5 Things I Do To Get Stuff Accomplished

I have my own company and work by myself quite often. I set my own agenda. Sometimes my temptation is to forget all of my work for the day and go and do something fun instead. To counter this temptation, I have several mechanisms I have developed over the years that help me get stuff accomplished. Here are 5 of these mechanisms:

Have a Set Routine: My “get up in the morning” and “go to bed at night” hours are pretty set. Even on the weekend, though I may sleep in an extra hour, I try to go to bed at about the same time. During the week, I wake up, check the markets and the messages, then I usually do some exercise before sitting down for the day. If you have a set routine, you know when you are available for any outside calls or meetings and you can more easily schedule them accordingly so as not to cause major interruption with the rest of your schedule. It also lets you slide into the productive part of your day without having to think about it.

Write Stuff Down: I have a notebook in which I write anything of note, and I carry that notebook everywhere. That way, if I am not at home, I most likely have any notes I need with me. I am more likely to remember to do something if I have written it down. Some people use their Notes function on their computer or smartphone – that can work as well.

Do the Hard Stuff First: If you have the choice to do so, I recommend doing whichever task you have that takes the most energy or brainpower first, or at least early on in the day. I get more tired and addled as the day wears on and so I can think more clearly during the early part of the day. I write most of my blog posts early in the morning, for instance – I don’t know how brilliant they read, but at least I have made the effort to write them. When you finish your most difficult task early in the day, you can take a deep breath because everything else for the rest of the day should be a breeze by comparison. You can give yourself a pre-lunch pat on the back.

Leave A Task Unfinished: Instead of aiming to finish everything you have planned for the day, leave something unfinished. That way you can wake up the next morning and easily slide into the next day by finishing what you started the previous day. You will probably finish that task quickly because your brain will have had all night to sort through how to get it done. When I read a book, I often quit reading right in the middle of a good part because then I will be eager to get back to it as soon as I can.

Make a Plan For Tomorrow Before You End Today: Don’t wake up in the morning without a plan or a goal for the day. Instead, make your plan before you go to sleep the previous evening. Maybe the day’s plan is already set for you – if so, great! No thinking involved. However, if you have to self-motivate yourself (as I do many days), you will be motivated to get out of bed and get stuff done if you have already planned what to do the day before. You will find that your level of productivity and sense of accomplishment will increase if you don’t always have to think about your next step because you have already done so.

IMO: A lot of these pieces of advice fall into the Yoda category: Don’t think, do! Now for those of you who have an outside job and whose schedules are already over-filled, this column may not have as much relevance. However, perhaps you are sick of that over-scheduling and are contemplating retirement or at least wishing you had more free time. If that’s the case and you are one who likes to get stuff done, then consider my pointers here. Also, how does this relate to financial planning and investing? Well, what is the second word in financial “planning”? You have to plan in order to be successful with your financial life. Don’t put it off: Develop your financial plan and then live your life accordingly. Put your plan in action.

December Sell-Off?

Don’t be surprised if we have a sell-off in the stock market during December. Why? Because sell-offs happen when you least expect them, and because markets have been moving up a little too smoothly with decreased volatility during the past year. It all could be a bit too good to be true. I believe we could see a return to higher volatility and a market downturn between now and December 31.

Chart for SPY (S&P 500 Index ETF) March to December 2, 2019

YTD 2019

The S&P 500 ended November up about 25% YTD and with the VIX Volatility Index at about 12.6, at the low end of its recent range. The S&P 500 has gone up almost in a straight line since October 1, despite major headline headwinds. Larger institutional investors may look to sell and book some profits this year despite underlying fundamentals (low unemployment, low interest rates, positive GDP growth) that point to improving market conditions. My thought is these large investors sell now, book a positive 2019, and re-invest in 2020 and see what happens then.

What Should You Do?

If you are a long-term investor, just hold tight. Don’t sell in advance of something that may not happen, but don’t add to positions either. A market sell-off may feel like a short sharp shock, but typically a sell-off will have a basic pattern and will play itself out over a time period. If a sell-off does happen, I would view it as a technical sell-off, not one based on declining market or economic fundamentals, although the financial press may try to put that false narrative out there. If that is the case, and I am right about large investors wanting to book 2019 profits, then look to re-engage sometime right after 1/1/20.

