... Is Fear Itself

Fear is the current go to subject of the day. Most of us don’t outwardly admit to one another that we are scared. However, at the end of a conversation about politics, society, schools, vacation within or without our national borders, I find it common that people will sum up with something like, “I’m scared for… the future, our children’s future, the next generation…”

But, just as frequently now, and even more frequently than two or three years ago, people also finish with, “but we’re doing what we can and moving forward.” We’re all controlling what we can control and then continuing to move forward. This is simply what people do. I know I’ve said things like this before, but I’m going to continue to be a cheerleader for us all, because I think we need more cheerleaders. We need people who recognize the strength and perseverance it takes to simply move forward.

We all know from Warren Buffet’s famous quote that long-term investment success is best served by being greedy when others are fearful, and fearful when others are greedy. Today we have quite the mishmash of fear and greed, but what we are experiencing, from the markets, to the bank issues in the headlines, to the overall business cycle leading into a recession, is all a result of those common ingredients of fear and greed.

Even if it feels surprising or different this time… it isn’t. If anything is out of place it would be the continued growth of governmental power, though history has also shown even this to be cyclical. And, if you look close enough, people on both sides of the fence today are starting to push back against that control.

When I was thinking about Warren Buffet’s quote on fear and greed, it naturally led me to Roosevelt’s famous line from his first inaugural address, “…that the only thing we have to fear is fear itself.” Now before I continue, I want to plainly state I do not think today is leading to another Great Depression. But looking at the overall troubles of today, especially the fights between political parties, leaders of society, and the differing members of our capitalistic economy, it seems the social environment is very similar. There is a lack of trust, faith, and optimism.

It was the promise of those things that President Roosevelt offered in his inaugural address. Even if the good capitalist that I am finds the resulting governmental control he grasped and utilized through his “New Deal” unsettling, his address offered many gems that are fitting for today. I wanted to share two of them with you.

This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today.

Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

I enthusiastically believe the cure for this environment of vacant confidence comes from truth and honesty. It is important we all speak out against falsity, demand truth from others, but also, and most importantly, from ourselves. We can’t control much of what we see and hear from our leaders, but we can decry falsehood when it is spoon-fed to us, and by our own example, re-shape society from the bottom up into one that demands truth and honesty.

Still, this is not easy. Fear sells, and it feeds upon itself and flows through society just like any virus. The runs on the banks that have been in the news, which through extraordinary measures were bailed out, are ultimately a byproduct of the fear of the day. All of the failed banks in the news failed because of greed. They had business models based on profit maximization, without diversified safety nets, and many of their clients were just as deluded by greed and showed an equal absence of constraint. Those banks are not representative of most banks today, however. I think the fear many people are having about all banks due to the news and continuing commentary is unwarranted and unrealistic. But that doesn’t mean you should take the chances the clients of Silicon Valley Bank were taking. As we’ve preached forever, I will preach again: There is no reason to take the extra risk by having all of your savings in one bank in excess of the $250,000 FDIC limit. Even though there is talk today about precedents being set to make people whole above that, it doesn’t matter. The government does not have to do that going forward. We are always happy to help you diversify your savings if you need to, so please call us if it is on your mind.

There aren’t a lot of percentages about inflation, interest rate changes, market changes, or historical comparisons in this letter, but I have plenty of that in mind if you have a head for that sort of thing and want to discuss any of it. My overall assessment, though, is that the markets and economy continue to chug along, and not much has changed in months. The news and heads on TV, the sellers of “investment newsletters,” and the spiraling conversations we find ourselves in with friends and family may have us believe otherwise, but the big picture is still the same… and we’re all moving forward.

I will leave you all with one little snippet you may find interesting, but I look at this as more of a joke than a tool to be used by anyone. CNN Business provides us all with their Fear and Greed Index, which you can find at their website. It looks at 7 “Fear & Greed Indicators” to provide us all with a real-time updated explanation on what is driving market behavior. As I write this today, we just switched over to the bottom reading of “Extreme Fear.” Last month we were in the “Greed” reading. Oh, how quickly this world moves.
If you did want to use this as a tool and follow Mr. Buffett’s advice… if everyone else is fearful, it’s a good time to be greedy.

I hope you are all doing well and moving forward with strength and confidence.
 
Justin Anderson