MC Origin Stories – Jason Naiman

1) What was the turning point for you in deciding to change careers?

 

2) What lessons have you learned from your past work life that you’ve brought to MC?

If I were to find the common thread in the last 50+ years of my working life (OMG!), I guess I just mentioned it above: do the right thing. It wasn’t always easy in the life insurance business because of the inherent conflict of interest that existed based on how you were paid. What was best for your client wasn’t necessarily best for you. From the moment I joined Morton Capital, that issue has been in the rearview mirror.

 

3) How have your career aspirations changed over the years leading to this point?

Having had 14 years in the life insurance business, empathy was baked into your psyche. Selling an “intangible” requires being able to connect at a much different level than if you’re selling a product the buyer WANTS to buy. An axiom in our business was that life insurance wasn’t bought; it was sold. When you think about it, life insurance is a very empathetic purchase: it is being bought for the potential benefit of others. That’s empathy.

MC Origin Stories – Chris Galeski

1) What was the turning point for you in deciding to change careers?

 

2) What lessons have you learned from your past work life that you’ve brought to MC?

You can always improve and learn more. Most of us ignore our weaknesses and spend time doing the things we are good at. In order to give our clients what they deserve, we need to constantly reflect on our weaknesses, understanding the why behind them, and learn from those weaknesses and turn them into strengths. We can accomplish a lot more as a team than as individuals. Most of us have the same struggles and fears in life when it comes to money, so we have built a team here at MC that is inspired to work together collectively and come up with ideas and solutions to help clients move away from fear about money and towards the enjoyment of their wealth.

 

3) How have your career aspirations changed over the years leading to this point?

I went from trying to change or improve one client’s situation at a time to a place where we work together as a team to impact a larger audience and community. Working at Morton Capital and having a true team atmosphere allows us to deepen relationships and impact so many more people both internally and externally. I am driven by our ability as a team and company to impact the community and inspire others to think about money differently.

 

4) Has there been a common thread in the work experience you’ve had so far in life?

Besides competing and playing golf for a living, I have always been a financial advisor. I really enjoy helping people better understand money and investing. To me, relationships and trust in the process have been the most common threads in all the work I have done. Success is achieved by the consistent things we do each day, which compound over time and give us the ability to achieve great things. Rarely in life does something significant happen without sacrifice, having a process and being consistent in our actions. The best advice ever given to me is to enjoy the process more than the achievements. All great things happen when you enjoy and trust the process.

Has empathy been a quality you’ve drawn on in roles you’ve held before Morton? As an advisor, friend, husband and father, empathy is the key to a successful relationship. Without it, how can you possibly put yourself in someone else’s shoes? Understand where they are coming from? It is a crucial piece in order to be a good communicator. It’s not my job to put my values on someone else’s money or wishes. It is my job to help guide people in the decisions that will help them find success and get the most life out of their wealth. Empowering a customer or client is something many of us hope to achieve in our work. What opportunities have you had to accomplish this in the past? Helping clients identify that “bucket list” of things that they want to accomplish and then planning them one at a time is an exciting exercise. There have been several instances of this in my career with clients. There have been other instances like helping give to charities, retire earlier, or just even retire that have been just as much fun. Anytime I have a conversation with a client, and they walk away feeling better, more comfortable or happier is a great feeling.

MC Stories – Save Your Portfolio . . . and the World

Climate change hasn’t always been terribly high on my list of concerns. Don’t get me wrong, I believed the science, but it had been a selfish, somewhat conscious choice to ignore dealing with something I was pretty sure wouldn’t greatly affect me. I’ve lived in Santa Monica, where the beach is vast, and in Pasadena, where the sun shines hot, and I could never envision a time where either would become undesirable, let alone unlivable.

My wife, Alyssa, began her career preparing for and responding to natural disasters, first in California, then in a similar role with the U.S. government at FEMA, which moved us to Washington, D.C. She dealt with fires in the West, hurricanes in the Northeast, and tornados in the Midwest. She even traveled to Japan to understand the impact of their disastrous tsunami in March 2011. Throughout her 15 years working on climate and conservation issues, she’s spent innumerous hours educating governments and businesses alike on the perils of increasing temperatures and global sea-level rise.

While I once may have felt captive to these data-dense presentation rehearsals, I came to first merely absorb, but later to seek, the alarming data she was gathering. It was then that I began to make the inevitable connections between her professional world and mine. I thought, “I’m likely investing in companies that do the same damage my wife is devoting her career to remedying. Could I invest and make money in companies that were doing less harm? Or even some good? Environment can’t be the only social issue affected by investing. Could I make even a small impact by limiting exposure to companies that profit in guns, tobacco, child labor, etc.?”

