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Good morning, afternoon, or evening!  I hope you are doing well.

The last 5 weeks have been something else.  Safe to say that in my lifetime I haven’t really seen anything like it.  I’m 47, for the record.  For those of you who don’t know me, let me give you the short bio. My name is Justin and I am a principal and a lead advisor at Private Ocean.

How did I get to Private Ocean?  Short story but (maybe) adds credibility.  About 25 years ago I was in a PhD program at Columbia University, this was pre-dot com bubble.  This will be relevant in a second.  As an under-grad and graduate student at Columbia I had learned the importance of keys. The physical kind, that open doors. The physics department is in Pupin Hall on the North West corner of campus.  It’s a famous/infamous building where the Manhattan Project research was done. It’s an old New York building with lots of narrow hallways and random mysterious rooms.  If I came across a room that was interesting, I tried to get a copy of the key.  Right next to the Physics Library was a totally random un-used room that had three Sparc stations in it.  At that time these were the main computers used in the department.  I managed to get a key to this room and used it as my own office, never encountering another student.  That is where it all ended and began.  Day trading stocks in the Physics building!  I got hooked on the market, just found it fascinating.  I ended up taking a leave for a year and getting a job as a proprietary trader on Wall St. and never went back.

Then about 9 years ago I got sick of it.  My wife, daughter, and I left the East Coast and moved to Northern California.  I got my CFP and convinced Greg to hire me. The point of the background is to help explain why I believe so firmly in our approach to investing.  I studied Physics for about six years, and then traded and ran a very small fund for 15.  That combination of science, research, and trading inadvertently prepared me to be an advisor at Private Ocean.  That is the way Private Ocean has always thought and continues to think.  We approach all your investments in that spirit. Academic, research-based, and nuanced with investment experience.

When I woke up yesterday, Tuesday, April 7th, I had this nagging feeling that it was time to send a different kind of email to all of you.  On Monday, April 6th the S&P 500 finished up just shy of 8%. Then this morning we opened up another 4% at 6:30am and I thought, ok, this is starting to feel a little too good, time to set expectations.  First off, does this make any sense?  The few times I turn on the news all I see is that the next month is going to be scary. So then why is the market up ~20% from the bottom?  Is it broken?

To answer this question, we must stop and think about what the “market” is.  For those clients with whom I have the honor of working with directly you may have heard my rumination on this before.  The market is a forward-looking indicator. It’s a massive betting machine that is weighing all the bulls and bears all the time.  It wasn’t broken on the way down in March and it isn’t broken now. It also is not betting on the next four weeks or four months: that has already been priced in.  It is currently betting on more or less Q1 2021 and beyond, nine to 12 months in the future.  What it is saying to us is – things are going to be better in the future.

But on the road to get there, there are going to be more bumps.  Count on it.  Expect it. Plan on it.  At the same time, don’t lose faith.  Faith in what?  Science, capitalism, humanityWhen, how big a bump, how long?  We have no idea, no one does.  But you can only be surprised by that which you don’t expect. So just assume the market is going to remain volatile for a while.  There is always a “Two steps forward, one step back” pattern to the market.  In our experience it is always over-shooting both directions, down too much, up too much, but going up over time.  It’s nice that the relentless selling that we saw in March has abated, but we must stay vigilant.

Also, during this time, assume we are doing exactly what we are here to do.  Staying calm, disciplined and optimistic.

We will get through this together and we will see each other again.  This too shall pass.

Respectfully,

Justin