When Mr. Market is depressed, our Portfolio Manager Nathaniel Leach always likes to say: “The British had it right during WWII: we just need to ‘keep calm and carry on.’” We appreciate his sentiment and couldn't agree more, but we wanted to give a brief update on some recent news.
In the last two weeks, we have seen a market sell-off. Fears of a Coronavirus (COVID-19) pandemic has placed the financial markets on edge. As many of you may know, the Coronavirus started in mainland China and has since spread across the globe. The industrial, travel, and tech industries have taken a beating as worries mount about global slow down. With China being the epicenter of the disease and being a primary supplier of goods across the globe, forecasters are worried about supply chain disruption and lower consumption with people not traveling and staying home from work (i.e., both a supply and demand problem). These concerns are now rippling across the globe, and the thought of a global economic slowdown is on the tip of everyone’s tongue.
Furthermore, the Federal Reserve declared an emergency rate cut, bringing the Federal Fund Rate down -0.50%. With the continued market sell-off, the 10-year treasury yield has hit all-time lows. To add to the pain, on Sunday night Saudi Arabia and Russia could not foster an oil production deal. Saudi Arabia’s response was to cut prices and increase production, sending oil prices crashing. Also, the markets are worried bonds backing the oil industry may be in jeopardy as over-leveraged energy companies could feel the pain from a significant drop in oil prices.
Mix all of this together, and you create fear. Fear leads to irrational behavior and market selling. Is the decline in prices warranted? To be frank, we do not know, nor does anyone else. And don’t just take it from us, in Howard Marks[1]most recent memo “Nobody Knows II” he stated:
“Will stocks decline in the coming days, weeks and months? This is the wrong question to ask… primarily because it is entirely unanswerable. Since we don’t have the answers to the questions about the virus listed on page two, there’s no way to decide intelligently what the markets will do. We know the market declined 13% in seven trading days. There can be absolutely no basis on which to conclude that they’ll lose another 13% in the weeks ahead – or that they’ll rise by a like amount – since the answer will be determined largely by changed in investor psychology.”[2]
Simply, with all of the news swirling and new recession fears on the table, our mindset has not changed. We will consider such factors when conducting our due diligence on the positions we have decided to purchase, but we will not allow them to dictate our investment decisions.
We will continue to observe such events and monitor the fundamentals of the companies we own. We intend to take advantage of the upcoming volatility. We will wrap up this series with a quote from Warren Buffett: “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
Sincerely,
LBW
[1] https://en.wikipedia.org/wiki/Howard_Marks_(investor)
[2] https://www.oaktreecapital.com/docs/default-source/memos/nobody-knows-ii.pdf
When Mr. Market is depressed, our Portfolio Manager Nathaniel Leach always likes to say: “The British had it right during WWII: we just need to ‘keep calm and carry on.’” We appreciate his sentiment and couldn't agree more, but we wanted to give a brief update on some recent news.
In the last two weeks, we have seen a market sell-off. Fears of a Coronavirus (COVID-19) pandemic has placed the financial markets on edge. As many of you may know, the Coronavirus started in mainland China and has since spread across the globe. The industrial, travel, and tech industries have taken a beating as worries mount about global slow down. With China being the epicenter of the disease and being a primary supplier of goods across the globe, forecasters are worried about supply chain disruption and lower consumption with people not traveling and staying home from work (i.e., both a supply and demand problem). These concerns are now rippling across the globe, and the thought of a global economic slowdown is on the tip of everyone’s tongue.
Furthermore, the Federal Reserve declared an emergency rate cut, bringing the Federal Fund Rate down -0.50%. With the continued market sell-off, the 10-year treasury yield has hit all-time lows. To add to the pain, on Sunday night Saudi Arabia and Russia could not foster an oil production deal. Saudi Arabia’s response was to cut prices and increase production, sending oil prices crashing. Also, the markets are worried bonds backing the oil industry may be in jeopardy as over-leveraged energy companies could feel the pain from a significant drop in oil prices.