I’ve devoted an increasing amount of free time over recent years to the pursuit of educating myself in the nuances of socially conscious investing and marrying my values to my own personal investment choices. At Morton Capital, we’ve been deeply involved in our local communities and charities and offering investments in socially conscious funds for years. True to our mission and investment philosophy, I’m proud that we consistently seek knowledge and resources that allow our clients to pursue these investments at our firm.

When I introduce my clients to the concept of investing with their heads AND their hearts, I begin, as below, by exploring some of the broader definitions and themes. I also ensure that I address some common misconceptions associated with socially conscious investing. I most commonly see that people think that socially conscious investing means having to sacrifice returns, or that they are more expensive and harder to access. And while not all investments will be available or appropriate for every investor, I find it helpful to address multiple disciplines within the socially conscious investing realm to help provide more insight into the wide variety of strategies that exist. Below are three commonly implemented ones, listed from broader value-focused strategies to those purely focused on impact.

ESG (Environmental, Social, Governance):
This common strategy evaluates companies based on how well they are managing the various environmental, social, and corporate governance issues they face in their businesses. A top-down ESG investment strategy invests in companies that rate highly in environmental, social, and governance factors while still maintaining a focus on the returns and associated risks.

SRI (Socially Responsible Investing):
Socially responsible investing goes one step further than ESG by actively eliminating or selecting investments according to specific ethical guidelines. The underlying motive could be religion, personal values, or political beliefs. Unlike ESG analysis, which shapes valuations, SRI uses ESG factors to apply negative or positive screens to the broader investment universe.

Impact/Thematic Investing
In impact or thematic investing, positive outcomes are of the utmost importance—meaning the investments need to have a positive social or environmental impact in some way. The objective of impact investing is to help a business or organization accomplish specific goals that are beneficial to society or the environment. One example might be investing in a nonprofit dedicated to the research and development of clean energy, regardless of whether success is guaranteed.

As I mentioned, there are many more strategies associated with socially conscious investing than I’ve listed above, evidence of how seriously the investment world is paying attention to not only climate change but social impact as well. Investing with your head AND your heart can and will shape the future of investing as we know it. Knowing how to invest is only the beginning

 

DISCLOSURES:

This summary is for informational purposes only. It should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class. This document expresses the views of the author and such views are subject to change without notice. Morton Capital makes no representation that the strategies described are suitable or appropriate for any person.

All investments involve the risk of loss, including the loss of principal. Past performance is not indicative of future returns. A Fund’s concentration in a certain sector and lack of diversification across other sectors present risks specific to its strategy and should be carefully considered. You should consult with your financial advisor to thoroughly review all information and consider all ramifications before implementing any transactions and/or strategies concerning your finances.

MC Stories – Liquid vs. Illiquid Investments – What’s the Difference?

We all know that having the right types of investments in your portfolio is critical to achieving your goals. But did you know that you can’t create a successful mix of investments without first knowing what you need each asset to do for you? It’s like trying to pack for a vacation without knowing your destination. Get unlucky and you might be unpacking flip-flops when there’s a foot of snow outside. The same principle applies to your financial success—not knowing your desired destination (aka your financial goals) can hinder your investment selection and overall performance.

In addition to knowing your destination, an important ingredient when it comes to your investment mix is understanding the liquidity or illiquidity of a particular asset. Liquid investments are holdings that can readily be converted into cash with a certain level of price stability and include such assets as cash, money market funds, Treasury bills, and bonds. Illiquid investments are assets that are not easily sold or exchanged for cash, often referred to as “private placements”. If forced to sell before the end of any holding, or lock-up, period, these illiquid assets may suffer a substantial loss in value due to their limited marketability and/or greater price volatility.

So, assuming you know where you’re headed on your vacation (your financial goals) and you’re preparing to pack your bags for this trip (creating the appropriate mix of investments in your portfolio), my question for you is this: what do you carry on to the plane versus check down below?

When organizing your carry-on, you know the contents will be easily available and accessible to you throughout your journey. Usually this includes some snacks, a book or laptop, and, of course, your wallet (so you can buy more snacks if you run out). Even if you don’t do anything with these items during the flight, you’re able to relax knowing they’re within arm’s reach in case you do need them. That accessibility mimics that of your liquid investments. You want these funds to be quickly available to you to help manage any expenses that come up as you make your way towards reaching your financial goals. Liquid holdings serve a specific and important purpose in your portfolio and may need a place in your investment mix, just as your carry-on has a place on the plane (tucked under the seat in front of you).

