The Value of Nothing

In The Picture of Dorian Gray, novelist, Oscar Wilde wrote “Nowadays people know the price of everything and the value of nothing.” I am mindful of how applicable this quote is to investor behavior over the past few years. We have the price of everything available instantly on our mobile devices, but we’ve lost our curiosity about the true value of things. When this bull market ends, investors who have grown complacent in this area will pay a hefty financial price.

This is the lesson of market volatility. We have experienced nine years of consistent, increases in the broad stock market averages with little in the way of normal corrective price action along the way. There are sound arguments about the suspect nature of this low volatility bull market. Most of these observations cast a critical eye toward the powerful yet secretive Federal Reserve Bank system. The Federal Reserve’s unprecedented use of “creative” techniques after the housing bubble contributed to the bull market in ways that will take decades to understand. The deluge of stock buybacks which were often funded by corporations' ability to borrow money at near zero interest rates are one example of suspect behavior that the Fed's policies promoted.  

Long bull markets also tempt investors to consider two familiar forks in the behavioral road. Without the occasional price correction to jolt slumbering investors, they can drift into lazy thinking and numbly follow herd behavior. They forego the hard work of calculating the true value of their financial assets and simply trust in the masses. Other investors take the fork to blind hubris. They misinterpret market action as an affirmation of their intellect and ability to discern future price action. These investors adopt the mindset of short-term traders, churning through tweets, blog posts and charting software. They begin to trade higher risk instruments that they have little experience or understanding of but, as the bull rages, their risks pay off frequently enough to amplify their behavioral miscalculations.

We highlighted Tesla and Netflix in January as prime examples of the price/value conundrum. Netflix generates revenue but returns no money to shareholders. In fact, the company is burning through billions of dollars creating original shows with little expectation for how profitable the shows will be. The price of Netflix stock increased from $190 in January to $423 per share in June. Now (October 2018) it is on the verge of breaking $300.


This 122% jump followed by a 29% decline demonstrates the gap between the price of the company and the value of it’s shares. Placing a tangible value on Netflix requires making many unknowable assumptions about the future. Investors are left following a price trend that could reverse violently at any time.

I have a name for opportunities like Netflix and Tesla – uninvestable. There are other examples of companies whose stock price bears little resemblance to the intrinsic value of their products, services and financial assets. The Federal Reserve started reversing the housing crisis recovery experiments a couple of years ago. Stock investors were slow to understand the Fed’s persistence. Price volatility this year is an indication that investors are beginning to examine the price they have paid versus the value they bought. We have further to go before this price/value gap returns to historical norms.

Once they acknowledge the disconnect between prices and values in domestic stocks, investors can look at foreign markets where the price/value ratio is more favorable to long term appreciation. Pursuing value is our preferred path to build long term wealth.

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Welcome Our Newest LeConte Team Member

LeConte Wealth Management, LLC, announced today that Alex Willard has joined the firm as a Planning Associate. In that role, he will support the firm’s financial planning and tax preparation services.   

      

A former LeConte intern, Alex joins the firm after graduating Magna Cum Laude from Maryville College with a degree in Finance and Accounting in 2017. While an undergraduate, he was recognized as the Maryville College Outstanding Senior, received the Judson B. Murphy Endowed Business Award and was a winner of the Maryville College Spirit of the Covenant Award.  He served as an RA during his four years on campus and was recognized for his leadership with the Resident Life Distinguished Service Award in 2017.  He played Wide Receiver for the Fighting Scots football team and served as Co-Chair of the Peer Mentor program.

“We are excited to have Alex as a full-time team member after his internship this past spring,” said Jon Dockery, Director of Financial Planning.  “His character and work ethic make him a perfect fit as we continue to expand our practice.  He was an integral part of our tax team during his internship, and we look forward to further involve him in supporting our clients.” A Clinton native, Alex resides in his hometown and enjoys spending time outdoors and spending time with his family.

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Join the LeConte Team



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Update

We have filled this position. Stay tuned to meet our new associate!


LeConte Wealth Management, LLC is a full-service wealth management firm located in Maryville, TN. We provide counsel that helps people make good choices with their financial resources to help them achieve financial independence and fulfillment. We rely on teamwork, technology and decades of experience to deliver results for our clients.

Status: Exempt, health insurance and profit sharing benefits available. Two weeks paid vacation after probationary period.