Mix all of this together, and you create fear. Fear leads to irrational behavior and market selling. Is the decline in prices warranted? To be frank, we do not know, nor does anyone else. And don’t just take it from us, in Howard Marks[1]most recent memo “Nobody Knows II” he stated:
“Will stocks decline in the coming days, weeks and months? This is the wrong question to ask… primarily because it is entirely unanswerable. Since we don’t have the answers to the questions about the virus listed on page two, there’s no way to decide intelligently what the markets will do. We know the market declined 13% in seven trading days. There can be absolutely no basis on which to conclude that they’ll lose another 13% in the weeks ahead – or that they’ll rise by a like amount – since the answer will be determined largely by changed in investor psychology.”[2]
Simply, with all of the news swirling and new recession fears on the table, our mindset has not changed. We will consider such factors when conducting our due diligence on the positions we have decided to purchase, but we will not allow them to dictate our investment decisions.
We will continue to observe such events and monitor the fundamentals of the companies we own. We intend to take advantage of the upcoming volatility. We will wrap up this series with a quote from Warren Buffett: “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
Sincerely,
LBW
[1] https://en.wikipedia.org/wiki/Howard_Marks_(investor)
[2] https://www.oaktreecapital.com/docs/default-source/memos/nobody-knows-ii.pdf
Tim: 0:03
welcome to critically thinking required. Hosted by lbw. Our goal is Simple way. Want to challenge you to think differently about finance and business, Join us and start the journey today. Welcome to critically thinking required the pilot episode of L. B. W's new podcast We're hoping to release in 2020. You have your hosts myself, Tim Bickmore and my colleagues, Dan Weiss and Nathaniel Leach. In this episode, we talk about COVID-19. Yes, that's right. The most recent news that has had the markets in a spiral effect. We also discuss a little bit about the oil spat going on between Russia and Saudi Arabia and the effects there. But our overall point with this episode is to talk about the qualitative. You know, we talked a lot about the qualitative in house, and we want to talk more about the fears, the panic. What do you do? Which should be looking at is this really is? It's not riel and discuss those feelings, discuss those overall situations and help provide a different lens, or to think about situations like this today and then moving forward as it will probably occur. But we're really excited and we hope you continue to listen. As we released new episodes coming up here in 2020 we were going to talk about in our blog about narrative. I had recently read Robert Schiller's new book, Narrative Economics, and it really hit home in a lot of different ways. Because essentially, what his thesis was is that when you're looking at potential market downturns, when you're looking at recessions, when you're just looking at overall market turmoil, yes, uh, the quantitative side of things has to be taken in consideration with supply demand. All of that. But he was advocating is saying in a nutshell. Again, I'm paraphrasing. That narrative also needs to be looked at. You know what is what happens during downturns? What's pushing the market fear? What's pushing market? You know, the selling of markets. What does that really look like ? That's what we're gonna talk about in our block. But we decided, Hey, you know what? Let's try this this podcast like blog instead and talk a little bit. I just what's happening today in today's markets? I think it's a good example of what Robert Shiller was talking about is what is the narrative, so we're gonna kind of spin it off and talk a little bit. Now everybody knows that what's really going on is with the Coronavirus. Um, I think it's COVID- 19 COVID- 19 is a technical term for what? What the viruses started in mainland China, and it's subsequently dissipated or has spread across, uh, into globally, really, into the United States into Europe. And that is now causing potential fears. Now, if you read the headlines, if you read articles about what's going on from a market standpoint, what people are worried about is a global slowdown. And that's because China is a very big supply center for a lot of goods and services. And because they had to shut down a lot of their manufacturing for virus control, people are worried that those goods and services won't be able to be spread across the world, which means you're gonna have a contraction in supply. Plus, you have travel restrictions, people not going to work. So you may have demand restriction because our economy runs off of spending. So if people restrict spending, you have a supply and demand issue, a k a global slowdown. Which means that then the markets like don't like that uncertainty. They're gonna start pulling back. Um, and then recently, on Sunday of this past week, you had Saudi Arabia as well as Russia come out and have a little bit of a tiff. When it came comes to oil production, they couldn't come together on a contract or a discussion about what they wanted to do. So Saudi Arabia decided to actually increase production to slash prices. I mean, in my own personal opinion, this isn't anyone else's opinion to really kind of throw their weight around to see, you know, Hey, we're going to bring prices, which then from there spread to the United States which people who have credit facilities were credit debt with energy companies. If oil prices do drop to a certain degree, then they may not be able to afford their debt. Which means then there becomes a potential problem so that the oil the oil issue in conjunction with Coronavirus in conjunction with travel being halted, you know, I mean, I was watching SportsCenter the other day and it looks like the MBA and it's held MLB any sports that's going on there talking about Hey, where we may play games with without fans. Um, because people are just trying overall United States trying to control the overall outbreak of the Coronavirus. Now, I'm not a medical professional. Um, I don't know exactly what the spread is kind of look like, if it's bad, Good. You know how that's going to happen. But we want to kind of give our thoughts and our opinions on the overall news on and then just kind of put it into perspective. So since we have Nathaniel here, you know, he's always our man of the hour when it comes to markets and the irrationality of markets. So we're gonna have him start. What are your overall thoughts?
