The Markets

The world’s stock markets went wild with dramatic swings during the fourth quarter of 2018. Investors pulled $76 billion out of stocks in December alone, the most ever for that month. On Christmas Eve, the 10-year bull market almost came to an end, but then, “miraculously”, recovered.  With substantial volatility becoming the norm, major indexes, at least for now, retain some resiliency. When people ask how we react to this kind of market action, we say it is expected and not a cause for concern. The stock market has gone up 2 ½ times since March of 2009, when interest rates were dramatically and continuously cut in a concerted effort by the world’s central banks to shore up the public’s sense of confidence. There is no reason why the market should continue to go up the way that it has for the last decade and every reason for it to have a pullback, perhaps even for an extended period of time. This would be healthy and set the stage for the next bull market. The handwringing we have witnessed so far has been relatively mild as we have not yet seen people changing careers into or out of the investment business like we saw in 2000 and 2008. We are overdue for a major correction, even a real recession, but when that will occur remains to be seen.

The Dow Jones Industrial Average lost 6.7% in 2018 and the overall US stock market lost 7.8%. The technology laden NASDAQ 100 index was down only 1.7% while U.S. financial stocks lost 16%.  Energy stocks, following a precipitous decline in the price of oil, lost 19%. The global stock market, excluding the U.S., lost 16.6% over the last 12 months. The biggest contributing factor was China, which lost 24.4%. Japan was down 15.8% and the European markets as a whole declined 13.6%. The industrial powerhouse of Germany lost 18% while nearly bankrupt Italy was only down by 16%, go figure!  Brazil had one of the best performing global stock markets, up 15%, partially due to the election of a new ultra-conservative government that is promising to root out corruption, promote market reforms, etc. We have heard that before.

In the bond markets, the U.S. overall market lost .1% with mid-range corporate bonds slipping 2.6% and long-term U.S. government bonds down 4%. The Rikoon Group’s portfolios of bonds are generally very short corporate’s and so we fared well compared to long maturities in all areas. The average money market rate is now .6% with five-year CDs paying 2%.  The cost of a 30-year mortgage is around 4.6%, which is not too bad.

Most government bonds overseas had positive returns due to the lack of foreign central bank interest rate hikes in 2018. On average, global corporate bonds were up .93%, not much compensation for U.S. investors taking on non-dollar currency risk and tying those funds up for a while. Municipal bonds performed about the same as global governments with pretty much no overall gain or loss in general, there were no huge surprises or wild swings in market prices for U.S. bonds during the year. This kind of stability ties in with the theme discussed at length below of central-bank coordination and intervention in the markets.  High-yield corporate bonds, which we feel are the proverbial “canary in the coal mine,” declined 7% while crude oil lost 25% of its value. One of the best performing assets during 2018 was natural gas, up 12%, while gold declined 2%.

Mountains of Debt

This quarter’s commentary is longer than most because I have come to the conclusion that most of the developed world is shouldering an untenable burden of debt that will never be repaid (see cartoon).  If any of the major industrialized countries were to default, the rest of us would surely suffer. Governments in Europe, the U.S., Japan and China must therefore do their best to control investor sentiment.  For example, a huge selloff in US treasuries by the Chinese government would adversely impact the United States in important ways just like a great recession in the U.S. would negatively impact China.  Many companies and almost all sovereign nations are now thought to be “strategically important,” that is to say their bankruptcy would create a domino effect and the entire world’s financial system might be at risk.

Italy is a notable example. With a national debt far outstripping its ability to pay interest due, much less repay the principal, the European Union has propped up the Italian economy by bending the rules for fear of the crescendo effect that an Italian bankruptcy might produce. Greece is in worse shape than Italy, and Cyprus is in worse shape than Greece. Spain and France are not far behind Italy in terms of their economic woes.  The recent spike in Italian interest rates is instructive in that Italy, like the U.S., has benefited from ultra-low interest rates alongside of central banks’ asset purchases over the last ten years. Without this kind of support, Italy would be broke.  On an objective basis, looking at its debt and inability to pay off its maturing bonds or keep up with interest payments, it is in fact broke.

The weird thing is that Italy pays the same interest rates as Germany, which has half of the amount of debt. This refusal to face reality cannot go on unless European Union countries band together and decide to hide Italy and Greece’s problems under the skirts of Germany and the other northern European countries. To do this, it would have to be done behind closed doors, as it would be resoundingly defeated if they were to ask permission from the citizens of the EU.

