There’s no map for where we’re headed: doesn’t mean we need to fear the future! This is the business of building our own way.
Want content like this in your inbox each week? Leave your email here.
fear and greed
Here Be Dragons!
It is hard to imagine embarking on a long trip these days without the use of technology. Hours spent studying an atlas have been replaced by seconds of typing in your destination. An additional quick search alerts you to nearby fueling stations, rest stops, lodging—all the known resources along the way!
Long before GPS and atlases (and even truck stop chili dogs!), explorers had no choice but to set off toward destinations unknown. Cartographers would sketch the journey as they went, creating a compounding resource of information.
If the destination proved fruitful, the voyagers would have a way to return with their bounty. If nothing of interest materialized, well, at least they knew to no longer waste their time in that direction.
Looking over some of the earliest explorers’ maps, you’ll see intricate details of the paths traveled. You’ll also find, in some of the unmarked terrain, the words, “Here be dragons!”
Two possibilities might explain the drama of such labels. There’s fear, and there’s greed.
The fear: the harrowing journey brought such new and challenging experiences that they convinced themselves dragons are indeed real and are probably lurking in those unexplored pockets of the world. Thus, shouting ensues… “Here be dragons! Stay away!”
The greed: there could still be interesting stuff out there, so it was worth trying to scare off those other explorers.
Clients, we’re in the business of uncharted territory: the future isn’t mapped out for us. You can hear the shouts of other supposed explorers all day, every day. Dragons, treachery, treasure… It’s enough to throw anyone off course.
But luckily for us, we have our guiding lights—our principles, our goals—to keep us on track. Dragons be darned!
Clients, questions or concerns? Reach out anytime. It’s our pleasure to explore alongside you.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
Here Be Dragons! – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
The Dragon and the Hobbit
Do you remember The Hobbit? If you ever read J. R. R. Tolkien’s novel or watched the movies, you may remember the scene where the title character discovers the dragon Smaug sleeping atop an enormous pile of gold and treasure.
It’s a striking image: the entire wealth of a once-prosperous kingdom, gathered up, a bed for a giant dragon. Tolkien uses this splendid scenery to good effect, exciting the reader’s imagination with his description of riches. In the story, after reclaiming the dragon’s hoard, the hero Bilbo Baggins is able to ransom an entire city with just a one-fourteenth share of the treasure.
You have to wonder… what good did owning such unimaginable riches actually do for Smaug? After all, he was a dragon. It’s not like he had shopping to do or bills to pay. Piling it up to make a nest for naptime just seems like a poor use of the assets.
What’s more, the misused treasure had become a burden over time. When Bilbo first encountered the dragon, he managed to steal a single gold cup from the hoard. The loss of even this smallest part of his holdings made Smaug miserable and furious. For all his vast wealth, Smaug spent all his time and energy worrying about it.
We don’t know many dragons or hobbits, but wealth is certainly important to the humans we know.
Money can buy a better bed than a pile of gold (for a lot less, too). But money can also be a source of stress and frustration, from unexpected home repairs to medical bills and car accidents. It can feel like life keeps sending hobbits to pilfer the hoard you worked so hard to accumulate.
But these moments are precisely what we saved for in the first place. As stressful as paying bills might be, it is less stressful than having bills and not being able to pay them.
A pile of money can make your life easier, but only if you let it.
At the end of The Hobbit, Bilbo returns home only to find that his house and possessions have been auctioned off in his absence. He is forced to spend his remaining fraction of the treasure buying his own belongings back from greedy relatives.
Where Smaug lost sleep over a single gold cup, Bilbo feels only relief at giving up his hard-earned treasure to secure the happy and comfortable hobbit life he wants for himself.
It’s no burrow, and there’s no tea kettle over an open fire, but you’re always welcome to our office in beautiful downtown Louisville, where there’s always a pot of coffee going.