Nathaniel: 5:00
Hello again. I'm not being tongue in cheek when I say the following. The British had it right when it came to a World War two when they when they're phrase when their motto was keep calm and carry on. Really? I'm not being I'm not being cute. I think that we need to, as as stewards of our client's wealth. We need to be cognizant, of course, of what the market is doing, but we can't let it dictate how we invest. We can't let it change our process. That's what Uh, that's what separates us from the crowd, in my opinion, is that our strength is the ability to be rational when everyone else is being irrational. So the way that we execute upon that concept is that we are sticking to doing our jobs. Be it me with investment management. Tim and Darin with financial planning, Dan with client relations and estate planning and Ying with being our creative director and office manager, we need to continue to do our jobs, which we are doing with regards to our clients' wealth. We need to be consistent in our execution of our investment research process. We need to be taking advantage of this downturn of which nobody knows. And I can tell you this right now, nobody knows how long this is going to last. It could end tomorrow or it could go for the next 12 months. Could go for the next 24 months. Nobody knows, But what we can do is we can slowly start to take some cash off the sidelines and start to execute. Start to invest in those ideas that we currently are invested it within, or perhaps new ideas. After this is done, we then just need to keep chugging along and rinse and repeat. It's that simple. I know that there's some people after there's some investors are Russian. I wouldn't even call them investors. People who call themselves investors finance other financial advisers, if you will, who are saying to their clients. But we've hedge for this or we've invested in commodity funds for this purpose. Exactly. Or we've got this covered where we know what we're doing. We're We've invested all of your money in the inverse of of the S and P 500. So instead of on the S and P 500 falls, you're gonna make 3 to 4 times. Whatever that fall is because we've invested you in a leveraged fund where we're we've got this covered. They don't because most other financial advisors are speculators. And when a downturn like this occurs there, either investing in what I would call it is my opinion, only stupid things, things that have no rationality behind the investment thesis or they're selling out at the most inopportune time because typically what happens is there's an overreaction to something which I think that there is, to a degree in the market, an overreaction toe what is occurring. I also think that corrections, air healthy in the end, where people will succeed, is by writing it out. This has been proven time and time again. We read recently quote from a newsletter that that Affiliated Managers Group A MG sends out. We had We all have a couple of funds in our portfolio that are have some affiliations with his company. So we're saving correct. And one of the interesting statistics within this this right up was the following that from March of 09 to March of Tooth 2020. If an investor had been outside of the market, the equity market for 20 of the best trading days within that period, their returns would have been on an annualized basis, nearly cut in half by just being out of the market for those 20 days. So we're not going to be those people that sell out simply because the price volatility up make. It gives the appearance that we're losing money because volatility is not equal to risk. We say this all the time to our clients. We need to remember that we need to repeat that. We need to recite that volatility does not equal risk. So with that said, I'm gonna pass it on to you, too. If you guys wanna add some,
Tim: 10:25
well, you have. Then
Dan: 10:26
Tim mentions uncertainty inside the markets. And, uh, and I will tell you that uncertainty is uncertainty is a bigger problem for the markets than negative news. I really feel that that is a bigger issue because people just get they get more fearful. Even if something is negative, you at least know what to expect, and that does not bring up then the same kind of fear level as not knowing what to expect. And the reason why bring that up is because there's a lot of headlines, some, something, something that guys are actually contradictory to one another. There's a lot of headlines out there, and headlines will mess you up, and you have to keep in mind that there are incentives for those headlines. There's incentives for those who are writing those have lines to catch viewers. There are gonna be incentives for the people that find ways to profit off of those headlines. So