March 20, 2024
If you are a regular reader of these pages, or you know me well, you probably understand one of my most fervent beliefs is that love and gratitude can basically guide you to a life filled with peace and contentment.
We get into trouble when we allow our emotions, presumed self-sufficiency, and judgements to get in the way of the Truth of life. The Truth is: We all belong to the Universe, and we are all connected to one another. When we treat others poorly, take advantage of another person, or ignore the needs of others, we will end up hurting ourselves.
This is a simple reality, but many of us cannot see that the root of our own unhappiness is right under our noses. What blinds us?
Not focusing on the present. Our minds are always thinking of the past or the future.
Not having gratitude for the beauty all around us: environment, people, food, freedom.
Not putting the needs of others before our own needs.
Focusing too much on how we feel instead of focusing on our mission in life.
Laziness and the avoidance of hard choices and hard feelings.
Not having the strength to confront the hurtful behavior of ourselves and others.
The tale of two grandfathers.
I was lucky enough to know both of my grandfathers.
My father’s father showered me with love. When I was with him, he made it very clear how much he loved being with me. He died when I was nine; he had an enormous positive impact on my life that continues until this day. When I am interacting with young people, acting as a coach or mentor, he is the example I try to live up to. Dominic Cardello died almost a half century ago, but amazingly he continues to have a major positive impact on others through me (when I live up to his example!). He lived only 59 years, and he made the most of them.
On the other hand, my mother’s father gave me money, but no love. I remember him as bitter, selfish, controlling, and angry. He caused others a lot of pain. People did not want to cross him, so they acquiesced to his wishes. He lived to a ripe old age. I don’t miss him, and I doubt others miss him either. His was a sad, waste of a life. The damage he caused by his abusive behavior, either through biological or environmental factors unfortunately lives on in the lives of some people close to me. It’s a shame, it’s sad, and it's a waste.
If we fail to reflect, confront, and call out hurtful and selfish behavior, we are contributing to this cycle of abuse. I have seen far too many examples in my own family of people “walking on eggshells” around certain family members so as not to upset them. These people will suck the life out of you if you let them. If we continue to give energy and time to people who will not recognize and apologize for hurtful and selfish behavior, anger, and threats, then we enable them to continue hurting others. We are complicit.
It is not always easy to extricate oneself from abusive people and relationships, and often it is not easy for most people to even recognize it. However, when you do, it is liberating; it frees up time and energy to make a positive difference in the lives of others and the gifts of life that truly matter to you.
“It was as though, so long as the deceit ran along quiet and monotonous, all of us let ourselves be deceived, abetting it unawares or maybe through cowardice, since all people are cowards and naturally prefer any kind of treachery because it has a bland outside.
William Faulkner, As I Lay Dying
Creating Self-Reinforcing Positive Cycles:
In a corporate setting, I am constantly trying to create situations of positive cycles. These cycles include Helping clients reduce stress in their lives > allows them to focus more on work and relationships > this requires work of August Wealth staff, and it develops and improves their lives > All of us help to spread the word to others who can also benefit > Everyone can win.
But if you are selfish, negative, and abusive, you must be cut out of the equation like a cancer. We do not entertain negative relationships at AW because we must be true to our mission. My team knows that we will only work with team members, strategic partners, and clients that are supportive of a positive cycle which reinforces and lifts one another up.They understand how important it is to cut with haste anyone or anything that detracts from our mission.
Some people perceive any rift I may have with family members or former business associates as me “not liking them”, being rigid, or not having the ability to get along with them. This is perverted thinking. I hope and wish anyone demonstrating abusive and hurtful behaviors sees that the source of their own misery is within themselves. If they recognize that, they may have the ability to transform themselves. I want the best outcomes for everyone. Seeking revenge or wishing others ill is absurd. How does this help me?
If any of this sounds righteous, this is not my intention. I have an incredible list of shortcomings that must be dealt with regularly! It is paramount to address my own mistakes and shortcomings rapidly. The important point is to be open to criticism, being reflective about what we are doing well and where we can improve. Asking, whom have we helped, and whom have we hurt? Reinforce behaviors that are producing good fruit and cut behaviors that are not. The inability to reflect with an open mind, transmitting our problems and pain to others, and not transforming ourselves is likely the biggest contributor to the pain in our world.
The Motivation for Mutually Beneficial Relationships:
I believe in freedom, democracy, and capitalism as you know. Hence, I believe that businesses that desire growth must make money. However, “making money” should not be the motivation. Making money should be the result of accomplishing a business’s mission. At a high level, businesses have a mission to deliver goods and/or services to customers, and the result will be to make money from doing so.