Call or drop by anytime: we’re glad to share the adventure.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
The Dragon and the Hobbit – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Fantasy and Reality: A Huge Lesson from a Tiny Creature
One of the most striking images from Tolkien’s stories is of the dragon Smaug curled up on top of his massive treasure hoard. How far did his riches get him? Some real lessons from fantastic fiction.
Want content like this in your inbox each week? Leave your email here.
What’s the Magic Word?
An acquaintance of ours is a real charmer with her friends’ children. At her house, when adults ask children for “the magic word,” they don’t answer, “Please!”
Instead, she teaches them to answer, “Now!” And everyone dissolves into laughter.
“Now!” from a spunky child doesn’t carry as much weight as, say, an angry manager barking orders to an employee or a firefighter at an emergency yelling instructions.
But “Now!” gets thrown around fairly often. Our mail, our pop-up ads, and even our dentists insist they need our attention immediately. We simply must respond to this limited offer, this overdue action, this short supply.
Manufacturing urgency where there is none is a tactic. It compels us to turn our attention to whoever shouts “Now!” the loudest. And it can be startling.
Fear as a mode of motivation may “work” in the short term—it can really get people moving, right away—but a person can’t sustain the fear state. Fear triggers the part of our brain that wants to react quickly and prioritize survival. Maybe you’ve heard about those reactions: fight, flight, or freeze.
But fear is not a long-term mode of persuasion. Shaping others’ behavior has to happen with their consent and participation, over time. Habit changes, for instance, can’t be ruled by fear alone: there must be something providing positive reinforcement.
Hope, ease, intrinsic motivation—something of personal meaning must be present in any financial goal or financial habit. Otherwise, why would you do it?
Clients, people will shout “Now!” for all sorts of market reasons. We know to be wary. The shouting can be a sign of a stampede, sell-off, or unwarranted turmoil.
But don’t take our advice without investigating for yourself—even if we say, “Please!”
Questions for us? You won’t get scare tactics from us. Call the shop or write.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
What's the Magic Word? – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
May Cause Wiggling
The Funny Business of Fear-Based Peddlers
Electricians deal with electricity. Plumbers work with pipes. The work of grocers is all about… yes, groceries.
One might think that investment advisors, therefore, advise about investments.
It is a funny business. The work of some investment advisors has virtually nothing to do with investments. They traffic in fear, not investments. Our clients know that investments and markets go up and down. It is an integral, inescapable part of striving to achieve investment returns: we learn to live with volatility. Some fear-based advisors portray normal market volatility as some kind of horrible risk that nobody should face.
The “solutions” they offer to cure the fears they hype often include “guaranteed” products whose returns will inevitably reflect the current relatively-low interest rates available. We recently saw a proposal of this type, offering a product with a surrender charge of up to 14% that lasted ten years. It was a bold suggestion for a 75-year-old, a ten-year surrender charge.
The proposal came from a supposed investment advisor. In cases like this, we’ve discovered from you that this sort of professional cannot answer your questions about the stock market, nor comment in detail about ownership in any particular company, nor communicate the long-term potential of long-term investments… because they do not actually do much work with investments.
They provoke fear of investing in order to sell high-commission, high-expense products. This is a sales tactic. It is not investment advice.
So what to do? When you come across an offer that’s attempting to scare you, we suggest you hold onto your money and get a second opinion before you proceed. Yes, the world has risks. We are all about sorting out the ones that we can reasonably live with.
But the risk of getting locked into a poor deal from a fear-based peddler? That’s one to be wary of, no matter what they call themselves.
Clients, if you would like to talk about this or anything else, please email us or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
The Funny Business of Fear-Based Peddlers – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Value Will Out: Living with the Streaky In-Between
The ever-changing mosaic of the market holds my attention like few things do. It seems that a million factors bear on daily outcomes, mediated by human emotions such as fear and greed.
As fundamental investors, we believe that value ultimately comes out. Fads and fears may drive prices to irrational levels, but sooner or later the bottom line, the intrinsic worth makes itself known. This is why we are sometimes content to invest or hold onto unpopular companies: we’re waiting patiently.
