It would be nice if the path were always clear or the choice always obvious. But a life aimed at the long haul is a little more complicated. No guarantees, but at least there’s plenty of good company here in the messy real world.
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At the start of 2020, few people could have guessed the whiplash and lasting impact the novel coronavirus has caused. The pandemic has affected each of us in different ways, some minor and some profound.
“The return to normalcy” has been a stated goal for many individuals, leaders, and communities. And different people have different perspectives on the types of costs they are willing to pay in the interest of the return to normalcy.
But what is normal?
Some of you are reading these words on the screen of a cell phone. A few decades ago, this moment would’ve sounded absurd. Our website is available online: 50 years ago, the internet was still firmly in the realm of science fiction. Heck, a century ago, the notion of an electronic programmable computer itself was beyond imagination.
Many things that we take for granted in our lives, it turns out, are hardly “normal” at all: in the big scheme, our everyday circumstances would be new and alien to those who came before us. The routines of our daily lives, the things that feel so comfortable and natural to us, are often a product of a specific time and place in human history.
The oldest among us—just at the edge of living memory—were born in a world that would have found many of our habits and rituals unrecognizable.
Other things, however, they would recognize in an instant. Survivors of the 1918 influenza epidemic would have been keenly familiar with wearing face masks in public and witnessing the ongoing debate about their usefulness and appropriateness. Stories about overcrowded hospitals and overworked doctors and discussions about “flattening the curve” would not have been new (or surprising) to them.
It turns out that not only is our “normal” actually abnormal, but our “abnormal” is more normal than we might think.
Someday, hopefully in the not-too-distant future, we will be able to close the chapter on this pandemic and our lives will return to normal.
… Which is to say, they will be different, new, and unprecedented. Just like always.
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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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As value investors, we have always treasured the opportunity to buy shares at favorable prices for companies we deem to be durable. For many companies, 10 times the annual earnings per share looks like a bargain to us!
In the recent market turmoil, these kinds of opportunities appeared again. The arithmetic of these situations is interesting: an investment might compound to three times its beginning value over 10 years or so if the company is making annual profits of one-tenth the share price and earnings keep up.
No guarantees, of course. We could be wrong in our judgment, or some problem could befall the company and upset the theory.
But suppose shares are purchased in three such companies. If only one pans out as hoped over the 10 years or so, it may be worth triple the beginning value. If the other two are worth nothing, then the combined value of the three may still hover around the original value, as it was 10 years before.
One could redeem all.
Better yet, a company that delivers steady earnings over 10 years might be valued at 15 or 20 times earnings in the future instead of just 10 times, based on the steady earnings record. That valuation change might produce profits in addition to return of the original investment.
Well-known grocery chains, health companies, and food processors may be a fit for this strategy. We cannot know the future, but we believe all these companies will survive—not just one out of three—with the possibility of real gains.
But even if only one proves durable, that one may redeem all.
If you are ready to talk strategy as it relates to your goals, please email us or call.
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In psychology, “black-and-white thinking” is a defense mechanism that helps the brain cope by pushing things to their extremes. If there is a crisp division between “right” and “wrong,” things are easier, yeah? It’s not so overwhelming to decide how to behave if we can boil a situation down to two basic options.
Like a lot of fairytales, it sure does sound nice on the surface.
But so few things in life are truly black-and-white, all-or-nothing, either/or. The problem with “black-and-white thinking” is that it’s almost always a logical fallacy.
And a logical fallacy is just that: it is false, illogical. You can‘t reason with a fallacy. You reject it and find a frame that suits the situation better.
So why do people avoid hanging out in all that gray between black and white? Because gray is blurry. There are way more decisions to make when we navigate the gray.
I’m sorry to say it, but life is already mostly in the gray in-between. And it is no time for us to splinter into camps when we all could stay on the same team. Nebraskans are suffering tremendously as COVID-19 continues to move through our communities and swamp our hospitals and care systems.
What if we didn’t splinter in the face of such challenges? It is easier to hang out in the gray when we accept that we are here together. The extremes get lonely: we’d rather face reality and work through it with each other.
Across the coming years, we will learn more about the science of this pandemic and the damage it will continue to inflict even on those who survive. In the meantime, we don’t need things to be totally “black-and-white” to move in the right direction.
Stay safe enough.
Avoid unnecessary risks.
Use our resources as wisely as we can.
What do we stand to gain when we hang out in this blurry space? We get share each other’s strength in this tough time. We get to hold out some hope for the road ahead, the other side.
Clients, we’re grateful to get to work with you, even in this tough time. Have questions about your own options? Let’s talk.
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They say you can’t have your cake and eat it, too. Once you eat the cake, the cake is gone. No surprise, right?
The same thing might be said of your retirement fund. It is there for you to spend as you see fit—but once you spend it, it is gone.
How quickly you go through your retirement savings is a much bigger decision than how quickly you go through a cake. No one can tell you what the right answer is. Your retirement lifestyle might look very different from your neighbor’s retirement lifestyle.
