Month: October 2019

Important but not Urgent

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On the advice of a speaker at a conference, I am in the process of re-reading Stephen Covey’s classic book, 7 Habits of Highly Effective People. This 1980’s staple of business literature is surprisingly timeless.

One of Covey’s theories is that time management is really self-management. He suggested that all tasks might be categorized according to urgent or not urgent, and important or not important. Those things that are both urgent and important must always be handled: production, emergencies, project deadlines.

But many important things are not urgent:

  • Building relationships.
  • Increasing productive capacity.
  • Looking at new opportunities.
  • Planning.
  • Recreation.

On any given day, these non-urgent things might be ignored without huge cost. But in the long run, the time we spend on them might be a key indicator of success, health, and happiness. A balance between production (urgent and important) and taking care of productive capacity (important but not urgent) may be a hallmark of sustainable enterprise.

This seems to apply to our personal lives as well as business. (If we are doing it right, we lead integrated lives – being the same person off the job and on the job, anyway.) Many things that give us a chance for a longer, healthier life are important but not urgent.

Working on your plans and planning, whether for retirement or estate planning or whatever, falls into that ‘important but not urgent’ category as well. Easy to put off, not a big cost to ignore for a short time, but with a huge impact on long term outcomes.

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

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

 

Hammer or Pliers?

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Recently a client asked us a common question. With a little room in the budget, should more money be added to retirement savings, or a regular investment account? Which one is better?

Of course, the answer depends on the situation. In the early and middle career stages, one might not put funds to be used before retirement into a retirement account. Saving for intermediate term goals like buying or trading homes, or buying a boat or camper, perhaps should be done outside of a retirement account.

But getting it down to fine points, some retirement plans have provisions for using money before retirement without penalty. We believe you can gain an edge by paying attention to the fine points. We like to outline all the alternatives so you can make a good decision.

On the other hand, money to be devoted to growing the orchard – a pool of capital that you may someday live on – should almost always be sheltered from taxes, if possible. This typically means into some form of retirement plan. The tax advantages may make a big difference over the years and decades ahead.

And retirement plans come in different flavors. Individual retirement accounts, employer plans of various kinds, Roth… there are many options.

Just as one cannot know whether the better tool is a hammer or a pair of pliers, one cannot know the best way to invest without understanding the job the money is supposed to do for you. That’s why we talk back and forth! You ask us things about our area of expertise, we ask you things about yours. A meeting of the minds is just the thing to make progress, with a collaborative process.

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

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

 

How Does It Sound Now?

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They say country music great Chet Atkins was playing a gig in a small Nashville club. After finishing a song, an audience member said “Man, that old guitar sounds great.” Atkins placed the guitar on its stand and replied, “How does it sound now?”

I’m reminded of this story as we review available technology for financial planning and investing. Some approaches to investing rely entirely on technology. Your supposed “risk tolerance” can be reduced to a number, which correlates to a pre-determined set of investments chosen by an algorithm, a computer program.

The financial planning process may be practiced on a robotic basis as well. One may enter data into a program or website, and get back a recommendation as to how much money must be saved or invested each month to reach one’s goals.

Oddly, sometimes even financial representatives function only as a conduit to get information from you to put into the machinery, and then deliver the outcome of the calculations back to you. The main function of the human in that case is to be a money-finder, not actually do any investment work or financial counseling.

Lots of colors in the pie chart and lots of pages in the financial plan can not replace the human touch. Understanding and clarifying what makes you tick, your purpose, your most heartfelt goals, these are things best left to real people. The dialogue, the discussion may be the most valuable part of the process.

Often we find many little things that might be improved by a slightly different approach. But few people care, unless they feel they are on track to meet the biggest thing on their list – their most cherished goal. It seems like the robotic approach has trouble understanding priorities.

I’m thinking that the guitar will always need a guitar player, and a usable financial plan will often need a planner. Of course we use technology to extend our reach and effectiveness, but its biggest blessing is in giving us more time to work with you, one on one.

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

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.

Fall 2019 Market Themes

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We believe potential investment gains live in the gap between the unfolding reality and consensus expectations. Often, this means finding undervalued companies in unpopular industries. The theory is, if the future turns out better than expected, values may rise. No guarantees, of course.

We look for promising investments by studying opportunities in detail, reading annual reports, SEC filings, analyst commentary, and doing our own arithmetic.

Although we look at individual companies, we often find themes in our list. Our current Buy List has certain points of emphasis.

Natural resources continue to attract us. Producers of copper may do well in the years and decades ahead, as solar and wind power and batteries combine in a new energy revolution. These things require copper for their manufacture. Companies that mine precious metals may do well in an environment of political and economic uncertainty.

Shares in biotech companies do not seem to reflect the potential for continuing dramatic strides in treatment and cure of disease. They sell at a discount to the market multiple; some offer dividend income.

The price of airline stocks have slipped, over fears of recession. We believe the current share prices more than adequately discount that possibility. And recessions are followed by recoveries (at least, they always have been).

Owning the largest company in a highly fragmented industry has sometimes been a good recipe for investors in the past. As industries consolidate, the bigger players often get bigger by acquisition of smaller companies. This may give them a growth rate in excess of the overall economy. We see opportunities in this concept.

We continue to be struck by the performance gap between international equity markets and the US, going back a decade. Overseas diversification makes increasing sense to us.

