Excited Over Opportunities

2020 Index Returns (Year-to-Date)

*Source: MSCI Net Returns, Barclays Capital

“You wouldn’t be human if you didn’t feel fear in a situation like this. But feeling fear and acting on it are two different things. And it’s why I believe your financial advisor was sent into the world: not to somehow maxim-ize your return but to minimize your long-term regret.” - Nick Murray

Have you ever tried to stay calm on a roller coaster? Your heart rate isn’t going to slow down while you’re cruising along the track 100 feet above the ground. It’s just not possible. The same is true when you’re watch-ing your life’s savings evaporate while seemingly rational people talk about chaos, panic and plague. It’s nor-mal to feel anxiety.

Anxiety raises your heart rate and creates a restlessness in the body. Excite-ment also raises your heart rate and creates a restlessness in the body. The two emotions feel strikingly similar, except that anxiety is felt as negative and can lead to negative outcomes, while excitement is felt as positive and can improve outcomes.

The idea is that if we can tell ourselves that we feel excited rather than anx-ious, we’ll be better equipped to ride out stomach-lurching market drops. Whether it’s a pandemic, political shift, technological breakthrough or some-thing else, we will see black days, weeks or months in the market. As an in-vestor, it’s normal to get scared. Instead of staying calm, treat it like a roller coaster; turn the fear into fun.

The difference between fear and excitement is significant. Fear looks for threats, and excitement looks for op-portunities. When you are fearful, market drops trigger anxiety that would frighten the calmest among us. On the flip side, when you are excited, your brain looks for opportunities and believes in optimistic outcomes. If you’re excited about the market dropping, you’ll search for discounts on companies and funds that you may have previously wanted to buy, but were overpriced, or out of your price range. Fear sells. Excitement buys. As Art Laffer put it “when you make decisions when you are either panicked or drunk, the consequences are rarely attractive. Doing nothing and taking careful inventory of what’s happening and what can and should be done is hard, but desperately important.”

A majority of the above was captured from an InvestmentNews article attributed to Sarah Newcomb, a behav-ioral economist at Morningstar. Over the past month, we have aimed to provide you with timely, relevant and optimistic insights from industry experts to help you keep the faith and stay invested. Furthermore, provide recommendations to you on items we can control and attempt to turn your anxiety from fear based to excite-ment/opportunistic based. It has been quite the “war” the past month. We have lost a few battles (i.e. clients selling out of their stocks at temporary low prices) but in many cases clients have held on and not given into the panic and fear based anxiety. We celebrate this trust and patience everyday. It does not go unnoticed.

Major Stock Indices S&P 500

Dow Jones Industrial Ave MSCI EAFE

MSCI Emerging Markets

(As of 3/31/2020)* -19.60% -22.73% -22.83% -23.60%

Major Bond Indices U.S. Aggregate Bond Index U.S. High Yield Bond Index

U.S. Treasury: 20+ Year CPI—Headline

(As of 3/31/2020)* +3.15% -12.69% +21.47% +0.57%

Our Quarterly Report

“You do not play the stock market on the short-term. It will give you a heart attack.”

Rewald, Sebranek, & Frawley An Independent Firm April 2020

Stimulus Package—CARES Act

Financial Planning with Terry Terry Sebranek, Financial Advisor

One of the cornerstones of the Senate coronavirus stimulus package is the direct payment of $250 billion from the federal government to American individuals and families. Are you eligible and if so how much?

• People who file their taxes as individuals are eligible for payments up to $1,200, but that decreases for peo-ple who earn an adjusted gross income of more than $75,000 a year. The payment is reduced by 5% of eve-ry dollar above that mark, meaning it is reduced to zero for those individuals who make $99,000 or more.

• People who file a joint tax return are eligible for a payment of up to $2,400, plus an additional $500 per child. The amount decreases for those whose adjusted gross income is more than $150,000 in a year at the same 5% rate, meaning it is reduced to zero for joint filers without children who earn $198,000 or more.

• The income is based on people’s tax filings for 2019, but if they have not filed for that year, then their fil-ing for 2018 applies. Americans who have direct deposit set up with the IRS should expect to see their stimulus hit their bank accounts sooner than those who don’t.

