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2020: Reasonable optimism, living in history, and guarantees.

By: Devan Robinson

"Ultimately, a real understanding of history means we face NOTHING new under the sun." -General James Mattis, USMC


A mentor once joked to my wife that I was too optimistic for my own good.  It's become an inside-joke in my family.  If you know me personally you're probably smirking; it's pretty true.  I'm a thoroughbred optimist.

But it's not a blind optimism.  Am I a glass half-full kind of guy?  Yes, but there's more nuance than that.  I run my business very conservatively.  I keep my expenses low.  I don't rent an office and I don't have an assistant.  I don't have a big marketing spend.  Is that the right way to run things?  I don't know, but it's how I've run the ship these first five-years.  I think it's just how I'm wired.

I think that wiring comes from my parents.  They were entrepreneurs with a deep respect for recessions.  The kind of respect you earn by making your own mistakes.  It made an impression on me.  If you want a fortress at the end, play long-term games and play them to win.

I think Morgan Housel put it best: save like a pessimist and invest like an optimist.  Reasonable optimism.  I couldn't agree more.  You can position yourself to win the long-run while also preparing for storms.  Those mindsets aren't mutually-exclusive.

Acquire assets that will grow over decades, they're the bricks of your fortress.  Live within your means so you can keep laying more bricks over time.  That's how you construct a fortress and become inevitable.


2020

2020 closed out a stellar year for investors.  With the exception of global real estate, assets performed wonderfully across the board as global business adapted to a changing world.  If you traveled to a remote vacation January 2020 and recently arrived back you would think the year was uneventful.

Past performance may not be indicative of future results. Indexes are not available for direct investment.

In real-time the story was much different.

There were a few plot twists you missed while you were away:  A global-pandemic, a Saudi-Russia oil-price war, one of the fastest bear-markets in history, one of the fastest bull-markets in history, a recession, and even the largest economic-contraction in the history of the nation.

Past performance may not be indicative of future results. Indexes are not available for direct investment.

A few times each decade investors face the gut-check: the dreaded bear-market.  

Wall Street loves to create a ruleset for everything: -5% from a high is a pullback, -10% is a correction, -20% is a bear-market.  The last time we had a bear-market was 2018 with the U.S. China trade-war.  Both COVID-19 and the trade-war are considered bear-markets but they hardly felt similar.

I think it's a little more complex than an arbitrary Wall Street rule.  You feel a bear-market.  You sense it in your economy.  You go outside and see it with your eyes.  You detect the uncertainty, and sometimes anxiety, on the faces of your friends and family.  A stark reminder that there isn't a playbook for this life.  You didn't have that with the trade war.

As the great warrior-poet Mike Tyson once said: everyone has a plan 'till they get punched in the mouth.  COVID-19 was an economic system-shock.


Living in History

Two other times in my life felt like March 2020: 9/11 and Lehman Brothers.

What do 9/11, Lehman Brothers, and COVID-19 all have in common?  We didn't see them coming.  That's history; a long-line of surprises.

All three brought economic recessions.  In fact, you could argue 9/11, Lehman, and COVID-19 are the only events of the past twenty-years that moved the economic needle.  It's wild to imagine it took that magnitude to make our economy budge.  The American economy is immense and enduring.

It was also humbling what didn't cause any of those.  It wasn't the Federal Reserve printing money, it wasn't corporate tax-rates, it wasn't the national debt, it wasn't foreign policy...it was a virus.  Mother nature reminding us she's still in charge.

It was history, once again.  Somehow always different yet never changing.


The G-Word

In my business there's a certain liability-nightmare of a word we are never supposed to use.  The g-word.

Guarantee.  

Here's a guarantee: there will be another bear market.  When?  I have no idea.  It could be tomorrow, three years from now, or a decade from now.  What will cause it?  No clue, but it will probably be unexpected.  Each bear is unique.  In 1987 we even had a bear market with no apparent cause at all.  It simply happened.  Markets will never fail to surprise you.

My suggestion: have a vision for your life and charge toward it.  You can't control when seas get stormy so batten the hatches and keep sailing.

If the thought of another bear market makes you anxious, let's talk about it.  Your fortress may need some renovation.

If you're like me, young and still building a fortress: bring on the bear.  I've planted my flag and I'm going to keep laying bricks.  Am I too optimistic for my own good?  Perhaps, but as a reasonable optimist my bet's on the world figuring itself out in time.

Thank you for reading,


The foregoing content reflects the opinions of Fairlead Financial Group LLC and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

 Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful, or that markets will recover or react as they have in the past.