What Are You Looking At?

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In planning, we take a look at the world in which we operate. Our plans need to be grounded in reality to have a chance to work out. If I plan to learn to fly by flapping my arms vigorously, the laws of biology and physics are going to have an impact.

When we look at the world, two kinds of things are especially pertinent. Challenges are the obstacles to our success. The stuff in between the challenges are possibilities. The Wright brothers evidently spent no time trying the arm-flapping thing, or fussing about the challenges of physics and biology. Eventually, one of their possibilities was converted into the accomplishment of flight.

The way some people talk about challenges, fighting them or overcoming them seems to be a key element of success. In that line of thinking, challenges occupy a central role.

I have been in a situation where the challenges seemed impossible. In fact, many have failed to overcome the same kind of challenges. Reflecting later on this chapter in life, a surprising realization emerged.

Under the pressures of the situation, I had no time to think about anything but the possibilities. After the initial planning, the challenges turned out to be totally irrelevant.

The realization: when you focus on your possibilities, your challenges disappear.

Thus the question in the title. What are you looking at? Your focus, your perception, these things change the world.

We’ll be thinking about this more. There are applications to other parts of our work for you. In the meantime, if you would like to talk about this or anything else, please email us or call.

The Joy of Being Cheaply Amused

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Once upon a time, we went out on a Friday night – to the dollar theater. This was a discount affair, where good movies – not prime, first-run movies – could be seen on the big screen, for a dollar.

In the ticket line, we happened upon friends and clients, recently retired. They told us it was a regular part of their entertainment. They also hiked the trails at the state park, played cards with friends, read books from the library, and liked to watch the sun set over the river.

He said, “One of the things we had to learn early in my teaching career was the joy of being cheaply amused. We were not making much money, and did not really have a choice.” Even in retirement, on a good pension and with plenty of resources, those habits stuck.

That phrase struck a chord with me. I had long noticed that those who feel compelled to keep up with the Joneses, or whose happiness seemed to depend on shopping or acquiring things, were difficult clients to work with. Those traits are connected to a general desire to always want more.

In contrast, the joy of being cheaply amused seems to correlate with simpler lifestyles, longer-term orientation, and a greater sense of contentment.

This has a huge impact on lifestyles in retirement. The conundrum is, those who are cheaply amused tend to be the ones who can afford the bucket list trip to Europe or Alaskan cruise, to be generous in helping children and grandchildren, who have money for really significant activities.

In other words, some of the most successful retirees we know have grown into being able to spend well. Not having a lot of money starting out in life is good discipline for being thoughtful about spending later on.

Clients, if you would like to talk about this or anything else, please email us or call.

Make the Most of It

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All seven billion of us have the same job. Whether we are among the poorest or wealthiest, sickest or healthiest, a single task unites us: wake up every day and make the most of it.

Taking that one step farther, we each can increase our ability to do things, to be better, to be stronger. Beginning each day a little better, a little stronger than the day before, that helps us make the most of it.

I won’t pretend to know or prescribe what you should eat or drink, how you should live, whether to exercise, or give you health tips. My professional expertise is devoted strictly to striving to grow your buckets, for use in your real life.

When you entrust me to help you with your wealth, I owe you the effort to make the most of it. Wouldn’t it be better for you if my brain was a little bigger? After all, thinking is how I do my job. The Harvard Health Blog recently cited studies that show exercise boosts the size of parts of the brain involved in memory and learning.

So exercise may be helping me make the most of it, in ways that help you, too.
This is a win-win choice: I have other, selfish reasons for exercise that have nothing to do with you. But if Harvard is correct, you get an advisor with a bigger brain out of the deal.

This essay began with a focus on the day to day, making the most of it. Oddly, my longest-range goal brings me to the same choice about exercise. It will help me serve you until I am 92 years old.

This congruence between my fondest ambitions and my daily life is good for you, too. Win-win.

Clients, if you would like to talk about this or anything else, please email us or call.

Time and Space, Compressed

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In his memoirs, Civil War general and president Ulysses S. Grant wrote about the first time he rode on a train. (When Grant was a young man, trains were a new technology.) Traveling overland at the unprecedented speed of 15 miles an hour, it seemed to him that time and space had been compressed.

In our age, one might have consecutive meals on opposite coasts. A journey that first took months, then weeks, then days, takes hours in the jet age.

Time is compressed in other ways, here in the 21st century.

• New forms of media let us interact at the speed of light with dozens or thousands of people, for less than the price of a stamp.

• Email and other forms of digital messaging allow communication between people who are never available at the same time. This represents quite a productivity boost over the days of telephone tag.

• Research begins with fingertips on keyboards, virtually everywhere, instead of with trips to the library.

Necessity is the mother of invention, as they say. We had to effectively integrate these technologies into our business with you, and use them to maximum effect over the past few years.

