A US President was indicted this week. First time, ever. Nixon came close, but resigned (more importantly, pardoned). COVID. Hadn’t seen anything like this since 1918. Nuclear weapons proliferating. Two decent sized banks fail.
What’s a fella to do? Listen to Hall and Oates, Al Stewart, Carly Simon, and the Indigo Girls, maybe?
The Anxiety of Past, Present, and Future
Are these events disturbing? Oh, hell yes. Each day can be a challenge to endure, to make it until the next morning comes. Then, same stuff, different day. When we think like this, life is (even more) challenging, mentally if not physically. The mental can and often does manifest physically (Source: Mayo Clinic).
Is this time period different? Are we under more stress than the prior generations? Can we go back to the good, old days?
1800s - Industrial revolution
1854 - Establishment of Republican (!!!) Party by opponents of Slavery
1860 - Lincoln elected
1860-61 - 11 states secede and civil war begins
1863 - Lincoln issues Emancipation Proclamation, declaring slaves to be be free
1865 - Confederates defeated, Thirteenth Amendment abolishes slavery. Lincoln assassinated.
1866 - Jim Crow laws begin to appear
1877 - Supreme Court rules that states cannot prohibit segregation on common carriers.
1883 - Supreme Court declares the Civil Rights Act of 1875 unconstitutional. Formalization of “separate but equal”.
1898 - US gains Puerto Rico, Guam, the Philippines and Cuba following the Spanish-American war that year. US annexes Hawaii.
1914-1918 - World War I
1920 - Nineteenth Amendment grants women the right to vote. Start of prohibition. Nazi Party formed.
1929-1933 - Great depression. New deal launched in 1933.
1929-1936 - Hitler named leader of Nazi Party, establishes fascism, eliminates dissenters (Night of the Long Knives), and assumes control of Germany. Germany establishes Sachsenhausen concentration camp.
1939 - 1945 - World War II.
1942 - Pearl Harbor bombing and US joins in World War II
1947 - Start of Cold War.
1950-1954 - McCarthyism/Red scare. Korean War.
1961 - Bay of Pigs.
1963 - Kennedy assassinated.
1963-1974 - Vietnam War. Martin Luther King assassinated. Armstrong walks on the Moon. Nixon impeached and resigns.
1979 -1980 - US Embassy in Tehran is seized. 444-day hostage crisis and failed rescue attempt.
1986 - Challenger explodes, killing all aboard.
1986 - US bombs Libya, “Irangate”
1989 - US invades Panama, overthrows government.
1991 - Iraq war.
1995 - Alfred P Murrah building bombed in Oklahoma City, killing 160.
1998 - Clinton impeachment.
1999 - US/NATO bombing of Yugoslavia.
2001 - World Trade Center terrorist attack with over 2,900 deaths. Air strikes against Afghanistan
2003 - Space shuttle Columbia breaks up, killing all aboard. Iraq war, Hussein deposed.
2005 - Hurricane Katrina.
2008 - Great financial crisis starts.
2011 - 2012 - Bin Laden assassinated. US Consulate stormed and US Ambassador in Libya assassinated.
2013 - Snowden leaks surveillance information and flees to Russia.
2014 - Ferguson riots sparked by shooting of unarmed, black teenager Michael Brown.
2000s - Rise of mass shootings (graphic from Mother Jones).
We could keep going, and note all the disruptive events (including electricity, the telephone, TV, and the computer) up until today. We humans like to think negatively about the future, too. There is a current obsession among some folk that we are headed to another great recession. I recently had a client ask me, with all assurance in his mind and voice, to design an investment portfolio that will “work”, since “we are going to be in stagnant and negative markets for the next ten years”. Looking at the data, it is not possible to determine how the world’s markets perform in the future. The (rather inelegant picture, which hangs on my office wall to remind me that it is possible that the future, while random, remains reasonably predictable) chart below is from Investments Illustrated and starts in 1925.
Note: this client was just as pessimistic at the start of the year. I listened then and did not act. If we had acted, and moved out of equities, we would have missed some or all of this year’s positive performance to-date - about 12% when looking at the MSCI All-Countries World Index on Marketwatch today.
