On the surface, it was a good year if you were in the veterinary business. Year-over-year sales grew by 9.1 percent, while patient visits increased by 3 percent. For pet owners, however, not so much.

 

Owners found that the cost of keeping their pets healthy jumped by about 10 percent. Some of that price increase was due to higher fees, but consumers were also purchasing more products and services.

 

My chocolate Labrador Retriever, Titus, is now 13 years old. The rule of thumb: every year of a dog's life equals seven years of my life. That would put Titus' age at 91, versus my age of 73. I won't detail all his health ailments, suffice it to say that he is in the vet's office just about every other week. Those visits last for 30-60 minutes and we usually leave with medications. The cost fluctuates between $175 and $375 per visit (not counting the meds). In contrast, I saw my doctor twice last year and the one medication I take is free. 

 

Just like human medicine, veterinary medicine is experiencing new advances and frequent discoveries. Universities and pharmaceutical companies worldwide are stepping up their research, conducting quality trials, and achieving breakthroughs that are providing an entire range of modern medicines. As such, surgical procedures are now commonplace. Conditions, which in the past would spell end-of -life decisions by owners, are now treatable.  

 

Pet cancer treatments, for example, were practically unheard of twenty years ago. Today, the Veterinary Cancer Society estimates one in four dogs will develop cancer (and almost 50 percent of dogs over the age of 10). As a result, more and more vets are treating cancer, but at a cost.

 

Specialist visits to confirm cancer can run upwards of $1,500. Treatments are expensive — chemotherapy ($200-$5,000), radiation ($2,000-$6,000), drugs ($50+ per month). A cancerous pet can set you back $10,000 or more. And unfortunately, more and more pets are showing up with cancer.

 

To make matters worse, there is no such thing as Medicare for your dog. That means there is no government program to reimburse the veterinarian cancer hospitals, so they pass the full costs on to the pet owner.

 

What about pet insurance, you may ask? Unfortunately, many new pet owners don't feel the need to buy insurance for their pet until after it is too late. But even if you have pet insurance, most policies only cover half the cost, and typically pet insurance requires that you pay upfront.  

 

Titus doesn't have cancer, thank goodness, but he did have a herniated disc where his tail meets his spine a few years back.

 

That little operation cost $15,000 -- about the price of a European vacation (which we decided to forgo in favor of the operation). But as Titus aged, his hind quarters are giving out, while the arthritis in his shoulders continues to worsen. As a result, his prescription medicines are crowding out my own in the medicine cabinet and there is no Prescription D plan to take care of the costs. The most we can look forward to is more of the same. Bottom line — we love him — so it's worth it to us.

 

But don't think that your local vet is minting millions from your pet's misfortunes. If all they cared about was money, they would have entered another field like dentistry or human medicine. There aren't that many vet schools in the U.S. and all of them are highly competitive. The cost and duration of the education is similar to the cost of a human medical school. But the average salary of veterinarians is less than half of what medical doctors pull in. New vets have low starting salaries and high student debt payments as well.  

 

Supplies, equipment, and facility costs are equivalent to human medicine expenses. Staffing costs are lower, but a highly skilled and well-trained staff still costs money, especially in an environment of labor shortages and high turnover. In addition, the stress and pressure caused by the pandemic has taken its toll on vets. Omicron just increases those challenges. In the meantime, the increase in demand for veterinary care has exploded.

 

All in all, be grateful that you have a vet to go to when needed. Expect your vet bills to continue to increase. The best thing you can do is begin to practice preventive care. Regular vet care is important, even when nothing is going on. Vaccines, spaying and neutering, dental cleanings, flea and heartworm prevention, bloodwork and yearly exams are critical to keeping the big bills in check.

 

The Santa Rally continued this week with the S&P 500 Index hitting a new record high. Most stocks that gained did so on little volume. Don't read too much into this week's gains, however.

 

There is an old, rarely used term called "painting the tape." It is a mild form of market manipulation where market traders buy and sell securities among themselves to create an appearance of substantial trading activity. The goal is to fool investors into buying into stocks, sectors, or the market thereby driving prices higher.

 

These kinds of tactics often result in an unsustainable spike higher in the averages, followed by a period of consolidation, or decline. The back half of the week stocks consolidated but we will have to wait until the next week to discover the market's next move.

