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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.

 

Why Is Gold Going Up?

Gold is making headlines in 2020, as its performance leads most other asset classes year-to-date and investors are starting to take notice. In particular, Warren Buffet’s recent purchase of a gold mining stock has caught the attention of the media. Those who only think of gold as a “safe-haven” investment have been surprised by its strong performance even as the stock market rallied from its March low. But fundamentally, we believe that gold is not an investment at all. Instead, it’s just another form of money like the U.S. dollar or the Euro. So, if it’s not an investment, what’s driving this big rally in gold? While the answer can be complex, we’d argue that there are two main areas on which to focus when it comes to understanding the price of gold: the money supply and investor sentiment.

Read the full article by clicking the image below.

 

Mid-Quarter Newsletter – August 2020

Our Investment Philosophy

The last several months have been extraordinary to say the least and there are still so many unknowns in terms of the financial markets, our economy, and what our world will look like post-pandemic. As a firm, we have undoubtedly adapted how we communicate with our team, other business professionals, and our clients. Throughout all of these changes, the element of our business that has stayed consistent is our investment philosophy. At Morton Capital, we’ve always taken a different approach to investing—one that we believe is the best way to provide the returns our clients need for their lifestyle while trying to protect them from the swings of the market. Our beliefs have remained the same since our founder, Lon Morton, started our company almost 40 years ago and we take great pride in carrying on his legacy.

As we continue to communicate virtually, our Investment Team recently created a video that speaks to how we design portfolios to help our clients get the most life out of their wealth. Watch the video to meet the team and learn a little more about us.

Watch our Investment Approach Video here.

 

Financial Advisor Success Podcast & RIA White Paper
Featuring our COO, Stacey McKinnon

Our Chief Operating Officer, Stacey McKinnon, was featured on a recent episode of Michael Kitces’s Financial Advisor Success Podcast. Michael is a well-known speaker, writer, and editor in the financial services industry. In the episode “Scaling an Advisory Firm by Finding New Talent Outside the Financial Services Industry,” Stacey and Michael talked in-depth about how Morton has grown and evolved as a firm in recent years. Stacey touched on our culture of trust initiative in 2017, our non-traditional approach to hiring talent from outside the industry, and the way we’ve restructured our compensation model.

Stacey also co-authored an RIA white paper with the CEO of PFI Advisors, Matt Sonnen, called “The New RIA Workplace.” The industry report explores the changes firms have had to make to their businesses since stay-at-home orders began. It also shares the pros and cons of both office and remote work environments, how leaders and managers are maintaining company culture during these times, and what the office of the future could look like.

Click here to listen to Stacey’s podcast with Michael Kitces and read the RIA White paper here.

 

Why Is Gold Going Up?

Gold is making headlines in 2020, as its performance leads most other asset classes year-to-date and investors are starting to take notice. In particular, Warren Buffet’s recent purchase of a gold mining stock has caught the attention of the media. Those who only think of gold as a “safe-haven” investment have been surprised by its strong performance even as the stock market rallied from its March low. But fundamentally, we believe that gold is not an investment at all. Instead, it’s just another form of money like the U.S. dollar or the Euro. So, if it’s not an investment, what’s driving this big rally in gold? While the answer can be complex, we’d argue that there are two main areas on which to focus when it comes to understanding the price of gold: the money supply and investor sentiment. Read the Full Article here.

 

A Conversation About Change with Chris Galeski
Featuring Retired PGA Tour Player Peter Tomasulo 

Chris Galeski, Wealth Advisor and Partner at Morton Capital, speaks with Peter Tomasulo, retired PGA Tour player and Director of Investor Relations at Lyon Living. In this 30-minute video interview, they reflect on their former sporting careers, life lessons, family, and the triggers and milestones that opened the door for transition and career change.

 

Watch the video!

Quarterly Commentary – Q2 2020

Welcome to Wonderland

Adults and children alike are familiar with Lewis Carroll’s classic story, Alice’s Adventures in Wonderland, where the intrepid Alice ventures into a fantasy world that mixes the ridiculous with periodic insights into the human condition.  The story is one of the most well-known examples of the “literary nonsense” genre, which combines elements that make sense with others that do not.  In thinking about how to explain current events, certain anecdotes from the story offer some striking similarities.  If we lived in Wonderland, we might accept a market that is optimistically rising in the middle of a pandemic. But given that we do not live in Wonderland, we are staying consistent with our investment philosophy of risk management, true diversification, and cash flow, which has shown its resiliency in the first half of 2020 despite the wild roller coaster ride in the broader markets.

