patience

Slow and Steady

photo shows blue, partly cloudy sky and brown stalks of rice plants

I’ve got something to say—about rice.

I know. I’m not a foodie. This is not a food blog. But hear me out. A retired client and amateur nutritionist opened my eyes about rice.

I’ve always had issues with white rice: I generally want to eat the whole pot. It’s handy, it cooks up so quickly, but to get full from it, I keep eating and eating.

“That’s not what you need,” the client told me. “They take the good stuff out so it will cook faster.”

Brown rice isn’t “minute rice”: it’s 45-minute rice. But the slow route preserves the stuff we really need. We don’t throw out the good stuff for immediate gratification. And if you want to think about the big picture, remember that this grain has been a food staple across the world for thousands of years. No wonder. It packs a punch, if only we handle it responsibly.

We are not nutritionists (although when you and I visit, you may still hear me talking about brown rice!). But this lesson is still paying off in other ways. Did anything sound familiar as I relayed all this?

In their rush to get in on the action, some new investors head for day-trading. It scratches an itch, but it’s focused on the smallest time frame. Investing for the long haul? That’s where the good stuff is, we believe. (No guarantees.)

There are benefits in the waiting. Preservation, patience—sometimes we need a dash of each.

Clients, email or call to talk about this or anything else.


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.


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Getting Stuck on the Ground Floor

“Getting in on the ground floor” may sound enticing. We humans like to be first, best, and on top of things. But just remember that the view is usually better from higher up.


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The View from the Top

photo shows a city skyline from the perspective of a rooftop viewfinder

In movies and popular media, there are certain images associated with investors. One of the character tropes is the well-to-do friend racing around in their fancy sports car.

Picture it with us. The car, bright and shiny, has a vanity license plate: it notes the ticker symbol for the holding that made them rich. If the story gives away any more information, it’s that the friend benefitted from a hot tip about a tiny tech company on the brink of striking it big.

Outside of Hollywood, it’s true that some of the most successful investors have done something like this. They happened upon that one hot investment that more than made up for all the mediocre ones. (The bad ones, too, for that matter.) They happened to get in, early.

Clients, we’re seeing newer industries with many possible pathways to growth over the next 7, 14, and 21 years. It’s exciting, but within each of these sectors, there might be dozens of public companies vying to become the next big thing. They all want their ticker on the license plate. The problem is, there is no way to tell—in the moment—which single company it will be.

If a growing industry is going to prove to be important, there’s no harm in waiting for the field to narrow. Time will tell, and so will experience, performance, management, debt, and competition. The companies that aren’t built to last? They’ll be winnowed out soon enough.

The car, the license plate, those aren’t the goal: we believe in investing because it’s getting a piece of the action. It’s providing capital to endeavors we can get behind.

So while getting in on the ground floor sounds enticing, there’s no promise that the building will ever be built—and it’s hard to beat the view from the top.


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In Any Language, There’s One Simple Investing Goal

Hope, optimism, belief, confidence… In our line of work, it doesn’t matter how you say it. We’re banking on the idea that, overall, we’ll see more up than down.


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In Which the Old Hound Dog Teaches Us About Retirement

photo shows old hound dog sitting in front of a limestone wall

Decades ago, when Louisville, Nebraska, even more closely resembled Mayberry, the old-fashioned service station was run by a gentle soul. His old hound dog was a regular fixture there.

One day a customer pulled in to the station, eager to get to the gas pump. They were delayed by the dog, ambling across the drive, pausing to look at the impatient driver… before continuing slowly on his way.

When the customer finally got to the pump, they jumped out to yell at the proprietor. “That is the laziest dog in all of creation!”

The proprietor offered a different explanation: “He ain’t lazy, he’s just got nothing to do.” Neither person convinced the other, of course.

I was reminded of this story in talking to recent retirees. Most have full days and weeks. This one travels extensively and gardens in between trips; that one helps with younger generations; another is busy improving the country acreage that is home. One says going to the gym is the new job. Some work part-time at hobby jobs.

But a small fraction of people are at loose ends—out of sorts—often after retiring from long careers. Like the hound dog, they get the sense they’ve got nothing to do.

Perhaps those who retired to something more specific do better with this than those whose focus is on getting away from that job or career. Those who are getting away are focused on the past, while those who are retiring to do other things are ready for the future. (No judgment from us: sometimes we must make changes for the sake of our mental or emotional health and can sort out the future later.)

The lesson, if there is one, is to think about the best way to invest our hours and days when we anticipate gaining more control over them. When we are intentional about what we are doing, boredom has less of an opportunity to take root, and there’s more space for whatever is about to begin.

Clients, if you would like to talk about this or anything else, please email us or call.


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In Which the Old Hound Dog Teaches Us about Retirement 228Main.com Presents: The Best of Leibman Financial Services

This text can be found at https://www.228Main.com/.

Value Will Out: Living with the Streaky In-Between

photo shows a pair of glasses aimed looking out an office window

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.


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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/.

Slow and Steady

photo shows blue, partly cloudy sky and brown stalks of rice plants

I’ve got something to say—about rice.

I know. I’m not a foodie. This is not a food blog. But hear me out. Recently, a retired client and amateur nutritionist opened my eyes about rice.

I’ve always had issues with white rice: I generally want to eat the whole pot. It’s handy, it cooks up so quickly, but to get full from it, I keep eating and eating.