Reports to: Managing Partners, Director of Financial Planning
This is a summary outline of the responsibilities initially required of a Junior Planning Associate for LeConte Wealth Management.
Our Planning Associate is an integral part of our ensemble organization. With financial planning responsibility for the firm's clients, a Planning Associate learns to be an advisor-- first, by assisting in building the business while allowing the Lead Advisor to focus on advising the clients. A successful Planning Associate may then move up to advising clients, dependent on licensing, experience and expertise.

SUMMARY OF ESSENTIAL DUTIES

A Planning Associate supports the firm’s ensemble of advisors by aiding with a variety of tasks so the advisors are more efficient and focused on business development and professional responsibilities. They must be passionate about helping individuals achieve their goals by overcoming their financial and behavioral shortcomings. The candidate must enjoy working on a collaborative team to learn from other team members. Specific areas of responsibility include, but are not limited to:

PLANNING SUPPORT

  • Attend client meetings; take, assemble and transcribe notes relative to action items, tasks and decisions made during appointments.
  • Assist with signature collection from clients, copying of documents or other tasks required during client meetings
  • Monitor and follow up with all action items from client meetings
  • Monitor and follow up with all work-related notes with members of staff, reps or clients
  • Schedule client appointments according to work or Advisory Report mailings
  • Calendar, confirm and start appointment preparation for each client appointment set
  • Can maintain a flexible weekly work schedule, which will include working evenings as needed and may include an occasional weekend day.
  • Prepare and analyze personal and business tax returns (training provided)

ADVISORY OPERATIONS SUPPORT

  • Update asset values and run reports from database
  • Assist Operations Manager where needed, have a strong desire to learn the operations aspects of the organization

GENERAL SUPPORT

  • Assist with document scanning
  • Maintain client files in appropriate order
  • Respond to client inquiries and assist with client request to provide the highest level of client service
  • Maintain appointment calendar according to Planner’s protocol
  • Assist with answering telephones when needed
  • Assist Operations Manager when needed
  • Assist with answering client questions when needed
  • Assist with workshops, seminars and client educational events

MINIMUM REQUIREMENTS

  • Bachelor’s degree required
  • Series 65 or 66 (if not licensed, then desire to attain license within 120 days)
  • Insurance Certification preferred or a strong desire to obtain Insurance Certification
  • Licensed or enrolled in Certified Financial Planner® program a plus – if not licensed or enrolled, must want to become a Certified Financial Planner® in the future
  • Excellent written and verbal communications skills; strong typing and note taking skills, including being able to transcribe client meeting notes efficiently and accurately
  • Superior customer service skills
  • Advanced level computer skills; strong knowledge of Microsoft Office Suite
  • Exceptional organizational skills; ability to multi-task in dynamic environment
  • Comfort with being a "team player" and doing whatever is needed, big or small
  • Able to manage and get along with diverse personalities
  • Professional appearance and demeanor
  • Well-developed interpersonal skills
  • Attention to detail with a perfectionist’s eye
  • Successful sales experience a plus
  • A willingness to succeed!

ESSENTIAL MENTAL FUNCTIONS

  • Impeccable ability to maintain confidentiality and integrity
  • Exemplary planning and organizational skills; efficient multi-tasker
  • Effective follow-up, deadline focused
  • Ability to learn new computer programs quickly and embrace technology
  • Detail oriented with high degree of accuracy
  • Energetic, eager to learn, willing to cooperate
  • Self-motivated with ability to work independently as well as under direction
  • Positive, cooperative attitude is a must
  • Enjoy working in a calm, stress-free environment
  • Appreciate the values and appeal of East Tennessee, its residents and its culture.
  • Able to process constructive critiques to learn and grow professionally

ESSENTIAL PHYSICAL FUNCTIONS

All positions in our office require interaction with people and technology while either standing or sitting. To best service our customers, stores and vendors, all employees must be able to communicate face-to-face and on the phone with or without reasonable accommodation.

EQUIPMENT USED

Constant use of computer and telephone
Use of office equipment, including copier, fax, scanner, shredder, etc.

ADDITIONAL COMMENTS:

Nothing in this job description restricts management’s right to assign or reassign duties and responsibilities to this job at any time.

