Philosophy

You Can’t Always Get What You Want

© Can Stock Photo / lucidwaters

Wouldn’t it be great to have an easy job with a big salary? Or a hot sports car that was very low-priced? Or a luscious dessert with no calories?

The financial equivalent: an investment with good returns and stable value. Believe us when we say this is a popular concept.

Nearly five decades ago, the Rolling Stones advised that “You can’t always get what you want.” This is surely true of each of the situations described above. You just cannot get those desirable combinations.

But “if you try sometime, you just might find, you get what you need.” On the investment front, many people need their money to grow over time to meet long term goals. Stability of value along the way would be comforting to have. The true need is growth, and the key measure is how much money you wind up with in the distant future.

The real return on truly stable assets is usually low. Some people with a lot of assets relative to their needs can live with low returns. Most of our clients need their money working harder than that—so necessarily must forego stability along the way. (Or, adjust their goals to reflect more modest circumstances.)

We take pride in telling it like it is. Although many sellers promote the false notion that you CAN get good returns and enjoy stable values, we believe you can handle the truth. Markets go up and down—and that’s OK. Whether you were born with effective investment instincts or we had to train and coach you, many of you have shown the ability to live with volatility and invest effectively anyway.

Go ahead, ask us again about that mythical investment with good returns and stable value. We will help you understand that you can’t always get what you want, but you can get what you need. Call or email us if you wish to discuss your situation.


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

122 Out of 7 Billion

© Can Stock Photo / thesupe87

Of the seven billion people on the planet, more than three billion have access to the internet—including 286 million in the United States1. Any of these millions and billions may read our work and our thoughts here at 228Main.com, no cost.

The funny thing is, we started out writing with a specific audience of 122 households in mind. These are the people who trust us to manage their portfolios and help them frame their financial issues. We began writing these articles to improve our ability to communicate with and serve 122 of you, our existing core clients.

It turns out that there is a pleasant side effect to this process. We find that making it easier to connect with you has improved our capacity. We used to think that the 122 households were about our limit for how many we could take on without compromising service. But as our operations grow more effective, we believe we have been able to deliver better and better service. We now believe we may have room to grow to 160 client households.

We don’t know who will wind up filling our excess capacity, where they live, or what their circumstances are. But we do know a few things about them already.

They will have effective attitudes about investing, or be willing to learn them. In other words, they will fit into our niche market of the mind. They will have a few hundred thousand dollars available for long-term investing, or more. They will understand that we put all of our efforts into trying to grow the buckets and communicating with clients, instead of spending some of our time organizing wine tastings or delivering smoked turkeys or chasing prospects around.

We have long thought we have all the business we need. We do not know what the future holds, though, and the regulatory environment is constantly changing. We do not always believe in the conventional textbook wisdom. Regulations based on the textbook approach may potentially make business more difficult for those of us who would rather try something different. The increased scale afforded by our newfound capacity might be helpful in handling regulatory compliance down the road.

Our work for our core clients is extremely gratifying. If you are one, thank you for the opportunity to serve you. If you may be one of the thirty-eight future clients, please soak up all you can here at http://www.228Main.com. Feel free to get in touch with us via phone or e-mail. And for the rest of the millions and billions, we’re glad you are here, too—you are welcome to eavesdrop while we talk to our clients.

1Data from http://www.internetlivestats.com


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

We Are All Connected

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Much has been written about the polarization of American society. While noisy disagreement and entirely human behavior has always been part of our fabric, the whole “us” versus “them” theme seems to be a bigger part of our social discourse. It seeps into our politics and economics too, it seems.

Yet everything is connected. What many miss are the interests we share.

If you hope to be collecting Social Security benefits many years into the future, you might have an interest in making sure that each child today grows up to be a healthy and educated and productive citizen. Why? They will pay more Social Security taxes if they do—and better work towards your financial future. You are connected to the next generation.

Some seem to assume that big companies are always out to get them, and favor any new regulation or restraint that might be proposed to limit their activity. Yet if we needed to fly across the country, would we dare do so in an artisanal airplane, built with locally-sourced materials by a local craft person? You are connected to big companies.

Likewise, the largest oil companies in the world routinely spend more than 96% of their revenues helping people get back and forth to work, powering their homes, and providing materials used in everyday life. If you use gasoline or electricity or plastic, you are connected to them.