As the magnitude of the pandemic started becoming clear in early March, the financial markets fell into a bear market.  From its high in mid-February, the S&P 500 Index lost almost 35% in a span of five weeks, as volatility exceeded the turbulence of the Great Financial Crisis in 2008 and 2009.  Both the Federal Reserve (Fed) and the federal government reacted to the market downturn with aggressive policy responses that exceeded any other historical response (more on this later).  The extraordinary stimulus fueled a robust recovery in equity prices, though limited for the most part to larger companies in the United States.  From its low in late March, the S&P 500 Index rallied close to 40% to close down only 3.1% for the year by the end of the second quarter.  While other stock indices had a strong second quarter, most are still meaningfully negative on the year.

The table below summarizes the second-quarter performance for selected indices.

 

“Curiouser and Curiouser” 

After tumbling down the rabbit hole, Alice invents the word “curiouser” to try and describe the simultaneously fascinating and nonsensical world in which she finds herself. Our reality today bears similar attributes to this world of make-believe. All the economic news pundits out there keep talking about the different letter shapes that the economic recovery could take. Will the precipitous drop in economic activity be followed by an equally strong rebound, creating the ideal V-shaped recovery? Will economic growth flatline for some time, creating more of an “L” or, ultimately, a “U”? While the debate is still rampant as it relates to the fundamentals of the global economy, stock prices are looking more and more like a “V” as illustrated in the below chart of the S&P 500’s recent performance.

 

Fastest Stock Market Fall and Recovery in History

There is a real danger of confusing this stock market rebound with an economic recovery. While many stock prices have had a V-shaped recovery, valuations and underlying fundamentals tell a completely different story. Corporate earnings have been almost cut in half from pre-crisis levels. While unemployment has slowed its rise, it remains meaningfully elevated. Though numerous cities in the United States started to reopen a few weeks ago, spiking virus cases are sending many back into lockdown. These challenging fundamentals have made us wonder whether the “V” in stocks will turn into a “W” and retest previous lows.

There is a general perception out there that all this economic damage is temporary and will be reversed as soon as there is a vaccine or we get the virus under control. Unfortunately, though, we are already seeing more permanent damage to the economy in the form of spiking bankruptcies—and we are only a few months into this crisis. Many of these bankruptcies are big-name companies that most of you likely know: Hertz, J.Crew, Neiman Marcus, JCPenny, Cirque du Soleil, Pier 1 Imports, and 24 Hour Fitness. Most of the bankruptcies so far have been consumer-related companies, which does not bode well since the consumer accounts for two-thirds of all economic growth! With so much bad news on the actual economy, it is definitely “curiouser and curiouser” that the stock market continues to march higher, day after day, almost in defiance of reality.

 

The Stimulus Rabbit Hole

In the absence of improving fundamentals, the U.S. government’s aggressive response to the COVID-19 crisis seems to be the driving force behind the stock market’s recovery.  The below graph puts the current stimulus and policy response in context with spending that took place in previous crises.

These numbers are in today’s dollars, or, in other words, they are adjusted for inflation to make them apples to apples. And these numbers do not factor in the additional stimulus that is likely coming in the ensuing months. The CARES Act infused $2 trillion into the American economy and included assistance to businesses, states and localities; 159 million stimulus checks to individuals and families; and extra payments of $600 a week in unemployment benefits to tens of millions of Americans. The Fed entered the fray as well by employing their main tools designed to stimulate economic growth: lowering interest rates and buying bonds (with the goal of keeping long-term interest rates low). The Fed very quickly lowered short-term rates to zero and then launched a bond-buying campaign that is expanding its balance sheet to a parabolic degree. Already, the Fed has added $3 trillion to its balance sheet, pushing it up to an all-time high of $7 trillion, and it has all but promised to continue throwing money at the problem and do whatever it takes to get the economy back on track. The challenge is that with each economic bump in the road, it seems to be taking more and more extreme policy responses to keep the economy on track. As the Red Queen tells Alice, “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