 

This week most newsletters, brokerage houses, and investment advisors were releasing their forecasts for 2022. Those predictions span the gambit. Some are buying value; others are buying growth. Many are simply arguing to buy both since they have no idea what will outperform. Most on Wall Street are sticking with large cap technology, arguing that they are both defensive and aggressive (go figure). Selling the high-flying, Kathy Wood stocks, seems to be a popular call. Bottom line — no one knows.

 

However, just about everyone will be taking credit for fabulous 2021 returns. Few will remind readers that it is not difficult to make money for their investors when the S&P 500 Index is up 25 percent for the year. If truth be told, credit for those returns should go to the United States government.

 

The Federal Reserve Bank's massive monetary stimulus, coupled with trillions of dollars of fiscal stimulus, created those gains in the stock market. Of course, no one wants to acknowledge that. But that era may well be over.

 

Last week, I warned readers that government stimulus is now winding down.

 

The U.S. central bank is planning to raise interest rates soon. Worldwide, some central banks are already doing just that. At the same time, fiscal stimulus is also declining. In the U.S., President Biden's Build Back Better spending plan is expected to be the last such program on the docket, if it is ever passes. Experts give it less than a 50 percent chance of succeeding.

 

So, let's keep this simple. Ignore the debate on how high inflation will rise (or not). Forget the arguments on when the supply chain bottlenecks will ease, or whether Omicron will be the worst, or even the last, variant to afflict the world. Answers to those questions are merely guesstimates anyway.

 

What we do know is what the government plans to do. Given their intentions, it is hard for me to believe that the economy can continue to grow at its present rate, while shutting off the spigot of all this government money. Common sense would tell you that the economy will take a hit, growth should slow, and with it, corporate earnings, which brings us to the stock market.

 

Sometime in the first quarter of 2022, I expect a rather serious correction in the stock market due to the government decline in stimulus. I have stuck my neck out and pinned late January, early February, as a possible start date for this event. What should you do?

 

I advise readers to hire an investment advisor as a first step. They will be able to maneuver through what I suspect will be a difficult year (or years) better than you can. If that is not an option, I suggest you reduce risk.

 

Move to a more conservative portfolio. Consumer durables, telecom, REITS, healthcare are some suggestions, but these sectors have already risen in price substantially in December. Make no mistake, however, if my call proves correct, you can expect losses no matter how conservative you may be. What I do not suggest you do is sell everything and move to cash.

 

For one thing, I could be wrong. Second, stocks could continue to rise over the next few weeks, or months, even if I am ultimately proven right. And after correction, I expect markets to bounce back. Very few will know when to get back in. So, stay invested, just not as aggressively. 

 

In 2021, worldwide, the costs of the ten worst disasters caused by climate change totaled more than $170 billion. It was the fourth time in the last five years that we have suffered that level of damages. Scientists expect next year to be even worse.

 

Insurance companies, like Zurich-based Swiss Re, bear the brunt of the costs of extreme weather. During the last decade, losses have been rising 5-6 percent per year, according to Swiss Re's recent analysis. They expect at least one $10 billion catastrophe, such as severe flooding, a winter storm, or a massive wildfire will be part of the new normal in weather changes.   

 

What is worse, more than ever before, extreme weather events are striking densely populated areas. That is one reason why these disasters are so costly. As we continue to spew greenhouse gases into the air, as global temperatures continue to climb, scientists believe that future annual insurance losses will continue to far exceed the $100 billion mark.

 

Hurricane Ida, according to a U.K.-based, non-profit organization called Christian Aid, took first place in U.S. damages in 2021. The August storm made landfall in Louisiana as a Category 4, costing $65 billion in damages as it made its way across the Eastern part of the country. July's Western European floods came in second with a price tag of $43 billion. In February 2021, the winter storm that paralyzed Texas, damaging the state's electrical grid, racked up $23 billion in losses.  

 

While Louisiana was dealing with Hurricane Ida, China's Henan Province was hit by massive flooding, accounting for $17.6 billion in destruction. British Columbia saw record-setting rainfall in November 2021, which cost Canada $7.5 billion.

 

Some of the other disasters that didn't make the grade, but cost billions of dollars, nonetheless, were Cyclone Yaws in India and Bangladesh, Australian flooding in March that displaced 18,000 people and cost $2.1 billion in damages, the Parana River drought in Latin America, which impacted jobs and lives in Brazil, Argentina, and Paraguay. I could go on and on.

