I am sick of all the fighting. The real story and subject of conversation in newsrooms, on talk shows, court T.V., and reality T.V. is the fight between the people. It doesn’t matter what is supposedly being talked about, the viewers and fans really show up for the battle and friction between people. We then all take that fight out into the world. Coworkers fight each other and upper management, politicians fight with each other and voters on both sides, and voters fight other voters on both sides as well. Parents conflict with teachers and other parents, while kids fight parents, teachers, and other kids both in-person and virtually.
I used to be able to fight all those daily battles and then retreat home to a sanctuary free from it all. Now, however, I must go toe-to-toe with my eight-year-old. He fights smart and he fights dirty. He is good at arguing and fighting, but why shouldn’t he be? He is surrounded by it every day. It’s like pulling teeth getting him ready in the morning and out the door, and the same at night for bedtime. Craig recently joked, “Don’t worry Justin, it will only be that way a little longer. He’ll be 18 and out of your control before you know it.”
I’m the discipliner in the family, so the brunt of the fighting with Carter lies with me, and I believe most of the fights have to do with the concept of perfection. My son is very much like me, Kendall (a.k.a. Gpa), and Robyn (a.k.a. Mommy). I’m a shameful perfectionist, and both Kendall and Robyn like to win and don’t like to lose. So, it just ends up being this fantastic recipe of problems and outbursts arising from wanted perfection, and the realization that perfection doesn’t exist.
Even though we all know perfection doesn’t exist, we fall into the trap every day. We think we’ll find the perfect way through the traffic on the way to work. We think we have a perfect recipe for rice, or lumpless oatmeal. We believe we’ve come up with the perfect apology that will get us out of trouble with our spouses. We think we’ve found the perfect investment strategy that protects us from all of the different risks that go along with investing. Well, reality proves our dreams of perfection invalid more times than not.
All this talk about fighting and perfection is relevant to how we’re managing your savings in this imperfect world. Two concepts that have been present in these letters going back to the beginning when Dad first began them are the ideas of conservatism and the identification and acceptance of risk. To most people, the idea of being conservative with investing means only using “not risky” investments. It means not investing much in the stock market. We have always countered that being conservative means understanding what you own and understanding the risks involved in what you own. How can you truthfully say you own a “conservative” mutual fund if you don’t understand how the mutual fund is run, or all the investments inside it? A conservative investor knows all investments have some kind of risk, and they have enough knowledge on what they own to identify and choose to accept those risks.
Lots of people have continued to be worried about the banks. This worry has even escalated to the idea that the U.S. dollar is weakening and in jeopardy. I have talked to several of you about these concerns, and I know it is widespread enough to reach many of the investment advisor bulletin boards out there. I just read a piece by an intelligent contributor who normally doesn’t talk about subjects like this, but I’m guessing he did because of how broad the worry ripples have been spreading. The article is The Dollars Death, Not So Fast, by Michael Lebowitz. Now discussions of the strength of the U.S. Dollar, world reserve currencies, strength of banks, and how all these ideas including interest rates work together can be a heavy economic discussion. But Mr. Lebowitz and I agree that even though there could at some point in the future be a shift in the preeminence of the U.S. Dollar as the world reserve currency, it is not happening anytime soon. The current share of U.S. dollars in global foreign-exchange reserves, after a 20 year decline, has just hit 59%, which is more than all others combined. The second largest foreign exchange currency is the Euro at 21%.
The downfall of the banks that we’ve all heard about in the news stemmed from decision makers pretending risk, especially interest rate risk and reinvestment risk, didn’t exist. Or even if it did exist, they believed everything would continue to be fine long enough that they wouldn’t have to worry about it. They believed everything was running perfectly until reality stepped in to have its say. It was our conservative nature that kept us from falling into those same worries with our own fixed-income selection these past five years. We didn’t believe the world was running perfectly and kept the threat of changing interest rates in mind as we invested the portion of your savings which were not invested in the market.
Dad always says an advantage we have is continuously viewing the investment environment not as we want it to be, but as it really is. It is how we conduct reviews, and how we make our most fundamental rules. Likewise, I am hoping with enough patience and enough reminders that “You can’t always get a chihuahua,” my and Carter’s daily battles will lessen.
Please reach out if you have any questions. You are never wasting our time asking for our explanation on something you see in the news that you’re worried about. Peace of mind, especially when it may involve your savings, is important. We are especially motivated to discuss these things with you since much of what you’ll see are fear-based selling techniques.
I hope you all had a lovely Easter and are doing well,
P.S. “You can’t always get a chihuahua” obviously comes from our family’s fun re-singing of the Rolling Stone’s classic song “You Can’t Always Get What You Want.” I was happy to see we weren’t the only ones to make the change-up in lyrics. There is actually a term for mishearing the lyrics of a song. The word is mondegreen and there are many lists of countless mondegreens you can find with a Google search.
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Kendall J. Anderson, CFA, Founder
Justin T. Anderson, President