By injecting massive stimulus, governments are once again contributing to speculative investor behavior that has further decoupled asset valuations from underlying fundamentals. This manifests itself in various forms, one example being the massive run-up in the stock prices of a handful of technology companies. The five largest stocks in the S&P 500 are Facebook, Amazon, Apple, Microsoft, and Google. Toward the end of May, those five stocks were up 15% for the year while the other 495 stocks in the index were down 8%. While some of these companies have held up well or even prospered in the current crisis, their stocks are still escalating at a pace well beyond their current earnings growth trajectories. Not surprisingly, the increase in the stock market (coupled with Americans getting stimulus checks and no longer having professional sports to bet on) has corresponded with a spike in new accounts being opened at brokerage firms like Charles Schwab and E*TRADE. These new traders not only speculate on the darling tech companies, but have also jumped into distressed names. There has been very high trading volume in companies like Hertz, which declared bankruptcy in late May and subsequently saw a jump in its stock price from $1 up to $5, before it fell back down again, as these inexperienced day traders jumped in and out of a stock that is very likely worth $0 at the end of the day. Perhaps Alice would have been able to empathize with these traders when she declared, “Why, sometimes I’ve believed as many as six impossible things before breakfast.”

 

We Refuse to Play Croquet with a Flamingo

Investing in broader markets today, we can relate to how Alice must have felt playing “croquet” with the Queen, where the balls were hedgehogs and the mallets live flamingos. The rules of the game keep changing, but rather than give into the nonsensical, we are more determined than ever to find investments where the fundamentals still make sense.

An example of one such investment is the allocation that we made during the second quarter to a mutual fund that invests primarily in bonds backed by real estate. At the height of the volatility this year, these bonds traded down dramatically as certain holders were forced to sell to generate liquidity. The fundamentals, however, did not justify such dramatic price declines. When we dug deeper, we found that many of the bonds were backed by seasoned home mortgages that were outstanding prior to the 2008 crisis. These loans survived that crisis and now have 12 to 15 years of payment history, lower balances since they have been amortizing over time, and typically higher home values since real estate prices have appreciated. Pools of these mortgages had average loan-to-value ratios of approximately 55-60%, meaning that home prices would have to take major hits before the loans would be at risk of impairment. Because of the dramatic price declines these bonds saw earlier this year, they now yield income in the mid-single digits and have the potential for double-digit total returns as prices recover in the future.

Another example of sticking to the fundamentals is our allocation to gold. We have had an allocation to gold for some time but increased our target to this asset in late 2019. While we, of course, had no insight into the upcoming pandemic, we were increasingly concerned with the lack of discipline being exhibited by governments. This lack of discipline has only been magnified in the current environment, increasing our conviction in gold as a true store of value in an environment where more and more money is being printed every day. We think that this is an environment where the fundamentals support a strong outlook for gold.

We continue to look for other opportunities with solid fundamentals, but many of the investments that are currently on our radar are less liquid than those found in public markets. Even prior to the recent crisis, we were finding that willing investors could trade market risk for some degree of liquidity risk (i.e., an inability to immediately sell for cash). We believe these less liquid assets have the potential for more consistent long-term returns based on the fundamentals and offer investors an alternative to exposing themselves to the irrationality of investing in Wonderland. However, the amount of liquidity risk that is appropriate is going to vary for each individual’s portfolio. As we pursue a number of these new strategies in the coming months, we would strongly encourage you to revisit your financial plan. Your plan is essential in determining how much liquidity risk is appropriate for your personal situation. It is also a great time to revisit your risk tolerance and ask yourself how much volatility you are comfortable within your portfolio. We just went through a roller coaster ride in the stock market; if you found yourself nervous and losing sleep over it, it may make a lot of sense to take some risk off the table now that asset prices have had a strong recovery.

Please do not hesitate to contact your Morton Capital wealth advisory team if you have any questions or would like to review your portfolio or financial plan in more detail. As always, we appreciate your continued confidence and trust.

Morton Capital Investment Team

 

 

Disclosures

This commentary is mailed quarterly to our clients and friends and is for information purposes only.  This document should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class, and should not be considered investment advice. This memorandum expresses the views of the author and are subject to change without notice. All information contained herein is current only as of the earlier of the date hereof and the date on which it is delivered by Morton Capital (MC) to the intended recipient, or such other date indicated with respect to specific information. Certain information contained herein is based on or derived from information provided by independent third-party sources. The author believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information. Any performance information contained herein is for illustrative purposes only.

