The Importance Of Acceptance
October 7, 2026
“Vulnerability is not winning or losing: it’s having the courage to show up and be seen when we have no control over the outcome.”
-Brene Brown
The Importance of Acceptance
I am having a hard month. This time of year, can cause feelings of loss for me. These are not conscious thoughts; it just happens. It’s not a pleasant feeling, so my first inclination is to resist it. I rail against what I do not like, and then I try to escape the reality of my situation. The effort is futile, but I still try. This is a mistake. It’s a mistake because it saps me of energy, it makes me angry, and it blinds me from seeing all the wonderful parts of my life.
It always ends the same way. I stop resisting and I accept.
Life is not within our control; we only think that it is because it appears that way for short periods of time. We may be healthy today, but eventually we will lose our health. We may think our friends or family will be with us always, but they won’t.
The quicker I am to realize my lack of control, stop resisting, accept my reality, and allow myself to be completely vulnerable, the more at peace I become, and the richness of my life grows.
It’s the same for all of us.
We must accept and stop resisting:
Accept that our expectations may not be met.
Accept that people will maintain different views from our own.
Accept that we don’t have all the answers.
Accept our fate.
Once we accept, we can start living fully, and it’s wonderful. But it is hard!
Until we embrace our helplessness and lack of control, we will be stressed and without peace. That stress will infect all aspects of our life: bad decisions, taking relationships for granted, and allowing our emotions to get the better of us.
Fortunately, I have become better at recognizing how to center myself more quickly than in the past, and my hope is that you can find ways to do this too.
Then I can get back to having gratitude and taking good care of what is most important in my life. One of the most important parts of all our lives, whether we recognize it or not, is our relationships with others (our friends and our enemies).
Gratitude and a Personal Thank You
One of my closest friends, KS, is retiring from his senior executive role at one of the largest global banks this month. I want to recognize him because of the care and love he puts into all aspects of his life. To me, he has been a friend, a mentor, a colleague, Godfather to my oldest son, and a former boss. He would be a valuable advisor to anyone starting or building a career and family; he is tough, no-nonsense, skilled, grateful, hardworking, selfless, and he is fair. He was successful because he was giving.
His humility would not allow him to take so much credit, but his importance cannot be understated. Without him, it’s quite possible that August Wealth would not exist. He was and is instrumental in my life and career. Thank you, KS, and I hope you enjoy your extra time to focus on your family and yourself.
Some thoughts on the market:
Looking at the S&P500 index as a measure of the “stock market” is essentially only looking at the top 10 companies in the United States. There are many other companies and businesses that exist, but they are mainly not captured by this index.
These S&P500 companies dominate wealth and power globally, and they are based in the United States. The combined revenue of these top 10 companies is larger than the Gross Domestic Product of every country on planet earth except China.
The experts communicating about the impending decline of the US Dollar seem to have gone quiet for now. It’s probably a smart move. As an economist studying currency markets for most of my career, it is hard to understand the argument. The United States continues to attract investment into its economy from the rest of the world. The dollar remains strong and continues to strengthen in 2026. Whenever I ask what the alternative would be to the US Dollar, I never get a sufficient answer. China, Crypto, Euro, BRIC currency are the usual answers, but at least for now, the trajectory of all of these “alternatives” are waning relative to the increasing strength of the dollar. So, I don’t understand the argument.
The United States has a huge debt problem; this seems to be on everyone’s radar currently. Though, perhaps we should consider that the 10 companies dominating the global economy are based in the United States. Although the government technically does not “own” these companies, we do have the ability to tax and regulate them. The USA and its government benefit from this economic dominance. I don’t believe we can only discuss the liabilities of the USA. The wealth being created in the USA is remarkable, especially in relation to the rest of the world.
I wonder if these 10 companies are sucking up most of the available capital globally in the pursuit of artificial intelligence. Global bond and stock markets are dropping in value while the valuations of these companies continue to climb. In the short term, it certainly seems that building data centers and artificial intelligence is the most important (sometimes feels like the only) game in town.
