January 7, 2021
Merry Christmas:
I feel as though I have lived a long time; I feel old in many ways. My body cannot do the things it used to do, I can’t keep weight off despite watching what I eat and exercising, and my energy levels are nowhere near what they were even 10 years ago. Although I certainly miss my youth, I know I need to accept the aging process. On the positive side, it has forced me to slow down and be more contemplative. Because of this, I have gained wisdom. It allows me to look back on all the downsides of my youth: my selfishness, my pride, my hurtfulness, and other less admiral qualities. Contemplation and meditation allow me to look at the bigger picture of who I really am, and what will really bring a fulfilling and happy life. Reflecting on my life allows me to realize, that although I have selfish human tendencies, that does not define who I am. It allows me to recognize that acting on many of those human impulses will surely lead to unhappiness. It allows me to know that acting with selflessness, humility, and empathy are the keys to a successful and happy life, and it has nothing to do with money.
This wisdom allows me to (hopefully) recognize what is truly important and what is noise.
For my own life, I know exactly what my mission is: 1) Through partnership with my wife, to bring up our children to recognize what brings peace and happiness in life, and 2) To help others navigate life and market uncertainty so they can focus on their own relationships with their families and friends.
I do not deviate from my mission (sometimes this can be interpreted as rigid) because I know that it’s a win/win in business and in life. Hopefully by focusing on this mission, I do not become influenced by noise. I recognize the noise, interpret how it influences human emotion, but continue to stay true to the mission (not influenced by greed, fear, money, fashionable opinion, nor power). Success flows from making decisions only that support and further the mission. It’s not always easy; mistakes get made, but over time, if you forgive your mistakes and keep moving forward, peace finds you and so does success.
My interpretation of recent events at the U.S. Capitol:
The optics of yesterday’s events are horrible; I was saddened to watch these events in what I believe is the greatest system of government in the world. It is far from perfect; all systems are flawed. There are weak spots, and although we think we can solve everything with laws, that’s not how life works. Most people on the right and the left are good people that have different ideas around policy, but they also firmly believe in our system of government. Our system protects different ideas, allows for discourse, and makes changes where appropriate. It is dynamic and that is our biggest strength. People care; this is evidenced by the amount of people voting this year.
However, some people lose sight of what is truly important (selflessness, humility, empathy) and allow causes or policies to become part of their identity. It is one thing to stand up for what you believe in and fight for it, but it is another thing entirely to be consumed by a “cause” or government policy (whatever it may be).
Obviously, Trump is using people on the extreme right that don’t like what they see on the extreme left, and he sows division. It’s awful, but I think it is noise. Sadly, many politicians lost sight of their own mission to serve people of this country because they want to hold on to their own power; this self-preservation allowed them to go along with a cropped-up story that the election was stolen from Trump.
The bottom line is that despite the short-term weaknesses and lapses in judgement evidenced yesterday; we believe in free and fair elections, civil discourse, and a system of government that will allow us to move forward. As an aside, I found it humorous that the Chinese government mocked what happened at the US Capitol building while arresting people in Hong Kong because they are afraid of “ideas” that might mean they would have to cede some of their own power (they don’t have the monopoly on what is best for the Chinese or people of Hong Kong).
To me, yesterday was not a protest, nor was it anything close to revolution or even a worthy cause. It was about a sad man, that lost an election by a historically large margin, motivated by self-preservation, whipping up a mob that believes that he protects their identity. Mainly, it was just sad to watch the lack of moral courage that should have taken a stand against this “stolen election” nonsense long ago. I suspect the press will talk about how scary this is for our democratic system of government, but they are biased to spread doom and fear. It is emotional and it is scary, but it will not shake the foundation of the United States.
I really do not care much for politics beyond a system of government that protects our country’s founding ideals. These seem to me very much in-tact, and we shall move on. Trump had some good policies and some bad policies, but he will mainly be known for his lack of grace in defeat. I think Trump is history now, and the country will move on with Joe Biden as President. His party will control both the house and the senate.
What does this democratic sweep mean for the markets?
Joe Biden is a centrist, a strong character that understands how to overcome pain, and a life-long politician with a lot of experience. Far right Republicans may think this is the worst event ever, but I suspect he will provide something for everyone. Democrats will focus their efforts on the less affluent part of the population. He will have the money to spend because the Fed will provide the needed money to fight against lockdowns due to the pandemic. There is virtually no discussion of fiscal prudence, and there is unlikely to be anytime soon. There appears to be a desire at the Fed to help provide money to the more vulnerable parts of the economy and population. This seems to dovetail with what the Democrats would like to achieve as well.
Will taxes go up? Probably at some level, but I believe fiscal policy will be more expansionary because of the Democratic sweep in aggregate, and that is the more significant factor. Fed policy will continue to support expansion.
Prices of most real and financial assets are rising rapidly. There is some evidence of prices rising for goods as well. Given the pace of the gains in these assets, it leads me to believe the market is still holding too much cash. Many people I speak with are still very afraid of the virus, lockdowns, politics, and are worried about investing their cash.
These fears are understandable, but I think they are all very temporary. I suspect that as summer comes around most of these fears will wane. In the meantime, fiscal and monetary policy will continue to pump more money into the economy. It will likely support the current trends.
I think it is inevitable we will see more volatility in assets prices with the unprecedented amount of cash being continually pumped into the economy, but the trends for now remain well supported.
My views are largely unchanged, and I refer you back to my previous commentaries instead of rehashing them here.
I will leave you with a Happy New Year wish for 2021.
Book this month: The Razor’s Edge by Somerset Maugham
It’s about a regular guy that searches for the deeper meaning in his life. People of all stripes and wealth levels gravitate to him but cannot ever understand him. He is alone but at peace. I was always fascinated by this movie when I was in high school. The main character was played by Bill Murray in his first serious role.
Quote: “In the absence of justice, what is sovereignty but organized robbery?”
Augustine of Hippo
Joseph Cardello, Principal
August Wealth Advisors, LLC
The Loft, 101 Franklin Street, Suite A
Westport, CT 06880
Direct (916) 461-9451 toll free (800) 985-9477
jcardello@augustwealthadvisors.com
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