Our list includes other things as well, but each of these themes is well represented. We believe picking our spots, and paying attention to the fine points, is the right approach.

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

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

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

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.

The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

Taking Stock

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One of the things we do periodically with you is take stock. Having a periodic review helps us stay in touch with what is going on in your life. It’s also a good time to review your holdings, the economy and the markets as well. The items to discuss fall into these two basic categories.

  1. Planning – connecting your money to your life.
    1. Cash flow needs, saving, spending and lifestyle.
    2. Thinking on retirement.
    3. Plans for residence, if any, moving or major remodeling.
    4. Estate and trust considerations.
    5. Other objectives, special considerations, taxes.
  2. Investing – your portfolio and the markets.
    1. The role of volatility in long term investing.
    2. Risk tolerance discussion.
    3. Time horizon review.
    4. Our assessment of opportunities and risks.

Of course, we spend a lot of time working with you when a money question comes up. You can ask us anything, any time. If we don’t know the answer, we’ll do our best to find it.

Clients, if things are happening we should know about, please email us or call. Otherwise, we’ll be in touch by and by.

The Long View

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The unemployment rate dropped to 3.5%, a fifty-year low, according to the Labor Department’s report for September. Like clockwork, some observers were quick to find the clouds around this silver lining.

That got us to thinking about life fifty years ago compared to today. Looking at the facts, it is hard to think of it as anything but unimaginable progress. In 1970, more than three quarters of homes lacked air conditioning. Televisions were only in 61% of them. 38% had washing machines. One in twenty lacked indoor
plumbing. There was about one land line telephone for every two people.

More startling are the things that nobody had in 1970, because they had not yet been invented. Mobile phones, digital cameras, post-it notes, email, video games, inkjet printers, MRI scanners, fiber optics, personal computers, GPS, and the internet, to name a few of them.

Median household income, adjusted for inflation, grew 37% over that half century. The rich got richer, but the average household made a lot of progress, too.

However, life isn’t all puppy dogs and rainbows, as an older acquaintance of mine likes to say. The economy grew and shrank in its cycle of expansions and recessions. The stock market, measured by its major averages, also went up and down year to year, sometimes sharply.

In between the record low unemployment rates at the beginning and end of the fifty years, we had three episodes of unemployment in excess of 10%.

We have noticed that when times are bad, some have difficulty imaging a recovery. And when times are good, some can scarcely think about the possibility of poor times returning. We humans like to believe that present trends and conditions will persist, good or bad.

The bad news is, the economy and the markets will continue to go up and down. The good news is, over the long term we have made amazing progress on almost every front. The past is no guarantee of the future, of course. In our opinion, there are many reasons to believe our progress will continue.

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

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.

Free Wins

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People or companies may confer benefits on third parties without cost, as a side effect or byproduct of their actions. Planting a tree improves the neighborhood and provides shade to a neighbor. Keeping bees results in the pollination of nearby crops. Providing first-aid training to workers may save lives outside of work. A video or blog post created for clients might contain an idea that helps people who are not clients.

These are examples of what economists call positive externalities. These things are all good. They make the world a better place.

I believe the concept applies in our interactions with others, as well. Have you ever had your day brightened by the laughter of a group of passersby? Watched someone hold a door for someone with an armload of packages? Overheard a “thank you” being given for an otherwise thankless task?

All of these things are benefits that they produced for free and you enjoyed at no extra cost. They are positive externalities, on the small scale of daily life.

Having a tree planted improves our home as well as the neighborhood, but generating positive externalities can also help us beyond business transactions. Friends and family members respond to the empathy, kindness, and thoughtfulness embedded in any of those little actions we can take. If employed, those in our network are likely to sense the intangibles we add to the workplace environment. Our teammates across the community likely enjoy our interactions more.

Generating positive externalities is not charity. There are no costs involved, only benefits for giver, recipient, and neighbors and passersby. Win-win-win.

The general concept has been around for a long time, and is often expressed more simply. Be kind. Fill up the buckets of others. Do unto others.

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

Navigating Life

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I have never been what they call “an early adopter.” Even at the dawn of the personal computing age, my strategy was to figure out where the leading edge of technology was, and take two steps back. So it may not surprise you to know I am fairly new to the world of smart phone navigation.

The way those systems work reminds me of the way we approach life here at 228 Main:

1. Start where you are.
2. Proceed by way of your plans.
3. Arrive at your dreams.

When the phone maps a route for you, it never says “Gosh! There are a lot of problems where you are. It’s too far to go! Maybe you should wait for a better day to go.” It simply takes your location and starts to make plans.

Once underway, if you get off course, the phone figures out whether it is better to go back the way you came, or take a new route to the same goal. One way or the other, it wants you back on track. It won’t let you go mile after mile the wrong direction.

If you don’t know where you are going, any road will do. So one of the basic requirements is knowing your destination.

When we think about our work for you, there are many similarities. We begin by understanding where you are, your starting point. We invest time in learning your goals (or dreams), helping you clarify them if necessary. Where you are, where you want to go: it is about the same as using your phone to navigate.

Then we do the work. Sort out the best path to get you to your dreams. Check in and monitor it to make sure you are still on course. Provide midcourse corrections if needed. And communicate continuously with you.

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