Unlike your carry-on, the items you choose to put in your checked bag are not easily accessible to you during your journey. While we all get a little nervous watching our luggage disappear into the darkness of the conveyer belt, we also know that at our final destination the items in our bag will maximize our vacation experience. We didn’t have to limit ourselves to a three-ounce shampoo bottle or have to choose between two pairs of shoes. This checked bag will provide us with both the variety and volume that our carry-on can’t. This inaccessibility is typical of the illiquid investments in your portfolio. Locking up your money can also be nerve-wracking, but just like your checked bag provides benefits over your carry-on, illiquid assets can also be beneficial as part of your portfolio when appropriate: higher targeted returns to compensate you for that lack of accessibility, predictable cash flow compared to publicly traded assets, and lower relative volatility due to the lack of daily pricing.

As you can see, both liquid and illiquid investments can serve specific purposes in a portfolio. Some travelers may choose to only bring a carry-on. They understand the limitations of their decision but believe the convenience of access outweighs the benefits of delayed gratification. Other travelers may always choose to check their luggage, knowing they prefer to be greeted with a larger bag (with more to choose from) upon their arrival. But once you know what you need your assets to do for you, you’re better able to prepare so that you can both enjoy your journey towards achieving your financial goals and maximize your success once you do reach your final destination.

 

Disclosures:

This information is presented for educational purposes only and is not intended to constitute investment advice.  Morton Capital makes no representation that the strategies described are suitable or appropriate for any person. Investments in illiquid assets are available only to eligible clients and can only be made after review and completion of the applicable offering documents. Illiquid investments involve a high degree of risk, including the loss of capital. You should consult with your financial advisor to thoroughly review all information and consider all ramifications before implementing any transactions and/or strategies concerning your finances.

MC Stories – Financing Life Insurance . . . with Debt?

America is a society that has become extremely comfortable with financing. It’s rare nowadays for someone to pay cash for large purchases like their home, a car, or education costs. It’s also, however, more popular than ever for people to finance small purchases. Credit cards are used to buy groceries, gas, meals, clothes—pretty much everything.

With such widespread comfort around debt, it’s not a surprise that it’s used to finance life insurance premiums as well. This strategy has, in fact, been around for over 20 years (even longer in the property and casualty marketplace). Life insurance premium financing is where an insured borrows money from a bank to pay their life insurance premiums. The borrower is then responsible for posting collateral for the loan and paying the interest on the debt.

Today, financing represents around 25% of all policy premiums for in-force insurance policies. However, many people still haven’t actually heard of premium financing before and it has to do with the history of the strategy. In the early 2000s, a time known as the “Wild West” in life insurance sales, premium financing was used incorrectly and with limited regulations. Many people lost money and got hurt by taking on investments that they didn’t fully understand. Because of the stigma and reputation of its past, premium financing remains out of the mainstream conversation for many.

Fast forward to today, where the pendulum has swung far in the opposite direction and premium financing is now under strict regulation. The National Association of Insurance Commissioners passed Actuarial Guideline 49 in mid-2015 to protect consumers from misleading illustrations by limiting the growth rate and by limiting the policy design options that advisors are able to use in marketing to their clients. Also, all carriers now require the insured to have skin in the game by posting collateral and/or paying interest on the loans.

With stronger protections in place, the benefits that make financing life insurance special are much more attractive: the guarantees and the flexibility and optionality of the design, both from the onset as well as throughout the life of the policy. Because of these guarantees, financing life insurance can be a lower risk strategy to compound your wealth. That’s why the fastest-growing segment for premium financing is high earners in their 30s–50s. Rather than purchasing insurance for a death benefit, investors are looking to maximize their investment growth and increase their wealth to establish a future tax-free income stream in retirement. With interest rates near all-time lows, the benefits of using debt in a thoughtful way have never been greater.

But, as with any investment strategy, premium financing has additional risks not present when purchasing a policy without financing, such as having enough liquidity to post collateral, interest rate risk, and market risk. Financed life insurance should be considered for someone who has a need for a large-premium life insurance policy or is interested in compounding their wealth. Specifically, for business owners, financing should be considered as a smarter way to protect their company with a buy/sell agreement or key-person policy while keeping more cash available for other ventures within their business. If the business is a C-corp, there are even greater strategies to amplify the benefits. Given the nature of premium financing, it’s recommended that you consult your professional tax and legal advisors before purchasing a financed policy.

In my role as a financial advisor at Morton Capital, I collaborate with our internal financial planning team as well as outside insurance professionals to review and evaluate our clients’ life insurance policies. Although we don’t get paid for selling insurance, reviews are an integral part of ensuring our clients have the appropriate risk coverage and are taking advantage of investment opportunities when they align with their goals and risk tolerance.

