Our dog Graham is a handful, and then some. He is a solid 100-pound yellow lab. Looking at
Graham, one would think that he shouldn’t have a worry in the world. He is king of our household, eats
well, sleeps in our bed, goes out almost whenever he would like and gets away with just about everything.
However, for reasons we cannot comprehend, Graham has developed anxiety issues. Which for a
100-pound dog are not fun to deal with. What does Graham seem to be most afraid of? You guessed it…
rain. The dog loves to swim and has no problem being wet. But when storms or even just rain comes, he
cowers in a corner, shaking, panting and drooling. Outside of medication we have tried just about everything
to calm his nerves. His fears are clearly irrational, at least to us. To him though, he must have a reason for
acting the way that he does.
This behavior is similar to the behavior from many investors, especially recently. With the markets experiencing
their longest negative cycle in a number of years many people have become concerned, which
is certainly understandable. Unfortunately, many of these investors have allowed this concern to fester and
build and have reacted, thus jeopardizing their future and certainly negatively impacting any planning that they
may have had in place.
Our number one enemy is inflation, not the historically temporary declines from the
capital markets. Historically inflation or the rising cost of goods and services has increased around 3% per
year. For much of the past decade inflation remained benign, which makes the recent bout of higher inflation
seem more challenging. It is important that policies be implemented to help control this rising inflation. These
policies will likely lead to slower growth from businesses, which in turn has led to lower valuations for these
businesses. But just like all cycles are temporary, businesses will adapt and inflationary pressures will
temper, as they always have before.
To help manage our stress and anxiety during these periods of time we must stay focused on the longer term
and our plans. As time goes by, the chances of longer-term loss, is reduced, essentially to zero. And as part of
your planning we always have smart places to access funds to help meet your income needs while we wait for
better times, which are most certainly on their way.
Unfortunately, my crazy dog cannot understand that rain and periodic storms will not hurt him. Just as these
things are scary to him, negative fluctuations in the value of your hard-earned assets can certainly be scary and
induce anxiety. However, since we can be more rational than Graham, we can understand that these more
negative periods of time, while never pleasant, have always been temporary, and have generally led not only to
new technologies and opportunities, but have also historically always led to higher highs in the value of publicly
traded businesses. And thus new highs at some point in the value of portfolios, as well.
It is generally during these times of increased chaos that many investors often make
significant behavioral mistakes, which can easily lead to a substantial negative impact on their long-term financial success. If you know of someone that needs a better financial path or could use a second opinion, it would be my pleasure to listen to them and do my best to help them in whatever way that I can. As always, if you have any questions, concerns or I can help in any way, please do not hesitate to let me know
Bryan