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Vizionary Client Letter Q2 2021

A quick reminder to you our clients - your quarterly reports are available and can be viewed through your Client Portal.


Life Beyond Covid 19

By Wayne Wagner Jr. - Where we've been, where we are, and where we are going as a nation.

A quick reminder to you our clients - your quarterly reports are available and can be viewed through your Client Portal.

For the fifth quarter in a row the global economy and the especially the US markets showed upticks in economic activity and stock market valuations.  After the initial shock and awe of the onset of Covid that led to a 38% decline in stock market averages over a period of weeks, the global community has rallied strongly to fight the disease, change how we do business and find better ways of doing things. 

New Business Models for a New World

We have seen multiple evolutions of business models within an 18-month period like those seen in the restaurant industry.  Here’s an example of the massive evolution we have seen:

  • Two years ago, Uber Eats, DoorDash and GrubHub were ideas that most of us barely used. The idea that we would pay a 30% premium on the restaurant’s menu price plus a delivery fee and tip for the “privilege” of eating restaurant food (and soggy fries!!) in our own home was nuts. Today, many of us use these models on a regular basis.
  • Restaurants grabbed this idea and now many international brands have their own App where you can order food, at the same premium prices, and one of their own delivery driver will deliver that food to your house (and we are paying the delivery fee plus the tip too!).
  • There are now fast-food brands that are setting up commercial kitchens to solely accept online orders for delivery. They are cutting the delivery times down and expanding the range to which they can deliver by literally just setting up a kitchen in a warehouse with no storefront. Fewer people, less overhead, hotter food at the point of delivery, more happy customers.

This is 3 entire business model evolutions in 18 months, a rate of change unseen to this point in our economic growth.  When we observe that the pace of change is accelerating, Covid has put that process on steroids!

Are We Now Seeing Acceleration or Inflation?

This has all lead to significant acceleration in the economic recovery which had led to lots of concern about inflation, etc. I want to make a few points about the issue of inflation and encourage you to watch the videos coming out on this topic this week or early next.

Keep an eye on your inbox.

Raw Materials Navigate Supply & Demand

Raw materials manufacturers have been shrinking and expanding supply during periods of economic ups and downs for hundreds of years.

They know that when the economy hits a crisis it takes about 2.5 years on average for the economy to get back to “zero” in terms of total economic output.  This time we did that in less than a year and within 15 months we are back at the long-term trend growth line.  

This rapid recovery has left these manufacturers a bit behind in delivering the raw materials we need, and this is contributing to the inflation numbers we are seeing at present.

Remaining Pinch Points in the Supply Chain

We have had major pinch points in the supply chain and it’s not just that one ship that was stuck in the canal in the Middle East.

Think about everything we have had to do to “get back” from Covid - all the policies, procedures, etc.  

Now think about a port that unloads dozens or hundreds of ships with tens of thousands of containers being unloaded daily and all the procedures that needed to be developed and written to “get back” to a new Covid complaint normal at our ports.  

Government Intervention - "Printing Money"

Many have suggested that the amount of money being “printed” will itself lead to out-of-control inflation for the long term.  

'While most of us would agree:

  1. We don’t like ever increasing government debt
  2. There have been excesses in some of the ongoing stimulus payments to companies and individuals.

The fact of the matter is:

  1. These spigots will be turned off at some point
  2. The debt is being financed at multi-generationally low rates, so the payments on the debt are not wildly out of balance with the overall size of the budget.  

A good example here is the “runaway real estate market”: prices on houses have indeed risen, but because of low interest rates, the size of the payments has not risen dramatically.  

In fact, household debt payments as a percentage of overall household income are in the bottom quartile of its historical cost.

This means families are actually spending less than average to maintain their current debt levels, leaving lots of room in the average family’s budget for other spending … cue rising airplane ticket prices as these families start to travel!

So Where Do We Go From Here?

We see lots of things to feel positive about in 2021 and beyond. Covid took many people from us. Not one of us is untouched or can remain unfazed by what this disease has done to us as a global society.

However, we (the human race) are a resilient, adaptive, creative, and ingenious species. We have and will continue to adapt and overcome whatever is thrown at us. We won’t each survive every crisis, but WE will overcome and create a better tomorrow.  

We are blessed to live in a society and economy that is the world’s innovation driver where ideas can be taken to the marketplace in mass and used to serve not just some customers, but all the customers.

Markets will experience natural volatility and it’s important to rebalance during those seasons. To make sure you have a cashflow plan to survive inevitable market downturns without selling equity assets to meet your current cashflow needs.

Here at Vizionary, we are always here with perspective for your decisions ahead. Reach out any time we can help.

Have an amazing Summer 2021! Get on a plane, go to the mountains, find a beach - whatever your vibe is, get out there and find it.