On Writing

https://onefpablog.org/2019/06/13/how-to-write-like-someone-might-actually-read-your-work/?utm_source=smartbrief&utm_medium=email&utm_campaign=blog&utm_content=061819

The above is from Dan Martin via FPA blog.

1.) Write Like You Speak

2.) Read It Out Loud

  • First, it can help you practice and ultimately, master Tip #1 (writing like you speak).
  • Second, it can help you identify the areas where you need to add some qualifiers to simplify and clarify certain thoughts.
  • Third, it’s the best way I’ve found to ensure that content is conversational enough for your audience, and for the objective of the piece. Reading aloud will help you identify the areas of your work that really lend themselves to a conversational style (i.e., something that you, or at least some human being, might actually say), and those that need some adjusting.

3.) Edit, Don’t Sterilize

My last piece of advice on engaging writing is to remember that the small imperfections and quirks in your writing style are not necessarily bad things. I think some of these quirks make up an important part of anyone’s writing style, and not all of them should be eradicated through the editing process.

 

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Time to diversify?

Following the pullback at the end of 2018 and subsequent recovery, most analysts agree that we are likely near the end of the bull market. The 10 year – 2 year yield curve nearly inverted in December, and the 10 year – 3 month yield curve inverted in March. Other leading indicators have been mixed, as well.

Over the last several years, the best performing asset, by a lot, has been US large cap stocks. For those investing with a home bias, this has been a winning strategy. For those investing with global diversification, it’s been a long hard road.

Looking at valuations, it appears that emerging markets have the best opportunity for higher forward-looking returns, followed by international developed, with US equities coming in last (see https://mebfaber.com/2019/01/25/the-biggest-valuation-spread-in-40-years/). P/B, CAPE, and cyclically-adjusted CAPE values all suggest that the S&P 500 is due for a rough 10 years ahead.  However, this has been true for at least the last 3 years. John Hussman has been predicting low returns for far longer. If you examine his analyses (at http://www.hussmanfunds.com), they are clearly well researched and make sense. But they haven’t worked.

One unaccounted-for variable has been central bank interventions. This includes not only our Federal Reserve, but actions of the central banks of Europe and Japan as well.  You can find a monthly update showing the close correlation of the S&P 500 to the total of these balance sheets at yardeni.com. Since October 2017, the Fed has been reducing its balance sheet. Will this cause the US markets to decline? It appears that instead, the other central banks will increase their holdings to make up for at least part of it. The correction in December 2018 has been variously credited oil prices, revisions to 2019 earnings estimates and/or Fed balance sheet reduction. Of those three options, we have many years experience with two of them, and zero experience with the third.

One way to determine a sensible action plan is to think through possible outcomes and consider their likelihoods. Start with some assumptions:  Economic conditions are likely to either stay stable for the foreseeable future or weaken. Although it is possible for conditions to further improve, it seems unlikely based on most forecasts.  Central bank interventions will likely be contingent on economic conditions, which may include market conditions.

What are the possible outcomes of stable conditions vs. weakening conditions? We know that economic recessions are nearly always accompanied by market corrections. We also know that the US market is more richly valued than other markets, which may result in a larger over-correction in the next bear market. OR NOT! In Meb Faber’s article referenced above, notice that the US has been over-valued now for about 7 years. How long can this continue? Is it related to the Fed or to something else?

Many market observers, myself included, believed that this massive Fed balance sheet would cause sustained inflation above the Fed’s target 2%. We have been wrong. Before responding with, “CPI is measuring inflation wrong,” take a look at this article from Cullen Roche:  https://seekingalpha.com/article/4255137-hard-truths-inflation-truthers. His arguments debunking the idea are compelling. We have not experienced excessive inflation so far, but that doesn’t mean we can’t. Moderate inflation is possible, although hyperinflation in the global reserve currency remains unlikely. How to protect clients from inflation? The traditional answer has been real assets and commodities, with a newer option being TIPS.

Will the US dollar remain the primary global reserve currency through the next recession? Despite the ongoing buzz about how China and the yuan are taking over the world, the answer is almost certainly yes. This article explains why: https://www.thebalance.com/world-currency-3305931. What does that mean for our analysis? It means the dollar, and US Treasuries, are special compared to any other currency and any other security.

Conclusions for asset allocation:

  1. If you hold US government securities for diversification and stability, there appears to be a strong argument that they will continue to function well in this role.
  2. If you hold most of your equity allocation in US securities, this might be a good time to consider some diversification to a more global allocation, international developed and/or emerging markets. Please note, this involves home-bias risk, because clients will certainly see the underperformance of their portfolios if the current outperformance of the US market continues.
  3. If you have concern about possible inflation, consider a position in one of the traditional hedges, keeping in mind that while these positions have provided effective diversification over the past 10 years, this mainly means that they have been performing poorly compared to US equities and other investments.

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Rules of the wealthy

I’m not sure where “Family Wealth Watch” got this data or information, but it makes sense to me.

Focus on big wins (Edit: I think this should say Focus on Big Goals)

Working hard is not always the right answer. Working hard on the right things is how the elite compete.

Not thinking about retirement in your 20s? Think again.

There will be areas in your financial life that disproportionately affect your chances of achieving financial success. By paying significant attention to these areas – such as eliminating debt, building substantial savings and investing early – the wealthy are able to leverage big financial wins.