Recently the broad stock market averages had their worst day in many months—followed the next day by the best day in many months. One day the global economy is supposedly going off a cliff; the next, all is well in the world. During such turmoil, we are happy to do our research, make decisions, and hang on.
The crosscurrents have been strong. When some of our larger holdings gain or lose 5% in a day, it has an impact on your account balances. But we pick our spots, thinking about the long term, and judge our results over the longest possible time horizon.
Streakiness in the short run, we can tolerate. It may just be the price of getting to the long-term results we desire.
For you, that means we are interested in your cumulative results: how much have you put in, and how much do you have now? This is generally a more useful, and gratifying, way to look at your portfolios. The day-to-day action can appear random, by comparison. (It goes up and down, this we know.)
In the meantime, we read and study, assessing our holdings and looking for new possibilities. Having the best clients in the world helps: we spend no time apologizing or explaining short-term volatility, for we know it will always be with us.
Clients, if you would like to talk about this or anything else, please email us or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
Value Will Out: Living With the Streaky In-Between – 228Main.com Presents: The Best of Leibman Financial Services
This text can be found at https://www.228Main.com/.
The Anti-Buffett
We had back-to-back conversations recently with clients who are big fans of Warren Buffett. Oddly, they seem to dislike the application of his principles to their portfolios. It is a good illustration of why Buffett’s success has endured, in our opinion. His ideas are easy to understand, hard to do.
Consider these quotations, investor first, then Buffett in bold.
“This stock has done nothing but go down since I bought it. I want to sell.”
I love it when stocks I like go down, then I can buy more at a better price.
“That company is in the news all the time with problems. I don’t think we should buy it.”
The troubles everyone knows about are already in the stock price.
“Everyone I know is afraid of this market, so I’m thinking of getting out.”
Be greedy when others are fearful.
“This stock is doing great, it’s gone up a lot since we bought it.”
Watch the company, not the stock.
These conversations are noteworthy because they are rare. The tagline on our digital archives, ‘for the best clients in the whole world,’ reflects our high esteem for you.
Clients, if you would like to talk to us about this or anything else, please email us or call.
Content in this material is for general information only and 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.
Fear and Greed
Two of the primary emotions affecting the stock market, it is said, are fear and greed.
Facts and figures are prominent in our work of assessing and ranking various investment opportunities. But in the day to day action of any market, buyers and sellers and their motivations have an oversize impact.
In our view, fear has dominated most of the last eight years in the US stock market. Many investors sold out after the double drubbings beginning in 2000 and in 2007. Money flows from retail investors, reflecting withdrawals from the market in most recent years, seem to confirm it.
Anecdotally, we also noticed burgeoning interest in strategies that hoped to avoid exposure to the stock market yet still make money. Commodities, derivatives, factor investing, bonds at low interest rates and other fads drew in a lot of money. This, we believe, reflected fear of the stock market.
For much of the market rise since 2009, it was said to be ‘the most hated rally in history’ because so many people missed out.
Knowing Warren Buffett’s famous dictum, “Be greedy when others are fearful, and fearful when others are greedy,” we stayed the course through the downturn. None of us hated this rally, did we?
Now the market sits at all-time highs. This probably makes sense when earnings are high and rising, and interest rates remain fairly low. But we are on the lookout for signs that greed has become the dominant force in the market. When others become greedy, perhaps we need to become fearful.
We are also doing other things, as well. You may have noticed winning positions getting trimmed back, and potential new bargains (we hope!) being added to portfolios. Owning bargains is no guarantee against loss, but we believe it helps. We are also nibbling at other markets in other lands, ones that have lagged and may be at low levels.
Our new portfolio design, accommodating layers of cash and more moderate investments as well as our traditional research-driven core layer, is another way to attempt to mitigate future downside.
The markets go up and down. We cannot build wealth over the long haul without facing that, and living with it. If you would like to talk about your portfolio or situation in detail, 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.
Stock investing involves risk including loss of principal.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
You must be logged in to post a comment.