Certain private investment opportunities discussed herein may only be available to eligible clients and can only be made after careful review and completion of applicable offering documents. Private investments are speculative and involve a high degree of risk.

The indices referenced in this document are provided to allow for comparison to well-known and widely recognized asset classes and asset class categories. Q3 returns shown are from 06-28-2019 through 09-30-2019 and the year-to-date returns are from 12-31-2018 through 09-30-2019.  Index returns shown do not reflect the deduction of any fees or expenses. The volatility of the benchmarks may be materially different from the performance of MC.  In addition, MC’s recommendations may differ significantly from the securities that comprise the benchmarks.  Indices are unmanaged, and an investment cannot be made directly in an index.

Past performance is not indicative of future results.  All investments involve risk including the loss of principal. Details on MC’s advisory services, fees and investment strategies, including a summary of risks surrounding the strategies, can be found in our Form ADV Part 2A. A copy may be obtained at www.adviserinfo.sec.gov.

MC Stories – Wearing Multiple Hats

If I were to ask you how many hats do you wear, what would your answer be? For me, I wear the hats of wife, mom, Associate Advisor, and student. Unfortunately, time does not expand the more hats you wear. So how can we juggle the different roles that we are in? It is important to have separate environments for each of the roles that you have. One of the hardest things to do is to keep work at work. Not all our jobs allow us to take our work hat off completely. However, it is important that when we work from home, we have a dedicated space for doing so. Even though it is easy to take a laptop from room to room, it blurs the lines between roles.

I have found the following tips useful in helping me be fully present in each role:

  • Have separate spaces: It is important to have separate environments for each of the roles that you have. One of the hardest things to do is to keep work at work. Not all our jobs allow us to take our work hat off completely. However, it is important that when we work from home, we have a dedicated space for doing so. Even though it is easy to take a laptop from room to room, it blurs the lines between roles.
  • Dedicate your time specifically: This advice has been the most helpful for me. If you look through the pictures of this post, I shared my schedule. On weekdays, I dedicate my mornings to my family, 9am-5pm to work, 5pm-7pm to my kids before they go to bed, then I have time for school. This way, I can focus on each role individually rather than being overwhelmed with everything that needs to get accomplished in each role all at once. 
  • Communicate your schedule and ask others to hold you accountable: Unless I have a meeting or school assignment that takes me out of my normal scheduled time, my family knows that when it’s 5 o’clock, they can come into my office and help me transition to family time. I think this is important because it makes them feel just as important as the work I was doing during the day. I also set these guidelines with my peers at work so they are confident that I will be responsive and reliable during my work hours. 
  • Schedule things to look forward to in each role: Sometimes our schedules can become monotonous. It is important to schedule things to look forward to in each role. My oldest daughter and I have hot chocolate every Saturday morning. When I am bogged down by a busy work week or demanding school assignment, the thought of Saturday morning helps me push through it.

Many of us may not realize how many hats we truly wear. However, the current environment is challenging the “norm” and highlighting the different roles we all play.  What hats do you wear? Which of these tips do you think would be useful for you? The next time you start feeling overwhelmed by how much is on your plate, take a moment, breathe, and make sure you aren’t wearing too many hats at once.

 

 

 

 

 

 

 

 

MC Stories – Timing is not critical to long term success… however, time is!

 

Time or timing…which is more critical to investment success? We would say time in the market is more important. Investors would all like to buy near the bottom of the market declines and sell near the high, but no one can accurately predict when those opportunities will present themselves. It is only with the benefit of hindsight that these highs and lows become evident, so staying invested in the market is critical to capture the benefits. We often hear investors say that their market anxiety keeps them on the sidelines to save them pain, but it may also ensure they will miss the gain. Historically, downturns have been followed by eventual upswings, but knowing when that is going to occur is impossible to predict. This is why it is imperative to understand how much stock market exposure is appropriate for you, diversify your portfolio so that your lifestyle isn’t impacted by market swings, and avoid trying to outsmart the market.