The Italian banks are a disaster and no measures have been taken by the Italian government to tighten their belts.  They could proceed by selling assets or opening up their markets to competition, but this runs counter to their culture.  The Italian government and financial institutions are locked together in a dependent dance which can only successfully be kept in place by greater central control of EU government authorities. Italian banks are now extensions of the government, and their industrial corporations may soon follow.  This means that the Western European model will start to look more like that of the Chinese, with attendant social controls. That is one of the true costs of not paying back one’s debts, just ask the Lannisters of “Game of Thrones” fame.

China, the European Union, Japan and the United States represent the vast majority of outstanding government debt, and the United States is now one toke over the line of ever being able to repay it. Back in the day, there was an assumption that the truth about a nation or company or individual’s financial situation would eventually become known and that the consequences of poor fiscal management would be borne by the offending party. If this is no longer the case, it is an important challenge for us as long-term investors.

Being economic thinkers and financial planners, our job is to look ahead and see what the implications are of possible scenarios where the world’s government debts are never brought under control, where companies’ misfortunes are kept from the investing public’s view.  Because of the preponderance of global government and corporate debt, and the absolute impossibility of avoiding the mathematical truth that nations that owe more than they produce in a full calendar year will never pay off their debt, the only way the global economic system has of coping with this imbalance is to cheapen the quality of mass products and make quality goods/services more expensive.  The environmental impact of this trend is obviously profound as cheap goods quickly become unusable and generally are unrepairable, adding to the mountains of plastic and electronic garbage dumped on land and in the ocean.

The compounding weight of increases in the cost of quality services includes medicine, education, automobiles, physical and electronic security, and establishing/maintaining desirable places to live/work/play. The global economy has spread out the negative impact of the U.S. debt burden, Japan’s demographic time bomb, China’s voracious appetite for resources and Europe’s tolerance for bureaucratic autocracy so that most of us are, in some measure, under the auspices of some kind of government control. It is our conclusion that we must be willing to go out on some kind of an investing limb if we want to offset the tidal wave of debt that will hit the shore this century.

For some time, I have been looking for an underlying unifying theme that would explain how increasing government intervention in the markets since the start of the 21st century has changed the basic economic tenets under which we operate. Below is a brief recap of how we came to this new type of world economic order.

It’s necessary to look back 80 years, to the 1940s, when World War II began.   There was a 20-year intense focus on building industrial power, first to win the war and then to manage the inevitable reconstruction boom that followed after VE and VJ days. In the 1960s, the United States continued its ascendancy as Europe and Japan regained their footings, while China and the third world entered a period of rapid cultural change.  Gold’s meteoric rise in the 1970s was accompanied by the stock market’s abject failure to keep up with the inflation produced by Arab nations wielding their oil power.  Japan regained standing on the world stage by flexing their manufacturing muscles while Europe, with the exception of post-Marshall Plan Germany, never recovered its industrial or global trading preeminence.  European banks and institutional wealth were able to retain their vast store of riches from the past, the result of several centuries of colonial dominance. In the 1980s, America continued to dominate the world’s markets by leading the way in deregulation, tax reduction and foreign influence.  The end of social idealism of Johnson’s Great Society was accompanied by the beginning visions of environmental consciousness while the actual planet’s physical ecosystem began to decline.

In the 1990s, the developed world’s economies were propelled by the rise of the internet and America’s preeminent position as home to the world’s largest and most aggressive telecommunication and technology companies, all of which crashed at the same time as terrorism reared its troublesome head. Terrorism and all forms of rebellion are, I believe, the visible sign that economically disenfranchised populations have no hope of participating in bettering their lot.   Though they often have ideological and religious overtones, terrorism and rebellion take place as last-ditch efforts of educated middle-class idealists who cannot see a brighter future for themselves under present frustrating conditions.