 

Disclosures:

This information is presented for educational purposes only, and should not be treated as tax, legal or financial advice. This information should not be taken as a representation that the strategies described are suitable or appropriate for any person. All investments involve risk, including the loss of capital. You should consult with your insurance professional to thoroughly review all information and consider all ramifications before making any decisions regarding your insurance coverage.

 

 

MC Stories – 4 days, 450 miles in a 4-wheeler

How often do we get the chance to really get away from it all and unplug? With the stresses of modern-day life—raising two children, my wife, Jen, and I working full-time—I was looking forward to a “guys trip.” Now, mind you, this was not with my friends but rather an L.A.-based group called Wilderness Collective, which runs UTV and motorbike trips in the western United States. I had been thinking about doing one of their adventures for the past two years but the timing never seemed to work out. However, in early August, I decided that it was time to get out and make it happen.

I was fortunate to be able to spend four days over Labor Day weekend traveling from St. George, Utah, through the Northern Arizona desert to the North Rim of the Grand Canyon in my own UTV four-wheeler. I traveled in a caravan of 14 guests, accompanied by four guides, a cook and a photographer.

 

In reflecting upon my adventure, I was able to take away a few key points that can apply to my role as a wealth advisor.

1. Communication is key. Imagine being alone in the desert for seven hours without a way to communicate with your guide. This is what happened to me on that Saturday. How, you ask? For the prior two days, we were using a “flagging” system where, if the lead guide came to a fork in the road, he would pull over and have the next driver stay and direct traffic in the proper direction. Given the speed at which we were driving (oftentimes 60–70 mph), the distance between vehicles (sometimes hundreds of yards due to the dust or other factors) and the length of our entire caravan, it wasn’t uncommon for the total distance from beginning to end to be 5–10 miles long. Additionally, we had a large truck hauling our food, camping supplies and extra gasoline, among other things, that was oftentimes 20–30 minutes behind. The truck was always the “sweeper,” meaning anyone who acted as a flagger was to remain in position until the truck got to you and that was the signal to move out.

We left camp early on Saturday morning, and after a few miles of winding turns in the pine forest, we reached a fork in the road and the guide positioned me as the flagger. Over the course of the next 15–20 minutes, I performed my duty as four-wheelers passed me, pointing them in the direction ahead along the dirt road. Another 10–15 minutes passed and I began to wonder, Where is the truck? Eventually, it became clear to me that they had left me.

Later, I found out our lead guide had instructed another guide to act as a sweeper instead of the truck. The new sweeper waived as he went by, assuming this was enough for me to follow him. I was still thinking about what the lead guide had said on the first day, which was DO NOT LEAVE YOUR POSITION UNTIL THE SWEEPER RELIEVES YOU. When changes occur, it’s critical that all parties know what the change is.

As you know, we work in teams at Morton Capital to ensure the highest level of client service. To this end, each advisory team meets weekly to thoroughly address all client matters. These recurring weekly meetings are supplemented by morning huddles (brief meetings) throughout the week to address the most pertinent issues of the day so we all know when changes occur.

We are also passionate about proactive communication with your other trusted advisors, like your CPA, insurance advisor and estate attorney.

During the pandemic, we enhanced our communications with our clients even further, all with the purpose of staying connected so you knew we were on top of your finances. Our outreach included robust video content and webinars that covered everything from the economy to investor behavior. Additionally, we created articles and content for social media via platforms like LinkedIn, Facebook and Instagram.

2. Don’t make a bad situation worse. It was about 12:00 or 1:00 pm—the sun was directly overhead and the desert was cooking. I’d been alone for probably two hours and I was getting antsy. I thought to myself, Ok, I can catch up to them. I had a general sense of the direction they were going, and it was just me, so I could go faster than the caravan.I took off down the mountain covered in pine trees, screaming around corners and straightaways for about 10 miles. I hit a T-junction and saw the vast terrain of open desert in front of me. I could see for about 100 miles to my left, 100 miles to my right and 100 miles in front of me—truly like something out of a movie. My caravan was nowhere in sight, so I’d be speculating by picking a direction to try and find them.

Oftentimes, when things don’t go our way, we can feel like we have to “do something.” In this case, I had to evaluate the risks of staying put (playing defense) versus going on the offensive. I decided the smart thing to do was to go back to my original position where I had shade and water and wait it out. I knew the terrain better and it was my best chance of the guide knowing where I was. Also, given that we had experienced four flat tires up until that point and my rig was not outfitted with a spare tire or the necessary tools, it seemed too risky for me to wander off into the desert alone with limited water. In the case of my adventure, access to shade and water were my most basic needs and the most important drivers of my decision.

Markets and investments don’t always go as planned. Our natural inclination might be to sell when asset prices fall. While it might feel good in the moment to “do something,” more often than not, these knee-jerk reactions work against us in the long run.

