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Three Things: Ross Perot, Voltaire, New Hire

September 03, 2020
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Greetings! It's been a busy few weeks and there are some exciting to new developments with the firm. I'm looking forward to sharing those with you later in this email and also in the weeks to come. 


Over the last couple weeks I've spent some time thinking about the upcoming election and the state of optimism in the US financial markets. Here is some commentary I hope you'll find valuable. 


Adam Harding 
CFP & Smartvestor Pro

(If you are receiving this for the first time, this email series is just about me sharing some thoughts about various financial, economic, or investment related themes. I try to keep it interesting and relevant, so if there's anything you'd like to see me address, definitely email it over and I'll dig in.)

Thing #1: Election Preparation

"I can't be friends with that person, they voted for [insert politician here]."

"My family members are Republican/Democrat, I'm skipping Thanksgiving."

"Goodyear Tires said they opposed Blue Lives Matter... I'm never buying those tires again. Congrats Michelin Man, you now have my business."

"Goya beans supports President Trump.... I'll start a bean farm in my backyard before buying beans from them ever again." 

...Or the always controversial:



Sheesh, you guys. We're pretty divided, aren't we?

But are we more divided and vitriolic than ever before? Not really. 

Let's look all the way back to John Adams vs. Thomas Jefferson: 

Here was John Adam’s key advertisement:

IF YOU ELECT THOMAS JEFFERSON, MURDER, ROBBERY, RAPE, INCEST, and ADULTRY will be practiced throughout the land.

Are you prepared to see your dwellings in flames…FEMALE CHASTITY VIOLATED, or children writhing on the pike?  

In response, Tommy Jefferson didn't exactly take a different tone... 

JOHN ADAMS is busy IMPORTING MISTRESSES from Europe or trying to marry one of his sons to the daughter of King George.

He is a HIDEOUS, HERMAPHRODITICAL CHARACTER with neither the force or firmness of man, nor the gentleness and sensibility of a woman.

... If these two American patriots could be this nasty but then afterward share a few mugs of mead, have a couple lamb shanks, and then build the greatest country in history, then I'm optimistic we'll all be okay after November. 

With that said, this is an investing newsletter, so here's my point:

Maintain your opinion and status as a free thinker, but try not to allow the election to dictate your long term investment philosophy. This rarely leads to good outcomes. 

Right now you're almost certainly getting bombarded with opinions about the markets and economy as a result of the election. For a reminder of how valid those opinions are, here are a few from 2016: 

"A Trump Win Would Sink Markets" --Politico (Link)

From the New York Times Article "What Happens to the Markets if Donald Trump Wins?":

"The conventional wisdom is that, right off the bat, the stock market would fall precipitously. Simon Johnson, the Massachusetts Institute of Technology economist, posited that Mr. Trump's presidency would “likely cause the stock market to crash and plunge the world into recession.” He predicted that Mr. Trump’s “anti-trade policies would cause a sharp slowdown, much like the British are experiencing” after their vote to exit the European Union."

"A Trump Win Would Sink Stocks. What About Clinton?" -- CNN Money (link)

The bottom line: 

Nobody knows what will happen in the short run and the media isn't your friend. 

The good news is that it doesn't matter. Your plan isn't short term. 

Lastly, here are some market returns in-and-around election years. Past performance isn't a guarantee of future performance, but there's nothing historically significant to infer that panic is warranted. 

Thing #2: Candide

The gentleman above is François-Marie Arouet, who's better known by his pen name, Voltaire.... You may have heard of him. 

One of Voltaire's most famous works, Candideis characterized by a sheltered young man's initial indoctrination into an overly optimistic outlook before the darkness in the world shows itself to him. His initial optimism is as a result of his mentor, Professor Pangloss, and his unrelenting optimism. 

First I mentioned Ross Perot and now Voltaire?! What a weird newsletter.... So why am I bringing this up?

Because there's a healthy dose of "Dr. Pangloss' Optimism" swirling around in the stock market these days, and unchecked optimism can be dangerous. 

Before I go further, I should note that I started writing this blog about 10 days ago and I'm just now finishing it on Tuesday, Sept 8th. Over the last 3 trading days there's been a pretty significant selloff of some of the market. Perhaps pricing in a bit of skepticism or caution... Nonetheless, I hope this section presents at least some insight. 