IMO

I get the most worried when things are going a little too well. Now is one of those times. Though I am not losing sleep, I believe we could see some rough sees for the remainder of 2019. I recommend you hold your ammo for now until we get some confirmation first of a sell-off and then of an uptrend that ends the sell-off.

Happy Thanksgiving!

We all have a lot to be thankful for this year, especially in the financial markets. The S&P 500 is up about 25% year to date (albeit from a low starting point after a 14% decline during Q4 2018). Interest rates are low, unemployment is down, wages are up, and inflation is low. Most likely, if you want a job, you can find a job. Holiday spending is expected to increase. Not all is hunky-dory, and the media likes to find clouds on the horizon, but in general, the US economy is good and stock and bond market performance reflects that strength.

Other Things To Be Thankful For

Here are some other things that I think help to underpin the markets and help to keep them strong:

  • Online Trading: Think about what markets were like 20 years ago, prior to the advent of online trading, and think about the ease of access to markets that we have now due to the internet and online trading. Transaction costs have been driven down so far that they are now $0 for many trades – can’t go lower than that (although central banks in Europe and Japan have negative interest rates. Think about that – what if Charles Schwab paid you to make a trade?). With more and more people owning equities – many of them indirectly through mutual funds in their retirement accounts – it means that a greater percentage of the population has a vested interest in the markets. This can only be good for the economy.
  • No Cheating: In the US, markets are generally perceived to be fair in part because the SEC does a good job rooting out and then publicizing offenders of the insider trading laws. Sure, there are always exceptions and there are those Debbie Downers out there who think that things are corrupt or rigged, but individual and institutional investors would not invest the trillions of dollars that they do invest if the markets in the US were not perceived to be fair.
  • Shareholder Capitalism: There are voices out there who say that companies should be beholden to a number of “stakeholders” including employees, the community and the environment, and not just to people and institutions who own shares in their companies. I say, “Wrong!” Companies innovate and become great only if they are motivated to make money doing so. It is human nature. “Stakeholder” capitalism replaces shareholder capitalism only if we want to become a static mediocrity going forward. That said, the Golden Rule from the Bible applies to corporate management, which is something that cannot be regulated.
  • Liberty: My Facebook profile photo is one of the Statue of Liberty that I took on a trip there last year. Diversity is a good thing, but it is Liberty that made this country great. We are not perfect, and not all of us have had full Liberty since 1776, but we remain a work in process, and protection of our various God-given liberties will be paramount if we want to remain thankful and count our blessings in the future.

Caring and Robots

I recently attended a conference for financial planners. There were several speakers. All were good. They all addressed what financial planners will need to do going forward in order to differentiate themselves and grow their business against a backdrop of fee compression and increased automation in the financial planning business. They all said that the “human touch” of caring, listening, and empathizing with clients is what sets human financial planners apart from the robots. Makes sense. Portfolio composition, allocation, and monitoring, while important, are becoming less so as investors move to lower-cost ETF’s. Having an ear to lend and understanding a client’s situation are opportunities for a financial planner to add value. The planner needs to listen and care.

How Do I Show That I Care?

This is good news for me. I believe I am a good listener, especially in one-on-one situations. I have a strong memory and I typically bring up something someone mentioned in a previous meeting when I meet them again – maybe to put them at ease, or maybe to bust their chops. I empathize well with people and people like to talk to me because of my skills in that area. So, based on what I heard during the conference, I am well-suited to be a good financial planner and grow my business.

The issue that I have is that it is difficult for a financial planner to convey that they care. Of course, an existing client can refer me to a new client on the basis that “I care”, but beyond an unsolicited referral, my options are limited. For instance, I am restricted in my ability to use customer testimonials on social media or in my advertising. The bodies that regulate my business don’t want me to cherrypick client referrals, so they effectively ban them. I suppose I could put something like “I care about you and your money!” or “I am customer-focused!” on my website, but that sounds so hokey. How about, “You can trust me with your finances!” Eech!

Demonstrate, Don’t State!