I think people just have to be really careful about that, because what we're really talking about here is what the scenario looks like when somebody panics, which maybe is because of a health reason. Maybe it's not. But panic is an intense fear and or discomfort that reaches its peak in a few minutes, and that causes situations to be a little bit out of control because there's there's a time mechanism in there that is just, I think everyone could understand. It's just simply unhealthy and so that causes people to be irrational and emotional and good decisions are never made any part, not just finance. When you were a rational and emotional, it's very hard to do. That's a human nature thing in it, and I'm not trying to discount people's fear by any means. Fear is very real. We all have it. In fact, we'll need to have it because it acts as a flight or fight response. And the reality is for some individuals that fear is coming out because maybe you shouldn't be doing what you're doing. Maybe you are a person who is investing. It's with, really not a good idea as to what? How you should be investing those assets. I mean, Tim also talks about the oil situation that has occurred this week to that issue was actually less about oil and more about credit facilities. But if you But if you don't know that or understand credit facilities or get the structure that that's not an issue as much as the structure of the debt then you're looking at is just oil's going down, that oil is the problem. Oil is not necessarily the underlying problem there. So if a person doesn't understand or know, then their fear response might be telling a message that, hey, I shouldn't be playing ball in this situation, among many other things that could simply tell you. But I think being honest with oneself and recognizing that is really the first step someone has to take to being able to not let a panic control you and make you the victim. You have to remain in control of your own thought process, or else you become. You make yourself the victim. That's not gonna help you.
Tim: 13:06
I mean, I think Dan t pick it back off Dan, when it comes to uncertainty, uncertainty with the markets. And we have written about this in a couple of blocks, and I wish I knew at the top of my head which ones we written. I know recession re Kon is one. Please go take a look at that. We also wrote in one of our quarterly reports quarterly quarterly reports about this as well is I've always I've been I've been calling the market a seer, which I'm a Harry Potter geek. So, um, you probably know that one of the professors has a ball and can potentially forecast you know what's gonna happen in the future. And if you look at a narrative right, that's what makes Harry Potter is such a cool book is that you'd really don't know. You have an idea of what Voldemort's doing of an idea of where Harry can go. But that uncertainty creates fear. It creates excitement. It creates a lot of things right. And you're trying to look forward to trying to forecast The reason why bring that up is because I think it was in February, the jobs report came out and, you know, the United States crushed the drop expectations. Unemployment actually ticked down. So then people always ask, Well, the economy is not doing bad. But why is the market going down? And it's because they're not necessarily tied together. Now the market is trying to predict what's going to happen for going forward. So they're saying, Oh, no, there's another supply demand problem that could contract GDP going forward. So we're going to build that in today before it happened before we actually see the data come out and saying, Oh, yeah, you know what? We did contract over the last 2/4 or 3/4 or 4/4 of wherever it may be, because when you're looking at a recession and we talked about this the other day, you also need to understand what the definition of a recession actually means. It's contracting GDP over 2/4 is one definition. The economic bureau is going to say that it's contracting GDP over multiple quarters. Couldn't just be too. Could be three could be four and then that GT contracting in certain areas of the economy right over a certain period of time. Now, does that mean that's going to equate to job losses? Job losses is a trickle effect, right? It's a second order effect of GDP contraction because then businesses retract capital. They decided to hiring, hiring freezes or layoffs in the anticipation that they may lose revenues. And as Dan just mentioned right with oil, it's looking at the second and third order effects of oil prices. Oil prices go down, revenue decrease if revenues decrease, your expenses are still going to stay there. That means you have to do something about your expenses. If you can't