expectations versus reality

Minding the Bears

photo shows a rocky mountain trail

One recent morning, I was lucky enough to be hiking on a mountain trail with my sister. The air was crisp and clear, the smell of the pines was thick—a beautiful day.

We came across animal tracks, then more animal tracks, on the muddy parts of the trail.

We knew before we started that there were bears in the neighborhood. (In fact, one might say we were in the bears’ neighborhood!) The tracks seemed to have the shape of claws, with a size and depth that impressed me with a desire to avoid a meeting.

It seemed as good a time as any to turn around, so we did. My senses were on high alert as we began to descend. We reached the trailhead without incident.

Later, I looked up the facts about bear attacks. Only one out of 175 million people worldwide is the victim of a fatal bear attack each year, fewer than two in the whole United States.

The danger I perceived was far larger than the actual risk involved.

This reminds me of where we are in the investment markets. It seems to be the economic equivalent of a beautiful day: the market has had a sharp rebound from the pandemic lows of 2020. Yet some are concerned about the bear (a bear market meaning, of course, a big decline).

Just as there are plenty of bears in the wooded mountains, there are regular declines in the stock market. Some estimate that 10 to 15% declines are routine each year. But fear of the bear often seems to be greater than the actual damage a bear market might do to long-term investors.

Learning to live with the ups and downs, one may benefit from long-term growth in value. But fear of a decline that proves to be temporary—and rarely truly catastrophic—may lead one to sell out long before money is actually needed, with future gains foregone.

Clients, thank you for inviting us to hike the trails of your life with you. If you would like to talk bears or mountains or markets, please email us or call.


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The “Stuff” of Wealth

photo shows clothing hanging and a table full of glassware and kitchen goods for sale at a yard sale

Spring cleaning has given way to garage sale season in many communities. What a thrill for the senses! Whole rooms, stages of life, and past eras get arranged outside for our neighbors to consider.

I myself lean more minimalist, in general. Less stuff means less to manage. But having moved a few times in a few years, I’m thinking more about our relationship to the stuff our lives—and what it might highlight about our wealth more generally.

Maybe you’ve read about or seen the Netflix show from Marie Kondo: she’s a Japanese “tidying expert.” In her method, people have to confront their relationship with things they keep.

Does each item spark something in you? Does each item have a home?

The spark is typically joy or energy, but it could be a basic appreciation. (I wouldn’t say my toilet brush “sparks joy,” but hey, I’m glad enough I own one for when I need it!)

There are no formulas about what fraction of your wealth you devote to the stuff of your life, from furnishings and clothes to gadgets and books and fine art and gardening tools and… whatever it might be. You might, however, think about whether there’s a fit between what you have and the life you’re living. Does anything feel like it doesn’t fit? Do you get the sense something’s missing?

Our stuff is not the most important part of our financial planning, but it can certainly be part of it. As you look around at the things of your life, we hope that you see them as a reflection of and tool toward your goals—as part of a happier, healthier, and more sustainable financial future.

Think of it from the other direction: if you’ve got stuff around that’s not really part of your life, you’re paying for it to live rent-free with you! (How’s that for crystalizing the financial cost of keeping stuff around?)

Clients, no judgments from us: when you’re ready to talk about how we can help realign your money with your life, write or call.


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My “Money” Valentine: Practicing Healthy Relationships with Money

photo shows dollars bent into heart shapes

With another Valentine’s Day approaching, plenty of folks are reflecting on their romantic entanglements or interests, but it’s making us think more deeply about all sorts of relationships. 

What does a healthy relationship with money feel like? 

We are not here to give personal advice, per se, but there seem to be some fundamental principles that could serve us well in any partnership. 

Make way for reality. 

The most important of life’s conversations require some vulnerability—and bravery. Whether we’re talking about romantic commitments, financial health, or other big relationship, everyone involved would do well to be on the same page from the get-go.  

Start by getting everything relevant out on the table. Getting more familiar with the current state of things will help you face and work with the reality of your financial life. The important conversations deserve this level of honesty, even when it’s “just” you and your money! 

Check your expectations. 

For any endeavor, idealizing a relationship can doom it in an instant. Instead we’d recommend checking in with your expectations about money. Is any past baggage adding weight to a current financial issue? Or does it feel like progress is coming way too slowly? 