Focusing on risk management ahead of time and properly evaluating both the upside and downside of a given action or investment is critical. Additionally, focusing on the basics when things get complicated can help. This is why we are so passionate about cash flow in our investments. At the end of the day, we can’t control the price a buyer will give us for an investment but if we focus on the basics of cash flow, that is a universal sign of health and stability in any environment.

3. Always have a backup plan or safety net. At the beginning of our trip, our guide had given us a small black pouch and in it was a device with an SOS button. It was only to be used in extreme emergencies. If you hit the SOS button, it would activate local first responders and they would send in the helicopter to find you. Knowing I had that in my tool chest should I need it gave me the comfort to sit tight.Ultimately, I waited it out and one of the guides returned around 5:00 pm. We raced through the desert for the next few hours as the sun set, trying to cover as much ground as possible before night fell. By around 10:00 pm, we made it to camp just in time for roasted herb chicken with a side of fresh dill potato salad. I sat around the campfire with the guys as they teased me for getting “lost.” It was all in good fun.

As we have added financial planning as a core element of our services. When developing our clients’ cash flow plan, we stress-test the plan for a variety of factors like down markets, long-term healthcare events and lower returns to ensure we have a backup plan in place so you are in the best position possible to adapt to most any circumstance.

Knowing ahead of time that your financial plan can withstand these difficult situations helps to calm the natural anxiety you experience when confronted with a situation beyond your direct control.

How often does someone get to spend the night 50 feet from the edge of the Grand Canyon? Or gaze up at the Milky Way galaxy with no light pollution and see the night sky with an unblemished view? Or watch the sun come up over the North Rim? Life is short. We are a culture of information overload, flooded with constant information on a daily basis about politics, our economy, the civil unrest our nation is currently experiencing, the pandemic, etc. Having four days away from emails, text messages and phone calls was really good for my soul and allowed me to be grateful for the career I have, the clients I serve and the talented people I am blessed to work with on a daily basis, all contributing to our mission of helping our clients get the most life out of their wealth. It also made me eager to get back to Jen and the kids and, yes, to take a shower 🙂

MC Stories – Out of the Mouth of Babes

When I became a mom, I always thought I would be teaching my kids things, not the other way around, especially when it comes to what I do for a living. But as they say—out of the mouth of babes. . . .

One morning recently, I was anxious to take the kids to my parents’ house to go swimming. We’ve been isolating inside like the rest of the world due to the current pandemic, but have been fortunate enough to be able to keep my family in our “bubble.”

My husband and I have three beautiful girls: Dilynn (4), Nora (2), and Harlowe (10 mos). Dilynn is my most tenacious. As we were putting on our shoes to leave, she asked if she could go pack her backpack. Knowing she would put up a fight if I said no, I told her to go pack it quickly.

After a minute or two, Dilynn hadn’t returned. I found her in her room just looking around. Somewhat annoyed, I told her to just grab Puppy (her favorite stuffed animal) and Cozy (her favorite blanket). She pushed back (did I mention her tenacity?) and said she always brings Puppy and Cozy and that she needed to pack other things. She then asked me, “Mom, where are we going? I need to know if I should pack my mittens or a bathing suit.”

That question, out of the mouth of my four-year-old daughter, really made clear just how important it is to know your destination before you pack. Similarly, as advisors, our clients’ life goals—their destination—are so important for us to know before we can create their portfolio allocation. We probably all remember our favorite stuffed animal or special blanket/comfort item, which is, as Dilynn pointed out, an essential item we always pack. Similarly, certain assets like stocks and bonds are essential parts of every portfolio. However, at Morton Capital, we believe that diversification beyond those two asset classes is crucial when trying to mitigate risk and customize our strategy to help clients achieve success. How we choose which additional investments to add to the portfolio is guided by the client’s goals/destination. We need to know if a client needs mittens (maybe that is something that provides more long-term appreciation) or if they need a bathing suit (maybe that is something with less liquidity risk that provides monthly cash flow).

Furthermore, when I first found Dilynn in her room, she wasn’t just stuffing things in her bag. She was looking around. She was taking inventory. To be able to pack for your destination, you have to know what you have first (and what you might be missing). As advisors, we feel this “taking inventory” step, what we call data gathering, is the most important part of the process when it comes to creating a dynamic financial plan that gives our clients control over their long-term financial decisions. Thus, we spend a significant amount of time on data gathering, asking for a breakdown of expenses (such as how much you spend on dining out vs. groceries), mortgage statements, bank statements, insurance policies, and tax returns. Many of our clients assume that providing us with broad income and expense numbers will give us sufficient information to produce an accurate plan, or one that is “close enough.” However, this could mean that you might end up packing a bathing suit when what you really need is a pair of mittens, or, worse, packing half a bathing suit and one mitten (i.e., close but not enough).

