"When I see memos from Howard Marks in my mail,
they're the first thing I open and read." –Warren Buffett

Few (if any) money managers are better than Howard Marks of Oaktree Capital, in our opinion. I mean, can you get a bigger endorsement than Warren’s quote above? If you are not familiar with Howard's work, you can read his memos here.

In 2022, Howard perhaps unintentionally made a case for systematic investing generally, and trend following specifically, that we would be hard-pressed to match. From his July memo titled, “I Beg To Differ”:

“You can’t take the same actions as everyone else and expect to outperform.”

Remember that episode of “Seinfeld” where Uncle Leo gets Jerry’s father a last-minute appointment with a top notch back doctor? And when Jerry’s father accuses the office of stealing his wallet, Uncle Leo is mortified since he gave a personal recommendation and asked the back specialist for such a big favor.

Although this scenario was from a sitcom, it is not far off from the view of the financial advisory world held by Mike Garrison, a business coach and best-selling author. In his just-released book, “Can I Borrow Your Car?” Mike highlights the importance of knowing and trusting both parties in a referral: who you’re referring and who you’re referring to. If you “loan” a key relationship out by making an introduction, you want absolute confidence the individual will come back to you without dings, dents, or scrapes.

Let’s face it. If you have clients with any level of exposure to traditional assets, such as stocks or bonds, 2022 has been unpleasant. Equities closed at all-time highs in 2021, then steadily declined in 2022. Bond investors have arguably had it worse, certainly on a risk-adjusted basis.

Just when you think it can’t get much worse, unless your clients are in tax-managed strategies, another round of pain could be on the horizon. Taxes.

We hate to be the bearers of bad news, but investors – particularly those in active or semi-active mutual funds – could be in for trouble.

Just one of these scenarios likely would be enough to cause concern for an investor:

• Potential end of the post-Global Financial Crisis secular bull market in equities
• Prospect of the first sustained rising U.S. interest rate environment in more than 40 years
• Highest inflation level in four decades

Yet in 2022, we’re facing all three at once. It’s a potentially catastrophic combination, especially for investors nearing or in the early years of retirement.

In my opinion, this is a “perfect storm” (yes, I know that’s a super cliché saying – even I cringed when typing it). And it demonstrates how the need for a more modern approach to retirement income has never been greater. It also motivated my colleague, Brandon Langley, and I to embark on a research project into different approaches to sustaining clients throughout retirement. Today, we’ve released our findings in a new white paper available to financial advisors, “An Advisor’s Guide to Protecting Retirement Income.”

When we travel by air, my wife usually points out that she thinks it would be better if people by windows boarded first; that way, anyone in an aisle or middle seat wouldn’t have to keep standing up. Meanwhile, I think the Southwest Airlines style of pick-any-open-seat is optimal.

Our “gut feelings” were recently rendered irrelevant when we ran across an old episode of “MythBusters.” In it, the cast built a mock 173-seat aircraft and tested several boarding approaches using real people and luggage.

Relying on the data cut through the emotional biases. It also inspired me to take a similar data-backed look at a common question I hear about systematic investing: Is this style of investing capable of reacting fast enough to declining markets?