I think the extent to which someone cares is demonstrated over time, and not stated on a website. This is where the phenomena of social media substituting for normal human interaction falls short. One cannot convey the level and depth of human emotion through social media that one can in a face-to-face meeting, whether it is about financial planning or anything else. One gains trust in someone else by interfacing with that person over a period of time, and by the counterparty actually caring about them. Social media in its many forms cannot replace human relationships, and robots cannot replace human financial planners when it comes to the various nuances of human lives.

How Keynes Would Advise You To Invest

Most people know John Maynard Keynes as the father of “Keynesian” economic policy, which big-government statists have used as a theoretical justification for increased government intervention in the private economy. The thoughts underpinning fiscal deficits are Keynesian: that government increases its fiscal spending during hard times to stimulate aggregate demand so that more people become employed and the hard times ultimately subside. What’s lost in this argument is that Keynes believed the fiscal stimulus should end during good times – that part of the message gets lost in current politics.

John Maynard Keynes

Keynes As A Money Manager

What’s less known about Keynes is that he was also a money manager. In addition to managing his own wealth, Keynes for years managed the endowment for one of the colleges of his alma mater, Cambridge University. According to this article, Keynes was successful, earning a compounded annual return of 12% for 22 years ending with Keynes’ death in 1946. These years included the Great Depression, so 12% was pretty darn good for that time. In his personal portfolio, Keynes went from being nearly wiped out in the 1929 Crash to the equivalent of $13 million in today’s dollars by his 1946 death (according to Wikipedia). That’s outstanding!

Methods

How did Keynes manage money? A lot like Warren Buffett does today, and a lot like Benjamin Graham, Buffett’s teacher, did back in the day. Keynes bought stock in companies with strong balance sheets and strong, growing sales and held his positions for a long time, and avoided selling during down quarters or years. Keynes owned a relatively small number of concentrated positions because he preferred to have a strong level of familiarity with the firms in which he invested. Unlike Buffett, Keynes did not take full control over the companies in which he invested, at least through the Cambridge endowment fund, because Keynes preferred to have these investments more liquid in the event the money was needed by the college.

IMO

This shows that there is not a lot new. Buffett’s investment methods are considered state of the art even today, but Keynes was investing the same way almost 100 years ago. It also shows that the Keynes/Buffett Way of investing in strong companies at a favorable price and holding for the long term remains a superior way to build wealth over a long period of time.

Yield Curve – Return to Normal

Remember September of this year? It was only 2 months ago that the yield curve partially inverted, which caused some investors and talking heads in the financial media to aver that this is strong evidence that the US economy is heading into a recession soon because inverted yield curves have presaged a recession in the past.

Un-Inversion

Now, as I write this, the yield curve is back to its normal upward-sloping arc. Whereas in September, at its widest diversion, the 3 Month US Treasury was in the 1.9%-range whilst the 10 Year Note was below 1.5%, now it is the 3 Month with the lower yield at about 1.6% and the 10 Year at about 1.9% (Source: Treasury.gov). Nearer-term rates are lower than longer-term rates almost entirely across the spectrum. Am I hearing from those same pundits that the recession risk has been averted? So far, crickets.

IMO

What do I think? I didn’t believe that the inverted yield curve in September was signaling a recession. I thought that it was signaling an overbought situation at the long end of the curve. I wrote that there were many other factors at play that signaled no recession, such as low inflation, high employment/low unemployment, and sufficient cash in the financial system. As for the return to a normal, upward-sloping curve, I don’t think that necessarily signals that there is any less probability of a recession. I think it does mean that the predictive power of the shape of the yield curve is not that robust. Then there is the next thing to ponder: Quantitative trading algorithms are founded upon such probabilities as “inverted yield curve likely equals upcoming recession”. Algos are based on the probability of something that has happened in the past will happen again. Any algo that traded in September that there will be a recession due to an inverted yield curve is likely underwater now. Algos work until they don’t. If you are looking at investing with someone who has an algo strategy, caveat emptor. Higher than 50% probability doesn’t equal certainty.

China Trade and the Stock Market

The stock market seems to whipsaw with every new development in the saga of US/China trade negotiations. Headlines today as I write this are good, and so the S&P 500 is up about 0.5%. That could reverse tomorrow if a bad headline or a bad Trump tweet comes out. It has been this way since early 2018 when President Trump and his administration began threatening tariffs. The stock market seems to want resolution on this US/China trade issue above all other issues out there. Why is US/China trade so important to the stock market? In one word, Uncertainty.