It is easy to get stuck in the rhythm of our day-to-day routine. I talk to clients all the time about what we do and why we do it. However, this particular morning with Dilynn really made our process and the reasons behind it more tangible for me. I can’t wait to see what she teaches me next.

MC Stories – An Advisor’s Annotated Book Stack

 

I like to read historical literary texts as well as their inventive modern reinterpretations.  Both sets pose questions that don’t go out of style:  Who are we as a society?  What do we value?  What should we teach our children?  How do we know what we know?  My book stack offers a few examples…

With Infinity in the Palm of Her Handauthor Gioconda Belli takes a line from a William Blake poem and reimagines the conversations of Eve and Adam and the Serpent in the Garden of Eden.  Eve, and Adam to a lesser degree, ask the questions that we moderns might also wish to pose.

 

            Eve:  “What is there beyond this garden; why are we here?”

            Serpent:  “Why do you want to know?  You have everything you need.”

            Eve:  “Why would I not want to know?  What does it matter if I know?”

 

            Eve:  “It seems that you want me to eat this fruit.”

            Serpent:  “No.  I merely envy the fact that you have the option of choosing.  If you eat the fruit, you and Adam will be free, like Elokim.”

            Eve:  “Which would you choose?  Knowledge or eternity?”

            Serpent:  “I am a serpent.  The Serpent.  I told you that I do not have the option to choose.”

 

Homer’s The Iliad and The Odyssey are among the first origin stories of Western Civilization.  In The OdysseyOdysseus (like Eve, above) gets a shot at Eternity — but only if he marries the goddess Calypso.  Instead, Odysseus chooses finite life on his own terms, reuniting with his wife Penelope.  My copy of The Iliad is a signed first edition of the Robert Fitzgerald translation, a college gift that set me on a lifetime course of inquiry. Together the two books pose grand (and small) questions about how we should live.  The texts’ richness in language and allegory has been the source of new literature for almost three thousand years.  Each generation reinterprets the original.  Four hundred years or so after Homer, Aeschylus wrote The Oresteia, performed in Athenian amphitheaters.  A hundred years ago, an Egyptian-Greek poet, C.P. Cavafy, penned a short piece called Ithaca.

More recently, a classics professor at Bard College, Daniel Mendelsohn, wrote An Odyssey.  His aging father audited Mendelsohn’s class on The Odyssey, and this book becomes a meditation on what these historic texts mean to college students with brief life experience, juxtaposed with the meaning for someone who has lived a very long life.  The elder Mendelsohn audited the class in anticipation of joining his son on a Mediterranean cruise that would track the voyage of Odysseus.  An important part of Homer’s Odyssey is a son taking a journey to search for a father he doesn’t know; in Mendelsohn’s Odysseyit, too, is the search by a son for a father, this time a psychological and emotional expedition.

When my older daughter was a sophomore in college, she invited me to audit a class with her; the course combined architecture with gender studies.  Following a conversation with the professor, and germane to the syllabus, I wound up giving a lecture on “advice texts through history”.  In addition to the first four chapters of Homer’s Odyssey, other assigned reading included Discourse to Lady Lavinia His Daughter.  Here, a nobleman during the Italian Renaissance, Annibal Guasco, prepared his 11-year-old daughter to be a Lady-in-Waiting in the Court of Savoy, and as a gift, wrote the Discourse for her.  At such a young age, she required a crash course on decorum.  These are two examples offered by Guasco to Lavinia:

  • On the subject of talking badly about others behind their backs,“…Guard against this, for not only would it be unworthy of your noble rank, but the very earth would repeat it [even] if men remained silent.”
  • On the general topic of being thoughtful in one’s speech,“…Learn well how to control your tongue, considering that Nature enclosed it mysteriously within the lips and the teeth, as if behind two doors, to [hold back certain thoughts] with our teeth, even if they had got as far as the tip of our tongue, and then restrain them with our lips, if they had escaped the confines of our teeth.”

Guasco gave Lavinia advice in many areas of daily life, and among them, this:  “…it is very true that no greater happiness is attainable in this world than through intellectual achievement.”  In the year 1585, this was quite a bright light from a father to a daughter.

