It’s Episode 131 and we have a very special guest on the show to speak about the labor market. Everyone knows the labor market’s been hot and will continue to be. We have Eric Sigurdson on today. He co-leads the Chief Information Officers Practice at Russell Reynolds Associates. He has spent the last 30 years recruiting and placing senior execs in the IT space and is really on the pulse of what’s happening in the job market, the tech market specifically.
On The Tipping Point, we’re going to talk about some of our true and tried investment philosophies that you can apply to your financial freedom independence plan.
The technology job market has remained robust
The role of Chief Technology Officer and other tech roles have become increasingly important as companies spend a larger portion of their budgets on technology. New roles like Chief Data Officer and Chief Digital Officer have emerged to reflect specialization within the tech field.
While the overall technology job market has remained robust, there was a correction earlier this year as tech companies overhired during the pandemic and had to reduce staff. Outside of the tech industry itself, demand for top technology executives at other companies has continued.
Many companies want people back at the office
It’s hard to go back to the idea of five days a week in the office now that people have become used to at least some remote work. Many companies are just hoping for 2 to 3 days a week in the office. The smarter companies are trying to coordinate people’s time at the office so everyone in your team is in the office at the same time.
”Nothing worse than showing up to the office and being there by yourself and sitting in a cubicle on Zoom calls all day.
Eric Sigurdson
Workers have the upper hand right now
Some companies are mandating a return to the office, but most are trying to be more encouraging about it. For example, a large accounting firm said, “Hey, it will impact your bonus next spring.”
But because unemployment is still so low, workers still have the power. If unemployment goes up that would change.
”Once that genie has left the bottle, it's really hard to get it back in and the idea of five days a week is almost off the table.
Eric Sigurdson
The Tipping Point
Financial Rules
Payne Points
At our firm Payne Capital Management, we have developed planning and investing rules, the tenets of our firm over our years of experience.
#1 Higher returns typically mean higher risk
Higher returns in technology and growth investments can lead to concentration in big mega-cap names, but the downside can be ugly. It’s important to consider the risk in your portfolio and not just focus on day-to-day volatility. Proactive risk management is better than reactive risk management.
”As long-term investors.. We're like the tortoise, not the hare. We like that slow and steady growth.
Bob Payne
”Those 3x leveraged funds that are up 3 times the S&P 500.. but when it goes the other way you're down 3 times as much.
Chris Payne
#2 Planning over prophecies
It’s not a good investment strategy to follow prophecies about recession, hyperinflation, and the falling value of the dollar. A planning-based approach is better for understanding what you own and why you own it. People have been sold on the idea that the dollar will be debased, but gold has been a horrible investment. The average annual return on gold is 1%, while equities have been 10% for almost 50 years.
#3 Diversification over concentration
We see a lot of different portfolios concentrated in stocks like Amazon, Google, Apple, and Facebook, the top stocks in the S&P 500. But that over-concentration is always a problem on the downside.
”Funds like the ARK Fund are great for cocktail party conversation, but, boy, they disastrous for your financial health.
Bob Payne
”..when the tech bubble burst you saw stocks like Cisco, Oracle, stocks that did so well.. people wrote them up.. then they wrote them down.
Ryan Payne
Hidden Facts of Finance
The average annual return of the S&P 500 was 10% a year from 1992-2022, excluding dividends, the biggest return of any single stock in one year since 1980 was Qualcomm in 1999, it went up a mind-numbing 2,620% in one year. The second biggest one-year gainer of all time was Tesla in 2020 was up 743%.
In the United States, there were about 75 workers available for every hundred job openings as of July of this year, while states like New Jersey and California have more workers than they know what to do with, you go to places like North Dakota they only have .35 workers available for every 100 jobs, potentially tipping the balance of where job seekers should probably go.