“Wall Street”—to some, the only villains in the last financial crisis—presents another example. Communities building schools or sewers, employers building facilities or buying machinery, teachers hoping to retire on their pensions, people saving for retirement or living on their capital in retirement: all these depend on services from the securities industry. We are all connected.

Is this an argument for turning a blind eye to bad behavior or hurtful policies or injustice or anything else that cries out for change? No way. We each should challenge the things that deserve to be challenged, and support the things that deserve to be supported. We won’t all agree on which is which.

But perhaps our differences would more often get us to a better place if we each kept in mind that everything—and everyone—is connected.


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

This Will Change the World

© Can Stock Photo / martin33

The human tendency is to believe that present circumstances will continue. The gap between expectations and unfolding reality is where profit potential lives. Therefore understanding unanticipated change is one of the key tasks in our quest for investment gains.

Two related trends are about to unleash massive change and opportunity. If we can puzzle out some of the ramifications, it may serve us very well.

Solar power, being a technology, is declining in cost about ten percent per year. In some applications, it is already competitive with more conventional sources. As the cost continues to decline, we may surmise that solar power will represent an increasing fraction of world energy production—and the overall cost of electricity may begin to fall.

The second trend is the declining cost of energy storage. Bloomberg recently reported on the ribbon-cutting of a power-plant size array of batteries, in California, for meeting peaks in demand. The cost of the facility is twice that of a conventional natural gas peaking plant.

Although paying double does not seem to be an economic threat to the old way of doing things, Bloomberg reports that the cost of storage on that scale has dropped 90% in a decade. Again, energy storage is a technology, and the cost of technology tends to drop over time. We know how this works, right?

Connect the dots: we soon may have ever-cheaper energy available when we need it, courtesy of what we might call the Next Energy Revolution.

Economic history is largely a story of new sources of energy. Water power and steam power launched the modern era more than two centuries ago, with the Industrial Revolution. Petroleum in all its forms was central to the astonishing change and growth in the 20th century. What changes will the next revolution bring?

• Given lower costs for energy, will households consume more of it, or spend more money on other things?

• Will less developed areas of the world modernize more rapidly, powered by the sun?

• Does this hasten the rise of electric vehicles?

• Which companies or industries will be helped by cheaper energy? Which will suffer?

• How much wealthier will the world be, as a consequence?

Change brings opportunities and threats. We have begun to identify winners and losers in the next energy revolution. Much more study and thought will be required. Please call or email us if you would like to discuss how this affects your situation.


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.

Memento Mori

© Can Stock Photo / boggy

In ancient Rome, it was customary for the city to throw lavish triumphal parades in honor of victorious generals. The whole city would turn out to celebrate those who had brought glory to Rome. For a successful general, it was an intoxicating reward.

Lest their generals become too intoxicated with success, however, the Romans would assign a servant with a unique task. Their job was to follow the triumphant general throughout the festivities and periodically whisper in their ear memento mori: “Remember, you are mortal.”

It is humbling advice, and one that we would do well to remember. The markets have had several great quarters lately, leading to the Dow average topping the dizzying benchmark of 20,000 points for the first time last week. We have no way of knowing how high it may get in this rally or the next, either.

We do know one thing, however: no rally lasts forever. No matter how high the market soars, it can always drop back down. We don’t know when, and we don’t know how much, but someday that day will come. There is always a recession in our future.

Our goal is to try to minimize the damage by avoiding stampedes when we see them. When investor sentiment gets overly exuberant, when we start hearing people say “You can’t lose money in the stock market”, this is when we must pay heed: “Remember, market rallies are mortal.” We are confident that in the long run the markets may bounce back from future downturns as they have always done before and we can potentially be better off afterwards—but the recovery will undoubtedly be slower and more painful if we fall into the trap of thinking that our portfolios are invincible just because they’re doing well now.

We’re thrilled with our performance over the past year and excited about the continued evolution of our portfolio strategies. At the same time, we know that nothing lasts forever. At some point in the future, we will have to reckon with another downturn. It might be in a year, or it might be in five years. Either way we must keep this inevitable fact in mind if we hope to try to mitigate the damage. If this weighs on your plans and planning, give us a call or email us to discuss your situation.


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.

