Month: December 2020

The Active Roster
photo shows Billy Garver smiling

Clients, 2020 changed work life for many, but some changes in our office had been in the works even without a pandemic on top!

I say “in our office,” but the truth is we’ve been getting more flexible in our approach to work. The roster has grown again as of December 1, with the addition of Billy Garver as our new full-time Data Analyst. For now, Billy joins the team working from afar.

Here are a few things we’re excited about:

  • This role will grow along with Billy, who is a statistician and teacher by training. His skills will bring a fresh perspective to the research that happens behind the scenes in our firm.
  • Having another teammate means greater sustainability. You know my intent to work to age 92: our practice requires we “build a deeper bench,” an endeavor that can thrive across the decades.
  • The more we work from our collective strengths, the stronger the firm will be. Billy’s experience with documentation for academic research frees me up to spend more time doing what I love the most—talking with you!

I’m grateful to have a talent like Billy on board, and we’re excited to see how this group continues to exceed the sum of its parts!

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

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2021 Market Forecast
photo shows hands around a glowing blue crystal ball

It is that time of year! Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds? Some forecasts are hedged and don’t really say much. Our prediction is quite specific.

For those who have visited our offices, you know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.

If you knew which way the stock market was going to go, could you make money investing?

Here’s the catch: our crystal ball has only been 74% accurate. So perhaps the question should be, “If you knew which way the stock market was going to go 74% of the time, could you make money investing?”

Without further ado, here is what our crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.

Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74% of the time.

We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our principles and plans and strategies. And remember the long haul sets its sights beyond the coming year.

It is tempting here to include a discussion of the economy, the strengths and weaknesses we perceive. We’ll leave that to people with more time on their hands. If your plans are evolving and deserve some attention in the new year, please email us or call.

Cheers to 2021, friends.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.

Investing involves risks including possible loss of principal. All performance referenced is historical and is no guarantee of future results.

Any economic forecasts set forth may not develop as predicted and are subject to change.

Two Secrets About Money and Time
photo shows a clock sitting in front of a calendar on a desk

“Wealth consists in caring less about what others think about you and more about using your money to control how you spend your time.” — Morgan Housel

We’re fond of the work of Morgan Housel, who strives to help folks change their relationship to money. In his definition of wealth, we notice two key ideas—ideas that could bring some clarity to our financial decisions.

Wealth Isn’t About Anyone But You

It takes only a moment to recognize the potential problems of using wealth to influence how others perceive us. The trappings of wealth can be had with borrowed money: a $10,000 watch for $200 monthly payments, a luxury car for a monthly lease payment. But the watch and the car are not proof of anything.

Ultimately, we do not control what others think. No amount of money gives us that power.

When we focus on meeting our own needs rather than some notion of what might impress others, we require less wealth to gain control and therefore focus. We may be able to retire earlier or work at a more rewarding endeavor on less money, should we choose… which leads us to the second key idea from Housel’s definition.

Time Is Money Is Time

The familiar phrase “time is money” comes to us by way of Benjamin Franklin, writing in colonial Philadelphia. Housel writes that wealth is about using your money to control how you spend your time. In short, he turns the idea upside down: money is time.

Carried to its logical conclusion, when we have enough wealth, we may retire and gain control over the time we formerly spent working. In the form of Social Security and pension benefits, investments and 401(k) balances, the money we’ve earned then buys us time. Money is time!

Housel adds a layer to our understanding of wealth, which magnifies the good it may do us.

When you are ready to talk about your time or money, email us or call. We’ll be ready to talk with you.

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Portfolio Themes: December 2020
photo shows airplane at an airport at sunset

Our investment research process is bottom-up: we look first at individual companies, screening for bargains and dividends, checking out ideas, reading SEC filings and news reports.

But certain themes do tend to emerge, as favorable opportunities often cluster in one industry or sector.

Thinking about the big picture, it seems to us that inflation may surprise on the upside in the months and years ahead. The COVID-19 pandemic—suppressing activity on a global basis—may give way to a synchronized global recovery. With not enough production capacity attempting to supply material and goods through a transportation network constrained by the crisis, shortages may lead to higher prices.

Record tides of debt and monetary stimulus may create more purchasing power than there are goods and services to purchase. Therefore, we are striving to avoid low-interest bonds and other investments that expose us to the risk of loss from inflation.

Our most recent additions to the “buy list” reflect favorable valuations in companies we believe to be durable—and fundamental to our lives. We will still require food and shelter and medicine in the future; finding bargain prices in profitable, dividend-paying providers is a joy.

We have revised an older theme—airlines and related companies—to focus on those with the most durable balance sheets. The airline industry has faced new challenges in the pandemic, and an industry under stress presents an opportunity… but we need the companies to survive in order to live through the current difficulties. (Hence the focus on only the strongest.)

Certain natural resource holdings have become market darlings. We began investing in them years ago, sometimes adding at lower prices as we waited for the turn to come. Our patience is being rewarded, and we believe this theme has years to run.

This is not a comprehensive list, of course, but covers some of the dominant themes we are seeing today.

Clients, if you would like to discuss these or offer additional ideas, please email us or call.

