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The Sun Will Come Out
photo shows a rainbow-colored sunrise over a mountain

March 13, 2020: The novel coronavirus COVID-19 is declared a national emergency in the U.S.

In the weeks that followed, schools and businesses closed across the country as one state after another issued stay-at-home policies to curb the spread of the virus. It has been rough since then, full of ups and downs.

It’s not the end of the road yet, but an end is closer all the time, nearly in view.

Many of the routine activities we once took for granted will come back: shopping, movies, sports, travel. Some of the changes we have gone through may stick around: perhaps people will be more inclined to get takeout than sit in a restaurant, and maybe folks will consider the occasional mask during flu season. But people will likely have fresh goals and new energy.

With this, we can expect a flurry of economic activity as people go out and do all the things they have been holding off on. After the shutdown started, many households responded by saving money and paying down lines of credit. There is plenty of pent-up demand waiting to be fulfilled.

We have written before about the Roaring Twenties that followed on the heels of the deadly 1918 influenza pandemic: if things line up, we may be poised for this century’s own version.

There are no guarantees. It is possible that the market has already priced in a robust recovery following the pandemic, leaving less potential for further gains.

Still, we have reason to be optimistic. Markets aside, we all have a lot to look forward to in our personal lives. Time with friends and relatives, at favorite restaurants and vacation spots. Many of us have suffered, and not everything we lost will come back.

But as the old song goes, the sun will come out—tomorrow.

If you would like to talk about your and planning, please call or email us.

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.

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The Sun Will Come Out – 228Main.com Presents: The Best of Leibman Financial Services

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Probabilities Versus Possibilities
photo shows a goldfish with a shark fin strapped to it swimming with the fin above water

Our energy is a finite resource. Sure, we consume food and we sleep to replenish our bodies, but they too don’t last forever. The basic formula for kinetic energy requires velocity—movement. But we don’t always direct our movement in the most skillful ways.

For instance, we humans are great at focusing on low-probability events. After all, these are the events that catch headlines: “if it bleeds, it leads” the saying goes. (I mean, how do you think the world ended up with Shark Week?)

We wrote recently about bear attacks, among all things, and now we’re thinking more deeply about these ideas. What if instead of placing so much energy into unlikely (albeit scary) events, we limit our focus a little: what if we focused more instead on what’s probable?

In the markets, we hope to see at least the typical patterns of probability. Some ups and downs every year, a general trajectory of more up than down across almost any stretch of five or more years. No guarantees. But these are the general probabilities of the long-term proposition.

We don’t lock into losses by treating drops like the end of the world. Of course fatal shark attacks do happen, they are real, but we don’t stay out of the pool because one time somebody got eaten out in the open sea. That just wouldn’t make a ton of sense, huh?

The possibilities are endless, and they could consume us until our last breath. Let’s direct more energy toward what’s probable.

Clients, want to discuss what’s probable and suitable for your situation? Reach out anytime.

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Probabilities Versus Possibilities – 228Main.com Presents: The Best of Leibman Financial Services

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Streams of Consciousness
photo shows four different driftwood fires burning on a Platte River sandbar

A pastime of mine is enjoying driftwood fires on the Platte River, just outside beautiful downtown Louisville. With the changes in the weather, a recent trip to the river got me thinking.

There’s an idea—often attributed to Greek philosopher Heraclitus—that suggests, “No one ever steps in the same river twice, for it’s not the same river, and they are not the same person.”

Each day, we experience new things. These events bring us joy, sadness, pain, elation. Some events change us by an inch. Others change us by a mile. Some changes are flighty. Others are permanent.

But we change daily.

The market has been acting like this proverbial river lately. From a distance, not much has changed. But if you look closer, you’ll see it differently. Small victories. Temporary setbacks. The ebb and flow of new information.

We have a sense of where the market is flowing. But just like an actual river, there are no guarantees (Mother Nature has her ways, right?).

As the river makes anew, it brings me more driftwood. Which allows me to continue my pastime. Which prompts me to recognize that each fire is different—and the observer is different too.

Clients, if you’d like to talk about this or anything else, email or call.

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Play the audio version of this post below:

Streams of Consciousness – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://228main.com/.

Re(balancing) Act
photo shows a golden scale out of balance

We’ve got something that may sound like a riddle at first, but this situation captures an idea that we apply here in the shop. 