21st century technologies have helped our old-fashioned conversations begin with more common ground, then go deeper into the topics in which you are interested. It seems to me we are closer now than ever before. This makes sense, if we are communicating more than we used to.

Clients, if you would like to talk about this or anything else, please email us or call.

Too Close to the Sun

© Can Stock Photo / Paha_L

In Greek mythology, Daedalus constructs wings of feathers and wax so he and his son Icarus may escape from the island of Crete. Although warned against flying too close to the sun, Icarus becomes giddy with the sensation of flight. His wings melt when he gets too close to the sun, and he crashes into the sea and drowns.

This tale of hubris is perhaps mimicked in our time by central bankers around the world. Central banks including our Federal Reserve Bank are charged with conducting monetary policy to achieve stability of prices and favorable economic results. The stresses of the last global recession induced some of these authorities to adopt unprecedented policies.

Among these ideas, the most unusual might be negative interest rates. If we think of the rate of interest as a price – the price of money – then the concept of negative rates seems insane. If bananas had negative prices, producers would have to pay you to take them.

There are practical problems, too, for savers and investors. Imagine having $100,000 in the bank today. After a year of -1% interest, you would have, say, $99,000. “Money in the bank” would no longer be like money in the bank.

Why would central bankers consider such a policy? Like Icarus with his wings, they seem intoxicated by their apparent power to manipulate the economy. Negative interest rates would be a strong incentive to reduce savings and increase spending. This could theoretically boost the economy.

The unintended consequences of their actions could create real problems. Average folks trying to save for the future were severely disadvantaged by the zero interest policy of the last decade. Negative rates would make that even worse.
The Federal Reserve has not yet gone below zero. But a research paper published by a Fed official earlier this year concluded that “negative interest rates might be a useful tool…”1

Clients, our concern over this trend in Fed thinking bolsters our conviction about the investments we hold that would potentially benefit from the unintended consequences. No guarantees: we wish central bankers would simply avoid flying too close to the sun, so to speak.

Clients, if you would like to talk about this or anything else, please email us or call.

Notes & References

1. “How Much Could Negative Rates Have Helped the Recovery?”, Federal Reserve Bank of San Francisco. https://www.frbsf.org/economic-research/publications/economic-letter/2019/february/how-much-could-negative-rates-have-helped-recovery/. Accessed June 25th, 2019.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Life in Four Dimensions

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Kurt Vonnegut wrote about a race of beings who could see in four dimensions. The fourth dimension is time. “All moments, past, present, and future, have always existed, always will exist.” They could look at different moments from the past or future the way you and I might look at a stretch of the Rocky Mountains.

This is an interesting way to think about the work we do together with you, planning for the future. It requires us to see the future we want, and do what is needed to make that plan potentially become reality. People in their working years need to see ahead a decade or two or three, and envision the future.

Our investment process relies heavily on history, being able to see the past. Most conditions in the economy and markets repeat from time to time in one form or another. We can better understand these things when we know what has gone on before. In other words, seeing the past may provide clues that help us in the present.

The Vonnegut quote contains an implication with which we strongly disagree. The idea that the future is already set implies that nothing we do matters.

In fact, our whole philosophy is that the choices we make are crucial in shaping the future. There are many things beyond our control, but we control our actions. We do not control the future, but we can work to make the best things more likely to happen.

Putting this all together, we can formulate our own idea about life in four dimensions: learn from the past to shape the future we desire. When we work together, we have a better chance to pull this off.

Clients, if you would like to talk about this, or anything else, please email us or call.

Louisville, My Home Sweet Home

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Planning to work to age 92 has a side effect: there is no date any time soon after which I can do what I want. Cathy and I knew this. A decade ago we figured out that we needed to have some fun along the way. That’s how the whole snowbird plan got started.

Snowbirds are people who go south for part or all of the winter, migrating north to their homes in the spring. We began doing that in 2010, for a few winter months. It was the best of both worlds. We had our home in Nebraska to enjoy most of the year, close to friends and family, and a place to get some weeks of warmth in the dead of winter.

A couple years after we began this, Cathy’s health went south. She was diagnosed with a slew of pretty awful lung conditions. We were able to continue our snowbird routine. Her rising need for oxygen eventually made flying impossible, so we simply drove back and forth.

Three years ago, things got to where long road trips were no longer possible. She had to choose where to live. The specialists who saved her life and continued to treat her are in the south. And Nebraska winter weather could be fatal in a power outage or a stalled car. Staying in the south became a matter of medical necessity for Cathy.

At the same time, health insurance paid the bills for stuff that kept Cathy alive. My small group policy required me to maintain Nebraska residency. And I needed to be in the shop at 228 Main Street for a bit every month. (Our work for you helped Cathy, because it’s expensive to be sick.) I became a long-range commuter. Cathy could remain in the warmth and I could keep the business end going.