The Western world has now regularly been having to deal with terrorism for 20 years, a part of the tool bag developed for this conflict are transnational central-bank collaboration and security force coordination.  The decade of fighting terrorism and moribund real economic growth from 2000 to 2010 set the stage for the global debt trap which we are now discussing, and it also brought forth the first truly powerful internationally coordinated bureaucracy, staffed by unelected officials, whose job it is to head off potential unrest. I believe that during this next decade, we will see a great reset of the boundaries of government, giving unelected officials vastly increased leverage over the macro structures of commerce.  This will affect international trade, the flow of capital across borders, and greatly impact individual country’s domestic policies, especially as they relate to social services. Overall, it will be characterized by a continued loss of individual autonomy.

The present decade, from 2010 to 2020, has been marked by the rise of mega-tech companies and the world’s governments interceding as arbiters of markets. Depending on the local culture, it has manifested in China in terms of what social behavior is acceptable, in Japan, the endgame of its isolated culture being crushed by its astronomical debt, all foisted on a rapidly declining population.  The liberal democracies of Western Europe face, for the first time, real minority and ethnic conflict while trying to deal with their mostly chronically stalled economies that lack opportunities for their youth.  The hallmark of the U.S. has been that, although we have maintained our military and economic preeminence, our democratic underpinnings have been eaten away by a culture of untruths and an increasingly passive population. As our public infrastructures deteriorate, including education, mental and physical health, as well as highways and mass transportation, we risk having our domestic intellectual stock fall further behind our competitors in other parts of the world.

Now that most of the world’s largest economies’ government debt cannot and will not be paid off – how is the investing public impacted by this latent form of bankruptcy? It must unfold without generating panic or civil unrest.  As governments must continue to issue more and more debt, just to pay the interest on their current debt, the hope is that citizens will continue to have money, either through entitlements or nominal jobs, to spend on consumer goods. Most working people in both the developed and developing worlds already have access to cheap goods, not only in terms of price but also in quality. People everywhere are living longer, and, with their smartphones, there are few places where the general population is unaware of the goods and services enjoyed by people in the EU and the United States. Expectations are, therefore, becoming more uniform throughout the planet.

As goods have become cheaper and dependency on electronic devices more prevalent, it seems to me that people’s ability to think independently has and will continue to go down. Although many people of all ages are concerned about the fate of their disposable goods, the effort it takes to do something about non-recyclable materials is considerable. Addictive behavior, promoted by electronic gaming devices, goes hand-in-hand with the loss of mental acuity.  If global government and banking debts are unrepayable, then perhaps it is best that the general public is unaware and has their eyes glued on their phones.

Factories being built today, and most businesses, are looking to reduce the number of human beings needed to operate the business.  People are messy, make mistakes, get sick, occasionally go on strike, quit without notice, commit large and petty crimes, etc.  With the world’s population moving up towards 8 billion, a much smaller percentage of people will be needed to perform “basic” jobs like running transportation systems, delivering goods and so on. When a sizable portion of the population is not productively employed, the only way to keep them from causing trouble is to satiate and entertain them.

The drive for increased productivity on the part of corporations depends on removing the human beings, and their associated expenses, from the production chain as much as possible. There must be an appearance of “abundance”, no matter that the quality or substance appears to be irrelevant.  To produce goods for 8 billion people without soiling the environment beyond repair, like a petri dish of overly successful reproductive organisms, means that consumers worldwide must have less choice, less privacy, less voice and more rules to follow – that will be part of the price to pay for endless “peace and prosperity.”

Previous generations, who saved their money in banks or conservative bond vehicles, have seen their purchasing power decline in major but covert ways. No one who lives on a fixed income is in nearly as good shape today as they were 10 years ago, and we think that decline continues. No matter how harsh the reality is, we as financial advisors to families must make the best of things as they are.

Officially of course, there is still “low to no” inflation. There is an unspoken agreement among central banks that there is a necessity to keep interest rates below 4% because, in an economy where government debt exceeds the gross national product, interest on government debt will soon sink the regime that allows the public to figure out that they, the authorities, are plumb broke.  It is apparent that bond and savings accounts are not throwing off enough income to keep up with their personal loss of purchasing power. Conservative investment plans no longer carry their weight and as a result, there is and will continue to be a massive underfunding of public pension plans because they were set up with erroneous assumptions about investment rates of return. These social contracts between the government and taxpayers must eventually be broken unless there is a sale of public assets to cover our debts. We will hear much more about the potential sale of public assets soon enough.

