November 1, 2023
How do we stay positive in a world like this?
War
The environment
Race relations
Crime
Politics
It may seem overwhelming and impossible, but it is not!
“Make each day your masterpiece.”
- John Wooden
People often think that my positive outlook is the result of a cheerful and balanced personality. This is simply not true. My days normally start with a feeling of dread and sadness, and sometimes this is overwhelming. I wish this were not the case, but it is simply my reality. I do not intend to wake up feeling that way, and I empathize with other people that wake up with similar feelings. I don’t think anyone wants to feel sad. However, after many years of these “feelings”, I have come to understand that they are just “feelings”. They do not have to negatively impact my ability to have a positive impact on others.
So, if I am sad, but I do not want to be sad, how do I overcome it? How do I manage to become enthusiastic, positive, and productive? Many people have asked me this question over the years, so I figured I may as well write about it. Perhaps someone will find my routine useful.
“I love to see a young girl go out and grab the world by the lapels. Life’s a bitch. You’ve got to go and kick ass.”
-Maya Angelou
1. It’s important to point out, I am mission driven. My mission, broadly speaking, is to leave the world a better place than I found it. I was impacted at a young age by family members that showed me an enormous amount of love and support. Some of those influential people were taken away from me at a very young age. This led me to the realization that:
We are all going to die; it’s merely a matter of when. So, I better figure out the greater purpose of life.
The impact that I have on others (positive or negative) will last throughout time, and long after I am gone.
I am unlikely to conceive the potentially outsized impact my interactions will have on others throughout time. I would prefer those impacts to be positive wherever possible (that is the goal).
My son, Christopher, who is a freshman studying philosophy at Loyola Marymount University in Los Angeles, recently recommended a book that I believe anyone can benefit from:
The Lost Art of Dying. Reviving Forgotten Wisdom. By L.S. Dugdale. She is a physician and medical ethicist at Columbia University. The book does a good job in pointing out why it is important to reflect and consider broader philosophical questions about life before it is too late.
My gravitation towards philosophy in my writing occurs because it is the foundation for how I live, and how I work.
2. I think it is important to always have work to do. When I wake each day, I have a purpose. This is important for two reasons: 1) If I dwell on my feelings for too long, it will take away time and energy from important work, and 2) If I waste time with cynicism and nonsense, it will take away time and energy from important work!
3. Patience and balance are essential in life. These are not personality traits that are natural to me. To ensure this balance, and to keep moving forward towards my goals does not happen for me without consistent routine. I have found that my daily routine is an essential part of keeping me at peace, reducing distraction and stress, and enabling me to operate at a much more productive level than I ever imagined.
For anyone interested in my daily routine, you can click here, and request a copy to be sent to you. This is just what works for me, but you may find it useful.
Markets Require Patience Too:
A quick high-level recap of considerations when investing:
Your needs for cash on spending or asset purchases in the short term (within the next 2 years).
Your ability to deal with fluctuations on the balance of your account in the near term:
- Will the fluctuation over the next 2 years impact your lifestyle (spending)?
- Will emotion cause you to make bad decisions if you watch too closely?
Requirements and goals for your investment: Income? Growth?
When we invest, we marry these considerations with the current opportunity set in financial markets. The opportunity set consists of a range of potential risks and rewards across markets. We also consider expense and tax hurdles that should be mitigated whenever possible.
Many of our client conversations happen because of emotional reactions to news, politics, and fluctuations in their portfolio. This is of course natural human behavior, but history suggests that staying invested in accordance with your plan leads to better long-term outcomes (patience and balance are required).
Make a Change When the Circumstances Change:
We stick to plans, we stay invested, but strategy is adjusted when your personal situation changes or market opportunities and risks change. Change is always happening!
With all that in mind, I will give you some additional personal thoughts to consider:
Investors were able to borrow money at very cheap rates for much of the last 15 years. The implications were the following:
- Growth companies were valued only on long term growth trajectories; cash flow didn’t matter much.
- Private equity industry exploded as firms were able to borrow cheaply, invest in growth companies, and reap the benefits of asset prices rising. They were able to lock up client money for long periods and charge their clients high fees. The quote below on the private equity industry is telling (from the Financial Times Nov 1, 2023):
“Many of the reasons these guys outperformed had nothing to do with skill,” says Patrick Dwyer, a managing director at NewEdge Wealth, an advisory firm whose clients invest in private equity funds. “Borrowing costs were cheap and the liquidity was there. Now, it’s not there,” he adds. “Private equity is going to have a really hard time for a while…The wind is blowing in your face today, not at your back.”
Source: Financial Times (sourced from Pitchbook • Q3 2023)
Cheap interest rates are no longer available (US government 2-year notes and 10-year notes are now at levels last experienced in 2007). This makes borrowing very expensive for anyone needing cash to buy a house, car, or run a business.
- When you can earn a guaranteed return of 5% in US government 2-year notes, competition for money will be fierce.
- It will be more difficult for businesses to expand margins using leverage, and it will be more difficult for consumers to purchase big ticket items. This should slow the economy at the margin.
- Companies growing cash flows should ultimately be more desirable in a world where money is more expensive.
War sometimes escalates, but sometimes a tragedy or crisis occurs and allows for growth. Perhaps this is one of those times. There are reasons for all sides not to desire an escalation in the middle east; it isn’t in any country’s best interest from my vantage point.