Sometimes the problem isn’t the issue itself: the problem is how we are framing the problem. Goals can be wonderful (see below!), but even as we’re playing the long game, embrace what author Lynne Twist calls “experiences of sufficiency.”  

They are those moments when things feel whole and life is full of “enough.”  

A meal that satisfies. Sunbeams falling across the countertop. Clothes on your back.  

A plan that you allow to inspire some hope. Speaking of… 

Use goals to light the path you’d like to take. 

Not every day of a relationship will be great, but the point isn’t total control of the outcome. Security comes from having confidence that, generally, things are headed the right direction. 

So what are the milestones along the way that will remind you of that? That will spark joy, serve others, or continue to connect you to what’s important? 

In the end…  

Love is all you need! Thanks to the Beatles for this one, but it works. In short, compassion is a great foundation for a healthier relationship with money. 

If you’d like to talk about what this means for you, please write or call.


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NEITHER HERE NOR THERE

photo shows gold key in a lock hole

The secrets to success aren’t locked in the past, but they also aren’t waiting to be revealed in some crystal ball. History and context have plenty to teach us, and we ought to prepare as best we can for the future.

But success depends on our ability to move among the past, present, and future. That’s the key.

Imagine if we relied solely on the past. Human tendency leads us to believe current trends will continue. We are masters at spotting patterns and weaving details into coherent tapestries. (Those are the moves that kept us alive when our main job was to avoid predators and find sustenance.)

Today our brains try to do the same thing—to a fault, sometimes. Economic information surrounds us, and we want to find the story in it quickly. The brain wants to spot the pattern and react. When we learn that a company is finding some early success, for example, we want to conclude, “It’s a rocket ship, look at it go!”

Understanding the current trajectory is important, but the patterns of history are especially useful. Every age has fallen prey to some sort of mania. Tulips in 16th century Holland? Tech stocks in the 1990s? Not such different moments. There’s an edge in both knowing the history and being able to apply its lessons.

But what if that’s all we have, the wisdom of history? Well, we miss the big turning points, those moments of departure. We have to understand why and when a change might occur. The future will not be like the past: a proactive approach may keep us ahead of the pack.

In business, even when our past methods and processes have served you and us well, the world keeps spinning: we can expect change, which means we’d do well to keep an eye on potential opportunities, bargains, and possibilities.

My education includes a degree in history. When I was in college and developed a growing interest in business, I spent time on my own in the campus library with The Wall Street Journal and The Journal of Commerce. Like I’ve mentioned before, it’s tough to say which has been more valuable to clients—the history studies or the business reading.

How we got here and where we’re going are two different conversations. So the secrets to success are neither here nor there—literally. They’re in the wisdom in between, and we have to keep perspective.

Clients, if you would like to discuss this or any other topic, please email us or call.

Four Trends for Fall, 2018

© Can Stock Photo / Elenathewise

The gap between consensus expectations and reality as it unfolds is where we think profit potential lives. This is why we put so much effort into studying trends, and the ramifications for investors.

One year ago, we wrote about four trends. The next energy revolution (solar + batteries), long range prospects for the world’s most populous democracy, the airline industry, and rising interest rates continue to play roles in our thoughts and portfolios.

Other ideas are also in play.

1. Thinking about the next few years, our highest conviction idea is inflation will exceed consensus expectations. Some of the ways we act on this belief may provide some counterweight to other portfolio holdings, since inflation hurts some industries while it helps others.

2. As the economic expansion lengthens toward record territory, the desire to extend our lifespan tends to be insensitive to the business cycle. Biopharmaceutical companies, working on cures for everything from Alzheimers to various forms of cancer, seem attractively priced.

3. The trend toward rising interest rates, noted last year, may have an effect on weaker and more leveraged companies. We are looking to avoid the second-order and third-order effects that higher rates may have on some borrowers.

4. US stocks have become popular relative to international equities, with dramatic outperformance over the past decade. At some point the trend changes, and better value usually wins out.

One of the difficult things about being contrarian–going against the crowd–is that we sometimes look silly. When everybody else is having more success in the short run while we search for bargains, it can be tough. But that is what we do. We’re excited about the continuing evolution of your holdings as the future unfolds.

We can offer no guarantees except that we will continue to put our best effort into the endeavor. Clients, if you have any questions or comments or insights to add, 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.

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.