US/China Trade Negotiations

History

China was allowed into the World Trade Organization in 2001. China’s production and trade volume with the US and the rest of the world has skyrocketed since then. China’s labor and production costs were cheap then, although less cheap now. Since 2001, it has been a given that US companies (such as Apple) can produce goods in China at a low cost and that US consumers can purchase goods made in China (at Wal-Mart, for instance) also at a low cost. This is one of the main reasons inflation has been kept in check for all of these years.

Trump

That “given” perhaps has changed or may change with the introduction of tariffs by the Trump administration, especially those aimed at China. We are currently in the negotiation phase of what the new trade landscape will look like, and negotiations can take some unusual and unexpected turns. While we are in the midst of negotiations as we are now, we don’t know what the end result will look like. Both the US and China have a lot to gain and a lot to lose.

Uncertainty

Because of the uncertainty of the trade landscape going forward, corporations don’t know what their Cost of Goods will be, and so they don’t know what their profits will be. “Financial Risk” is the probability that a future actual result will diverge from a projected result. Because of the trade negotiations, investors don’t know and can’t project a financial result, and so they don’t have a good barometer to read the actual results. Too much uncertainty means too much risk, and too much risk means some investors shy away from the market.

Record Highs

Counterbalancing this argument is the fact that the market is at or near all-time highs. To me, this means that we would be even higher had this US/China trade situation been resolved earlier. It also means that the US’s hand in negotiating the trade relationship becomes stronger as the market highs demonstrate that US investors are able to see through some of the uncertainty.

IMO

Look for the stock market to make even higher new highs if trade negotiations with China continue to make progress or even result in a trade relationship both countries benefit from. I am not the only one making this prediction, but I hope you have a better understanding that it is the economic uncertainty that results from the negotiation process that is the source for a lot of the volatility that we have seen in the stock market especially since early 2018.

Commission-Free Trades: Watch Out!

Schwab was the first to introduce commission-free trades a month or so ago, and the other major discount brokerages quickly followed suit. Now anyone who has an account at one of these firms can trade as much as they want with no transaction cost. Sounds great, right? What could go wrong?

Beware when someone offers you something for free!

Over-Trading

A lot can go wrong. First of all, most real money that is made in the stock market is made by buying and holding quality positions for a long period of time. Frequent trading can be profitable for a short time but it is very difficult to make money by trading all the way to the top. This is the Efficient Markets Theory in action. You might ride a hot streak for a while, but eventually returns will revert to the mean over the long term.

“Popular” Stocks

Another side of this is that no commissions might cause investors to invest more in the “popular” stocks of the day. This type of momentum-based trading can work out for a while, but as with popular culture, the fall from grace can be violent and swift. This is why especially amateur traders don’t make real money in the market: they buy what is popular when it is expensive and then they sell when the popularity turns.

Poorer Corporate Governance

Another ramification is that corporations may become less accountable to their shareholders. If their shareholders are only temporary squatters, then there is less motivation for corporate management to run a clean house. Long-term investors tend to be more committed to keeping a management team in check. Although it is not yet a publicly-traded company, witness SoftBank’s jerk of WeWork’s collar. This happened as a result of SoftBank’s long-term investment in WeWork.

IMO

My point is to encourage investors not to give in to the temptation to increase their level of trading in their accounts just because there are no commissions on trading. The formula for successful long-term investing have not changed, and investors need to keep to the formula. Don’t get into any bad behaviors in your own accounts!

No Recession

I have been saying the US economy is not going to fall into a recession at least for the next 2 years despite what might be happening in other countries. This article in the November 4 edition of the Wall Street Journal offers further support to my position.

Unemployment Factor

The WSJ article discusses a theory developed by Ph.D. economist Claudia Sahm. Sahm’s theory is that the US economy is in a recession when the 3-month average unemployment rate has risen 0.5 percentage points from its previous 12-month low. In other words, Dr. Sahm believes a spike in the unemployment rate is the canary in a coal mine warning that a recession is afoot. The theory has successfully called every recession for the past 60 years. Currently, the reading is just a tick above 0, meaning we are not in a recession and not in danger of heading into one.