What are other pieces tucked into this stimulus package? • For those without work, an extra $600 per week for up to four months, on top of state unemployment bene-

fits. This amounts to $250 billion. • $500 billion in loans for distressed companies, with $50 billion earmarked for passenger air carriers. • $350 billion forgivable loan program designed to ensure that small businesses do not lay off employees. • A 50% refundable payroll tax credit on worker wages will further incentivize businesses, including ones

with fewer than 500 employees, to retain workers. • A possible delay in employer-side payroll taxes for Social Security until 2021 and 2022. • Required Minimum Distributions (RMD) would not have to be taken in the 2020 calendar year. • A new $300 charitable deduction would be created for those who don’t itemize on their federal return.

Why is July 15, 2020 so Important?

Financial Planning with Terry Terry Sebranek, Financial Advisor

Not too long ago, on February 19th, U.S. stocks were breaking records and President Donald Trump was cele-brating. “Highest Stock Market In History, By Far!” he tweeted. Later that day, the S&P 500 closed at an all-time high. At that point in Trump’s presidency, the S&P 500 had gained 49% since his inauguration day. So much has changed since then. The coronavirus outbreak has been declared a global pandemic, as the number of cases and deaths from COVID-19 have soared. As a result, the stock market gains Trump once loved to tout have all but evaporated. As of close Monday, March 23rd, the S&P 500 was down 1% since his inauguration day. As of our publishing—March 31st—stocks are up 6% since Trump’s inauguration. Below is a chart from CNN Business that compares the performance of the S&P 500 over every presidency since Ronald Reagan. Based upon your political leanings, you can interpret the chart in many different ways. Yet it is an important reminder why one should not intermix their political views with their long term invest-ment philosophy. Rather we invest in the greatest, most innovative companies in the world, not the political bureaucracy and lobbyists that reside in Washington D.C.

From Reagan to Trump

As part of the response to the coronavirus, the Internal Revenue Service made a few changes to due dates. IRS Notice 2020-18 states that

• The 2019 tax filing deadline has been moved from April 15th to July 15th. Taxes do not have to be paid until this later date and no additional interest or penalties will accrue.

• All estimated tax payments originally due on April 15 for the 2020 tax year do not need to be submitted until July 15. Further, there will be no penalties and interest assessed on these balances due.

• Second quarter estimates for the 2020 tax year still need to be paid and submitted by June 15th. • IRA and Health Savings Account contribution deadlines for 2019 have been extended to July 15th as well.

It’s Starting to Rain Gold There are a couple of ways an equity investor can deal with the stock market’s response to the coronavirus panic. Neither involves selling and doing nothing—correct as it surely is—doesn’t merit any further commen-tary. It’s the investor who has, or is continuing to generate, cash that must ultimately be invested in equities who faces the two choices.

One is to buy, pursuant to some conscious discipline, in what one perceives as an area of enhanced long-term value. And to do so despite (or because of) how problematic the near-term outlook may be. The other is to wait until the market has clearly bottomed, and to chase it as it rallies.

My personal philosophy is to do the former. That is, buy when the things you want to own are so battered (and the investing public so utterly terror-stricken) that their long-term value as operating businesses far outweighs the very real risk that their prices will temporarily go even lower in the near term. For this strategy to work in practice, one must abandon any fantasy of “buying at the bottom.”

As this coronavirus panic kicked off in mid-February, I sat down with Maggie and we reviewed our personal finances. We keep one year’s worth of living expenses in our checking account and another chunk in our sav-ings account. It’s probably too much but the extra provides me the ability to sleep well at night. The rest of our cash and retirement assets are invested and allocated in various equities/equity mutual funds. At the family meeting I told Maggie “I don’t think this will be another Great Recession and even if it is, we’ll look back in five years and be amazed at what prices stocks were selling for.” I proceeded to ask her for her input and feed-back. Maggie’s simple response was “Don’t touch my checking account balance. Do whatever you want with the rest. Remember the savings account is your new truck money.” After we discussed and clarified the “my” versus “our” checking account pronoun mix up, we agreed that I would put my new truck purchase on hold and instead every 5% the stock market went down, we would chunk in 10% of our savings account balance. With the market down 35% from it’s peak, you can see how many times we chunked in only to see that amount go down in value. For example, $5,000 turning into $3,500 in a matter of a week. This only reinforces what many of you already know—Kaleb (RSF teammates too) is a horrible market timer. I get a piece of hum-ble pie every time I drive my 2003 yellow Chevy S10 with no heat, hail damage, rust and countless dents.