afford your interest payments, then it becomes a problem. So it's an overall trickling effect on the markets are going to try to anticipate that going forward but isn't a thing. I'll just mention. No one really knows where that's going to be right, so people try to start planning for it. Restrict capital, do different things. I mean, again, the administration came out with the potential spending a cent surplus to help with potential economic difficulties potentially coming to support it. That's why you know the murder. You know, the Federal Reserve came out and they cut interest rates to help with saying, Hey, you know, credits gonna go lower because right now, if you're in the position, and this is what I guess kind of positive about this. If you're in the position to refinance your house, if you're in a position to take on debt, it's another great time to actually do it if you have the capacity to do so, because interest rates are artificially low again and you can take advantage of it if you're in the position to do so. And right now, as were thing stand, some people really are. And that's going to then help again with stimulus from just putting cash back into the economy. And if the Corona virus, like nothing else said, decided that, you know we found a cure or it decreased in overall spread in the next 234 weeks. Um, you know, I recently just read an article today about what I think was from Goldman Sachs. I believe was saying that they feel that, you know, the markets could fall, but by 2021 like I think of this time next year, they think the market's gonna back at 3200. That's their forecast for the S and P five for that 7500 exactly and so it's, you know. But that may not happen, either. People you again. You're the seer and Harry Potter trying to anticipate what's going to happen. But depending on the choices of other of others in the marketplace, it may come to fruition. It may not. You know, it's very, very hard to predict the economy because it's multifaceted. 2nd 3rd or third order form for order effects. Um, so someone's trying to tell you they know what's gonna happen. It's, Ah,
Dan: 17:30
they don't
Nathaniel: 17:31
they don't. I'd like to add onto a couple things that Tim mention on been one of my own. So, uh, when When Tim mentions that investors are trying to plan for the unknown that trying to plan for the future, trying to figure out what the's 2nd 3rd 4th order effects, you're gonna be with your eyes to say, oil prices falling, the Corona virus outbreak. How is that going with us? If there's going to be a spread, how's it going to affect people? Well, I can tell you that when it comes to, I'd like to hit back touch back to my point about our investment process is that we've already we haven't had our asses we had a few months ago. We, as we in the U. S. Had no idea that the Corona virus outbreak would have it. It wasn't It wasn't on anybody's radar screen in us
Tim: 18:22
or in the world, for that matter. I mean, in the sense before it happened, no one knew that there was gonna be a disease that I
Nathaniel: 18:28
think there was. I mean, uh, experts have always said that there could be a pandemic. Could always repeat like that is that there's no getting away from that. But there's no way of knowing we had no way of knowing that was gonna happen at this time this year. We didn't know that there could be a potentially oil price war with the Saudi Arabia or Russia. We didn't know these things. So in terms of preparation, you can't prepare for something like that specifically. But what we have done is our investment process inherently is structured to mitigate events like these, not the events specifically. But when events like this occur, we are already planning for it in a way, by investing in companies at prices that are at a discount to their intrinsic value, like the value that we believe those companies are worth by discounting their free cash flows back to the present. We are already mitigating events like these by investing in companies at prices at a discount to their intrinsic value. So when an event like this occurs, yes, our clients holdings might full as much or they may not rise as much as the market. But that doesn't matter because of our time frame. We are investing for the long term. That means for us, at least at least 10 plus years, if not 2030 years, a generation, two generations. I would circle back to my previous statistic of that in the last 11 years. If you were out for the 20 best trading days, were there you saw the highest increases in your investment. Your performance on an annualized basis would have been nearly halved, nearly halved. That's 50% difference in your return. And on a compound in bases. It's actually more and assets than just a simple 50% cut.