At August Wealth, we invest in companies across various industries and geographies with a goal to protect and grow your wealth based on your individual needs, wealth level, and risk tolerance. We also provide many other services (as listed on our website). We charge an advisory fee we believe is fair to both you and us, and our objective is to operate in your best interest. Working for your best interest, is in our best interest, because if we do our job well, we believe:
Your wealth will hopefully grow over time.
You should have less anxiety around money and investments.
You will experience tangible and intangible benefits from relationships with our team.
You should be able to have your questions answered quickly and succinctly.
We earn a fee for the services we provide, and you should be happy to pay our fee because it’s a mutually beneficial relationship.
A Questionable Industry for Mutually Beneficial Relationships:
As I have explained over the years, I am skeptical of investing in private equity particularly for clients under $25m in investible assets. Despite the important role that private equity plays in our economy, and despite the talent of many in the industry, it may not help most families achieve their objectives.
The pitch from salespeople and/or advisors trying to sell private equity usually goes something like this: It offers higher returns, it diversifies your portfolio, and it will have less volatility than public markets. I will be writing a follow up piece challenging these claims for anyone considering these investments. What you can be certain about is that most investors (particularly families under $25m in assets) will be paying fees of roughly 1-2% of your invested capital AND you will pay 15-20% of your profits to the manager. You will probably be paying for many of the fund managers expenses as well (offices, private planes, other).
If your private equity funds do not deliver on these claims, I find it hard to understand how this is a mutually beneficial and positively self-reinforcing relationship. It seems the investor owns the risk, and the industry gets paid well. If the investment doesn’t work out for you, the good news is that your private equity manager and advisor will likely be just fine financially.
Reiterating the Importance of a Positive Self-Reinforcing Cycle:
If you have read to this point and interpret me as negative on the private equity industry or intolerant of anyone that treats others poorly, I have not made my point clearly. I am merely communicating that our actions should be contributing to a self- reinforcing positive cycle. If they are not, we should reflect and make a change. Energy or money expended that is not helping to foster a mutually beneficial relationship and connection with others will likely be a waste. If you invest in private equity, you can justify high fees and tolerate more risk, but you must also expect significant outperformance of your portfolio over time. In relationships where one side benefits at the expense of the other, it will fail, it is only a matter of time.
My strong belief is to work tirelessly at fostering mutually beneficial long-term relationships. As was the case of my loving grandfather, the returns to/from these relationships will remain positive. As is the case with August Wealth, our desire is to help grow your wealth within a fiduciary relationship that works in your best interest, is enjoyable, long lasting, and mutually rewarding financially.
Current Market Observations and Musings:
I remain fairly relaxed about any re- acceleration in inflation. Although goods and services remain expensive, there are signs that consumers are not tolerating further price increases.
Back to the office theme continues slowly. Employers are continuing to gain leverage over employees. This should keep wage gains contained.
Some real estate market prices (Austin and Nashville) are starting to soften. Prices for purchase in many parts of the country are probably unsustainable (relative to incomes), and real estate prices are one of the biggest contributors to official inflation numbers at present.
Interest rates remain relatively high as the worries of inflation persist; hence it is probably an opportunity to hold and/or increase the allocation to fixed income.
The interest rates earned on high grade corporate credit are becoming less attractive compared to the yield in the US Treasury market compared to a year ago.
There are significant geopolitical risks, and there are always unforeseen macroeconomic events that cannot be predicted that can cause stock markets to decline. For this reason, we like increasing our US Treasury weights relative to corporate credit. US Treasury bonds would likely provide a risk reduction and hedge during a stock market selloff.
That said, the current environment looks to me to have plenty of opportunities based on our research:
o Fixed income yields remain relatively high, we are happy to earn interest.
o Energy markets have become more attractive to us in the past months.
o Certain metals and certain mining companies are also attractive.
o Precious metals finally moved higher as we expected, and we are less bullish.
o We are still finding abundant opportunities in small and mid-cap equities.
My opinion is that there are signs of increased speculation.
o People SEEM to be gambling in many technology highfliers, short- dated options, crypto coins, and other areas.
o While not outright negative on any of these areas, volatility is high, and there are more attractive opportunities (in my view) for higher risk adjusted returns in other areas.
Overall, I am very excited about the prospects and challenges for navigating markets in the coming years. Although central banks may be shifting to cutting interest rates soon, they probably do not want to go back to a world of “free money”. This will likely create a more difficult environment for many investors that employed the: There Is No Alternative “TINA” strategy. When rates are at or near 0.00%, you must buy any assets to protect yourself. We are no longer in this zero-interest rate world.
Investors that allocate with cash flows in mind and that can shift portfolio allocations when the environment warrants will have advantages in my view. A world with higher risk-free rates of interest will create new and difficult obstacles for certain parts of the financial industry. I am excited for August Wealth to meet the coming challenges.i
Joe
i Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and August Wealth Advisors are separate entities.
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