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The Surprising Benefits of Hanging Out in the Gray
photo shows a black pencil on a white background next to a white pencil on a black background

In psychology, “black-and-white thinking” is a defense mechanism that helps the brain cope by pushing things to their extremes. If there is a crisp division between “right” and “wrong,” things are easier, yeah? It’s not so overwhelming to decide how to behave if we can boil a situation down to two basic options. 

Like a lot of fairytales, it sure does sound nice on the surface. 

But so few things in life are truly black-and-white, all-or-nothing, either/or. The problem with “black-and-white thinking” is that it’s almost always a logical fallacy.  

And a logical fallacy is just that: it is false, illogical. You can‘t reason with a fallacy. You reject it and find a frame that suits the situation better. 

So why do people avoid hanging out in all that gray between black and white? Because gray is blurry. There are way more decisions to make when we navigate the gray. 

I’m sorry to say it, but life is already mostly in the gray in-between. And it is no time for us to splinter into camps when we all could stay on the same team. Nebraskans are suffering tremendously as COVID-19 continues to move through our communities and swamp our hospitals and care systems. 

What if we didn’t splinter in the face of such challenges? It is easier to hang out in the gray when we accept that we are here together. The extremes get lonely: we’d rather face reality and work through it with each other. 

Across the coming years, we will learn more about the science of this pandemic and the damage it will continue to inflict even on those who survive. In the meantime, we don’t need things to be totally “black-and-white” to move in the right direction.  

Stay safe enough. 

Avoid unnecessary risks. 

Use our resources as wisely as we can. 

What do we stand to gain when we hang out in this blurry space? We get share each other’s strength in this tough time. We get to hold out some hope for the road ahead, the other side. 

Clients, we’re grateful to get to work with you, even in this tough time. Have questions about your own options? Let’s talk. 

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Have Your Cake, Eat Your Cake
photo shows a yellow cake with rainbow sprinkles with one piece gone

They say you can’t have your cake and eat it, too. Once you eat the cake, the cake is gone. No surprise, right? 

The same thing might be said of your retirement fund. It is there for you to spend as you see fit—but once you spend it, it is gone.  

How quickly you go through your retirement savings is a much bigger decision than how quickly you go through a cake. No one can tell you what the right answer is. Your retirement lifestyle might look very different from your neighbor’s retirement lifestyle.  

Some people hope to leave as much possible in their estate to provide a legacy for children and grandchildren. Others plan on spending as much as possible to enjoy the fruits of their own labors.  

Some people might plan to save the lion’s share of their savings to offset the healthcare costs they anticipate in their later years. Others plan to spend a big chunk up front, while they still have the good health to enjoy some options. 

None of these plans are inherently superior to any of the others. It is your money, after all. For many of you, retirement savings are the sum of an entire lifetime of work, and you alone get to decide how to direct them.  

What’s our wish for you? That you navigate these choices with your eyes open to the consequences.  

So here’s one important difference between your retirement savings and a cake: when you set aside a certain amount of cake for later, you will have exactly that much cake in the future: no more, no less. When you invest your nest egg, over time it may generate extra income and potentially appreciate in value, giving you more to spend in the future.  

There are no guarantees, of course. Depending on how aggressively you invest, you risk losing some of your value. This is just another tradeoff you need to weigh in planning your retirement. 

When we make our retirement choices carefully, the consequences are never a surprise. You can have your cake. You can eat your cake. Your call. 

Clients, when you have questions about this or anything else, please call or email. Let’s talk. 

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Don’t Let Anybody “Should” All Over You
photo shows a stop sign with a blue sky behind it

Trying to lose weight? Maybe you could focus on exercise, on diet, or on a combination of factors.  

Trying to repair something around the house? Maybe you could watch a tutorial and try your hand at it, or maybe you could hire out the work. 

But which way should you do it? 

The thrilling answer for many of life’s challenges and goals is that it depends. Lots of paths can lead to success. When we work with you, our clients, on your financial challenges and goals, the same is true.  

  • “What should I be doing to plan for retirement?” 
  • “What should I do with this inheritance?” 
  • “What should I do about this account?” 

It depends. That’s why we’re here to work with you, wherever you are in your process. 

Telling people what they “should” do with their money seems, to us, kind of gross. And we don’t want anyone to “should” all over you! 

I first heard this advice years ago from speaker and author Amy Florian, and it has roots with German theorist Karen Horney who talked about the “tyranny of the shoulds”: if we get too wrapped up with what we imagine what we “should” be doing, we lose sight of what we have and what’s within our control. 

The idea comes to mind whenever I read or hear some supposed expert on whether you “should” pay off your mortgage early or “should” retire at a certain age or “should” do anything. (I believe, quite often it comes from financial planners who seem to think they’ve been ordained to tell people how to live.) 

We think the first priority when you engage us on any issue is to outline the range of possibilities; then we can look together at the options and their ramifications. We’ll tell you what we think, but we will not tell you what to do.  

It is your money, your choice. What will help you sleep easy each night? What dreams are worth  pursuing each day? 

So what “should” you do? Well, we’d gently recommend that you not let anybody “should” all over you! 

Clients, let us know when we can help you address any of those “should” type of questions you may have.

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