optimism

Rational Optimists

Many businesses are weathering the pandemic by staying agile. Factories are retrofitting their equipment, computer-bound workers are getting more flexible working conditions, and food services are thinking outside the dining room. 

We recently read about how one brand we love is coping with COVID-19. The company Life Is Good has been slapping their cheerful slogans on shirts and coffee mugs for more than 20 years, and they had some tough decisions to make this spring. 

We had the pleasure of hearing from co-founder Bert Jacobs a few years ago. What struck us was that their flavor of optimism embraces life for its messy beauty. 

After 9/11 and the Boston Marathon bombing—moments when it would’ve been easy to fall into despair—the company responded. They sent the proceeds from special themed products straight to charity. Today, they’ve transformed their production process to make space between workstations and to be able to print shirts on-demand. 

Their core belief that life is good hasn’t wavered, and it’s served them well. Jacobs explains that their community is one of “rational optimists.” These are people who like to say, “Life isn’t easy, and life isn’t perfect. But life is good.” 

(And for whatever it’s worth, as of early July, they report zero COVID cases among employees at Life Is Good.) 

That idea has served us well, too. Life has not been easy, but here we are today. Life is good. 

Clients, if you want to talk through this or anything else, call or write. 

The End of the World Portfolio

We live in trying times, a recurring feature of our existence.

Our entire investment philosophy is underwritten by a simple fundamental belief: tomorrow will be better than today. We can’t know that this will be true of every single tomorrow, but we’re pretty sure about the long term trend.

Though they say that “past performance does not guarantee future results,” human civilization has a track record thousands of years long of resilience, rebounding from crisis to do better than before. We expect it will continue. Without this belief the idea of investing for the future is meaningless.

We know that there are troubles in the world, with the news full of the virus, death and disruption. People sometimes feel that the latest bad news signals imminent total catastrophe. This isn’t anything new–people have been predicting the end of civilization for the entire span of human history. Yet somehow we’ve always rebounded all the same.

If the most dire predictions ever do come to pass, it isn’t going to matter what investments you own. Your meanest neighbor will be trying to steal your canned goods. So the ideal portfolio for the end of the world is the one that will serve you best in the event that the end of the world fails to show up—again.

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.

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.

Grateful for Wealth in Many Forms

© Can Stock Photo / BVDC

The Thanksgiving season is a natural time to reflect on the things for which we are grateful. We each have our own list, of course—it’s a personal thing. Perhaps there are similarities between your list and mine.

I think of the connections to friends, family, colleagues, and clients. You in these overlapping groups hearten me for life’s challenges, great and small. You strengthen me with the stories of your lives. You make me optimistic about the future, come what may.

I think of being able to make the most of the challenges we’ve been given, in part because of the material blessings we’ve received for our efforts. We have seen up close, the link between prosperity and health.

I think of my work, so enjoyable that I want to do it to age 92. Many people work only until they do not need to, at jobs that will be a joy to retire from. We’re always happy to help you who are in that boat, while being grateful for our situation.

I think of how glorious life is, here in the 21st century. 228 Main has been wonderful as the center of our business universe. And www.228Main.com, just a gleam in my eye at the dawn of the new century, has proven to be more beneficial than we ever dreamed.

Sunshine on my face, wind in my hair, fish jumping, birds fishing, babies laughing, old friends, fond memories and a thousand other things round out my list.

Happy Thanksgiving! Please email us or call if we can make things any better for you.

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

 

Rule #3

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Our Fundamental Rule #3 of Investing: own the orchard for the fruit crop. What do we mean?

If the fruit crop is enough to live on, you would not have to care what the neighbor would pay for the orchard – it’s not for sale! Whether the latest bid was higher or lower than the day before makes no difference.

You can think of your long term portfolio the same way. If it produces the cash flow you need, fluctuating values don’t always affect your real life – you buy groceries with the income, not with the statement value. The down years may have no impact on your life or lifestyle. All we need to know is where to find the cash you need, when you need it, to do the things you want and need to do.

This is what we mean when we say “own the orchard for the fruit crop.” It’s important, because enduring volatility is an inherent part of investing for total return.

There are two key points of caution. This approach presumes you keep the faith that downturns in the market end someday, that the economy recovers from whatever ails it—and you do not sell out at low points. Also, it assumes that your short term lump sum cash needs are covered by savings that do not fluctuate.

Clients, this understanding is key to our work. Please call or email us if you would like to talk about it, or anything else.

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 investing involves risk including loss of principal. No strategy assures success or protects against loss.

