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Great thinker Morgan Housel talks about the scene in Lawrence of Arabia in which one man snuffs a match out with his fingers and doesn’t flinch. Another tries it, yells in pain, and asks what the trick is. “The trick is not minding that it hurts.”
Housel concludes “accepting a little pain has huge benefits. But it will always be rare, because it hurts.”
The implication for our business with you is clear. Housel concisely states what we’ve been working to convey for years: “The upside when you simply accept and endure the pain from market declines is that future declines don’t hurt as bad. You realize it’s just part of the game.”
That you have learned this lesson, and tend to live by it even when it is uncomfortable is why we say you are the best clients in the world. We feel fortunate, because it is rare. Somehow we found or attracted people with effective investing instincts, or helped to instill those.
The key to making this work in the real world is avoiding the need to sell at bad times. Cash reserves and adequate cash flow are the things that let us live with short term fluctuations with our long term money.
When we are all on the same page, we spend less time worrying about, and explaining, day to day or week to week market action. Almost all financial market commentary may be summarized by saying “it goes up and down.”
This gives us time to hunt for bargains, think about trends on the horizon, and work on your plans and planning. All of these are more worthwhile uses of our time than attempting to explain why the market went up or down yesterday, or predict what it might do tomorrow.
Clients, if you would like to talk about this or anything else, please email us or call.
Is money the root of all evil? Or is it what makes the world go ‘round? What IS the meaning of money?
Most of us receive most of the money we will ever make in exchange for our efforts. Our labor, our knowledge, our skills may be sold to employers if we are workers. They may be sold to customers or clients if we are in business. For this reason, in large part, money is the residue of the sweat we make while providing value to others.
What could be more noble than this symbol of being worthwhile to the rest of society?
In this framework, a 401(k) balance at retirement may be the end result of a lifetime of effort. An inheritance might represent two or more lifetimes of hard work. What could be more worthy of our best efforts to preserve and extend it?
While its sources are of interest, the uses of money have come into sharp focus for me recently. For the most part, my material needs are few. But money has become a vital factor in securing the health and welfare of loved ones.
The recent severe weather has resulted in hardship, pain, suffering and sometimes death for those who could not avoid its effects, or afford backup systems to meet special health needs. Oxygen concentrators require electricity, which sometimes fails. Refrigeration is needed for some kinds of life-sustaining medicine. Mobility is required to avoid some dangerous situations. All of this takes money.
When the power failed, we had a backup generator. When the storm threatened, we could leave the area. When the oxygen concentrator failed, we had another source. All of these things take money. And we had it.
Cathy’s care for children and work in the corporate world produced some of it. My efforts to help people with their plans and investing made some of it. Being good stewards of the amounts we were able to save provided some of it. The money came from worthy efforts, and it does important and worthy things for us.
Is money (or more properly, the love of money) the root of all evil? I don’t think so. It may be the evidence of lives of service and thrift. Luck? Certainly good fortune plays a role. And ill fortune surely plays a role in some people not having much of the stuff. We each must come to our own understanding of the meaning of money. This is mine.
Clients, if you would like to talk about this or any other pertinent topic, 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.
Investing involves risks including possible loss of principal.