It is generally acknowledged that our nation’s infrastructure needs rebuilding.  Of course, there are no surplus funds from tax revenues to follow through on the commitment to fix decaying roads, bridges and public transportation systems. If the Federal government had to match expenditures with its income, very little would be possible. Historically, countries and companies and individuals with large debts and no income have had to sell off capital assets to repay their debts. What would that look like? It need not take the form of outright transfers of property – be they physical or intellectual. How about restricting access to local, state and national parks to those that can afford to pay for their maintenance? What about the establishment of barriers to entry to quality libraries, art collections and universities? This would be one way, without calling it an outright sale, to transfer the enjoyment of the wealth of the nation to rich people who can contribute to the perpetual renewal of the country’s debts. The stratification of American society by wealth level has been underway since the Reagan years but it’s not called a caste system – yet.

The complacency that populations in the U.S., Japan and China feel about the debt problem is partially due to the fact that these societies can issue debt in their own currency, so they are somewhat inured to the markets. In the case of the United States, the strength of our military and the relative cultural attractiveness of our society continues to attract capital to our shores. Japan, because of their extremely high savings rate and the societal constraints to not make waves, allows their government to have twice the debt that it can service, even though its payments for interest are low because of the chronically moribund economy there.

It is well-known that the international bailout of the financial system in late 2007 through 2010 saved the investment and commercial banking systems biggest players, but it also produced a notable restraint in growth on Main Street because banks were discouraged from lending and have now lost much of their ability and motivation to do so. The tidal wave of money that entered the financial world has recalibrated the balance of activity away from producing things and towards consumption based on the value of financial, as opposed to real assets. Typically, a huge increase in the amount of money sloshing around the system would produce inflation, but this has not been the case.  In many ways, we are seeing a reversal of what happened during the 1970s when oil and food multiplied in price along with gold.

We actually have experienced decreasing prices for some forms of energy due to overproduction and new extraction techniques, and there are many places where cheap food is available even if it is essentially bad for one’s long term health. The mass production of electronics has flattened the price of entertainment devices and consumer goods, even if they break after one or two seasons. The rise of real estate prices in urban areas around the world stands in sharp contrast to the price of unproductive land in rural areas.  There are, therefore, sharp economic class divisions wherever the value of assets favors those with certain kinds of education, interests, and geographic locations. Unfortunately, the ongoing degradation of the natural environment is one of the few ways that “mass affluence on the cheap” manifests itself around the world along with the rise of obesity, addiction, depression, and the constant dumbing down of public (and some private) education.

To recap the difference between today’s and the 20th century’s economy, back then real assets appreciated, and the price of quality goods went up and so the cost of traveling kept most people home.  This allowed for ample job creation to provide genuine person-to-person services. Homes in suburban areas appreciated because of flight from increasingly dangerous cities.  The stock market went up and down with real inflation, and the economy had starts and stops because it was unmanaged. There were no central authorities to “keep the peace.”

Today, we have mountains of debt which cannot be paid off unless public assets are sold, which is exactly what was contemplated to resolve the City of Detroit’s bankruptcy filing earlier this decade.  Only last-minute intercession from major corporations and foundations saved the city’s art collection from auction.  Now, as new debt makes its way into increased prices for financial assets, the value of hard assets like commodities have fallen.   Likewise, homes in suburban and rural areas that are “less desirable” or “unproductive” in the new “gig” economy (temporary positions) have spiraled downwards. Urban migration has benefited those in desirable city centers, thereby pushing low-income families further out into decaying suburbs, further resulting in the decreasing quality of lower and middle-income American life, both qualitatively and quantitatively.

As we look ahead towards investing strategies for the next decade or two, what the general population does and buys, and how they recreate and procreate, will have a great influence on the markets.  I do not think that this is part of some grand design to cheat the world’s population out of their hopes and aspirations for a better economic future. It is the simple result of a collective cowardice and failure to address the challenge of living within our means.

This next reset will be different from what occurred in the 1930s and the 1970s, both periods when a general debasement of money’s value occurred. We need not have runaway inflation, nor renege on our debt, nor devalue our currency.  These are the three traditional means of shunting off debt.  It is my belief that the decade from 2020-2030 will be one of a continuing decline in the quality of goods and services available so that there appears to be great abundance even as the quality of life exhibits a steady decline, as measured in our human physical and mental health as well as by other species and the planet’s health. It doesn’t mean we will not live longer, just in a more beleaguered way.

