How to Make Good Financial Decisions in a Time of Insanity

How to Make Good Financial Decisions in a Time of Insanity

 Regardless of your vantage point, it would be hard to find a better word than “insane” to describe the year 2020. From a global pandemic, to its historic economic consequences, to enormous sociopolitical unrest, 2020 looks nothing like any year before it.

 However, we as investors still need to do what we can to make savvy financial decisions. Despite an overwhelming sense of uncertainty, and an ever-distorted definition of the word “normal,” it’s our job to wrap our heads around the various conditions influencing our moment, and discern something like order in the chaos.

 Here’s how to keep a level head and make good, rational decisions in a time when rationality itself is on trial.

 But First, a Quick Update…

 Economically, not much has changed since last month. Reports are generally pretty dire. Unemployment has improved somewhat, but 20 million Americans remain unemployed. Unemployment benefits are running out, and with upwards of $75B of unpaid rent, landlords are in a terrible place, and many tenants will soon face eviction. Commodity prices are falling, signaling a weak economy for some time to come.

 The Fed is very accommodative at 0% interest rates, but they have nowhere else to go. While the markets recently set record highs, they then sold off 5-10%, which is in line with what we expected. The bond market’s low interest rates support the stock market, but even still, we remain bearish on the stock market in general. Unless the market falls 20%, we’ll invest — short of that, we probably won’t.

 Now, let’s talk about lying.

 The Evolution of Lying

 “I’m going to say this again: I did not have sexual relations with that woman, Miss Lewinsky.”

 That, of course, comes from President Bill Clinton’s famous press conference, during which he falsified the nature of his relationship with Monica Lewinsky. It came to light that this was a lie, and President Clinton was impeached.

 He was charged with perjury in Grand Jury testimony. He was charged with obstruction of justice — pressuring witnesses to not testify against him. He was acquitted in 1999, but spent the last 20 months of his second term as a lame duck president. Going even further, Clinton’s lie had a discrediting effect on Democratic leadership as a whole, likely causing Al Gore to lose his 2000 presidential bid. Without the shadow of impeachment, Gore would have stood a much better chance, as Clinton’s two terms were beneficial for many Americans.

 The bottom line: Clinton lied, and faced negative consequences.

 Now, let’s fast forward to the present.

 In late August, President Donald Trump sat for an interview with Fox News’s Laura Ingraham. During the interview, he relayed a story in which “thugs” dressed in all black had boarded a plane, and were flying from city to city, terrorizing people. That was a lie. How do we know? Other than Trump’s history of compulsive lying, TSA doesn’t let bottles of water onto planes, much less violent, uniformed rogues. Besides that, there’s no video evidence — in an age where everything from casseroles to bad cops are caught on video, some actual images would have emerged by now. Even Ingraham has a hard time with the lie — she tries, unsuccessfully, to guide Trump back to reality.

 The difference between this apparent lie and Clinton’s lie is that, unlike twenty years ago, Donald Trump faces no negative consequences.

 Indeed, lying has become a central tenet of his administration. Attorney General William Barr, in a recent interview with Wolf Blitzer centered on voting, said he didn’t know whether Trump’s recommendation that people in North Carolina vote both in absentee and in person was illegal. Fifth graders know that’s illegal. Barr, a longtime high-ranking Justice Department attorney, knows that’s illegal. He’s lying on behalf of his prevaricator-in-chief.

 Later in the interview, Barr also claimed that 1,700 illegal votes were cast in a Texas election. This claim was also false, but the damage was done. Fact-checks never catch up with lies. The people who want to believe Barr are going to believe him.

 We’re in a place where lying at the very top has no consequences. It used to, but it doesn’t anymore.

 As Investors, Why Do We Care?

 At the dawn of proto-human civilization, threats were easy to understand. Our genetic ancestors worried about bad weather, big-toothed predators, volcanos, — things that they could see before their eyes, and either fight or flee.

 These days, threats are still everywhere, but they’re far less tangible. Right now, people are concerned about an extremely wide range of threats, including:

·      Pandemic: will I get sick?

·      Medical Progress: Can I be cured or vaccinated?

·      Short-Term Economics: How much unemployment, will I lose my job?

·      Family: can my children get jobs?

·      Long-Term Economics: Impact of stimulus, will my company fail?

·      Social Unrest: Will there be riots in my town?

·      Portfolio Volatility: Am I going to be okay?  Can I retire?

·      National Politics: Will my candidate lose?

·      Geopolitical Conflicts: Are we in danger? Russia, China, Iran, N. Korea

·      Climate Change: Why so many natural disasters this year?

·      Trust: Who can I trust?  Can I trust anyone?

 Surveys measuring the public’s trust in government have been heading steadily downward since 1970.  A society just can’t function without trust — but an untrusting society is exactly what we’re dealing with.

 These threats are all very real, but they're also very hard to address. In the face of this, we want to do something, but can’t seem to take immediate, consequential action. This makes us impatient, which makes us frustrated and intolerant — how many of us have had unusually tense political conversations lately? It also causes a distinctly modern phenomenon, doom-scrolling, in which we scroll through our newsfeeds endlessly, in search of hope. Ultimately, we get physically exhausted, and our resilience runs dangerously low.

 How Do We Take Back Control?

 Something Heron Wealth does religiously is boil down big tasks to checklists. We have checklists for new clients, new employees, monthly reports, annual compliance reviews, annual tax calculations, and more. We have many checklists freely available on our website — if you go to HeronWealth.com and click the “Free Investment Guides” button, you can find checklists on marriage, your career, retirement, and our brand new checklist on financial uncertainty. Download a copy, and take a half hour to look at the items on the list. If you check off 30 out of 40 boxes, that's great, you’re in good shape. If you’re somewhere under that, and you need some help, give us a call.

 Also, stop doom-scrolling. It’s terrible. Don’t rely on Facebook, Twitter, or any social media source for news. The vast, vast majority of what you see there is nonsense. Lately, people have been spreading a false story on Facebook that looters have been spreading fires in Portland, Oregon. So, people in Portland aren’t leaving their homes for fear of non-existent looters. Those people are putting themselves in potentially life-threatening situations because of a Facebook lie.

 There are fact-checking resources out there — use them. Politifact, for example, evaluates all politicians’ statements (not only Democrats or only Republicans) for veracity. They’ll tell you what’s true and what isn’t. Even better: Do you own original sourcing. Don’t rely on secondhand sourcing — check it out yourself, ideally from multiple sources.

 Above all, ignore known liars, and respect experts. Experts aren’t always right, but they’re infinitely more likely to be right than amateurs. Don’t trust the MyPillow CEO when he says that oleandrin is a miracle cure for COVID-19. Trust doctors, trust researchers, trust experts.

 A Pledge to Restore Sanity

 The reality of our current situation is that sources which, throughout history, have been reliable — the White House, news outlets, popular pundits — have seen their credibility diminish. Particularly at a time when we, as a species, are facing a wide variety of unprecedented challenges, each of us needs to do all we can to ensure that we’re being influenced by reliable, sane sources.

 Reduce big problems to manageable pieces. We’re pros at that — give us a call if you need some assistance – 347-580-5288 is David Edwards’ direct line.

 Find truth, and verify truth. Don't settle for dishonesty. The power, as ever, is in your hands.