Some people hope to leave as much possible in their estate to provide a legacy for children and grandchildren. Others plan on spending as much as possible to enjoy the fruits of their own labors.
Some people might plan to save the lion’s share of their savings to offset the healthcare costs they anticipate in their later years. Others plan to spend a big chunk up front, while they still have the good health to enjoy some options.
None of these plans are inherently superior to any of the others. It is your money, after all. For many of you, retirement savings are the sum of an entire lifetime of work, and you alone get to decide how to direct them.
What’s our wish for you? That you navigate these choices with your eyes open to the consequences.
So here’s one important difference between your retirement savings and a cake: when you set aside a certain amount of cake for later, you will have exactly that much cake in the future: no more, no less. When you invest your nest egg, over time it may generate extra income and potentially appreciate in value, giving you more to spend in the future.
There are no guarantees, of course. Depending on how aggressively you invest, you risk losing some of your value. This is just another tradeoff you need to weigh in planning your retirement.
When we make our retirement choices carefully, the consequences are never a surprise. You can have your cake. You can eat your cake. Your call.
Clients, when you have questions about this or anything else, please call or email. Let’s talk.
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This is personal.
I was visiting with a client the other day about the inevitable rebound to come in our economy, and the opportunities that are developing now. The conversation turned to concern for those we know who might not survive a COVID-19 episode, and the grim scenes and stories from tragically overburdened hospitals.
It was a reminder, again, of the duality of our existence.
On the big scale, it is almost mundane. Demographers estimate that 108 billion humans have been born in all of history, and 100 billion of us have already died. Death comes to us all. It happens to everyone.
Yet when you get down to cases, what could be more unique or personal than our experience of the loss of a friend, lover, parent, brother, sister?
It may seem impersonal or cold to compare a projected death toll from our current troubles to some past pandemic, to talk about economic recovery and market rebounds. But we have to think about the big picture in order to make plans for living. We need to avoid emotional reactions to issues which would benefit from reasoned consideration.
I am only going to say this once. I feel the pain up close, intensely. Less than a year ago I learned first hand what happens when the ventilator loses the battle to keep a person alive.
I’ll not be apologizing for trying to figure out how to make the most of what we have to work with. Cathy wrote me a note in her last hours. It said “You have a lot of wonderful life left.” That’s the big picture. 330 million of us will survive the virus in this country. We have a lot of wonderful life left.
We need to feel our feelings about the pain up close. But we owe it to each other to think our thinking in the big picture.
If you would like to talk about the big picture or anything else, please email us or call.
We have worked to understand as best we can the coronavirus. There are a lot of aspects to it: the health and safety of our family and friends, public health considerations, economic and investment effects. All this, while sorting through information and misinformation of varying quality.
Which of these are true?
“Most people experience negligible symptoms, or those of a typical case of the flu” or “The virus can cause rapid respiratory failure and death”?
“People who have no other health problems and are below age 60 have little risk” or “It is important for everyone to do what they can to slow the spread of the virus”?
“The experience of other countries should comfort us” or “The experience of other countries should concern us”?
Get your mind wide open, because all of these things contain some truth. Those who are below age 60 and healthy will likely only get mild symptoms with a low risk of death. But healthy people can spread it to at-risk people.
Do you have an elderly neighbor? A young cousin with asthma? Relatives with diabetes or cardiac disease? Are you around people that have organ transplants? Or being treated for cancer? No matter what course the virus takes in the weeks and months ahead, some people with those conditions are probably going to be struggling to stay alive. Not all will survive.
To protect ourselves and others, it makes sense to do what we can to slow the rate of infection. If cases spike up rapidly, hospitals will be overwhlemed, with catastrophic effects on care. (This happened in parts of Italy.) If the rate of infection is more moderate, health facilities have a better chance to stay ahead of the curve. It makes a difference on the death rate.
The experts call this moderating effect of slower infection rates “flattening the curve.” It’s a good thing.
The extremes are not where we want to be: the virus is not going to kill us all, but neither is it a big hoax. Clients, if you would like to talk about this or anything else, please email or call.
It seems like everywhere you turn, there are opinions about retirement. We have not seen this particular bit of advice, so here goes.
After thought and study, we conclude that the worst possible state for retirement is… the state of confusion. Confusion may seriously impair the retirement experience.
• If we don’t understand the income potential of our lump sum balances, we may either be unnecessarily tight with our budget, or run the risk of winding up broke.
• Running out of money is a common and natural fear. Arithmetic guided by experience and knowledge may ease that concern.
• Decisions about Social Security benefits and pension payouts may have a large impact on financial security. The advice one gets at coffee break or at the water cooler may not be the best.
• Health care transforms for most people in retirement. Putting all the pieces together can be confusing. Medicare Part A, Part B, Part D, and supplemental insurance all enter into it. Personal health and financial factors play roles, too.
We advocate thoughtful approaches to major life decisions. A framework of solid information and the right arithmetic may help reduce confusion.
All in all, the state of confidence is a far better place to retire than the state of confusion. Clients, if you would like to discuss 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.
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