“That’s not what you need,” the client told me. “They take the good stuff out so it will cook faster.”

Brown rice isn’t “minute rice.” It’s 45-minute rice, but the slow route preserves the stuff we really need. We don’t throw out the good stuff for immediate gratification. And if you want to think about the big picture, remember that this grain has been a food staple across the world for thousands of years. No wonder. It packs a punch, if only we handle it responsibly.

We are not nutritionists (although when you and I visit, you may still hear me talking about brown rice!). But this lesson is still paying off in other ways. Did anything sound familiar as I relayed all this?

In their rush to get in on the action, some new investors head for day trading. It scratches an itch, but it’s focused on the smallest time frame. Investing for the long haul? That’s where the good stuff is, we believe. (No guarantees.)

There are benefits in the waiting. Preservation, patience—sometimes we need a dash of each.

Clients, email or call to talk about this or anything else.


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.

 

Confusion, Wealth, and Options

© Can Stock Photo / bruesw

A confession: I am confused about a fairly important life question. Some of you have been, or will be, facing similar conundrums.

You may be surprised, depending on how well you know me. Clarity is something I strive for.

When I am home in Louisville Nebraska, there are no traffic lights between my modest abode and my shop at 228 Main Street, a ten minute walk if I choose. Life is simple, inexpensive, and easily within the means of future benefits from Social Security and a small pension.

I also have a home in Florida which is not particularly modest. We chose it a few years ago, when I was part of a ‘we.’ It met the needs of my high school sweetheart as she worked to extend her life in the face of serious health challenges. The original rationale for the decision no longer holds, as Cathy passed away last summer.

You may recall our original decision a decade ago to adopt a snowbird lifestyle, in the hopes of making my plan to work to age 92 a sustainable one. I had no appetite then for decades more of Nebraska winters.

Now I am confused.

• I still have little appetite for Nebraska winters.
• The Florida home is more than I need.
• It takes money to maintain a second home.
• Where I will want to spend how much time in the future is something I cannot answer now.

What is needed to cure my confusion is time. The old rule of thumb about dealing with wrenching personal change is “don’t make any big decisions for at least a year.” Now I understand this rule, after giving myself whiplash trying to make plans prematurely.

The answers will become clear with time.

What gives us the time we need is money. I have some; you have some. Money for its own sake has little value, but the time and flexibility it provides is priceless.

Clients, if you would like to talk 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.

 

Dumb as a Rock?

© Can Stock Photo / disorderly

Haven’t we all heard the insult ‘dumb as a rock’ at one time or another? We recently came to the conclusion that there is something worse.
Sometimes people fail to act as smart as a rock.

A rock never acts rashly when presented with an unexpected situation. Nor makes impulsive decisions based on fleeting feelings. Nor changes long term strategies because of short term conditions.

No rock ever wanted to sell all investments because of that Democrat or Republican that got elected. No rock wanted to jump on the latest fad in the markets.

Perhaps striving to be as smart as a rock fits in with one of the ideas that legendary investor Charlie Munger talks about. His notion is that it is a lot more valuable to not be stupid than it is to be smart. After all, smart people may make stupid mistakes.

Do not take this the wrong way. We believe in education. We read incessantly. We are always searching for perspectives or knowledge that might give us an edge. Brains are useful. But it helps to remember, as Munger said, to avoid being stupid.

One of the nuances of being human is the possibility that we can be two things at the same time. Generally kind people might be rude. Those who tend to be rough might be gentle. And smart people might do stupid things. When we analyze opportunities or think about financial decisions, we try to not be stupid.

Clients, if you would like to talk 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.

The Rip Van Winkle Effect

canstockphoto7218325.jpg

Rip Van Winkle is a character in a Washington Irving short story written nearly two centuries ago. You might know the story: Rip sleeps for twenty years up in the mountains, eventually returning home to find that much had changed.

One of the most dynamic companies in the world emerged on the scene a little over twenty years ago. An investor who purchased it on its first day of trading would have made several hundred times his original investment, had they held all the way through.

In spite of the incredible long-term result, it would have been very difficult to achieve even if one had bought in early. If you carefully looked every day to see how it was doing, as of November 12th this is what you would have experienced:

• On 1,346 of the days of ownership, the value would have been less than 50% of its previous peak. This is nearly one day in four, out of the 5,410 trading days in question1.
• On 494 of the days, the value would have been down 80% from the prior peak.
• The worst drop from a prior peak would have been 94%.

It isn’t always easy to hold an investment that has declined in value. We strive to own bargains, even when they become better bargains. (Once upon a time, a client asked me “What kind of moron would watch a stock go down from $11 to $7, dropping day after day, and do nothing?” Of course, I am that kind of moron.)

We have noticed that a certain few of our clients use the Rip Van Winkle effect, to their benefit. In the example above, they would have accepted in advance they would be under water at times, and just held for the long term. They enjoy the long-term result, without the day to day anguish of fluctuating values—they did not need to look every day.

We work diligently to understand what we should own, and why. Sometimes we change our opinion and sell at a loss. But often the Rip Van Winkle effect would help us. Clients, if you would like to talk about this or anything else, please call.

Notes & References

1. Standard & Poor’s 500 Index, S&P Dow Jones Indices. Retrieved November 12th, 2018.


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.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Stock investing involves risk including loss of principal.