We do not claim to have any idea how far this outbreak will spread, nor how many lives it will claim, before it is brought under control. We’re reasonably certain that many of the world’s leading virologists and epidemiol-ogist are working on it, and we believe their efforts will ultimately succeed.

The common thread is unknowability: we simply don’t know where, when or how these phenomena (coronavirus to oil price war) will play out. In our experience, the thing in this world that markets hate and fear most is uncertainty. We have no control over uncertainty; we can and should have perfect control over how we respond it. Or, ideally, how we don’t respond. The last thing in the world long-term, goal-focused investors like us do when the whole world is selling is sell. Riding out this historic decline is how investors will earn the premium returns of equities when the firestorm of terror burns itself out and the permanent advance resumes.

Sir John Templeton stated long ago “The four most dangerous words in investing are: It’s different this time.” History doesn’t repeat itself but it often rhymes. It’s not a matter of if we recover, rather when. Until then, I’m glad spring is on the horizon because the Wisconsin winter sure is cold driving without heat!

Kaleb’s Corner Kaleb Frawley, Financial Advisor

“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold.”

- Warren Buffet, Berkshire Hathaway’s 2016 annual report

4,000 deaths out of 350 million people in US = apocalypse? #thistooshallpass #keepthefaithstayinvested

The Roaring Twenties Over the past month or so, it has been our group’s goal to reinforce and be the face of positivity and optimism in a world of doom and gloom. The 24/7 news media has more than enough negativity to share to cover that side of the equation. Yet it is an understatement to say I’m not disappointed and emotionally exhausted—Badgers basketball not able to play in the Big Ten Tournament to no March Madness to perhaps the best chance in my lifetime of watching the Giannis led Bucks win a NBA championship and yes, not too mention seeing my personal as well as our client-friends’ portfolios and net worth drop 20-30% on average in a matter of a month. (As an aside, funny how people reference volatility when the stock market is down 35% in a little over a month but never mention it when it goes up 30%+ the preceding year…..but I digress). In February, I turned 30 years old and on the my birthday Joel texted me the value of the Dow Jones 30 years earlier. After what has happened with the stock market since my 30th birthday, I thought it would be timely to refresh my “Four Generations of Frawley Family Tree Stock Market Numbers.”

September 21, 1923, Grandfather Bernard is born. Dow Jones Industrial Average at 88.54

June 15, 1946, Grandfather gets married. Dow Jones Industrial Average at 210.36

October 11, 1957, Father Mark is born. Dow Jones Industrial Average at 441.16

April 21, 1979, Father gets married. Dow Jones Industrial Average at 856.98

February 27, 1990, Kaleb is born. Dow Jones Industrial Average at 2,617.72

January 3, 2001, Grandfather passes away. Dow Jones Industrial Average at 10,646.15

February 25, 2017, Kaleb gets married. Dow Jones Industrial Average at 20,821.76

August 22, 2019, Kaleb’s son Jacob is born. Dow Jones Industrial Average at 26,252.24

March 31, 2020, Date of our writing today. Dow Jones Industrial Average at 21,917.16

My Grandpa grew up during the Great Depression and World War II. My Dad grew up as 1 of 13 on a poor family farm with divorced parents. In their adult lives, both these men lived through events like Vietnam, an assassination of a president and Black Mon-day in 1987. In my life, I can recall where I was on September 11th and later making my first Roth IRA contribution and losing 40%+ in a matter of months during the Great Recession. Now my son is growing up during the coronavirus panic. In the grand scheme of things, in nearly a century of Frawley boys, this virus sure seems quite miniscule to what trials previous generations encountered and overcame. This too shall pass. For a multigenerational investor, this is a tremendous buying opportunity. Don’t let your emotions take control of your money. Above all, remember not to let fear of the unknown con-trol you. You have the power decide how you’ll react—glass half empty or glass half full. Focus on the here and now. Enjoy the life you have today. Play a board game with family, read a book, call your grandparent, widow or lonely friend or give financially from your abundance to someone who is not. Don’t let this oppor-tunity pass without being the sunshine in someone else’s life. Count the many blessings you still have and don’t take for granted how fortunate we all are to have been born in this country.