Suppose you took some of your money and split it equally between two stocks, both trading at $20 per share.  

Let’s say that after a year or two, one of the stocks rose to $30 while the other fell to $10. 

Another year or two later, they leveled out again, and both stocks were back at $20. But your investment has not been a wash. How? 

It might appear that your holdings are right back where you started. There is, however, a simple portfolio management strategy that can help us take advantage of back-and-forth movements.  

Imagine if you had rebalanced your holdings in the two stocks when one went to $30 and the other went to $10. If you had sold off a third of your $30 stock and put the cash toward the $10 stock, you would wind up having twice as much of the cheap stock as you did of the expensive stock—and bringing both positions back to the dollar amount they were when you originally bought in. 

But now when the high-flying stock gives up its gains, you already took some out, so now the price decrease affects a smaller portion of your portfolio than if you’d held onto all the shares. Similarly, when the depressed stock recovers, you get to enjoy the ride up with more shares than you took on the ride down. 

Using rebalancing, this situation would leave you sitting on a net profit of one-third of your original investment—even though both stocks are back at the same price they were when you first bought them! 

Rebalancing works because it applies the simplest investing axiom: “buy low, sell high.” When you rebalance your portfolio, you are selling a little bit of the higher-priced stuff in order to buy a bit more of the lower-priced stuff.  

Trying to “time the market” is a fool’s errand; rebalancing takes the guesswork out and turns it into a matter of arithmetic. 

As always, there are no guarantees: in the above scenario, if the cheap stock kept going down from $10 to $5 and the expensive stock went from $30 to $60, you would look awfully silly (… although not as silly if you had sold out of the one entirely!). 

Stocks do not go up forever or down forever: We generally expect a lot of back and forth. By taking on the risk of missing out if there ever is an extended period without back and forth, we have a chance to use the back and forth to our advantage. 

Clients, when you have any questions about what this means for you, please call or write. 

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. 

Investing includes risks, including fluctuating prices and loss of principal. 

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Setbacks and Setups

© Can Stock Photo / yellowcrest

Time travel is a powerful way to reframe the present. Our collective present is full of challenges and setbacks, but what will this moment mean to you down the road, looking back?

If you’re prone to stay mired in the moment, here’s a game of “I spy” for you: where are the setups among all these setbacks?

You’ve heard it from us before. There’s day-night, day-night. There’s up-down, up-down. Well here’s one for these challenging times: setback and setup.

Some of our acquaintances are facing tradeoffs big and small right now. Less time for work… but more time with the kids. Less time with the gym buddies… but more time out in the sunshine.

In terms of business, our classic principles still apply here. We seek bargains. Economic activity is shifting. Some areas have slammed on the brakes as demand has fallen off; some areas are buzzing in a scramble to keep up with demand.

Just like the setbacks in our individual lives, the business setbacks exist alongside potential setups. Part of our job is to take a good look around to try to spot them. No guarantees, but we wonder what future growth is being watered by the current storm.

We’re not ignoring the storm. This approach, however, helps remind us of the bigger picture. It’s a more complete way to tell the story of a setback.

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

Life in Four Dimensions

© Can Stock Photo / fredmantel

Kurt Vonnegut wrote about a race of beings who could see in four dimensions. The fourth dimension is time. “All moments, past, present, and future, have always existed, always will exist.” They could look at different moments from the past or future the way you and I might look at a stretch of the Rocky Mountains.

This is an interesting way to think about the work we do together with you, planning for the future. It requires us to see the future we want, and do what is needed to make that plan potentially become reality. People in their working years need to see ahead a decade or two or three, and envision the future.

Our investment process relies heavily on history, being able to see the past. Most conditions in the economy and markets repeat from time to time in one form or another. We can better understand these things when we know what has gone on before. In other words, seeing the past may provide clues that help us in the present.

The Vonnegut quote contains an implication with which we strongly disagree. The idea that the future is already set implies that nothing we do matters.

In fact, our whole philosophy is that the choices we make are crucial in shaping the future. There are many things beyond our control, but we control our actions. We do not control the future, but we can work to make the best things more likely to happen.

Putting this all together, we can formulate our own idea about life in four dimensions: learn from the past to shape the future we desire. When we work together, we have a better chance to pull this off.

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