Here is an example of what could have happened if an investor tried to outsmart the market vs. giving their investments time to perform. If you had invested $1000 in the S&P 500 (excluding dividends) on January 1, 2009 and left it there 10 years, until 12/31/18 it would have grown to $2775 or more than 10% a year. Had you tried to time the market and missed the 20 best days during that ten-year period, your investment would be worth $1228 or a little over 2%. Had you missed the 40 best days your $1000 would only be worth $712. The conclusion: time in the market is much more important to your investment success than timing the market.

(Sources: Thomson Reuters and S&P 500 index)

MC Stories – A 22-Year Love Affair with Alternatives

I met Lon Morton, the eponymous founder of Morton Capital Management, in 1984 when our family business was looking for a pension administration company. My father and I then started investing with Morton Capital in 1987, just three weeks before something called Black Monday, when the markets dropped about 50%. I remember calling Lon and asking, “What do we do now?” He said, “We do nothing.  Unfortunately, these things can happen, no one is able to predict it, but we are going to stay the course as markets tend to work themselves out.” With hindsight being 20-20, it was good advice as the markets did work themselves out and we had solid returns for the next few years.

I sold my company in 1996 and left in 1998, telling Lon that I was intended to retire at the ripe old age of 40. He firmly told me that I was NOT going to retire and that I was going to work with him at Morton Capital. We had worked together investing for many years, and he wanted to tap my experience in managing a company. Little did I know how wonderful a relationship and lifetime adventure it would turn out to be.

As luck would have it, I started investing my final company sale payout in the second half of 1998 and was met by a significant downturn in stocks. Disappointed, I came home to my wife and said, “I will never let the stock market be the sole dictator of our financial future.”  Thus, my love affair with alternative investments began.

With some effort, we survived the three years of the Y2K market crash and lived through the great financial crisis of 2008. Now we are faced with probably the biggest health and financial crisis in our lifetime: pandemic. With most of the world shut down, it will take all our combined resolve to overcome and beat the virus and get back to our normal lives. Having lived through a number of these disruptions in the markets, I firmly believe that our resolve and perseverance on the health side, and our asset allocation decisions on the financial side, will win the day!

Much of this is made possible by the incredibly hard work and dedication of the entire Morton Capital team. Being the senior partner, it is gratifying to see all our younger teammates working so hard and sensing the responsibility of service to our clients and making sure that they are okay. I have been fortunate to work with many good teams in the past, but there is no doubt that the current team at Morton Capital is outstanding. It makes me proud to be part of that diligence and compassion. I am even prouder of Morton Capital’s recent Give Back initiative: a community outreach to offer free consultations, advice, and guidance to help our community in this time of need. If you know of a friend or loved one in need of some direction, please see our Facebook or LinkedIn page for more information or just click here: Community Give Back Video

Before 2020, and after 22 years at Morton Capital, I figured I had mostly seen it all in the financial markets.  Leave it to a pandemic to prove me wrong!  But, the one thing that remains constant for me is my love affair with alternative investments and how they help round out my investments and exposure to a world where there are never any guarantees what will be coming next.

MC Stories – The Value of Diversifying, as Learned on a Farm

You may have heard about diversifying later in life when you started to manage your investments. I learned the value of diversifying much earlier, on the farm.

I grew up on a family-run farm in Iowa where we worked hard and played hard, together as a team.

On the farm, I learned that there is a natural cycle to things, and you can’t fight Mother Nature. If it’s winter and there’s a snowstorm raging around outside — that is a very good time to stay sheltered inside where you can be snug and warm and maybe enjoy popcorn and games with the family. It’s a very bad time to try to plant crops or expect anything to grow. But during those stormy winter days when our crops could not produce, my family figured out another means to survive. We took care of our milk-producing livestock and our hens who laid eggs – both of which gave us a nice source of income through the winter months. Then, no matter how long and cold the winter might seem, and no matter how dead those barren trees looked outside we knew we would be provided for until the harvest came. And as long as those trees had good roots, there would be a new cycle of growth.

When you apply these lessons to investing, you realize that it’s important to have diversified assets with some investments providing steady income and others providing longer-term, larger growth. And, all assets have a natural cycle. So, like Mother Nature, you can’t fight the cycles but you can be grateful for the growth cycle and patient during the “winter” as you wait for that next cycle of renewal.