Up And Down Really Means Up And Down

© Can Stock Photo / webking

As long term investors we talk a lot about the need to weather short-term volatility in pursuit of long-term results. Our notion is that volatility is not risk, but an inherent feature of investing.

As years go by, many think of the market as having good years and bad years. This is based on the outcome for calendar years. The astonishing thing is how much movement there is during the course of the typical year.

“At least one year in four, roughly, the market declines.” We’ve said that about a billion times, to reiterate that our accounts are likely to also have good years and bad years, if one judges on annual returns. The object is to make a decent return over the whole course of the economic cycle, year by year and decade by decade.

But in those other three years out of four, the market also experiences declines during the course of the year. In an average year you may see a decline of 10 to 15% at some point during the year.

Our object is to leave long term money to work through the ups and downs, without selling out at a bad time. Three things help us do that:

1. A sense that everything will work out eventually, a mindset of optimism.

2. Awareness that downturns tend to be temporary, ultimately yielding to long term growth in the economy.

3. Knowing where our needed cash will come from, based on a sound cash flow plan.

Bottom line, even years that end up well can give us a rough ride. Knowing this can make it easier to deal with.

Clients, if you would like to talk about 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.

Stock investing involves risk including loss of principal.

All performance referenced is historical and is no guarantee of future results.

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.

 

Grateful for Wealth in Many Forms

© Can Stock Photo / BVDC

The Thanksgiving season is a natural time to reflect on the things for which we are grateful. We each have our own list, of course—it’s a personal thing. Perhaps there are similarities between your list and mine.

I think of the connections to friends, family, colleagues, and clients. You in these overlapping groups hearten me for life’s challenges, great and small. You strengthen me with the stories of your lives. You make me optimistic about the future, come what may.

I think of being able to make the most of the challenges we’ve been given, in part because of the material blessings we’ve received for our efforts. We have seen up close, the link between prosperity and health.

I think of my work, so enjoyable that I want to do it to age 92. Many people work only until they do not need to, at jobs that will be a joy to retire from. We’re always happy to help you who are in that boat, while being grateful for our situation.

I think of how glorious life is, here in the 21st century. 228 Main has been wonderful as the center of our business universe. And www.228Main.com, just a gleam in my eye at the dawn of the new century, has proven to be more beneficial than we ever dreamed.

Sunshine on my face, wind in my hair, fish jumping, birds fishing, babies laughing, old friends, fond memories and a thousand other things round out my list.

Happy Thanksgiving! Please email us or call if we can make things any better for you.

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

 

In Praise of Gratitude

© Can Stock Photo / PetarPaunchev

The Harvard Medical School published an essay with this same title some time ago. The key lines: “Gratitude is strongly and consistently associated with greater happiness. Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.”

Gratitude may be about past blessings, current conditions, or reflect a hopeful and optimistic attitude about the future. One of the best things about an attitude toward gratitude is that it can be cultivated.

In one study, three groups of people were directed to write a few sentences each week. One group was instructed to write about irritations or things that had displeased them. The second was directed to write about things that had affected them. The third group was directed to focus on things that had happened for which they were grateful.

After ten weeks, one group was more optimistic about life, and had a greater sense of well-being. That group also happened to exercise more and make fewer visits to the doctor. You can guess which one.

We believe there are interesting applications to the work we do together with you. Short term fluctuations in the markets may be irritating, but gratitude for long term returns might let us focus on more rewarding mindsets. The economy and markets always seem to be a mixed bag, but gratitude for opportunities may help us avoid a focus on problems that might prevent us from investing effectively.

At the heart of all this is the simple truth that we get to choose what gets our attention, what we focus on. Does choosing gratitude make us healthier, wealthier, and wiser? No guarantees, but we might have more fun while we find out together.

Clients, if you would like to talk about 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.

What We Learned at the Big Conference

© Can Stock Photo / appalachianviews

I have gone to many conferences over a long period of time. Each has provided some perspective, insight or connection that proved to be quite valuable. Our quest to improve your financial position, being a human endeavor, is always susceptible to improvement. The conferences serve to expose us to ideas, concepts and tools that can help.

LPL Financial’s Focus17 event was perhaps the most consequential ever. The social media and blog presence we started at http://www.228Main.com two years ago has a far greater reach than we realized. We have relationships with top executives at LPL Financial and senior management that we did not know we had. This is turning out to be vitally important to you and to us.

