history

Classical Language, Mostly Classic Ideas

© Can Stock Photo / franckito

A surprising number of Latin phrases are woven into modern society, considering the language has not been widely used for centuries. From simple truisms like tempus fugit (time flies) to mottos like e pluribus unum (from many, one), the wisdom and ideas of a civilization lost to antiquity survive.

The Roman historian Tacitus wrote “experientia docet,” experience teaches. We must take issue with this one. Investors make a critical mistake in learning from experience, in our view. They often learn the wrong lesson.

People sometimes adopt tactics and strategies that would have worked great in the last cycle. Unfortunately, times change and the outdated strategies usually fail to perform like they did before.

In the year 2000, following the stock market bust stocks fell—but home values rose. This taught people the wrong idea that “you can’t lose money in real estate”, which caused a lot of damage during the 2007 financial crisis. Then, by 2009, lenders learned the wrong lesson again—because auto loans outperformed in the downturn. Today they may be setting up future losses by putting too much money into substandard auto loans.

A related problem is best illustrated by a product pitch we recently received from an investment sponsor. Their latest offering is based on “the top performing asset class of the last decade!”

Clients, you know what our issue is with this. We love to buy bargains. The best performer over the past decade is, by definition, no bargain. Piling in after a big runup may be jumping on the bandwagon right before it goes off a cliff. However, the experience of the last decade evidently taught many that the specific sector was the one to buy now. Wrong lesson, again.

One interesting facet of all this is that experience actually can teach us. We just need to be certain we are learning the right lesson.

There were useful and profitable lessons in the tech wreck of 2000 and the real estate bust that began in 2007. In our view, those lessons are that it is dangerous to invest in over-priced assets—and it doesn’t pay to join a stampede in the market. Those lessons help us live with attractively priced stocks, and avoid the flight to safety that made historically more stable assets overpriced (in our opinion.)

So let us leave you with a little Latin of our own devising: cognitio ad felicitatem. (Knowledge leads to prosperity.) Clients, if you have any questions, comments or insights 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. All performance referenced is historical and is no guarantee of future results.

No strategy assures success or protects against loss.

Stock investing involves risk including loss of principal.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The History of the Future

© Can Stock Photo / Tasfoto

One might say that the study of History as a formal endeavor began 2,400 years ago. Herodotus, the so-called Father of History, sought “to prevent the traces of human events from being erased by time” in his chronicles of the Peloponnesian wars. Herodotus used perspective, context, and narrative to relate the fruits of his inquiries.

These same techniques are the foundation of our work. Facts and data come at us as if from a fire hose, particularly in the digital age. Perspective and context help us determine what is significant and pertinent; narrative is how disparate events and trends and facts can be woven into an understandable story.

The future will be different from the past; the next decade will not be like the last decade. So how does history fit into understanding the future?

First, some processes of change seem to be universal, even though the particulars change. For example, the future may include an energy revolution in which solar technology and battery storage combine to usher in unparalleled access to cheaper energy. But water power and steam power and petroleum are simply earlier examples of energy revolutions which also ushered in unparalleled access to cheaper energy. Same song, new verse.

Second, many times what seems to be entirely novel is truly not. After 9/11 a client told us “never before have we been this fearful and afraid.” The same client, as an elementary teacher, had coached young children how to get under their school desks and cover up to mitigate damage from nuclear war. Remembering the history of the Cuban Missile Crisis helped keep the events of 9/11 in perspective.

Third, human nature persists through every age. History provides a rich tapestry of behavior in action. Thinking about investments, the Tulip Mania in 16th century Holland and the South Sea Bubble in the 18th century provided many clues to the growth mania and technology bubble of the late 1990’s. Those who knew this history, and applied the knowledge properly, had an edge.

My education includes a History degree. When I developed a greater interest in business as an underclassman, I read the Wall Street Journal and the Journal of Commerce every day in the campus library. Not wishing to extend my college years by changing majors, I persisted in the study of History. Now, I would be hard pressed to say which has been more valuable to clients —the reading in the library, or the History degree.

Clients, if you would like to discuss this or any other 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.

Times Have Never Been So Tough!

© Can Stock Photo Inc. / Jetrel

As humans, we’re generally self-centered by nature. We sometimes have an exaggerated sense of our own importance.

That’s not to say that there’s anything wrong with this. We happen to think that enlightened self-interest, with the understanding that the best way to make ourselves better off is through mutually beneficial cooperation, is an excellent principle to live our lives by. But sometimes it pays to keep the bigger picture in mind.

Our experience of the present century is one of turmoil. We’ve seen terrorist attacks of unprecedented scale, the biggest recession in a century, extremist political movements everywhere from the third world to the first world, terrifying epidemics, wars, natural disasters—the list goes on and on. In our egotism, it’s easy to fall into the trap of thinking that we must be living through the greatest crisis in human history.

In fact, we’re so stuck in the here and now of our lives that we’re willing to ignore evidence from our own lived experience—many of us have actually lived through just as many troubles before! The recessions of the 70s saw higher unemployment, lower growth, and vastly more inflation all while the Cold War raged on in the background. We know the 2008 crash was painful, but compared to lines at the gas station and 20% inflation things don’t seem so bad.

And yet, those of us who came of age during those troubled times still have nothing to complain about. Think of how our grumbling about gas prices must have sounded to the generation before us! They lived through the Depression and the rise of fascism, bled on the beaches of Normandy and watched the Iron Curtain descend. They saw a hundred thousand souls go up in nuclear fire and millions more die in the concentration camps.

Those that came before them had it no easier, either. The fact that the Great War’s casualties took place on the battlefield rather than in bombing campaigns and death camps would have been little solace to towns that lost an entire generation of young men, butchered by unprecedented machines of war and chemical weapons so terrible that not even the Nazis would stoop to using them.

Going back further there’s an almost infinite number of crises in human history we can look back to. Everyone thinks they’ve got troubles, and by and large they’re right. But as preoccupied as we are with our own troubles, we should strive to keep them in perspective. As it turns out, we have a once-in-a-generation crisis about once a generation. As a civilization we’ve gone through a lot of generations and a lot of crises and still kept going.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Everything You Need to Know About the Federal Reserve “Conspiracy”

Federal Reserve - stock photo

We hear a lot about the Federal Reserve. It’s a poorly understood entity that seems to be in the news an awful lot for something most of the public knows so little about.

We have a firm understanding of what the Federal Reserve does, and we know that it is just a human institution like any other, subject to the same virtues and flaws as the rest of us. There is a vocal minority however that is concerned with the idea of a vast and powerful conspiracy with the Federal Reserve at its helm. They fear that a small handful of unelected people control everything at the expense of our legitimate elective government and will ultimately be our ruination.

There is a glaring problem with this theory: the hundred years since the Federal Reserve was founded has seen more progress in our country, in our living standards, and in goods and services that make our lives better than was done in the thousand (or two thousand, or ten thousand) years before.

In other words, if a handful of people really are controlling everything, they’ve apparently been doing a wonderful job for us so far.