 

But by no means does this partial list of climate disasters accurately reflect the total cost of climate change in 2021. These damage assessments were completed, for example, prior to the Dec. 11, 2021, six-state trail of devastation caused by more than 40 tornadoes in the U.S. Costs of that catastrophe are estimated to total $3.7 billion. It will be months before we know the true costs of climate change in 2021.

 

Unfortunately, most experts tend to focus on the financial costs to wealthier countries, which typically have higher property values. It is also in developed nations that insurance companies conduct most of their business. Many of this year's worst weather events have occurred in poorer nations, which have contributed far less to climate change, but have suffered disproportionately more in lives lost and in suffering.   

 

In the beginning of 2021, 17 scientists in Australia, Mexico, and the U.S. co-authored a perspective paper in the journal "Frontiers in Conservation Science." They concluded that much of humankind was in a state of denial when it came to climate change. I happen to agree with that view. As we draw closer to a "collapse in civilization as we know it," governments and political parties all but sit on their hands as the world burns.

 

For example, President Biden's infrastructure bill earmarked $47 billion to help communities to prepare for a new age of climate catastrophes. That was far less than the $88 billion in costs of just two of the nation's extreme weather events this year. And yet members of both political parties fought tooth and nail to reduce that amount!

 

The worldwide pandemic is small potatoes, in my opinion, compared to the era of devastation that we are now entering. Get real, people. The loss of biodiversity, climate disruption, unbridled human consumption, and exploding population growth, if left unaddressed, will make the lives we live today ecologically unsustainable.

 

While we may all be shocked, (even worried for a day or two) by 40 tornadoes overnight in six states, imagine what will happen when downtown Manhattan, Chicago, or Boston experience similar events. Unfortunately, by then it will be too little too late.

 

The continuing volatility in the stock market is troubling. It is likely signaling difficult times ahead as early as January or February 2022. As such, it is time to consider risk management.

 

After over a decade of steadily rising equity prices with few interruptions, investors have been lulled into believing that investing in stocks is a riskless game of never-ending profitability. Newcomers to the stock market arena, like your typical Robinhood investor, have been using stocks to supplement, or even replace, earned income.  Unfortunately, I believe we are entering an environment where the investment themes are changing to our detriment.

 

The most important change I see has been the pivot in the Federal Reserve Bank's monetary policy from dovish to hawkish. The Fed's focus switch from full employment to combating inflation is expected to reduce liquidity in the markets. That decline in liquidity, which has been supporting the financial markets for years, is going to impact the equity markets negatively. I believe that process has already begun. 

 

Inflation, one of the worst economic aftershocks of the pandemic, is the second variable that I see impacting stocks and bonds. Do I expect a hyperinflationary environment in 2022? No, but I do believe inflation will remain persistent throughout most of the year before subsiding. A little inflation, experts say, is good for stocks. That's probably true, but we are beyond "a little" at this point. Inflation is impacting corporate earnings, reducing profit margins, and forcing many companies and small businesses to raise prices.

 

That leads me to believe that in the first half of 2022, a lower level of corporate earnings will not be able to justify the present price levels of the stock market. As earnings and guidance weaken somewhat, so will the stock market. That is not a good environment for further market gains.

 

The economy will also suffer. Consumers, thanks to continued price increases, may reach a point where they curtail some of their purchases. They may focus on buying things they need, like consumer staples, as opposed to things they want. That will slow the economy. As a result, we could live through a few months that could best be described as "stagflation." That means a slowing economy and rising inflation.

 

I think that this stagflation, if it were to occur, would be a transitory event. By the second half of the year, we could see inflation begin to moderate (as supply shortages are resolved) and the economy grow, even if it is at a slower rate. If all the above were to occur, it would put the Fed between a rock and a hard place. They may be forced to choose between protecting Main Street from the crippling effect of further rises in inflation. But if they do raise interest rates, as they intend to, they risk precipitating a serious decline in the stock market.

 

What therefore should an investor do as we enter the New Year? In the very short term, nothing. We may still enjoy a somewhat abbreviated Santa Rally next week. I expect a possible pullback on Monday into Tuesday and then up again for a day or two. No different than what we have been dealing with for the last few weeks. Overall, therefore, I see a bigger chance that the markets will gain a little more between Christmas and New Year.

