The Happiness Assassins

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A professor at the Harvard Business School studies the connections between happiness and wealth. Since our immediate business here at 228 Main is wealth, and our primary object as human beings is happiness, we are paying attention.

Michael Norton’s research says there are two main questions people with money ask themselves when thinking about their level of satisfaction or happiness. “Am I doing better than before?” and “Am I doing better than other people?”

We recognize the comparison to others as ‘keeping up with the Joneses,’ don’t we? And always doing better than before implies a treadmill of constant improvement, ignoring the natural ebb and flow of markets, business and the economy. These are high hurdles to happiness.

Somebody somewhere is always doing better than us. And we can never have enough, if we always want more. Perhaps this is why researchers have found that people feel if only they had two or three times as much money as they had, then they would be perfectly happy.

Being the best clients in the world, you as a group are a little different. You possess a certain kind of common sense, a groundedness, that has you considering your happiness in connection with what you need and with your natural aspirations for the future. You understand the “two steps forward, one step back” nature of the markets and economy. (You don’t always like it, but you do understand it.)

One friend quotes her granny on this point: “I have enough, and enough is as good as a feast.” This is sheer genius.

Clients, it is unimaginably more satisfying for us to work with you, instead of the kind of people these researchers talk to. If you would like to talk about this 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.

2019 Market Forecast

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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.

Many of those who have visited our offices 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% accurate1. So perhaps the question should be, if you knew which way the stock market was going to go 74% of the time1, could you make money investing?

Without further ado, here is what my 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%1 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 plans and strategies.

It is tempting to include a discussion of the economy, the strengths we perceive, and the faint possibility of recession. We’ll leave that to people with more time on their hands. If your plans or planning will be evolving in the new year and require our attention, please call.

Notes and References

1. Online Data, Dr. Robert J. Shiller: http://www.econ.yale.edu/~shiller/data.htm. Accessed December 31st, 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.

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

It’s a Whole New Ballgame!

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When a team came from behind to forge a tie in the course of a game, a certain sportscaster in the last century would exclaim “It’s a whole new ball game!”

Games begin tied, zero to zero. So in a sense, a game that becomes tied in mid-course is a new game. We get the same sensation from the start of a new year. The coming of the new year is a good time to reflect on the year just ending, and to think ahead about the year to come.

2018 was interesting, to say the least.

• From a high point in January, the market became choppy and volatile. Some of the bargains we own got cheaper. Account values shrank over the course of the year.
• Some corporate earnings and economic indicators were strong, and interest rates rose.
• LPL Financial, our institutional broker dealer, used its increasing scale to reduce our overhead and improve the technology with which we serve you.
• We added staff at 228 Main, and started projects that will improve things in the years ahead.

2019 awaits.

• We will work to uncover potential opportunities as the economic cycle unfolds, and continue to monitor our holdings on a regular basis.
• Sorting out how to house a growing business in the years ahead will be a bigger issue as time goes on.
• We will continue to add systems and understudies to improve the sustainability and durability of the business. (I still want to work to age 92, after all.)

Your own look back and look ahead are about your own challenges and opportunities. Clients, if you would like to talk about those, 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.

 

Your Life In Three Acts

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Life is a three-act play.

Act One is where you came from. What are you, what shaped you, how did you get here?

Act Two is the present. This is a part of the story you begin writing anew, each day when you wake up.

Act Three is the future. It includes your hopes, dreams and plans.

When we think about our collaboration with you, it begins when you tell us your Act One. This helps us understand you in your most fundamental characteristics.

As our collaboration with you goes along, you keep us informed about pertinent things that are going on in your life. This is Act Two, and it is mostly about you. Sometimes we pitch in. If you are living on your capital, we help arrange the details of how you finance Act Two. Or if your situation changes and adjustments need to be made in your plans and planning, you get us involved.

Act Three, the future, we work to help you script that part. Sometimes there is arithmetic to do, or investment plans to implement. The future is where your plans meet reality. We believe you can make the future you want more likely, by planning it.

It seems we are never done with any part. The longer we know you, the more we learn about your Act One. And Act Two, the present, continuously unfolds day by day. Act Three is ever-changing too, as tomorrow become today. The future shrinks, the past grows, while we live in the present.

The present is where we turn the future into the past. We love striving to help you make the most of it!

Clients, if you would like to talk about any of the parts of your life, please email us or call.

Buy Low, Sell High

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If you watch a lot of sports journalism, sooner or later you will see someone deliver some variation on this nugget of wisdom: “If we want to win, we just have to score more points than the other team.”

In investing terms, the equivalent is “If we want to make money, we just have to buy low and sell high.” This is just math: if you sell something at a higher price than what you paid for it, you make a profit.

The “sell high” part is usually easy for most people to grasp. Sometimes someone in a hot rally may get wrapped up in watching their gains go up and up and forget to cash out before things inevitably come crashing back down. But generally taking profits is fun and comes naturally to people.

It is the “buy low” part of the equation that people tend to struggle with more. Something in the news for being popular and making money is probably not trading at a low price. Buying low often means a metaphorical dumpster dive to find the unwanted dregs of the market. It is often not pleasant or easy to put your money in something that has a reputation as an unattractive investment. But if you want to buy low, that is where you frequently need to go.

The upshot is that this makes it a lot easier to get excited about a down market. It feels good to participate in a rising market, but it can be difficult to find spots to buy in when markets are up. For a value investor, market selloffs may lead to buying opportunities.

Clients, many of you already know what we are talking about. We are in business with you for a reason—we think you are the best clients in the world. We know it is not always easy to make disciplined investing decisions. But we think you have what it takes.

If you have questions about this or any other topic, please call or email us.


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

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.

Honestly, It’s Not For Everyone

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Louisville, Nebraska has been the home of our business even before we moved into the office at 228 Main. It was our family home for many years before I started my practice, and it was from that home office that I struck out into business on my own.

I have mixed feelings about the great state of Nebraska. I enjoy seeing all of the friendly faces I know and love, and I look forward to many more days working in beautiful downtown Louisville. I do not look forward to spending several dozen more winters in Nebraska, but as you probably know, I have ways around that.

Nebraska’s tourism commission just unveiled a new ad campaign that embraces some of these feelings, announcing “Nebraska: Honestly, it’s not for everyone.”

Perhaps this slogan explains why the state is so near and dear to our hearts. We do not put much stock in advertising, but if we did, “it’s not for everyone” would be an apt slogan for our own business.

We are contrarians by nature. We like to think that we know what we are about, and through our communications, we hope we can give you some idea of what we are about as well. We do not have a lot of time to spend trying to be anything else. We know we are not always going to be a good fit, and would rather work with those we are than try to be everything to everybody.

We are definitely not for everyone. We do not want to be in business with everyone; we want to be in business with the best clients in the world. In our opinion, we are lucky enough to have found them.

Clients, if you want to discuss anything, 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.

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