Regulation creates change, and encourages standardization. You know we are contrarian; we dislike conventional wisdom, so we aren’t big on doing what everyone else is doing. As the company sorts out how to get to the future, our voice is in the conversation. Our proposals, the ones that will let us keep serving you as we have been, are being reviewed at the highest levels. If we didn’t have the new media presence, we would still be trying to let the brass know who we are and what we want.

Our communication strategy is to be radically transparent. We share our fundamental beliefs, our strategies, our methods and our views. So when we introduce ourselves to a policy-maker and say “this is what we are about,” the policy-maker says “Oh, I know, I read your blog. What do we need to do?”

Clients, understand, we put this all in place for you, not them. If there were three of me, none of us would have time for ego-stroking with big shots. But the fact is, these good people are going to help us shape the future in a way that might work out for everyone.

The highlight of the program was Bert Jacobs, Chief Executive Optimist of the Life Is Good Company. (You may have seen their T-shirts or coffee cups.) You have to know, the message that ‘life isn’t easy, life isn’t perfect, but life is good” certainly rang my bell. The idea that optimism is a tree trunk from which authenticity and empathy and humor and generosity etc. can branch is very powerful. Bert learned that ‘life is good’ resonated most deeply with people who had big challenges, not those who had easy lives.

I’ll summarize the rest by saying LPL Financial has a great culture carried by incredibly talented people. The firm is paying attention and taking care of business. You and we could not ask for more. Please call or email us with questions or to have a longer conversation.

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

Progress Beyond Our Dreams

© Can Stock Photo / smuay

In the spring of 1902, Brooklyn printers by the name of Sackett & Wilhelms had a problem. It is doubtful whether anyone realized the vast ramifications the solution would bring.

When the humidity changed, the printers found that the paper expanded and contracted, causing their four color printing process to come out misaligned. Wasted days, wasted paper–it was a pretty big problem. Fortunately, a young engineer at the Buffalo Forge had an idea.

The engineer drew plans for a device to control the humidity of the print shop, and the crew from Buffalo Forge installed it. It was the first of its kind. By the end of the summer, the device had been a success.

It took four years for someone else to come up with the name “air conditioning.” Systems spread to other commercial enterprises, and eventually to other businesses, homes, and even to automobiles. As we approach the summer months here in the 21st century, it is hard to imagine life without air conditioning!

The engineer, who was just a year out of college when he drew the plans, later founded and ran his own company. You might have heard of Willis Carrier’s air conditioning company.

Every day, somewhere people are working on solutions to problems the cost us money, time, health, or some other resource. Others are working on things that may improve our lives, or entertain us, or provide some other advantage. Our everyday lives contain scores of things that did not even exist twenty or forty years ago.

For most of history, this is not how things worked. Life was nasty, brutish, and short. Generations came and went, but little changed. Then modernity unleashed human creativity and potential like never before.

This may be the key factor behind the seemingly perpetual upward tendency of the equity markets, all the way back to their origins.

We have mentioned this before, but it bears repeating: stock markets are volatile. They go up and down. There are no guarantees. But they may represent a way to invest in human potential. Clients, please call or write if you would like to talk about this.

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

What We Learned from You

© Can Stock Photo / ScantyNebula

One of the privileges of working with you is the opportunity to get to know your life stories. Over the decades, we’ve met a lot of people and heard many stories. We learned a lot about about productive financial habits and instincts from you, our clients.

We have noticed that people who are successful in retirement have some habits that helped them get there. These factors do not guarantee success, of course, but there seems to be a strong correlation. Here are three habits that seem to be key:

1. For all or most of their working careers, they invested regularly—every month, every payday. 401(k) plans, automatic deposits to Roth or other accounts…these put wealth-building on autopilot.

2. They spent less than they made. One client told us, it isn’t how much you make, it is how much you keep. We all know people who make good money and spend all of it–and others who manage to save on modest incomes.

3. They adapted to unexpected surprises without impairing their long term financial planning. Having an emergency fund, realizing that life has uncertainties…these are key to getting back on track through all kinds of times.

The three habits go a long way towards building financial security. In addition to those, some clients were apparently born with helpful investment instincts:

A. A native sense of confidence that the country works through its problems, that economic slowdowns give way to recovery sooner or later. Those who believe that seem to have an easier time waiting for markets to rebound.

B. An aversion to needing to do what everybody else is doing. Fads (or stampedes, as we call them) can be a dangerous way to invest.

We got done at the university a very long time ago. Thanks to you, however, we are always learning. One of the gratifying aspects of our work is the opportunity to pay it forward—to deliver the good news to the next generation. Clients, please email us or call if you would like to discuss this or any other topic.

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