 

I expect that positive momentum to last through the first half of January 2022, but beyond that I am expecting trouble. A double-digit decline in the stock market (20 percent-plus) sometime in the first quarter would not surprise me. It could happen as early as the third week in January and last through February or beyond.

 

At the very least, investors should reduce risk. And there is no guarantee that "buying the dip" will work this time around. And even if it does, the equity rewards may lie elsewhere. International markets, for example, or commodities, or both may hold better promise than stocks in the U.S.

 

For those who have been managing money on their own, I advise you to seek out a professional investment manager and do it quickly. The coming environment will demand experience, knowledge, and a cool hand. If you need advice on how or whom, give me a call or send me an email.

 

In the meantime, have a happy holiday season and enjoy the last move higher in the stock markets.

 

Individual investors have had a decade or more of gains, compliments of a stock market that has gone up with few interruptions. But as we enter a new era of tighter monetary policy, the road ahead may be a bit rockier than most investors expect. As such, it might be time to enlist a little professional help to preserve those profits.

 

There is a saying on Wall Street that just about anyone can make money in a bull market. That may be a bit harsh. I don’t want to denigrate the efforts of so many who work hard at managing their own retirement portfolios. Some work diligently at following the markets and have made it a full-time occupation. Most others "dabble" with the aid of newsletters and columns like this one. That may have worked well up until now, but I fear we are entering a new stage of the market where a weekly column like mine just won’t be enough to protect your investments.

 

I recognize that if you are like me, you hate to spend money on something you can do yourself, especially if you have been making money by buying dips and staying invested. If this bullish trend continues, why would you even consider paying fees to a money manager?  

 

For the same reason you don't fix your own computer, washer/dryer, or put on your own new roof. Notice in each case I used an example where something broke down or malfunctioned. That has not happened yet in the stock market. Afterall, we are only a percentage point or two away from all-time highs. But what would happen if the stock market suffered a 20 percent decline? Well, just buy the dip, you might say, right?

 

What would happen if you were right, but after the sell-off, dip buying worked, just not in the case of U.S. equites? Let's say international securities bounced back, but U.S. equities did not. Are you prepared to navigate changes like this?

 

And do you have the time to do that? Up until recently, your portfolio was probably on auto-drive. A daily check on the markets, maybe a brief read of the occasional research note was sufficient to keep you on the straight and narrow. But the fact is that more than 75 percent of individuals investors, according to Fidelity studies, do not have the time, knowledge or experience to be confident in their investment choices.

 

I will be the first one to tell you that reading my weekly columns is not going to cut it. Sure, I have a good track record in calling the turns in the markets and possible investment choices over the years. But what I don't know are your backgrounds, your investing plans, nor your risk tolerance, tax status, spending behavior, retirement issues, or your estate and long-term care plans. That is why my advice will always remain generic. In down markets you need a lot more than that.

 

Now many investment advisors simply manage money, and don't get involved with financial planning. I believe that is a big mistake. Most investors, regardless of age, should seek an investment advisor that does both. How else can a professional craft an investment portfolio with the right risk profile that considers all your life factors. Many of those details are as important (or even more important) than how much money you win or lose over a day or month within the vagaries of the market.

 

Another important reason to consider a financial advisor is in order to keep your emotions in check. Personally, I expect a serious correction in the stock market in January-February 2022. If so, some investors could lose most of the profits they made in 2021. How much pain can you absorb? Does your present portfolio reflect the proper risk you are willing to take, or has it become more aggressive over time? If you are like most people, you have no idea. But I will bet your risk taking is higher than it should be.

 

History says that individual investors tend to hold on, suffer through the pain of a declining market only to sell at the bottom of a big decline. Don't allow yourself to be one of those casualties. The time to act, reduce the risk in your portfolio, and prepare for this pain trade is now. A professional portfolio manager can help you do that and be there for you when you are convinced the world is coming to an end.

 

The purpose of this column is to scare you into getting off your butt. Most people won't make a move until they absolutely must. Sure, I could give you all those boring, financial arguments that you read (and ignore) all the time. Fear is a great motivator, however. Pick up the phone and set up an appointment now, don't wait until it is too late. If you don't know who to contact, call, or email me. Given my background, plus 40 years of investment experience, I will work with you to determine someone appropriate given your circumstances.