 

Submit your contact information and resume here:

      

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Dynamic Pricing - Cashing In On Our FOMO Appetite

Most consumers have some experience with dynamic pricing. The most memorable instances are when hardware stores increase lumber prices ahead of a storm or your local gas station jacks up prices before a long holiday weekend. These opportunistic instances are rightly met with a consumer backlash and cries of unfair price fixing. On the other hand, we expect the price of a beachfront rental to cost more in the summer and accept the higher price because we maintain control over when and where we choose to stay.

Walt Disney has capitalized on the popularity of their theme parks and increased their use of dynamic pricing techniques to capture more of your wallet. Attendance at the Magic Kingdom park grew from 16.9 million in 2010 to 20 1/2 million in 2015. 



It comes as no surprise that Disney is using the allure of a magical park visit or a princess greeting to get more money from every visitor. Instead of relying on behavioral impulse purchases once you are at the park, Disney has pushed their dynamic pricing reach online to capture more revenue when you book your visit.

Most merchants don't have a power brand like Mickey Mouse but that isn't stopping them from implementing dynamic pricing. Online and mobile shopping has become ubiquitous and the big data analytics necessary to implement dynamic pricing is more accessible to online merchants. Dynamic pricing is reaching deeper into consumers wallets than ever. Consumer data acquisition and analytics is the driving force of this revolution. Facebook tracks your social media posts and browsing history, Google mines location specific data from us, Samsung and Apple uses beacons to covertly collect data on where we are, what we watch and even what we are listening to. As we plug more Amazon Alexa devices into our living rooms, the data stream will surge into a tsunami of geo-located real time information. This will allow companies to parse the hottest trends, mentions and social influencers in real time.



The hottest tickets have always commanded higher prices. This week a wealthy fan paid $133,000 for 2 court-side seat for game 5 of the NBA finals. Fear of missing out (FOMO) on an instagram-worthy social moment during your summer vacation will lead to higher prices as consumers seek to quench their thirst for happiness. Charging extra for a hot ticket like Hamilton isn't new but expect dynamic pricing to spread to more mundane or regionally hot items. Consumers comfort with allowing data mining of our every whim is making it happen.
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A Decade Ago

Where were you in 2007?

After their success with the iPod, Apple launched a new product that they dubbed the iPhone in 2007. Apple launched it on AT&T’s 2G network without the app store which wouldn't arrive until 2008.



A 10 year-old DVD rental company named Netflix offered a new service called “streaming video” that promised to deliver a massive catalog of television and movie content to customers over the Internet to home computers instead of waiting for the mail.



Peyton Manning lead the Indianapolis Colts to a 29-17 victory over the Chicago Bears in Super Bowl XLI and was named the game MVP for his performance. The Dixie Chicks had the number one song, “Not Ready to Make Nice” and album, “Taking the Long Way” a rebuttal to the death threats the band faced after their anti-war comments in 2003.

LeConte Opens

In March, Kevin and I opened LeConte Wealth Management after working together for five years in a local bank investment department. We built a solid friendship before we built our business partnership. Our friendship was founded on trust and respect for the character that our families had instilled in us. We encouraged each other on good days and not so good days. Clients always came first even when our sales manager pushed us to increase production. We enjoyed our work and how it benefited our clients, many of whom were (and are) family and friends.



We had a few simple goals when we started LeConte. We wanted to create a firm that was independent of conflicts and outside influences that are typical in the investment industry. We wanted to create a business culture of skilled, honest practitioners who worked together to help clients. We wanted the freedom to pursue a healthy balance between work and our family life.

Surviving the Great Recession

2007 was a devastating time to start an investment firm. Within our first 18 months, we saw the housing crisis boil over into an economic meltdown that forced dozens of banks and Wall Street investment firms into declaring bankruptcy. The S&P 500 lost more than ½ of its value before bottoming out in March 2009. Bank after bank fought for survival by reducing their businesses to bare bones essentials. This meant most banks reduced or eliminated their bond trading functions. As a result, the market for corporate and municipal bonds seized up in a liquidity vacuum.



When we opened LeConte, we moved our largest clients away from transaction-based brokerage accounts and into advisory accounts. With nearly 40 million dollars under discretionary management, we had flexibility to take advantage of the market disruptions of the times. At the point when many other investors we either over-reacting to events or burying their head in the sand, we were on the hunt for mispriced assets for our clients.

