Month: December 2018

Did Fleetwood Mac Get It Wrong?

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The iconic Fleetwood Mac hit song, Don’t Stop Thinking About Tomorrow, encourages us to believe tomorrow will soon be here, better than before. The focus is always supposed to be on tomorrow.

But if we never stop thinking about tomorrow, we cannot live in the moment, appreciate what we have right now, and fully experience the sights and sounds and feelings of today.

Experts estimate we have 15 billion neurons outside of the brain, most with multiple nerve endings. If you are fully preoccupied with the 85 billion neurons in your head, thinking about tomorrow, you are not feeling the sun on your face, the wind in your hair, the smell of sweet clover, or whatever else may be going on right now. Are you truly living?

As with so many things, perhaps the best answer is in between. Not all of one, not all of the other, but down the middle. When we think about tomorrow, we improve life for our future selves. Planning pays off—that is why we show up for work every day.

But what is it for, if we do not truly live? Living in the moment, feeling life in all its joy and pain is what it means to be human. You may know of someone who pointed so hard toward retirement, worrying and saving every possible dime, that they never could begin to enjoy the present, even after that glorious tomorrow arrived. Tragic.

Our object is not to insult the wonderful classic rock tunes that some of us enjoy—but to promote the idea of balance. We need to think about tomorrow, plan and live an intentional life in some respects. At the same time, we will be happier and healthier, better centered and more well-grounded, if we also stay present in the moment.

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

Moving Target

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We have observed that spending in retirement is a moving target. One theory says we spend more money in the early years of retirement than in the later years. Financial planner Michael Stein describes it this way: the Go-Go years, the Slow-Go years, and the No-Go years.

Spending in retirement impacts some of our most fundamental plans and planning. Retirees have a wide range of lifestyles, avocations, and circumstances which take money. It’s a personal thing.

In our experience we see people spend less as they age. When we first noticed this trend, we wondered if that was because some people run low on money. However, we recently have taken note that people with resources tend to spend less as time goes on. (Health expenses may run counter to this trend, increasing toward the end of life).

Each person has their own objectives and habits, and life throws some curve balls too. Case by case, it could make sense to plan on spending more in the early years of retirement. Bucket list items, to be done once, might come early in retirement.

The Alaska cruise, trip to Hawaii, or tour of Europe should be undertaken when you have the time and money and health to do it. The boat or camper, if one is desired, should be purchased when one has more years to enjoy it.

One of the most gratifying parts of our work is working with people on their plans and planning. We’ve worked with some of you from mid-career all the way into many years of retirement. Each one of you is as different as a fingerprint.

Clients, if you would like to talk in more detail about your retirement aspirations or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

 

Self-Driving Skeptics

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We’ve been studying the evolution of the automobile for several years. One of the major trends is toward autonomous vehicles, or self-driving cars. While the future is unknowable, some interesting observations can be made.

Folks around beautiful downtown Louisville, out in the heartland, tend to have a tough time picturing the use of self-driving vehicles. Meanwhile, residents of Boston or Los Angeles seem to have a different take.

Autopilot for navigating a few minutes in Nebraska between Louisville and Weeping Water, or Cedar Creek and Plattsmouth, especially if gravel roads are involved, is not exactly a big deal. Not much time is involved, and the complexity of the driving may be beyond self-driving capabilities for many years.

But if you spend an hour commuting on I-93 in Boston or on the 405 in metro LA, being able to go hands-free from onramp to offramp is a game-changer. This kind of capability is available now in certain Tesla models, and we’ve been able to speak with people who have experienced it.

One basically may recover an hour or more for replying to correspondence, making calls, texting, reading, or working on documents. To be able to do this during a commute instead of during the first hour in the office or at home in the evening enhances work and life.

Small town friends who get to the big city and have a chance to drive in hands-free mode admit that it is disconcerting at first when you remove hands and feet from the controls. But within a short time they begin to feel that the car is a safe driver.

Other automakers may be close to introducing similar systems. We won’t pretend to know what the pace of adoption will be, nor the growth in capabilities over the years ahead. But it is clear that self-driving technology has changed the way some people live and work already.

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

The Rip Van Winkle Effect

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Rip Van Winkle is a character in a Washington Irving short story written nearly two centuries ago. You might know the story: Rip sleeps for twenty years up in the mountains, eventually returning home to find that much had changed.

One of the most dynamic companies in the world emerged on the scene a little over twenty years ago. An investor who purchased it on its first day of trading would have made several hundred times his original investment, had they held all the way through.

In spite of the incredible long-term result, it would have been very difficult to achieve even if one had bought in early. If you carefully looked every day to see how it was doing, as of November 12th this is what you would have experienced:

• On 1,346 of the days of ownership, the value would have been less than 50% of its previous peak. This is nearly one day in four, out of the 5,410 trading days in question1.
• On 494 of the days, the value would have been down 80% from the prior peak.
• The worst drop from a prior peak would have been 94%.

It isn’t always easy to hold an investment that has declined in value. We strive to own bargains, even when they become better bargains. (Once upon a time, a client asked me “What kind of moron would watch a stock go down from $11 to $7, dropping day after day, and do nothing?” Of course, I am that kind of moron.)

We have noticed that a certain few of our clients use the Rip Van Winkle effect, to their benefit. In the example above, they would have accepted in advance they would be under water at times, and just held for the long term. They enjoy the long-term result, without the day to day anguish of fluctuating values—they did not need to look every day.

We work diligently to understand what we should own, and why. Sometimes we change our opinion and sell at a loss. But often the Rip Van Winkle effect would help us. Clients, if you would like to talk about this or anything else, please call.

Notes & References

1. Standard & Poor’s 500 Index, S&P Dow Jones Indices. Retrieved November 12th, 2018.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Stock investing involves risk including loss of principal.