Demand for artificial intelligence and datacenters is unlikely to stop. This technology is very real, most of it seems positive, and it is developing faster than any other technology. However, producing investment returns can be different from recognizing the obvious trend. For example: When Obama became president, it seemed obvious that solar companies would produce excellent returns on investment, but the opposite turned out to be true. When Trump became president, the solar industry seemed to be a terrible place to invest, but one of our best investments from the beginning of 2025 to mid-2026 was a solar company. It’s worth keeping in mind that what we think is obvious for the future, rarely turns out that way.
Interest rates in the USA and globally are rising substantially. I wonder if this will matter to the economy at some point. When it costs more to borrow, doing business becomes more expensive generally, and that can put the breaks on decisions about growth. Perhaps it’s worth explaining through the consumer by considering mortgage rates at roughly 7.5% (they were closer to 3% in 2022). Even if a house price is affordable, if you must borrow money to own it, you may not be able to move forward with a purchase because you have other living expenses to consider. It’s the same for companies in many ways.
General Thoughts and Portfolio Adjustments over the past few months:
• Reduced allocation to stocks and increased allocation to US Treasury bonds. Why?
In 2020, when the US Government 10-year note was yielding 0.60%, a $1,000,000 purchase held for 10 years would have paid approximately $60,000 in interest.
Today, the US Government 10-year note is yielding 5.28%. The same $1,000,000 held for 10 years will pay approximately $528,000 in interest, nearly nine times as much. If those interest payments are reinvested at similar rates, the total could reach around $670,000.
In 2021, I was concerned about low interest rates, profligate government spending, and inflation. It made little sense to have bonds as an important part of our portfolios. Although some of these concerns remain, everyone seems to be more worried about these same issues today. But now, interest rates (probably) reflect some of these concerns (5.28% compared to 0.60%). Might it be considering locking in some guaranteed government rates of return? Probably. For a more detailed explanation, you can read what Robbie Newman and Ashley Fox wrote on Treasury bonds at the bottom of this piece.
In the chart below, you can see that a higher interest rate (which produces a higher income), cushions against the possibility of further interest rate rises (as rates rise, prices of bonds decline). For a buyer of 10-year notes today, if rates rise by 100bp from 5.30% to 6.30%, the value of your bond will indeed drop (by less than 2%). However, if rates fall by 100bp from 5.30% to 4.30%, the value of your bond will increase by over 12%.
Asymmetric Risks
For a balanced and diversified portfolio, fixed income should be a larger part of the mix.
US Treasury bonds are not subject to local and state income tax.
Technological growth in all economic sectors is likely to be disinflationary over the next 3 to 5 years.
If the economy slows, or an adverse exogenous event takes place, Treasury securities usually increase in value (interest rates decline with the expectation of Federal Reserve rate cuts).
We still are very cautious today on gold being part of the portfolio. I previously owned gold as central banks acquired it as part of their reserves, and interest rates were closer to zero for much of the past decade. The gold price performance was outstanding and better than the S+P 500 total return (depending on the period of measurement). We continue to hear talk that it should be part of portfolios because of inflation and economic uncertainty. However, gold costs money to own (storage and carry), and there is an opportunity cost of not investing in a positive cash flowing asset (like US Treasury bonds). What seems certain now is that its performance in the coming years is highly uncertain!
We believe power demand will continue to increase with the increased demand for computing for artificial intelligence. We have increased our allocation to utilities because many of these companies have declined in price substantially (because of the rise in interest rates).
We have also increased our allocation to green energy companies (see our note from last month). Share prices of these companies have also declined substantially since June. The long-term demand seems to be investment in power generation, and we will increase our allocation to these companies’ share prices while they are being offered to us at a discount.
If you have questions on your portfolio, or if any of the commentary sparks interest, please reach out to the team and me. As always, we love hearing from you.
Thank you for your trust,
Joe
The piece below is written by Ashley Fox and Robbie Newman, and it is a good read if you’re interested in some basic bond market dynamics.
Same bond, different risk
"The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price."
-Benjamin Graham, The Intelligent Investor
Most of us grew up with a simple rule: stocks are risky, bonds are safe. It is too simple. No asset is safe or risky on its own. The price you pay decides how much risk you take, and that holds for a government bond as much as for a growth stock.
