called M1 and M2 but I'm not going to get into that we've done it on an earlier podcast but we had more money in people's hands we've ever seen but they couldn't go out and spend it so that's why you saw the savings rate reach these levels we haven't seen in years.

 

So what's happening when they opened up the economy is they opened up the floodgates here came people rave to get out of their home man and obviously depending on where you lived the risk COVID restrictions differed so on the East Coast and on the West Coast were a little more constrictive or restrictive than they were here in Houston and in Texas and kind of up the middle of the United states So what all these people got out of doors they were spending money and what also happened as a result of the COVID is a tremendous amount of inflation and that's what's scaring people today and scaring people going over into 2022 and I've been having so many talks and I say the same thing every time there's nothing to fear with inflation and I keep repeating it there's nothing to fear with inflation of where I think it really is versus the fear where people think it is there is a difference and that's where we see in the data.

 

So what has caused a lot of this inflation has not just been people spending you can remember high school economics supply and demand where a lot of the inflation came from was the lack of supply the demand remained constant but the lack of supply so there were less goods to be bought which then caused an increase in the prices why were there less goods to be bought because the factories were shut down the transportation system in this country was shut down you couldn't make the goods and then you couldn't ship the goods down to the store and they couldn't put the goods on the shelf so there was a lack of goods it was real simple just imagine what it's like every time here a hurricane comes round you see it with toilet paper and you see it with bottled water it was kind of the exact same thing but that was demand that's demand driven but in this case there wasn't any to be had and so prices jumped across the board right now for used cars you can you can buy a new car for almost the same price that you're paying for a used car because there aren't any new cars to buy they haven't been able to make them they haven't been able to ship them down people haven't been able to get them and so that's why we've seen prices jumping.

 

In fact the Fed just came out today and talked about the inflation rate jumped to 5.3% it looks like that's going to be the total inflation rate for the year 5.3% that's a big number so if you add whatever you were paying add a 5.3 to it and that's what you're paying now in essence that that's how that works but everybody kept saying OK here's the inflation we're just going to keep going that way and I keep saying no we're not we're not going to keep growing like that and the reason why the inflation isn't going to keep growing like that is because the supply chain is coming back in line we're going to people are back at work people are back in the factories we're making goods transportation is back up and running they're getting goods back to the store it's happening so again the supply demand ratio will become more into balance when it's more into balance you see prices will come back down so I think that the combination of several things number one if you look at the unemployment rate it's low and it's only going to get lower what is happening when you have a unemployment rate that's getting lower it is harder for businesses to find employees So what do you think has to go up in order to attract more employees’ wages so wages wage inflation can hurt the earnings of a business no doubt but as long as they have enough business to push those wage inflation through along with the inflation of the product to the end consumer and the end consumer continues to pay it should equal out a little bit also what you're getting is with the wage inflation is people have more money in their hands when people have more money in their hands we do something really good in America we spend money so they're going to go out and they're going to start spending money I think that it's going to continue to be the case so we have a very low unemployment rate.

 

I think it's going to go lower we have cash in people’s hands we have the supply and the demand coming back into balance I think of what that all equals out to be is earnings at companies being pretty doggone good remember I don't have a crystal ball I just don't I can only guesstimate by looking at the data what I think is going to happen I've had three clients over the last week call up and say you got to Get Me Out OK tell me tell me why tell me why you're feeling this fear and that we got to get you out of the market the market's going to come down and then I'll ask this question why in the answer that I'm getting consistently is well because it's up high that's not a really good reason on why the market is going to come down because it's high neither is it a good reason why the market is going to go up when it's low let's look you have to look at the data I think the data is saying that we're going to have prices commodity prices come down in fact we've already seen a lot of it a lot of the inflation down is out I know iron ore prices they're down 60% off the high crew with 87.5% of the time is positive over any 10 year time frame it's 94.1% positive and over any 20 year timeframe going back to twenty 1926 there is never been a period where the markets on negative returns so I think it goes to two to the expression of it's not timing the market but time in the market that can make a real difference for you and so I really strongly feel that people need to just stay in the market granted we are constantly adjusting the overall allocation that someone might have is exposure to stocks for those of you who are retired you have much less exposure to the stock market than those of you who are younger but time in the market is going to make the difference we invest primarily in companies that are growing their revenues at a rate that's faster than their peers I think that is going to continue to work to continue to invest with brand name recognition companies that have low debt and a positive cash flow depending again it all depends upon the time frame but for accounts for kiddos where time frame they should know nothing but stocks you know for the long run retired folks have made them be down to 25% but you kind of get my picture on where I'm going with this it all depends on your allocation so it's not.

 

I hope you can take something positive as far as the prediction is concerned going into 2022 I do think it's going to be good I do think we will still have large bouts of volatility but we should always be ready to take advantage of this volatility by taking the cash that we have via from dividends via from interest whatever it is and reinvesting into the names that we like into the funds that you like whatever it is that you have uses it as an opportunity if you're not using the dividends and the interest to live on to reinvest back into those companies into those particular funds that are buying those companies whatever it may be the case with you.

 

So I wanted to keep it around 20 minutes I wanted to kind of give you this the final little shout out here as we're closing out on the 2021 I plan on being out of the office that we are almost two weeks from Christmas to the end of May be about third of the 4th but that doesn't mean that we're closed up shop we're all still around we can all be reached I'm hoping to increase in 2022 the amount of communication we've been putting out as far as we've been doing the podcast we're doing newsletters I'm doing regular emails I'm going to keep doing that because I do want people to be informed with what's going on of course we always welcome phone calls it is so much more entertaining to speak to you one on one on the phone on the zoom call than it is to crunch numbers at least for me I think there's some people that like Henry win probably likes crunching numbers he's a CPA I'd much rather talk to you as I know something you know I'm a I'm a talker and that is so much more entertaining and fun it makes my day more fun to be able to do that.

 

I'm really looking forward to having those conversations looking forward to seeing more people as this COVID mess continues to dissipate and hopefully go away so it's just something that we study in the history books finally I just want to thank you for your business thank you for all the support that you've given us here at red fish capital R our growth has been nothing short of incredible in 2020 and in 2021 and I'm just really looking forward to 2022 and with speaking with you guys and watching this market continue to grow as I think that's what's going to happen so until we speak until episode #25 which will be coming soon in January good to talk with you have a good day have a Merry Christmas and a great new year.