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 Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Longest Journey, Part Two

© Can Stock Photo / lmphot

W is the person we know who made the longest journey to become an effective investor. Before, he chased performance, jumped on popular investments, and focused only on the short-term action of his holdings.

In Part One we profiled how he managed to learn the correct lesson from the Tech Wreck in the year 2000. W learned that popular but over-priced assets are dangerous. Others learned the wrong lesson, “stocks are dangerous.” Those who learned that lesson generally went on to buy over-priced real estate, or withdrew completely from investing.

W profited by owning equity investments in the recovery from the technology bubble, all the way up to the stock market peak in 2007.

Approaching his retirement years, the ensuing market value losses terrified him. He told us later he did not know how he was going to explain to his wife how he had ruined their financial situation.

Although he was tempted to sell out at low points several times during the financial crisis, three things helped him stay invested, but just barely:

  1. The realization that the damage was probably already done, and selling out would only lock in the losses from the peak.
  2. Our relentless reminders of how market cycles work, and the positive perspective that comes from taking the long view.
  3. The dawning realization that portfolio income is what would supplement his retirement—not the market value that appeared on his statements. “If the fruit crop is big enough, why would you have to worry about what the neighbor would pay you for the orchard?”

There is no polite way to say it. W was a difficult client in these years. We spent a lot of time talking him down from the ledge, so to speak. But it was worth it, for the kind of investor that W became.

When the recovery from the financial crisis arrived, W’s portfolio was in position to potentially rebound, and it did. Free from worry about short term action, he could stand to own bargains that might be volatile in the short run. It paid off.

W went through the valley of the shadow of death, and learned that fear was optional. More accurately, he learned that fear did not need to be acted upon. When he emerged on the far side of the valley with more wealth than ever before, his experience had inoculated him against worrying about short term fluctuations.

W had completed the second part of his journey. He had learned two crucial lessons. But he was not yet fully formed as an effective investor. One more lesson was needed. It came entirely from within himself, with no help from us. We’ll write about that in the next installment.

If you would like to talk about your journey or your situation, please call or write.

Part Three


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 situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Investing involves risk including loss of principal.

The Longest Journey, Part One

© Can Stock Photo / sabinoparente

We have seen many clients make the journey to become more effective investors with more productive attitudes, beliefs, and habits. We are proud of the client who made the longest journey of all. Because it has so much potential for so many others, we are telling the story of W, our client, in this series of three posts.

W reached a place in his career where he had money to invest in the late 1990’s. He consulted us about investing—but did not become a client then.

Our principles led us to conclude that the red-hot technology sector, which everybody seemed to be buying, should not be purchased. The bargains we preferred were incredibly boring to W. An annual dividend of a few percent was not appealing compared to the prospect of continued 30-40% gains from the shooting stars.

(Long-time followers will recognize our three principles in this episode: avoid stampedes in the market, find the biggest bargains, “own the orchard for the fruit crop.”)

After the wheels came off the technology boom and W lost half his money, he brought what was left of his portfolio to us.

Many victims of the massive decline that began in 2000 learned the wrong lesson. Although ‘old economy’ companies held their own or gained while tech stocks plummeted, some learned that “the stock market is dangerous.” The correct lesson, of course, is that popular but over-priced assets are dangerous.

W, to his credit, had learned the right lesson. He remembered the advice he did not take, saw how that would have worked, and became a client. Meanwhile, the people who learned the wrong lesson sold out and usually went on to repeat their mistake elsewhere.

This was the first leg of the journey of W, where it really began. But he was not an effective investor, yet. Two more lessons were needed, further along the path.

We’ll be writing about those next two lessons in the days ahead. If you just can’t wait to learn the rest of the story, or want to talk about your situation, please call or write.


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 situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Stock investing involves risk including loss of principal.

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

Kiln-Fired Personalities

© Can Stock Photo / kosmos111

We all know people who know what they are about. They have clarity about that for which they strive. They focus on the essentials, and are not easily distracted. They understand the bigger picture, and their place in it.

These folks demonstrate considerable strength, firm adherence to their principles, and they usually are of service or value to others. A surprising fact applies to each of them: they all started out as soft little babies.

We have been privileged to know people who fit this description, and to read the biographies of others. The same pattern exists in people in every walk of life. In learning their stories, we often find considerable adversity or seemingly insurmountable obstacles in their past.