The Swerve – How the World Became Modern is a story that begins in the early Italian Renaissance, in 1417, with the discovery of an ancient text written by the Roman poet Lucretius, a follower of the Greek philosopher Epicurus.  (First, though, to set the record straight:  to be an “Epicure” is not to be a pleasure seeker in a hedonistic way; Epicurus placed greater emphasis on the avoidance of pain rather than the pursuit of pleasure, with more focus on intellectual pleasure, as it is the longer lasting one.)  In 1417, scholars knew of Lucretius, but his work had been lost to history for over 1,000 years – until an Italian manuscript hunter (yes, a real job) found a copy of “De Rerum Natura” (“On The Nature of Things”) tucked away in a German monastery.  The ideas contained within “On the Nature of Things” were shocking.  Though written before the birth of Christ, the text was heretical to the Catholic Church.  Contained in the most beautiful Latin verse were the ideas that all physical matter is made up of an infinite number of very small particles called “atoms”; there are different types of atoms, though the types are limited in number.  These atoms move in eternal motion, randomly colliding and swerving in new directions.  In this world of Lucretius, there are particles and voids – and nothing else.  Once brought back to Florence, the manuscript was treated as a secret document, and very few people were allowed to see it.  Scholars and artists learned about the ideas within “On the Nature of Things”, but to write about it would risk a Church accusation of heresy.  Painters, though, caught a break; they could paint the ideas of Lucretius onto the canvas, but they had, to use a modern term, “plausible deniability” when confronted by the Church. (“No, Monsignor, that creature is not from an early species that evolved into humans.  It is a chthonic beast from Greek mythology.”)

The Order of Time by the Italian theoretical physicist Carlo Rovelli shakes up what we know about the nature of time.  Rovelli is a lyrical writer, so the book is both a joy to read and a challenge, as our perceptions of time are challenged by him.  He tears down our assumptions about time, revealing a universe, where at the most fundamental level, time disappears.  Flipping through the pages just now, I see that I am going to have to re-read it.

Last, but not least, is the classic and definitive book on investment bubbles.  Written in 1841, Extraordinary Popular Delusions and the Madness of Crowds covers Tulip-mania, the South Sea Bubble, and John Law’s Mississippi Scheme.  There are, unquestionably, lessons to be learned from this book about today’s financial world — particularly regarding the Fed’s current money-printing regime, as well as the understanding that people will, and do, pay crazy amounts of money for items of fleeting worth.  Popular Delusions shows how the bubbles build.  From a distance of two centuries and more, foolishness seems obvious.  When we are living in it, though, it takes focus to keep questioning commonly-held beliefs, asking ourselves over and over, “How do we know what we know, and from there, which actions should we take?”

Next time:  “What’s the deal with all those record albums in the picture?!”

Bruce Tyson

 

MC Stories – Poker Play – Optimizing your investment approach

I am fascinated by the markets and all things related to investing. I have always enjoyed solving puzzles and various brainteasers. I enjoy deep-thinking games and activities that involve a constant change of information. One of my favorite games to play is poker. I love the game for the challenge it presents—playing the cards, playing the people, playing the odds—all while not letting emotions get the best of you.

With each round of betting, new information is learned and a new decision tree is spawned. Each hand delivers a range of potential outcomes and, depending on how you play the hand, you can either end up adding chips to your stack or biding your time for a better opportunity. Poker is a game of skill; however, even the best, most disciplined players will not win every time because there is a level of uncertainty with each hand played. Despite that uncertainty in the short term, over the long term the right strategy combined with a disciplined approach often becomes a winning strategy.

In this way, poker is very similar to investing. Having the right investment strategy and staying disciplined often leads to long-term success. In poker, you combine various cards of different suits and numbers to create the best hand. With investing, your “hand” is a diversified portfolio and it contains a combination of various asset classes (stocks, bonds, real estate, etc.). When investing (just like in poker), some combinations are better than others, based on the specific goal. Depending on what type of poker you are playing, sometimes the best hand wins and other times, technically speaking, the worst hand wins (Razz and 2-7 Triple Draw, for instance). Similarly, when it comes to investing, if you do not know the objective or the goal, then it is often difficult to know which “hand” of assets will give you the best chance to achieve the outcome you are seeking.

To have long-term success in poker or investing you must have a disciplined approach. Oftentimes people believe poker to be a game of excitement and thrills; however, those who play poker professionally are affectionately referred to as “grinders” for spending long hours playing through the monotony of poker, hand after hand, in order to make a living. When people think of investing, they conjure images of day traders or getting rich overnight, but, when done correctly, investing is boring. As the renowned investor George Soros once quipped, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” Whether playing poker or investing, making educated decisions based on the information available as well as the probabilities related to historical outcomes is necessary to consistently make decisions with confidence.

In the short term, it is difficult, if not impossible, to consistently predict the outcome. For instance, during a single day, the markets will either be positive or negative, and in poker you can do everything right, with the odds in your favor, and still end up losing a hand. If this continually happens, without a plan or a strategy, it can be frustrating and can sometimes lead to poor decisions driven by emotions. In poker, a player making emotional decisions no longer based on strategy is considered to be playing “on tilt,” whereas an investor making emotional decisions is often acting out of fear—fear of losing in a market downturn or fear of missing out (FOMO) during a market rally. Regardless of the activity, poker or investing, emotional decisions typically lead to poor decisions with unpredictable outcomes.