Over the last 20 years, the amount of outstanding government debt worldwide has tripled. It is off the charts and investors do not seem to care that this has allowed countries like Japan to keep from going into a depression and China to expand the size of its middle-class.   For every dollar lent, there is somebody who is expecting that money back. As I have stated above several times, mathematically speaking, there is no way that most government debt can be paid back, or even that a portion of it will be – especially if interest rates rise. Through concerted and coordinated action, the central banks have all issued debt at nearly the same time and together, they have driven interest rates down on purpose so as to allay public anxiety.

During the Great Recession, not only were interest rates reduced, but the financial institutions that serve the general population were allowed to make money without making loans.  The government loaned money to banks at no interest and then allowed the banks to redeposit those loans in other government vehicles (bonds) that paid interest.  So, the banks had a no-brainer, risk-free return on “their” money.  This was and is ridiculous, but investors did not object since we were all making money too.  There is widespread complacency among institutions and individuals alike that our government’s debt cannot go bad, which may be true superficially, but the cost will be a de facto admission that unelected people with no obligation to respond to the public’s concerns will become larger players in our daily lives.

This construct is evidenced in the belief investors hold that the U.S. budget deficit can expand indefinitely, without negative consequences. Low quality corporate debt is at its highest level ever and U.S. household debt is back at the level it was before the 2007-2008 financial crisis, close to $4 trillion. No one seems to worry about this, because headline (reported) inflation is low and unemployment numbers are supposedly positive.  Many banks offer credit to strapped consumers and automobile companies, desperate to keep their production facilities open, who are extending credit to people who cannot afford to repay their loans.

American consumers, in addition to the $4 trillion in personal debt, also hold $10 trillion in mortgage debt. The average U.S. consumer owes $7,000 on their credit cards and the average loan for a new car is $31,000. How can inflation not exist when the price of a basic car is twice what it was 10 years ago? This equates to an annual rate of 7.2% inflation, not 2% as the government reports. The first signs of problems with losses from consumer debt are becoming evident in credit cards and student loans. Outstanding student loans stand at approximately $1.5 trillion, and it is likely that over half will not be paid back.  No matter, the government picks up that tab!

Paying back one’s government debt is only important when citizens expect to have a future free of external control. The debt weighing on China is a case in point. The Chinese government is stressing the transition from being export-driven to relying on domestic consumer demand. The Chinese central bank continues to allow its financial institutions to extend more credit to consumers and to inefficient state-supported enterprises, as well as to local governments in the hope that jobs will be created. This to prevent a slide into an economic contraction, which in China could possibly mean riots in the street. The Chinese are excellent controllers of news and so even if half their state-owned enterprises are bankrupt, they can be kept open.

The U.S. government is one of the few developed nation’s economies that is expected to have its debt level continue to rise because of tax cuts and increased spending by the Trump administration. We’ve added approximately $1 trillion to our debt over the last two years with minimal reported increase in inflation or interest rates.  This is crazy, and it means that the government’s role in the financial markets must continue to rise because, as the math gets worse, it is all the more important to make sure a crisis of confidence does not occur.

For years, our government statistics have been used as tools to retain the public’s sense of confidence. This has worked, by and large for the last 20 years, and in Europe, the European Central Bank and EU governors have done the same. Occasionally, events in the political sphere, such as the recent Italian government elections, resulted in an unexpected surge of power for both left- and right-wing populist parties who took control of the government. Both were brought into line by the European Union fiscal noose tightening around their necks. The Italian budget deficit has been wrangled down to where the investing public’s confidence has been reestablished.  Italian government bonds are paying 3%, similar to U.S. government bond yields, and this for a country that has a debt 1.3 times its national economic output. Greece, Spain and France all are in the same ballpark. Manipulation of economic data is crucial to maintaining the public’s confidence and willingness to buy low interest rate debt.

I now believe that the world’s largest governments can borrow money, control interest rates and fool the investing public indefinitely, but at the cost of real rates of return continuing to decline.  Our need, as investment professionals, to have a return on investment that keeps up with the real rate of inflation, plus capital drawdowns, becomes all the more challenging.  This has major implications for financial planning. With expected returns of bonds in the 3% to 4% range, and for stocks to return in the 5% to 6% range, traditional public investing will fall short of its goal. An investment return of 7% to 8% is necessary to keep pace with inflation and normal expenditures, otherwise capital will be depleted.

