John Spooner Winter Memo - Shoffner & Associates

Wealth Management
28 State Street
Boston, MA 02109
Tel: 617-589-3234

QUARTERLY MEMO
TO CLIENTS AND FRIENDS
WINTER 2022

When anything appears to be easy in life… Perhaps we haven’t fully
figured it out. The last several years have been among the best periods in market
history to be invested in stock markets, particularly in great American companies.
We’ve been by far the best house in the challenging neighborhoods of the world.

As I’ve often written to you, over the years there are many bumps in the
road in financial markets. We’ve had a long run, primarily, in our view, because of
one thing: record low interest rates. Most of you, if polled about your tolerance for
risk would say… “Conservative. No speculation.” Historically, ‘conservative’
meant preservation of capital. But for years the safe havens: CDs, treasuries,
money market funds, yielded almost nothing for the buyers. Retired people
almost all need income, cash flow. They cannot afford to get almost zero on
these ‘safe havens’. That’s the single biggest reason, in our opinion, that cash
flowed into stocks. If one could get a 3% or higher dividend from a healthcare
company… plus perhaps eventually growth as a bonus, it sounded like a good
risk. It has been, over the last decade.

Now rates are predicted to rise, as inflation has escalated. Ten year US
Treasuries, which had traded around half of one percent, are now 2%. Even
though rates will rise, in our opinion the rates will go nowhere near 1970s levels.
For those who do not recall history, in a decade interest rates went to 20% as did
mortgage rates. You could buy a 30 year Treasury paying 15%. At these no-risk
rates, who would need the stock market? Even if the 10 year Treasury goes to
3%, I would still prefer to watch my assets grow over time, not to stagnate. I’ve
maintained many times over the years that the Dow Jones Industrials stood at
650 when I was the clueless rookie in this business. Do you think we’ve had
wars, panics, disastrous presidencies, natural disasters, 9/11, the meltdown of
’08-’09… The Pandemic? Not only are investors in our markets still standing, if
you stayed the course investing in strong companies… You most likely thrived.

Just a few words about the current market jitters, driven by inflation fears
and Ukraine headlines. You can feel anxious, but the things in life that really
damage us are events virtually no one saw coming. Almost anything headline
driven that wakes you at 3:30AM, will very likely never really harm you. But Pearl
Harbor, the JFK assassination, 9/11, the economic meltdown of ’08/’09, the
pandemic… almost no one predicted these horrendous events. I’ll say this again:
don’t be a headline reactor, unless you really know the truth behind those
headlines. We have a plan for your money. A plan that has evolved through
decades of chaos and bear markets. Our purpose is to guide you through these
storms, with deep experience and common sense.

The invasion of Ukraine is horrendous and thousands of commentators are
holding court on the implications. The wonderful woman who has done cleaning
for me came in today and said, “Life is up and down.” She’s right. We have a plan
for your financial future. Many have dividends, cash flow to you from almost
everything you hold here. We also have cash reserves to take advantage of
opportunities. Down the road, new headlines will replace the Ukraine as the next
challenge. We’ll always have challenges.

Be productive in your own lives. Love your friends and family. In time,
investing in strong companies with fine future prospects will most likely serve you
well.

We don’t want you to forget that we try to go against the ‘madness of
crowds’, avoiding fads. In the recent selloff of 2022, the biggest damage has
taken place in so-called ‘high flyers’, companies driven by high expectations and
no earnings. We have concentrated in areas that we think will perform well in a
new environment: healthcare, energy, financials. And the dividends they produce,
most paying more than 10 year Treasuries. In other words, current income plus
potential capital appreciation.

That’s our story and we’re sticking to it.

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be appropriate for all investors. Morgan Stanley Wealth Management recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Morgan Stanley does not provide tax or legal advice. Please consult your tax and/or legal advisor for such guidance. The above information was obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. This is not an official Morgan Stanley statement. Refer to the original statement received. Informational purposes only. Information furnished was obtained from sources we believe reliable. No guarantee is made to its accuracy. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally the leaders in their industry. An investment cannot be made directly in a market index. The views expressed herein are those of the
author and so not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.

The investments listed may not be appropriate for all investors. Morgan Stanley Smith Barney LLC recommends that investors independently evaluate particular investments, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment will depend upon an investor’s individual circumstances and objectives.

Equity securities may fluctuate in response to news on companies, industries, market conditions and the general economic environment. Companies cannot assure or guarantee a certain rate of return or dividend yield; they can increase, decrease or totally eliminate their dividends without notice.

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