When Experience Matters More Than Predictions
The following is an excerpt from Peter Grandich’s New Year Commentary. Readers can listen to the full audio commentary at petergrandich.com.
After completing what was the single best year of my career, I begin what I consider the first day of the rest of my natural business life. I remain part of an alternative to traditional financial planning team, licensed in life and health, serving U.S. residents. We focus on retirement and estate planning and business exit solutions designed to reduce stress and risk. We are not stock pickers, do not claim secret strategies, and do not attempt to turn Chevys into Rolls-Royces. Our role is to optimize planning efficiency and outcomes.
Drawing on nearly 42 years in this business, I believe the United States has already entered its worst economic, social, and political period, and it is not remotely close to bottoming. I believe the next several years will be the most challenging ever for both individual investors and professionals alike.
One reason is the structure of the financial services industry itself. In my experience, true objectivity is unattainable. Advisors are often incentivized to keep clients invested regardless of circumstances. I learned this firsthand in 1987 when I forecast a major market decline and was pressured to retract. The firm argued that even if I were right, only a small percentage of clients would act, and fewer still would respond properly afterward. From a business standpoint, they were correct.
My assessment is based on what I view as hard facts. Debt at every level — federal, state, local, corporate, and consumer — is unsustainable. Federal debt continues to grow at levels that will make interest costs increasingly unmanageable. Many states face serious pension obligations. At the same time, a large percentage of Americans live paycheck to paycheck, lack emergency savings, and rely on debt to cover basic necessities.
From a market standpoint, my single greatest concern is the dominance of passive investing and algorithmic trading. A large share of capital now flows automatically into index funds, allocating money based on index weight rather than analysis. This has weakened price discovery and helped inflate what I believe is the largest financial bubble in history. Many professionals and investors have never experienced a true bear market and have been conditioned to expect central bank intervention.
Political and social division only worsens these risks. I believe the country is more divided than at any time since the Civil War, and this division will make the next crisis far worse because cooperation will be limited or impossible.
At this stage of my life and career, my guiding principle is simple: less is more. Preserving capital, reducing risk, and improving tax efficiency matter more than chasing returns. I am cautious on broad equity exposure and deeply concerned about areas such as private equity and private credit, which I believe deserve extreme caution.
For a fuller discussion of these views and the experiences that shaped them, readers are encouraged to listen to the complete commentary at petergrandich.com.