Kaleb’s Corner Kaleb Frawley, Financial Advisor

Great investor Shelby Cullom Davis said something to the tune of “Bonds are supposed to offer risk-free re-turn, but they’re now priced to offer return-free risk.” If you have a 10+ year investing horizon, you almost have to be nuts or a believer in Armageddon in order to buy a 10 Year US Treasury yielding 0.60% versus the

S&P 500 dividend yield of 2.3%.

It’s NOT Different This Time

Reminiscing With Rewald Joel Rewald, Financial Advisor

I have been told before I’m not a “Great Communicator,” thus I borrowed the following piece from The Fiene Group (Baird affiliation) that a friend passed along to me. They said it better than I could have myself. As an aside, Lisa, the wonder dog and I arrived back in Richland Center on Sunday, March 29th. We enjoyed our time out west but are glad to be back home. Hope to see you soon after this coronavirus pandemic passes. It’s normal to fear the losses and feel helpless and out of control. None of us has control of the markets, we only have control of our own emotions and rational thought can help you through that process. First, remem-ber that the market has gone down literally thousands of times over the years and many times with very good reason. We have had wars, assassinations, pandemics, financial crisis, an irrational hunger for internet stocks, Democrats, Republicans… Each time people had good reason to sell or avoid buying. Do you know why people sold at the bottom of the market after a 57% drop in March of ’09? Because they were sure it would go lower. You’d have to be an idiot to sell if you had known it would go up massively for nearly 11 years after that. Do you know how many times the market has gone all the way back up after these thousands of selloffs in the past? Every time! Not when it settled down, not when the government got their stuff together, not when a new guy got elected, almost nobody calls the bottom or the top and I don’t know anybody that ever did it twice. Here is what I do know; it is very very difficult to buy back in after you have sold out. I know that because I have been doing this for more than 27 years. The thoughts that go through your mind are tor-ture. Did I make a mistake? What do I do now? What if I go back in and it goes down again? It’s awful! Want to see what irrational looks like?

Irrational is when people are selling a large publicly traded insurance company at 2.3 times its earnings. That means predicted earnings are for them to make the full value of the company in just over two years! Imagine if you owned a company that paid you back what you paid for it in just over two years. Oh and they pay you a dividend of 6.5% while you wait. How about a giant tech company? People are selling one that is basically the alternative to going to the store. Or one that has over $115 billion in cash is very profitable and is down about 30%. There are dozens of examples of these types of companies being tossed out the window in fear. Now, if people don’t go back to stores, bars and restaurants, don’t fly again and have enough toilet paper to last them the rest of their lives, perhaps those people will be right. I do think that this stop of the US economy will likely result in a recession in the second quarter and maybe the third but the fed has cut rates to zero, a huge bill for help is rumbling through congress and gas prices and other inflation is likely to remain in check for some time to come. There are multiple giant drug companies around the world working on a vaccine and a treatment and there has been progress there so the FDA is testing multiple therapies now. Millions of test kits have been ap-proved and will be used in coming weeks and people will be avoiding contact. Nobody can say with certainty that we will get through this quickly or have an absolute timeline on when we get through it but we have China and Korea to see as the models for this virus and both stomped it down and went back to work.

Finally, as an investor you have only three choices in this environment, sell, hold or buy more. If this is the end of the world as we know it, selling is probably not going to be your biggest problem and likely won’t solve your prob-lems. If it’s not the end of the world perhaps one of the oth-er two choices is more prudent. Maybe refinance your mort-gage and save a few hundred a month, buy a tank of gas for $1.90 a gallon and invest the savings in your 401k at the 30% discount prices. I hope everyone can try to stay less stressed and help out your friends and neighbors if you feel like they need a hand or just a friendly conversation; it’s always helped me cope when I can help. Fingers crossed for all of us, spring is coming and robins are everywhere!

Doing It Yourself

Jesse & Joe’s Dispatch

Several years ago, my wife Karia and I bought our first home. If there has been one thing bothering her the most in our house, it is the flooring in our dining room. When visitors walk into our home this is the first room they see and unfortunately the previous owners improperly installed the tile which over time has become an eye sore as it has began cracking and falling apart.