The goal then is to be aware of these emotions so when they appear you can objectively evaluate your decisions to determine whether the correct action is being taken. How do you do this? In poker, you can work with a coach to evaluate your play and review how you played during specific situations to ensure you are always playing with the optimal strategy. In investing, you can work with an advisor to create a financial plan based on your specific goals to determine your appropriate long-term strategy. Either way, having an independent third party can be a valuable resource to keep you on track.

Uncertainty can be challenging, but it can also create opportunities. Remember this the next time you get together for your monthly poker game or are analyzing your investments. In order to capitalize on an opportunity, you must first identify the goal. Then, with the goal in mind, you can create and implement the correct strategy. That will allow you to stay disciplined and consistently take the appropriate actions. And then, when emotions come into play (and they always will), to improve your chances for long-term success, have a system or person in place to help with decisions to counteract those emotions. Do this consistently and over time you will find success at the tables and in your portfolio.

 

MC Stories – The Technology Age — The Good, the Bad, and a Little Gen Z

Do you remember the time before cell phones, computers, or even televisions?

The generation who might answer “no” to this question, Generation Z, categorized as those born between the years of 1997 and 2015, is also known as the “Smartphone Generation.” According to a 2018 Pew Research Center survey, 95% of 13- to 17-year-olds have access to a smartphone, and a similar share (97%) use at least one of seven major online platforms.1 Teens surveyed have different opinions on whether social media has had a positive or negative effect on their generation. On a macroscale we are learning quickly to deal with the good and bad that is coming from this new Technology Age.

The Good

Staying connected to family and friends is easier than ever. One major cause for the positive impact is that the technologies traditionally used for business purposes, like videoconferencing and screen sharing, are now being brought into the home for personal use. For example, family meetings over Zoom are the new Sunday dinner meetup and grandparents or parents of Generation Z now celebrate birthday parties, baby showers, and graduations virtually. While in-person is preferred, most are happy they can enjoy each other and still maintain safety guidelines during the current pandemic.

Generation Z can also weigh in on the political conversations happening in this crucial election year on platforms such as Twitter and TikTok, even if they are not old enough to vote. Empowering youth to take an active role in their future is the result of independence and resources not afforded to previous generations. Activism is not unique to Gen Z, but this younger generation is sharing opinions of each other at a rapid pace that is affecting their self-worth.

The Bad

The more time teens spend looking at screens, the more likely they are to report symptoms of depression.2 The current circumstances of 2020 may lead you to believe that there is nothing occurring to feel left out of—but not so fast: FOMO, or fear of missing out, still runs rampant due to platforms like Facebook and Instagram, which show us a skewed view of the world and other people’s lives. Young adults who are looking for ways to monetize themselves and make cash fast are using technology to invest more easily which could have a good return or very bad returns depending on the market environment.

New online trading platforms such as Robinhood reported an increase in new accounts, spurred mostly by new investors who saw the market downturn in March of 2020 as an opportunity to start investing. Traditionally, financial professionals who trade stocks are required to pass an exam to obtain their securities license and are regularly monitored according to industry regulations. Millennials and Generation Z, while not as experienced in the investing space, still felt confident buying familiar big name tech stocks.3 If investors employ a buy-and-hold strategy, they may come out successful; but if individuals are allocating mortgage payments or student loan debt to a risky portfolio, they are in for a roller-coaster ride—emotionally and financially.

Generation Z

The Smartphone Generation may be young but they are mighty. They are coming of age during a volatile economy and an unprecedented technology age. The percentage of teens that reported they are online “almost constantly” virtually doubled in 2018 from a couple of years prior. This data makes them prime targets for online advertising and social media campaigns. With the access and speed currently available to this generation, the need to be a prudent investor is even more important. For the parents and other adults affected by this plugged-in generation (i.e., All of Us), it would be advantageous to learn the habits of this new generation and listen to their viewpoints, which are just as bold as past generations but reach much further. Making a wave is much easier with a touch of your smartphone and we are all now finding ourselves in the splash zone.

 

 

1 https://www.pewresearch.org/internet/2018/05/31/teens-social-media-technology-2018/

2 https://www.pewsocialtrends.org/essay/on-the-cusp-of-adulthood-and-facing-an-uncertain-future-what-we-know-about-gen-z-so-far/

3 https://www.cnbc.com/2020/05/12/young-investors-pile-into-stocks-seeing-generational-buying-moment-instead-of-risk.html