Don't get me wrong, I'm am optimist and I was pretty loud and pretty consistent about that through the downturn earlier this year. I also just finished telling you not to be scared solely because there's an election on the horizon. 

Also, to be clear, investing is always about making decisions in the face of uncertainty. It is how one deals with the uncertainty that distinguishes the good investors from the bad. Further, doubt will always be a byproduct of the presence of uncertainty.

At the time of my 'middle-of-chaos optimism' I had no idea what the market recovery would look like, but I wasn't betting on the end of the world or the second-coming of the Great Depression (as a few pundits were advocating). I was only assuming that people would want to continue doing business with other people. Sometimes when things get REALLY complicated, we have to dial back our thesis to something as simple as possible. 

All that said, I definitely didn't expect the rapid rebound we've seen. It's been fast.

Going forward, I have no idea how difficult it will be to get back to the prior low unemployment numbers. I don't know what a second wave of Covid-19 will do to the economy or what policy will follow. But we do know that these questions exist and that this uncertainty should be baked into the price of the market today and reflected in the approach you take going forward.

I'm optimistic, but I'm also a realist who's spent a lot of my bandwidth understanding the tendency of the mob to euphorically flood into assets while creating an unsustainable growth trajectory. Red flags started to go up in 1999 when your cab driver started talking about hot internet stocks.... In 2020, I'm sure Uber drivers were licking their chops at the Tesla stock split.

(Nothing against cab drivers or Uber drivers... This is more just about "stocks" being a topic of casual conversation amongst relative strangers. Also, with the benefit of witnessing the last few trading days in September, we're seeing stocks like Tesla come back down to earth a bit.)

Maintaining my cautious optimism, I'll continue to review our allocations and survey the global landscape, but just remember the following: 

1) The ENTIRE U.S. stock market has not recovered from the lows. The big tech stocks are leading the way and there are still plenty of places with potentially attractive entry points. 

2) If you have time on your side, it is much easier to ignore these short term issues and simply keep your money invested in an aim to grow or at least outpace inflation. If you have enough time on your side, the entry point matters very little. 

3) Much of the U.S. stock market rally has been fueled by the fed and by fiscal stimulus. Simply put, it's been about liquidity creation and low interest rates. This has been the justification for the U.S. reaching lofty valuations (i.e. stock prices relative to the earnings of those companies). Conversely, many foreign markets have also dropped interest rates and created liquidity, but haven't seen their stock market valuations rise like the U.S.... This is a big reason why I believe in global diversification. 

So while everyone seems to be caught up in Dr. Pangloss' optimism, I'd encourage you to remember this other Voltaire quote: 

“Doubt is not a pleasant condition, but certainty is absurd.” - Voltaire

Get comfortable being uncomfortable. 

Thing #3: New Employee

My kid turned one last month. What a crazy, amazing, stressful, and rewarding year to be a new parent.

Here he is both "Pre-Cake" and "Post-Cake":

We made it through year 1 with this guy and it was amazing. But we weren't immune to the challenges 2020 has provided, and it was definitely challenging to run this firm from home in the middle of a pandemic, with a stock market crash, a baby, two working parents, etc....

I'm so proud of clients' collective resolve and appreciative of the trust in me and the firm.

There won't always be pandemic-related challenges to overcome, but there will be something else; so to keep up the quality of work we do, I had to bring in some help.

Last Monday, I've had a new employee start with the firm and she's going to really change the calculus for the practice going forward. Giving us more bandwidth and expertise when it comes to client service and administration, as well as helping clients get and stay organized with their finances. 

With more than 15 years experience in client service in a wealth management setting, she's a tremendous asset and investment for the firm and I'm looking forward to introducing her in the weeks to come. I really think the future is bright. Each client will hear from us directly to announce her addition and new role going forward. 

And with that, I'll leave you to your week with this quick image I'd seen shared on Reddit this week. 

I love this.

Every piece of the societal machine contains workers whose skills are absolutely essential to keeping us moving. I work with clients who are teachers and pilots and doctors and contractors and everything in between. There is no common profession, but I definitely see common values across the board. 

Keep taking care of each other and when it comes to humankind, keep taking a healthy dose of Pangloss' optimism.


Adam Harding, CFP

(Lastly, never forget this cycle of human emotions and the way we feel through market declines and rallies. Try to ask yourself where you fall on this spectrum and also where you think most other people fall.)