I have never been asked to name my favorite highway sign but, if I were, it would be the one Courtney and I saw for the first time a few weeks ago, ‘Changed Conditions Ahead’. Whoever came up with that should ask for a raise. How brilliant the warning to be on alert because the path ahead may not be as you expect, how appropriate the message for investors today.
In the Spring of each year, Courtney and I plan a week or two in Palm Desert, California. Our firm’s great technology allows us to work in the morning and, in the afternoon, enjoy the sunshine and a few rounds of golf. There is just something special about seeing rain in the forecast at home while we enjoy clear skies and 85 degrees.
A recent article in The Wall Street Journal’s, ‘Heard on the Street’* column discussed something that has been on my mind lately. The article, which appeared March 5th, 2024 indicated that three quarters of the large 401K plans administered by Vanguard automatically enroll employees into plans which default to investing in a ‘balanced’ strategy. According to the article, 98% of these participants in this group ultimately invest in target-date funds.
If you have ever planned a vacation, birthday party or wedding, or awaited the arrival of a child or grandchild, you know that excitement builds as the day nears. Courtney and I work remotely from Palm Desert a few weeks in the Spring each year and, even though it is still weeks away, I am already excited about it.
I recently had the great fortune to stumble across a small book I had often heard about but never read. The book, “As a Man Thinketh” was written in 1903 by James Allen. It’s a small volume that could likely be finished in one sitting. Frankly, however, I wouldn’t recommend that. To do so would be to cheat yourself out of the time to fully reflect on the wisdom contained in its pages.
In February of 2022 I wrote a blog entitled Prepare to Tack. Readers who sail were quick to correct me that the term is, in fact, ‘Prepare to Come Around’. On that I stand corrected. Nonetheless, the blog discussed my belief that we were entering a period of higher interest rates; headwinds to what had been a robust period of growth in the financial markets. These headwinds turned out to be a gale that tested both our portfolios and our patience.
For the last two years of high school, I worked on a land-survey crew for a civil engineering firm. Pre-GPS, our equipment consisted of a compass, a theodolite for measuring angles, a rod with a prism atop, and a distance measuring device that measured the time it took for light to hit the prism and return. Oh yes, and machetes to handle the briars and snakes, long sleeve shirts and bug spray—lots of bug spray.
Here is a fact that may surprise the people that have invested with me over the past decade. I also invest in bonds. The problem was, until recently, I simply could not find a reason to accept the interest rate risk of owning a fixed rate investment in what I was fairly confident would be a rising rate environment.
I’ve had a secret in my closet since high school. There, safely in their cases, sit two “Olds” trombones. Why two? The first chair player in high school, whose dad happened to own the local music store, upgraded to a horn that had a larger bore, and an F key which made it look way cooler than my standard-issue intro horn. Suddenly I rationalized, it wasn’t my lack of practice holding me back, it was the equipment. Golfers will understand this logic.