We’re reminded of clay, and pottery. Clay is soft and malleable, fine particles that are quite porous. Pottery is durable, impermeable, fused into a single item—not a mix of soft particles.

More than ten thousand years ago, humans were creating pottery from clay on at least four continents. We learned a long time ago that heating a clay vessel in a hot enough kiln for a long enough time transforms it into pottery.

The heat of the kiln changes the properties of soft clay. Particles fuse together. The chemistry changes. What emerges from the kiln is fully formed, durable and useful.

Perhaps adversity is a kiln that produces change within us.

We would never suggest that problems or misery are good. One cannot know the depths of heartache or pain that another is forced to bear. The point is, much of what happens, happens. It is beyond our control.

We may be able to influence our own reaction, how we choose to spend our energy and our minutes in the face of adversity. Just as we cannot know what others must bear, we are not qualified to judge how others respond. But for each of us, with our own challenges, there may be some choice.

Please call or write if you would like perspective or help on your own situation or circumstances.

Don’t Make THIS Huge Mistake!

© Can Stock Photo / pressmaster

Most endeavors in life can be as complicated as you want to make them, or quite simple. The difference is in how you approach them.

We’ve been privileged to know some great coaches and mentors through the years, as well as less-gifted ones. The most effective ones focused on the few things one must do to be successful—not the infinite number of things one must not do.

A positive instruction is complete in itself; negative instructions never end. A softball coach might say “keep your eye on the ball.” That is simple and complete. “Don’t watch the butterflies” can be one of a thousand things to NOT watch, on a list that can never be complete.

We consume vast amounts of ideas and information in our work. But an article with a headline like “Twenty Retirement Mistakes to Avoid” or “Seven Investing Traps” is obviously incomplete. There are, after all, a thousand or a million retirement mistakes or investing traps out there. Knowing about seven or twenty of them cannot be enough.

Instead, we search for those crucial, simple things that are vital for success. For example, our faithful followers know we believe in three principles of investing. Avoid stampedes in the markets, seek the biggest bargains, own the orchard for the fruit crop—there you have it, in a single sentence.

An old-time peddler we knew in our youth had a motto: “Dazzle them with diamonds, baffle them with bullsheet.” Needless to say, that isn’t us. We work diligently to present our ideas clearly and simply, in a fashion that you can work with.

When people tell us they do not understand their advisor, we always wonder whether they’ve been dazzled or baffled. If you would like plain talk about your situation or question, please call or write.


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

Two Ideas About Time

© Can Stock Photo / Klementiev

Two ideas about time affect our plans and planning when it comes to investing. There is conflict between these ideas, so we need to examine them more closely.

The concept of compounding wealth over time is alluring and powerful. Something that doubles every eight years would be sixteen times the money in thirty-two years!

What does thirty-two years mean in the context of planning for a lifetime? It is the distance between age 30 and when people begin to retire. Of two people at age 60, one of them might reasonably expect to be alive thirty-two years later. You may think that thirty-two years sounds like a very, very long time. But 62 year olds will tell you that age 30 seems like yesterday. Thirty-two years clearly is a pertinent time frame for life planning.

This is key because long time horizons are generally tied to long term investment results.

The other idea about time rests in one of the ultimate truths of our existence. We may think about the past, or plan for the future, but where we live each second is RIGHT HERE, RIGHT NOW! The survival of the human species in earlier ages probably required us to be vigilant of potential threats and lurking dangers at all times. There was nothing to be gained by thinking about tomorrow if a lion was going to eat you today.

So human nature has a bias toward focusing on the present. This manifests itself in unhelpful ways in modern society. We tend to think that current trends or conditions will persist—even when they are unsustainable. Some of us seem to believe there will always be time later to take care of longer-term priorities or goals. We have trouble picturing future changes.

The focus on the present also may explain why so many lack the context and background that history can provide. We have heard people say “This has never happened before” about many things that are a recurring feature of our history. By not understanding challenges overcome in the past, today’s problems may trigger an unwarranted sense of danger.

The focus on the present is in conflict with the idea of compounding wealth over time. Our role is to try to make sure that people have what they need for the present, have a cushion for emergencies, and keep a long term focus for their long term investments.

In other words, balance is key. Call or write if you would like to talk about the balance in your plans and planning.


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