We are in the midst of a great reset in which the control of capital moves increasingly under the government’s umbrella and out of the hands of individuals. Even corporate pension plans have lost control of their own future by being caught between actuarial assumptions, political necessity and actual declining rates of return on their portfolios. Investing in the time-honored traditional way – allocating between stocks, bonds, and cash, will fail to produce the required results over the next several decades.

To summarize, the governments of the developed world will not pay back their loans.  In order to successfully escape their financial plight, they must exert increasing control over the markets, which, by definition, will drive stock and bond returns down on a permanent basis, far beneath the necessary level to keep up with the real rate of inflation.  The general public is now only a peripheral player on stock exchanges and in the bond markets.   To offset this loss of economic opportunity and avoid being marginalized as individuals, we have to diversify in creative ways.  Our job is to understand and address this challenge on behalf of our clients.

Cannabis – is it a worthwhile Investment opportunity?

We see plenty of opportunities to invest in creative startup marijuana businesses, on a local and national scale but, as of yet, have not yet fired any of them up. A conservative investor friend of mine called me and wanted to know if I was interested in participating in a private equity deal, to participate alongside some big private European investors in a West Coast of Canada marijuana production facility. I thought about it for a minute and decided that even if it were to make a lot of money, I didn’t want to participate.

My feelings about marijuana are similar to how I feel about gambling – which is that a little bit on occasion can be fun but the dangers that it poses to people who are unable to regulate themselves are severe.  I believe that the incremental pleasure it produces for more cautious people is far less than the cost it imposes on those who are less fortunate and cannot handle the activity. This is not to say that I am against the decriminalization of marijuana (and pretty much all drugs) because drug users are not de facto criminals, mostly they are just ill. Having experienced personal family tragedy from these substances, as have most Americans, rather than debate the benefits versus costs of legalization, the question for me is how to restrict their use, allow it to be consumed in safe and private ways, and get help to people who are unable to cope.

With the change in cultural norms and laws on the state level, nearly 200,000,000 Americans live in states that have some form of legalized marijuana use. Like gambling on the Native American reservations, there are mixed results. The good news is that legalization has cut down on the number of prisoners in the prison system, a good thing after decades of uneven enforcement and punishment standards for marijuana possession. About 15% of Americans used marijuana at least once in 2017, a 50% increase over the year before.  Only about 1/5 of Americans use marijuana as drink alcohol.

On the other hand, the number of people who use THC based products on a regular basis has gone up dramatically. Over the last 10 years, the number of habitual marijuana users has almost tripled to 8 million which is getting close to the 12 million Americans who drink alcohol every day. It is estimated that today’s marijuana contains 10 times the amount of THC, the active ingredient, than pot contained 30 years ago.   It is difficult to say what the effects of marijuana use are in the U.S. because records are not kept nor has there been a lot of time in this country to do so. Researchers in Finland and Denmark, however, have kept records and they show a significant increase in marijuana induced psychosis episodes.

The fact that the number of serious mental illness cases in the United States is increasing may be coincidental but maybe not. The use of marijuana does not produce either psychosis or violence in most people, but some studies indicate that mentally ill people who use marijuana have more acute psychotic episodes.  Again, looking at other countries who do keep track of marijuana use and their attendant social impacts show that the widespread cautionary notes about paranoia as a side effect of marijuana is warranted and that its use by certain segments of the population may translate, in time, into increased violent activity.

Generally, my main concern is over marijuana’s impact on young people’s motivational levels. Some of this may be the result of the widespread lack of rigorous educational standards and the predominance of easy access to electronic devices that flood our young adults’ brains with music, dialogue and imagery via YouTube, movies and TV.  We may look back and see that the benefits of marijuana use were not as high as expected and the costs considerable, much as the smartphone may be seen, in retrospect, to not be a positive influence on young people’s ability to communicate or learn.  Overall, we advise people to pass on investing in marijuana ventures.  There will be a few people who make a lot of money by selling out to the giant corporate cigarette manufacturers who will be the ones that end up controlling marijuana commerce within a few years.