It is certainly possible that we end the year negative. I predict and forecast absolutely nothing in the short term. We all suffer from recency and endowment bias. It is easier to forget that while we live in a highly variable, rapidly changing world, there is consistency. The trends are toward increasing wealth and quality of life. Yes, there are significant disparities in our society and an increasing stratification of wealth, which are topics for another day. However, pessimism, nihilism, and defeatism are disproven investment strategies in the long-term. Another truism: There is no way to formulate a long-term investment strategy based on short-term, unpredictable events.
Our biases lead to the thinking that this time is different. Emotions kick in. The probabilities, though, are against us. Do we routinely have negative markets? Yes. Could this next ten years look like the lost years of 1968-1980? Sure. Is this predictable? No. It takes but a quick glance at this chart from Slick Charts to see that positive years overwhelm negative years.
Look, if anybody could figure this out, they would have made the world’s greatest fortune timing the market. It would make oil profits look like pocket change. If they decided to sell their process and tools, then everyone would do the same and then no one would make any returns, as we would all be attempting to buy and sell at the same time (this is your warning to avoid the plague of the TikTokers, and others, claiming that they can keep you out of negative or otherwise time markets).
It seems to me that the good old days were not demonstrably better than today other than in our flawed memories. If yesterday was not the good old days, and we want to continue to postulate that tomorrow is going to be lousy, then today is the good old days.
Flourishing In Uncertainty
Recognizing that our brains constantly push us towards anxiety in the face of uncertainty and that uncertainty is our lives, taking action against our 130,000 year old operating system is my chosen path. My hypothesis is that we feel the best when we have certainty. There are only two things of which I can be certain: I can decide what I choose to do each day and I can be intentional about how I react to events. Perhaps these can provide enough offset to at least keep Captain Anxiety under control.
As a guideline for what I choose to do and how I react, I can be certain of my principles and values. Over time, I think we all craft our set of life rules. We just do not often express them. Here are mine:
Be kind.
Have patience: be accepting, however - ignore jerks.
Try and help someone every day.
Laugh often, at least 10 times a day.
Maintain fitness and health discipline.
Be humble.
Always be curious.
Be optimistically skeptical: there are new things in the world. Not often.
Think independently, critically, and courageously.
In our profession, we can adhere to principles and values, as well. We have total control of this. Ours are defined this way:
Life is unpredictable in duration and results. Have fun every day. Do the right thing each day. Be a decent human being.
Numbers are interesting. Decisions are impactful. Decisions do not get made on the numbers. They get made on what is important to you. The numbers are simply one factor in your decision.
If we are going to provide great advice, we need to understand what you care about, what drives you, what is really important.
Your plan will change. Often. Almost nothing in life is static.
We will make mistakes. When we do, we will be accountable and fix them.
We want you to focus on what you do best. We take care of the financial things you either do not wish to or do not have time to do.
We have to be trustable. We earn that by consistently doing what we say we will do.
It is our job, no matter how unpleasant and no matter the potential impact on our business relationship, to tell you that something you want to do is likely to have a poor outcome when measured against what you have told us you want.
Every person is different. Therefore, every plan is unique.
The planning and execution processes are what matter in achieving your outcomes. They are repeatable. We iterate through them at least annually.
Because many clients ask us to manage their investments, we have to be competent at investment management. This, however, is not the crux of your plan. Achieving your goals is.
We intend to do anything we can do, within our capabilities and expertise, such that you achieve your desired outcome.
To me, the real winners in life define their rules and responses. They focus on their locus of control and let anxiety take the hindmost. You do not have to be on the victim ship with Captain Anxiety. It is a choice.
Thanks for reading. I hope your weekend is amazing.
Hat tip to my friend, Jim Coleman, for suggesting this song as a closer.
Sundry:
I am reading Graff’s new book on Watergate. The level of criminality in the Nixon administration, which I thought I understood, since I was living in DC at the time, was astounding. It was not just the assault on Daniel Ellsburg and the Democratic National Committee/Watergate burglary. There were a substantial number of illegal surveillance and sabotage operations performed against and on those folks Nixon defined as enemies.
Queens of the Stone Age have new music coming. Awesome.
John Vincent Atanasoff died today. He was a computing pioneer.
I finished The Guest, by Emma Cline. It is quite a takedown of lifestyle and culture in the Hamptons.