Growth Through Innovation

We not only survived with this strategy, we laid a solid foundation for growth. We transformed our financial planning process and personnel to incorporate advanced real-time reporting technology. This enabled 24/7 access for clients to their financial data regardless of where the accounts were maintained. Our willingness to invest in technology and people when other firms were struggling to survive gave us a head start when the economy stabilized.



In 2013 Kevin and I left the brokerage commission business in the wreckage of the housing crisis and focused on growing our advisory practice. As we crossed the 100-million-dollar threshold in advisory assets, we registered with the Securities and Exchange Commission in Washington, DC. and dropped our brokerage licenses for good. Our transition to becoming a registered investment advisory (RIA) firm was complete but our growth story wasn’t.

Building on Our Advantage in the Marketplace

We added the next piece to the puzzle in 2014 when Jon Dockery, a local CPA, brought his tax expertise to LeConte clients. By offering excellence in asset management, financial planning and now tax preparation and filing, we offer a strong value proposition to Blount County residents who are busy enough in their personal and professional lives.



A decade after starting up, client assets have grown more than threefold from 40 million to 140 million. We’ve never raised our fees. We adhere to the same core principles that we discussed in 2007: Independence, teamwork, life outside of the office and community involvement.

We’ve added new team members and expanded our services so that we can help clients at every stage of financial maturity. We have maintained our technology investment pace by offering every client a customized Purpose-Built Planning portal, the LeConte Mobile app and text based notification services.

Our Second Decade

The next decade will undoubtedly give birth to significant historical events. We hope and pray that they aren’t as tumultuous as the last decade. With great clients, great team members and hard work, we look forward to seeing where it takes LeConte. Thank you to all our loyal clients who place their financial hopes and dreams in our hands. The trust that you have shown us is our most precious asset. We are grateful.

Thank You!

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FANG is Dead Money for the Next Decade

Before the Dot-com bubble burst in 2000, a few successful companies were looked upon to provide leadership to stock prices. Microsoft, Intel, Cisco and Oracle and Verizon Wireless were a few hot names to know. From 1997 to their Dot-com peaks these 5 stocks averaged gains of more than 700%.



From Hero to Zero

The chart above also shows what happened to investors who were late to the party and bought into these stocks around those peaks. They have been waiting to get back to "even" for a very long time. Seventeen years later, three of these former leaders have yet to eclipse their prior high. 10, 15, 20 years is too long to expect an investor to hold a losing hand. After the Dot-com crash, investors believed that these market darlings would recover their leadership role. They were wrong.

After a bear market, the leadership ranks change. The stocks that lead the market to old highs are not the companies that will lead investors out of the bear market. There's a good reason for this.

To endure a brutal recession or bear market, companies make reactionary changes to their businesses to survive. They fire employees and halt product development. They mothball projects that are too costly. These decisions come at a financial cost that often cripples the company from building on their prior market or product successes. Companies that limp out of a recession struggle to ramp back up fast enough to regain their stature. 
  

New Heroes and Potential Zeros

Flash forward from 1997 to 2017. Facebook, Amazon Netflix and Google, aka "FANG" stocks now provide the market leadership. Their respective market positions appear unassailable, almost bullet-proof. Their quarterly financial results are must-see media events. Everyone has a favorable opinion and expects these companies to dominate and even crush their competitors out of existence.  I think they run a huge risk of becoming this generation's version of dead money.

FANG's extreme valuations have been chronicled elsewhere so we'll skip the charts and focus on investor behavior. Leadership names change from generation to generation but investor behavior revolves around a familiar pattern of greed and fear. Investors who are new to stocks are acting on FOMO (fear of missing out, it's a millennial thing) more than common sense.  

The Myth of the Pain-free Recession

Bull markets end. When this bull fades and the bears trample FANG investors, they should be mindful of this history lesson. Amazon won't be funding drone delivery research when their customers start cancelling Prime memberships left and right. When times get tight, Amazon will fire employees just like every retailer before them did.

When Coke, Disney and Home Depot cut their advertising budgets, Facebook will feel it and be forced into reacting to survive. When consumers feel the pinch of layoffs, canceling their Netflix subscription will be an easy cost saving measure to take. Apple will be subletting space in their new headquarters.



The financial cost to these companies of enduring a painful bear market/recession will cost them their reputation as market leaders too. When the next bear ends and a new bull market begins, FANG will be replaced by some new herd of unstoppables.

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