Action always beats inaction

Most people feel stuck when it comes to making decisions about money. Information overload and analysis paralysis lead to inaction, which can frequently be the greatest impediment for financial progress.

Being decisive regarding money is vital to building small wins along the way toward wealth. This type of momentum, or consistent progress, contributes to overall success, according to Harvard researchers.

Intangible goods are the greatest in value

How you spend your money matters.

Experiential purchases offer some of the highest returns on investment. By prepaying for trips, vacations, or concerts, you allow yourself to extract the pleasure of the purchase before the event and for years afterward.

Another powerful mechanism that offers high returns on your spending is to invest in yourself. Continuous self-improvement pays off in many ways — and over the long term.

Intangibles, like the financial freedom to make a career change or take a year off to travel, are much more rewarding than a quickly depreciating asset.

Delayed gratification trumps impulse

According to financial experts Thomas Stanley and William Danko, most American millionaires have never spent more than $400 on a suit or $200 on shoes.

Delayed gratification is a learned behavior. And it is often the strongest predictor of success.

Confidence is a commodity

Confidence can be mined. With a deluge of personal financial advice already in the market, creating confidence assists in the decision-making process.

Confidence-building techniques should be part of your daily routine. And according to research studies, there is a strong correlation between positive self-talk, confidence and performance. Additionally, inward questioning and regular rewards allow individuals to continually foster confidence.

This allows room for wealthy thinking.

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when to put down your pet

From NYT:

To help pet owners make decisions about end-of-life care, Dr. Villalobos developed a decision tool based on seven indicators. The scale is often called the HHHHHMM scale, based on the first letter of each indicator. On a scale of zero to 10, with zero being very poor and 10 being best, a pet owner is asked to rate the following:

  • Hurt: Is the pet’s pain successfully managed? Is it breathing with ease or distress?

  • Hunger: Is the pet eating enough? Does hand-feeding help?

  • Hydration: Is the patient dehydrated?

  • Hygiene: Is the pet able to stay clean? Is it suffering from bed sores?

  • Happiness: Does the pet express joy and interest?

  • Mobility: Can the patient get up without assistance? Is it stumbling?

  • More: Does your pet have more good days than bad? Is a healthy human-animal bond still possible?

Dr. Villalobos says pet owners should talk to their vet about the ways they can improve a pet’s life in each category. When pet owners approach end of life this way, they often are surprised at how much they can do to improve a pet’s quality of life, she said.

[Try Dr. Villalobos’s scale: Assess Your Pet: Is It Time to Say Goodbye?]

By revisiting the scale frequently, pet owners can better assess the quality of the pet’s hospice care and gauge an animal’s decline. The goal should be to keep the total at 35 or higher. And as the numbers begin to decline below 35, the scale can be used to help a pet owner make a final decision about euthanasia.

 

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On saturated fats

Here’s a great podcast from Dr. Mike Roizen of the Cleveland Clinic, and the transcript is there too:

https://www.healthandwealthresearch.com/fab-9-supplements-call

It is focused on supplements, but includes this important detail about diet:

…food with carnitine, that is red meat and, yes, pork is a red meat, and lecithin, and choline such as egg yolks and cheese, in specific configurations seems to, and does, change the bacteria inside you over a period of as short as one week. And the good news is if you get rid of those foods totally, within one week, your bacteria changes back to healthy bacteria inside you. But when you have, for example, two six ounce steaks in a week, the bacteria that love that steak predominate, and those bacteria produce as their waste product from the carnitine—so it doesn’t matter whether it’s grass fed or not—but they produce from the carnitine an inflammatory substance that is called butyl butane and trimethylamine. The trimethylamine goes to the liver and creates trimethylamine oxide, which ends up causing inflammation and is a more powerful inflammatory agent and cause of heart disease, stroke, and memory loss than is in fact the LDL cholesterol 260. So there isn’t a physician who wouldn’t treat that. You probably should avoid more than four ounces of red meat or an egg yolk or cheese a week.

 

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Daily reminders

From Darius Foroux:

What you put in your brain influences your thoughts. And the quality of your thoughts influences the outcome of your life. That’s why I protect the gates to my brain as much as I can.

You do that by not consuming junk information like the news or mindless entertainment. You also do that by not associating with toxic people.

And you do that by reminding yourself of all the things that make life better. Here are 14 of those things. When I do these things, I’m a better person.

1. Let go of the past

Today, you’re a new person. Every day is a new beginning. Forget about what you said and did yesterday. What matters is that you have good intentions and that you do your best to make today the best day of your life.

2. Don’t rush things

We’re always going somewhere. And we rush the middle. But the funny thing is, that the middle IS our life.

3. Shape your own future

Who are you? What kind of life do you want? Shape your life by your decisions. Match your life with who you are.

4. Your life is good

….Remember that your life is good the way it is. Why? Because it’s the only one you have. Does that mean you should improve it? What makes you assume that? If something is good, you can still make it better.

The next 10 things are also worth reading.

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Yield Curve Inversion

Michael Lebowitz has written an interesting piece on yield curve inversion, posted at RealInvestmentAdvice.com

His thesis is that although the 2-10 has not inverted, it’s close enough, and maybe won’t, and if you look at all the comparisons, maybe you’re missing an even better signal.

2 charts tell the story:
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