It makes logical sense: Companies fear an oncoming recession or even a slowdown that doesn’t result in a “recession”, which is 2 consecutive quarters of negative GDP growth. So, they start to lay off workers. Currently, instead of laying off workers, companies are facing a different dilemma: Not enough qualified workers to fill open job listings. We are not heading into or already in a recession if corporate profits are strong and growing and companies are looking to hire rather than layoff workers.

Ramifications

If you believe the US is not heading into recession any time soon, what would you do, or what would you change in your investment outlook?

  • Risk On: You could opt to go farther out on the risk spectrum in your investment portfolio. This means, perhaps, instead of being 60%/40% stocks to bonds, maybe you bump up to 65%/35% or even 70%/30%. The environment is good for corporations, so own more of them relative to your other holdings. My recommendation is a diversified portfolio of ETFs or low-cost mutual funds so that you are well-diversified and not subject to company-specific risk.
  • Relax: If you are working and worried that a recession might cost you your job, don’t. Unless you mess up individually in some way, in general, you should keep your job due to the strong labor market.
  • Stable Interest Rates: Former Treasury Secretary Larry Summers recently stated US interest rates could fall to zero or below if we have a recession. This isn’t happening, in my opinion. The Federal Reserve stated that they are on hold with any future rate reductions. I believe there is a better chance rates will go up than down from current levels. The international rates market, with rates in Europe and Japan at zero or below, is a ballast on US rates, so therefore I predict stable rates in the next 12 months or so.

IMO

Take my advice based on what you pay for it, but I believe the US economy will remain strong and will not tilt into recession for at least the next 2 years, based on unemployment that remains low, coupled with strong and growing corporate earnings, low interest rates, and plentiful cash in the system. If you are currently hiding behind a tree for fear of recession, then you should heed the All Clear siren and go about your business.

Robocalls and Elder Abuse

Nobody likes receiving robocalls. Is there anyone out there who wakes up and says, “Gee, I hope somebody calls me today to tell me I am under investigation by the IRS and that I can avoid penalties by using such and such of a service!”? Between my home phone land-line (I’m a dinosaur, I know) and my cell phone, I get probably 20-25 such calls Per Day! Both numbers are on the Do Not Call list, so that may help but it doesn’t eliminate the problem.

Worse For Seniors

I am able mentally to write these calls off as an annoyance, but that may not be an easy thing to do for someone with some level of cognitive impairment. In fact, a number of these robocall scam perpetrators specifically target vulnerable senior citizens. I was just at a conference where several types of scams targeting seniors were mentioned. Hopefully you don’t, but unfortunately, you may have first-hand knowledge of seniors who have been scammed. Seniors can have their identities stolen and all of their life savings taken away from them by scammers through these robocalls. It is a major, major issue, and one that most people on all sides of the political spectrum agree on.

What To Do?

Don’t Answer!!! The AARP, the US Senate, the IRS, the FBI, and local police all agree that if you don’t explicitly know who is calling, you should not answer. If the call goes to Voice Mail and they leave a message, at least you can listen to that and have time to think about it so that you are not making a snap decision. The Voice Mail may also be forwardable to the police.

Set your phone to 3 rings, with no tie-in announcement either through your own answering machine or through your cable TV. You should be able to get to any call in 3 rings. If there are only 3 rings and then the scam call is gone, then there is still an annoyance factor, but not as much as 5 rings or more.

Get rid of your landline, and give out your cell phone number Only When Necessary. It’s difficult to “live in the shadows” in this day and age but doing so might help you avoid getting scammed.

Be Very Sceptical: This might be difficult for someone who is otherwise a very nice person, but there are bad people out there who mean to do you harm, if not physical harm, and your best defense is to be alert to the issue and stay away.

IMO

I can’t think of punishment too harsh for someone convicted of attempting to scam senior citizens through robocalls. For their part, the phone companies are making progress and doing what they can but the problem is too big. If you are a senior, or if you are responsible for the care of a senior, then make sure you or your charge don’t get taken in by one of these scams.