In preparation for our fourth child, Karia mentioned to me that she really hoped to get this “small project” done in the house prior to our baby’s April due date. In February, we spent a significant amount of time researching what type of flooring would be best for our home and a busy family like ours. Ultimately we settled on a product we were happy with—affordable, looked good and could hold up to the wear and tear of a family.

With the flooring chosen and purchased, we selected a weekend in March to advance this pro-ject. All we needed to do was tear out the old tile and lay down the new product. Sounded sim-ple and we would be done in a jiffy. Better yet, a family member who lays flooring was willing to install it for us at little to no cost.

As you may have guessed by now, things did not go smoothly. The flooring got installed as planned on Satur-day. However as I walked through the house I could not help but feel I needed to tiptoe around. Come to find out, the reason was the subfloor was in very poor condition and not level. After all the work and excitement we were left with one choice—spend the following weekend carefully removing our newly installed flooring, lev-el everything and reinstall.

The next weekend we did just that. First, we attempted to get things lev-el with liquid lever. However it was not long after I began working to reinstall our flooring it was apparent things were not as they should be. In fact, this “small project” was becoming a huge fiasco! Our house was torn up with no living room or dining room, the kids were home full time from school because of the coronavirus and relegated to their rooms or our basement and yes, do not forget my nearly nine month pregnant wife. To say I was battered and bruised both physically and emotionally would be an understatement. I was in over my head and we were forced to put the project on hold until a professional could bail us out. I have my fingers crossed this project gets resolved before baby #4 arrives.

Everyone has their own gifts, talents and expertise and after some self reflection, it is safe to say my calling is not to be a professional floor installer. However we all have this tendency to “Do It Yourself” rather than hire an expert. We can darn near YouTube or Google anything and find an answer. Yet it does not necessarily mean it is the correct one. The biggest frustration of many of the professional partners we work with are do it yourself estate plans (i.e. QuickenWillMaker) to tax returns (i.e. TurboTax) to diagnosing your own medical condition (i.e. WebMD). Most of the time things turn out well. In cases where it does not, it would have been cheaper in the first place to hire the expert. Like my flooring project, it will be more expensive to clean up the mess made after the fact instead of hiring an expert to do it correctly in the first place.

I am sure many of you have similar stories to share and can relate to the helpless feeling of not knowing what to do or where to turn. There are many great re-sources and people out there willing and able to help you physically, emotional-ly, spiritually, financially, etc. As we remain confined by the coronavirus and this “timeout” allows us to do some inner reflection, consider what areas in your life you could use an expert’s opinion and help? Pick up the phone and call and do not let this coronavirus opportunity pass without taking advantage.

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This material is intended for informational/educational purposes only. Contact your financial professional for more information specific to your situation.

It’s now clear that COVID-19 is a deadly serious global pandemic, and all necessary precautions should be taken. Still, C. S. Lewis’s words—written 72 years ago—ring with some relevance for us. Just replace “atomic bomb” with “coronavirus.”

In one way we think a great deal too much of the atomic bomb. “How are we to live in an atomic age?” I am tempted to reply: “Why, as you would have lived in the sixteenth century when the plague visited London almost every year, or as you would have lived in a Viking age when raiders from Scandinavia might land and cut your throat any night; or indeed, as you are already living in an age of cancer, an age of syphilis, an age of paralysis, an age of air raids, an

age of railway accidents, an age of motor accidents.”

In other words, do not let us begin by exaggerating the novelty of our situation. Believe me, dear sir or madam, you and all whom you love were already sentenced to death before the atomic bomb was invented: and quite a high percentage of us were going to die in unpleasant ways. We had, indeed, one very great advantage over our ancestors—anesthetics; but we have that still. It is perfectly ri-diculous to go about whimpering and drawing long faces because the scientists have added one

more chance of painful and premature death to a world which already bristled with such chances and in which death itself was not a chance at all, but a certainty.

This is the first point to be made: and the first action to be taken is to pull ourselves together. If we are all going to be destroyed by an atomic bomb, let that bomb when it comes find us doing sensible and human things—praying, work-ing, teaching, reading, listening to music, bathing the children, playing tennis, chatting to our friends over a pint and a game of darts—not huddled together like frightened sheep and thinking about bombs. They may break our bodies (a

microbe can do that) but they need not dominate our minds.

— “On Living in an Atomic Age” (1948) in Present Concerns: Journalistic Essays

Wisdom From C.S. Lewis