Cathy got extra years of life with the help of Florida weather and Florida doctors—important years, in which children got married and grandbabies were born. With her passing, I can focus again on life in Louisville, my home. I’ll be selling Cathy’s Florida house – it’s too much, and in the wrong place.

We have come full circle, back to the original situation. I’m going to work to age 92, so I need to figure out how to have some fun along the way. Bottom line, I’ll be spending much more time at home in Louisville.

Clients, if you would like to talk about this or anything else, please email us or call.

Extreme Discounts

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One of the basic distinctions made in the stock market is between growth and value. Growth stocks offer the potential or history of above-average growth in revenues and earnings. Investors are buying a brighter future.

Value stocks present a low cost in terms of price for a current dollar of earnings, or price/earnings (P/E) ratio. In the late 1990’s growth stock boom, value stocks were derided as “old economy” stocks. The exciting “new economy stocks,” computer chip and internet and fiber optic companies, were all firmly in the growth camp.

Investing in growth worked well until it didn’t. Value stocks went nowhere until the Tech Wreck, when growth stocks peaked and then fell a long way. The stock market often experiences periods where one of these factors outperforms, and the other one lags.

A recent article at MarketWatch.com1 detailed the work of a Wall Street analyst who claims that value stocks are at their biggest discount relative to growth in many years. The charts show that valuation differences generated by a decade of strong growth stock returns put value stocks at perhaps the biggest discount in history relative to growth.

In plain language, the bargain stocks have generally become bigger bargains.
When there are sound reasons for expecting better stock prices at some point in the future, we may own companies that are underwater, or down from what we paid for them, for an extended period.

We strive to own the best bargains. It is hard to watch as bargains become even better bargains while more expensive stocks do better. But we know how this works. We believe that sooner or later the bargains will produce gains.

If the differences in valuations are at extreme levels, perhaps the trend change is coming sooner rather than later.

Clients, if you would like to talk about this or anything else, please email us or call.

Notes & References

1. MarketWatch, “Value Stocks are Trading at the Steepest Discount in History”. https://www.marketwatch.com/story/value-stocks-are-trading-at-the-steepest-discount-in-history-2019-06-06. Accessed June 14th, 2019


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

One of a Kind

cathy

I wasn’t picturing this day back in the 8th grade when, playing the role of Charlie Brown to her as the little red-haired girl, she didn’t know my name. Nor on the first day of freshman year in high school, when the divine miracle of alphabetical order put Cathy Livingston’s locker next to mine. Nor on the 4th of July the following summer, when our long romance began.

Not when we married, and certainly not when the babies came, four in all.
But seven years ago I learned this day was coming–and here we are. Football players strive for ‘yards after contact.’ Cathy battled to get ‘years after diagnosis,’ and she got them. She saw kids get married and she met her grandbabies in those hard-won years.

She’s gone, but not. She lives on in the intelligence of her children, the determination (stubbornness?) of her grandchildren, the formative influence she had on me, our children, the kids she cared for, and in a thousand other ways. This lover, child enthusiast, Disney fan, dolphin watcher, mother, and grandmother endures in our hearts and memories.

At the end of our life together, I am filled with an abundant gratitude, not regrets. Sad, and hopeful. Who wouldn’t be? On a ventilator, unable to speak, nearly paralysed, in her last hours she communicated by writing. One of her messages to me: “You have a lot of wonderful life left.” One chapter ends, another begins.

My work for you is not done. I don’t have the option of curling up into a ball, there is too much to do. I’ll need a little time and space—but I’ll be back. After all, making the most of it is one of the things I learned from Cathy.
Thank you all, again, for everything.

Knowing and Doing

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Knowing and doing are two different things. We were reminded of this recently, during a Financial Literacy Month discussion. A colleague surprised us with a contrarian opinion on financial literacy.

Conventional thinking is that the presence of so many people who fail to save for retirement and make costly mistakes is proof that more and better financial education is needed. Our colleague asked us whether the issue was one of knowing, or one of doing?

“Consider what we know about health and what we do about health,” he said. By some estimates, lack of exercise and poor eating habits lead to millions of deaths each year, not to mention deaths from tobacco use and alcohol abuse. Haven’t we all heard about these things?

Likewise, most people may have heard that investing for the future is a good idea, and spending within one’s means. But surveys show that many are ill-prepared for retirement.

Whoever first said “knowledge is power” perhaps was only partly right. Wall Street pioneer Roger Babson wrote a century ago:

“Experience has taught me that there is one chief reason why some people succeed and others fail. The difference is not one of knowing, but of doing. So far as success can be reduced to a formula, it consists of this: doing what you know you should do.”

Our view at 228 Main is that ‘knowledge in action is power.’ We will continue to promote knowledge and awareness of financial and investment concepts and ideas. But we will also work to motivate and persuade on the merits of taking worthwhile action.

Knowing. And doing. We need both in order to get where we want to go. Clients, if you would like to talk about this or anything else, please email us or call.