Slow and steady wins the race. There are many potential opportunities in fixed income and equities at attractive prices relative to their cash flows and macro-economic considerations. We will embrace these potential opportunities. However, there are many cross currents which will cause short term volatility; patience and persistence is required.
- Moving from a world of nearly free money to expensive money (low to high interest rates). This takes time to digest and change business models for many sectors of economy and fund management industry built on low rates.
- War in the Middle East.
- Divesting from China to other more open market-based economies.
- Covid behavioral changes such as: Work from home/back to office. Consumer preferences/tastes. Housing supply/mortgage issues/expensive rent.
- Immigration to the United States increasing from nearly all other countries.
More detail on the adjustments to our portfolio were outlined in last month’s commentary which you can find here (skip to the current thoughts section).
Finally, I would like to wish a final farewell to a creative thinker on the markets and life. Byron Wien, Blackstone Vice Chairman of Private Wealth Solutions passed away on October 25, 2023 at age 90. His annual list of “10 Surprises” will be missed. The list always made me think more expansively, and I am grateful he shared them every year. I would like to share his 20 Life Lessons (thanks SR for pointing it out):
From Byron Wien:
Here are some of the lessons I learned in my first 80 years, which I continue to practice as I enter my 90’s.
Concentrate on finding a big idea that will make an impact on the people you want to influence. The Ten Surprises, which I started doing in 1986, has been a defining product. People all over the world are aware of it and identify me with it. What they seem to like about it is that I put myself at risk by going on record with these events, which I believe are probable and hold myself accountable at year-end. If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.
Network intensely. Luck plays a big role in life, and there is no better way to increase your luck than by knowing as many people as possible. Nurture your network by sending articles, books and emails to people to show you’re thinking about them. Write op-eds and thought pieces for major publications. Organize discussion groups to bring your thoughtful friends together.
When you meet someone new, treat that person as a friend. Assume he or she is a winner and will become a positive force in your life. Most people wait for others to prove their value. Give them the benefit of the doubt from the start. Occasionally you will be disappointed, but your network will broaden rapidly if you follow this path.
Read all the time. Don’t just do it because you’re curious about something, read actively. Have a point of view before you start a book or article and see if what you think is confirmed or refuted by the author. If you do that, you will read faster and comprehend more.
Get enough sleep. Seven hours will do until you’re sixty, eight from sixty to seventy, nine thereafter, which might include eight hours at night and a one-hour afternoon nap.
Evolve. Try to think of your life in phases so you can avoid a burn-out. Do the numbers crunching in the early phase of your career. Try developing concepts later on. Stay at risk throughout the process.
Travel extensively. Try to get everywhere before you wear out. Attempt to meet local interesting people where you travel and keep in contact with them throughout your life. See them when you return to a place.
When meeting someone new, try to find out what formative experience occurred in their lives before they were 17. It is my belief that some important event in everyone’s youth has an influence on everything that occurs afterwards.
On philanthropy, my approach is to try to relieve pain rather than spread joy. Music, theatre and art museums have many affluent supporters, give the best parties and can add to your social luster in a community. They don’t need you. Social service, hospitals and educational institutions can make the world a better place and help the disadvantaged make their way toward the American dream.
Younger people are naturally insecure and tend to overplay their accomplishments. Most people don’t become comfortable with who they are until they’re in their 40’s. By that time, they can underplay their achievements and become a nicer, more likeable person. Try to get to that point as soon as you can.
Take the time to give those who work for you a pat on the back when they do good work. Most people are so focused on the next challenge that they fail to thank the people who support them. It is important to do this. It motivates and inspires people and encourages them to perform. at a higher level.
When someone extends a kindness to you write them a handwritten note, not an e-mail. Handwritten notes make an impact and are not quickly forgotten.
At the beginning of every year think of ways you can do your job better than you have ever done it before. Write them down and look at what you have set out for yourself when the year is over.
The hard way is always the right way. Never take shortcuts, except when driving home from the Hamptons. Shortcuts can be construed as sloppiness, a career killer.
Don’t try to be better than your competitors, try to be different. There is always going to be someone smarter than you, but there may not be someone who is more imaginative.
When seeking a career as you come out of school or making a job change, always take the job that looks like it will be the most enjoyable. If it pays the most, you’re lucky. If it doesn’t, take it anyway, I took a severe pay cut to accept each of the two best jobs I’ve ever had, and they both turned out to be exceptionally rewarding financially.
There is a perfect job out there for everyone. Most people never find it. Keep looking. The goal of life is to be a happy person, and the right job is essential to that.
When your children are grown or if you have no children, always find someone younger to mentor. It is very satisfying to help someone steer through life’s obstacles, and you’ll be surprised at how much you will learn in the process.
Every year, try doing something you have never done before that is totally out of your comfort zone. It could be running a marathon, attending a conference that interests you on an off-beat subject that will be populated by people very different from your usual circle of associates and friends, or traveling to an obscure destination alone. This will add to the essential process of self-discovery.
Never retire. If you work forever, you can live forever. I know there is an abundance of biological evidence against this theory, but I’m going with it anyway.
Joe
Joseph Cardello, Principal
August Wealth Advisors, LLC
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Westport, CT 06880
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