Bonds offer a clear example. Since 2021 a US Treasury bond has gone from a poor investment to one, we are happy to own.
In March 2021, Joe Cardello wrote that fixed income offered "bounded upside with considerable downside" and that we should be cautious. Around the same time, Warren Buffett, chairman of Berkshire Hathaway, had told his shareholders that "bonds are not the place to be these days."
At the start of 2021, a 30-year US Treasury bond (a loan to the US government for 30 years) paid 1.66% a year. Lend the government $100,000 and you received $1,660 a year, fixed, until 2051.
Rates rose. At the start of 2024, the 30-year interest rate was about 4.1%, and that $100,000 bond was worth about $61,000 (as interest rates rise, bond prices fall). Today it is worth less than half what was paid for it.
What has changed?
Today the same 30-year Treasury pays about 5.6%, the highest level since 2002. The same $100,000 invested, now earns $5,600 a year instead of $1,660. The higher income does more than pay the bills. It changes the risk:
We are paid while we wait. In three years, we receive $16,800 of interest payments by purchasing at today’s price, compared to only $4,980 over three years of payments for the 2021 buyer.
The cushion is bigger. In 2021 a rise in rates of just 7 basis points over a year was enough to wipe out a full year of interest. Today it takes 41 basis points. Over three years, rates could rise about 140 basis points (from 5.6% to roughly 7%) before the investment’s interest payments are wiped out.
The bond is less jumpy. Bond prices move opposite to interest rates, but how far they move depends on where rates start. A 100-basis point rise cuts the value of a new 30-year bond bought at 1.66% by about 21%. At 5.6%, the same rise cuts it by about 13%.
There is room to move both ways. At 1.66% rates had little room to fall and a long way to rise. At 5.6% they have room in both directions.
Bonds can cushion a stock market fall again. Bond prices have usually risen when stocks fall, because a slowing economy usually leads the Federal Reserve to cut interest rates. In 2021 investors were even paying for that protection: the extra pay for locking money up for longer (what economists call the term premium) was below zero. Today it is the highest since 2014. It is not a perfect hedge, but it is a useful feature at portfolio level.
Here is how that plays out for two investors who each lend the US government $100,000 for 30 years, one in January 2021 at 1.66% and one today at 5.60%.
Value after three years, bond plus interest received:
If the 30-year rate in three years is | Bought January 2021 at 1.66% | Bought today at 5.60% |
Unchanged | $104,980 (+5%) | $116,800 (+17%) |
1 point higher | $85,800 (−14%) | $104,270 (+4%) |
3.50% | $73,010 (−27%) | $153,290 (+53%) |
The figures are an illustration, not a forecast. They assume a 30-year US Treasury bought at its face value, paying interest twice a year, with the interest not reinvested, before tax and fees. Bond values after purchase, including those in the table, are estimated from the 30-year rate at the time or in the scenario shown.
In the bottom row the same 3.50% rate is a loss for one buyer and a large gain for the other. That rate is not farfetched: the 30-year bond averaged about 3.3% since 2010 and was last below 3.50% in December 2022.
What don't I know?
Will rates go higher from here? I have no idea. Government debt is large, and as I have said before, the one certainty with central bankers is that they will make policy errors. Rates could rise further.
That is the point. In 2021 you needed rates to fall to make money on a long bond, and they had almost nowhere left to fall. Today we do not need to be right. If rates stay where they are, we earn a good income. If they fall, the gains are large. If they rise by up to about 1.4 points over three years, the income still covers the loss.
There is one more risk people forget: reinvestment. As I wrote in March 2023, cash and short-term bonds feel safe until rates fall. Then the money must be reinvested at lower rates. A longer bond locks in the current income for years.
What are we doing?
Our process has not changed. We held back on bonds when we were not paid for the risk, and we are adding to fixed income now that we are. Same process, opposite conclusion.
The figures above are an illustration, not a forecast. They assume a 30-year US Treasury bought at its face value, interest paid twice a year and not reinvested, before tax and fees. Values for the 2021 bond at the start of 2024 and today are estimated from the 30-year rate on those dates.
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