Staff Updates

Rob Rikoon: The holiday season was quiet as, for the most part, my end of the year intent is generally to not travel and have some consistent nonwork time in the studio. It is also an excellent opportunity for reviewing the old year and planning for the new one. During the first quarter, I will be taking a one-week trip to Amsterdam and Berlin with a focus on art museums and will be traveling with one of my high school friends who is now a social worker at a charter school in Harlem. My interest in being part of the team involved in creating artist/crafts persons live/work spaces using modular metal buildings with lots of light and flexibility continues apace with several projects in the works for newly designated “opportunity zones” in North Carolina and also potentially in New Mexico.

Kyle Burns: For the holidays, my family and I traveled to Bucerias, Mexico, a small beach town outside of Puerto Vallarta. We missed our New Mexico holiday traditions, but had a really great time in Mexico where our primary responsibility was going to the beach each day and figuring out where to get tacos. As a parent, it was nice to let the boys loose for a week without having to worry about cleaning their rooms or doing homework. I am excited for 2019 to kick off with my wife entering her last semester of her Nurse Practitioner studies and the boys joining the school basketball team.

Contessa Archuleta: I spent the holidays celebrating with family and friends and admiring the beautiful winter weather here in New Mexico.  Now that 2018 has come to an end, I reflect on all the blessings in my life – my family, home and friends, health, fulfilling career, and new friendships I formed.  I am looking forward to the new adventures that await me and my family in 2019.  We plan to explore the mountains of northern New Mexico and southern Colorado by getting in as much hiking, camping, and ATV riding as possible.  I also hope to fit in a beach vacation at some point too.

Keren James: My son and I spent the holidays in California with my family eating a lot of dim sum, and playing various board and card games. It was wonderful to be in the Bay Area, but I am always so happy to come home to Santa Fe. The snow is beautiful, and I am hoping to go cross-country skiing over the next few weeks. I am excited about the changes that 2019 has in store for us. My son is transitioning into a new school this month, and I am continuing my studies in preparation for the Series 65 exam. Here is to a year of growth!

Anthony Penner: The Holidays were especially calm and quiet this year. Most of which was spent at home starting new traditions with my family. This was the first year my daughter was engaged in the whole concept of Christmas and Santa Claus, which made it especially enjoyable for my wife and I putting everything together for her. The New Year was brought in with a nice dinner and some Holiday Cheer with friends. Now we look ahead to the many adventures 2019 will bring.

Patrick Gendron: With the arrival of winter and some much-needed precipitation, I have been making my way up to Ski Santa Fe as much as possible to go Snowboarding.  I am very grateful to live so close to the mountains and really enjoy getting out amongst the trees.  The holiday season around Santa Fe is magical and my girlfriend and I had a great time doing the Canyon Road Farolito Walk on Christmas Eve.  We also had a fun time going out dancing with friends on New Year’s Eve.  Now it is time to get focused on 2019 and I definitely have a lot of goals. Most of my goals are work related but I am also looking forward to attending Yoga classes more regularly and reading more at home.

Jeff Sand: This fall, the solar electric system was completed on the roof of our house and so now it is fully operational. In December before the snow arrived, we were able to finish pouring the cement slab for the casita that we are building. It was an interesting and new process for me because we are using radiant heating in the floors. We had to lay out the tubing on a wire mesh and then lift up the tubing and mesh as the cement was being poured so that it will rest approximately in the middle of the concrete and not lie at the bottom. The winter weather has now stalled most of our other construction projects and so we will have a bit of a break until the spring time. Future projects, beside the casita, include a garage and a horse shelter and corral.

Gayle Johnson: 2018 was an amazing year; I can’t thank my loyal clients enough!  Now it’s onward and upward into a New Year, of adventure, opportunities, and appreciation of the good in all of us.  New Mexico has been blessed with moisture, and I’m hopeful the lakes will be full for summer boating. I look forward to sharing laughs with my “grandgirlz”, enjoying a Rolling Stones concert (it’s on the bucket list!), and spending more time in the glorious outdoors.  Together, we will navigate these markets, with your goals in mind, and a positive eye on the future.

Upcoming Teas

Please join us for our quarterly gathering at 2218 Old Arroyo Chamiso in Santa Fe to discuss economic and market related events on Wednesday, March 13th from 3:30 to 5 p.m. (MT). The call-in” tea” will occur on Thursday, March 14th from 3:30 to 4:30 p.m. (MT). The call-in number is 719.234.7872, code: 470070#.