Dan: 21:04
Nathaniel mentions timeframe, and when it comes to investing, there really isn't anything that is more critical than than understanding the timeframe. Absolutely, and This is not just an asset management conversation. That's management is not just with this firm. Does fact? This firm probably spends just as much, if not more time talking about real true, dynamic, agile financial planning. And what that means is it's a positioning conversation. So when we talk about what we can do and what people can d'oh, it isn't just about asset management, which needs to be debunked, cause that's what people talk about. But it also means that we have to look at an individual's life as their own business and positioning them so they can withstand that situation, not just with standard situation. Let me back up there, actually take advantage of it. Not not everybody has the opportunity to do that, but there are a lot of people that do if they can get past this fear situation and really focus on it and be preemptive, meaning they do that planning work ahead of time just like we do our prep work for are investing ahead of time so that they are ready to roll when situations like this happen. Because if you have cash on hand and we know we can calibrate a person's life, which is really big thing we do here at this firm. Then we know what you spend, how that could be allocated, what's disposable, what's not. And that's where we can have conversations about. Does this really impact you? And does it actually present an opportunity for us to buy things that are going to help bring purpose to your goals and make those goals even easier
Tim: 22:40
or better in achieving them? Yeah, I don't I don't mean that digress here. But then you know how to throw in the financial planning hat, which I'm happy. Thio had a little bit of that. But I wonder if some of our clients, if you know, let's say that this happens to go into a financial crisis like 2008 and people do lose their jobs and it becomes a little bit more severe, which I'm not sure if that will not happen. But I think our clients might be happy that we keep, you know, emphasizing to a certain degree. Emergency funds. Yeah, positioning. This is where they come in handy, you know? I mean, and if, for example, you know some of the things that dance talk about positioning is it doesn't make sense now to do a Roth conversion. Take advantage of the market decrease right? Doesn't make sense to get a refinancing. Does it make sense to buy that home because we saved cash for the home to get into lower rates that we weren't anticipating six months ago? I mean, there's a lot to be excited about if you're in the position to be excited about it, um, to be able to take advantage of situations like this. I mean, if you go back to even 2008 if you're positioned in your position yourself well enough, which a lot of people were, unfortunately, just didn't have the ability to dio in certain markets in certain areas. But if you did buying real estate in 9 10 6011 great bye, because things were so depressed. But you had to be positioned prior to 2008 to be able to take advantage of 89 6010 to 11. And that's what we always try to do is position clients for events like that from a planning perspective, not just an asset management perspective because, as Nathaniel just mentioned, the time frame is, there's not much you can do. You've got to just ride the markets, and that doesn't matter if you're active and or indexing. It's the same time from in it. And it baffles me from an asset management standpoint. I I encourage people. If you If you look at active management and you want to go read up on Warren Buffett, Charlie Munger, all of the famous investors, great, then if you could, I would I would implore you to. Then go read all of the indexing Father's John Bogle Go read. I mean, he's really the one that I would really hit on. You don't read about him. And if you start comparing their overall thought process,
Dan: 24:51
it's very similar.
Tim: 24:52
It's very similar. Give it time, let it ride. It's gonna go up and it's gonna go down, be consistent and be consistent with what you're doing and be convicted in it. And so it's just it's just funny, because people want to sometimes pen those people against each other, right? And it's like that. Why you? Why are you pinning two of the same thought process there just implementing slightly different cause. They may have different skill sets or just have different beliefs or values, and they're going to implore and implemented differently. Um, so anyways, that's that's where. But I do agree with Dan on the financial planning pieces. It is about positioning because, just like Nathaniel said, when we plan, we also don't know that the Corona viruses coming. We don't know that oil prices or energies which could affect the markets, which could then constrict jobs and people could start losing their jobs. So we have to assume and build for it and going back. That's why emergency funds are important for everyone to have
Dan: 25:50
people will. People are fascinating creatures. They will cut off their nose to save the face in the sense of you. Tim just mentioned for example, one thing that should be considering he's dead right is should you look at a Roth conversion? Yes, but going back to the incentive comment I made earlier, we've heard it already. Advisors is telling people I would do a Roth conversion if you don't know the positioning, and I don't care what people think. Most people, the vast majority, think they know or no, they don't know. But then they just tell they don't know what their positioning really should look like and what it does look like for them. For example, if someone tells you, do a Roth conversion numerically, that's that makes a lot of sense. But if your age 50 for example, and you go and do that,
Tim: 26:33
you may not.
Dan: 26:34
You may not be able to do it because because you have to bring cash to the table to avoid an IRS penalty because you're under the age of 59 a half. So are you position to bring the cash the table? And what does that mean is an opportunity cost the rest of your life? Do you truly know that most people know you do not. So that again, I think, is where opportunities come up here. But you've gotta be able to sort through that and actually do that. I'll tell you two something else. Actually, that was brought in this conversation that I find absolutely fascinating. So I think Tim actually was the one who mentioned looking at recessions a little bit, too. So people remember what they want to remember, whether that's conscious or subconscious, that's what it is. So when we talk about recessions, everyone thinks of 2008. Why? Partly because it's the last time we saw that, which is incredible because we've had 11 recession since. The Great Depression has just been a really long time since we've seen one. Abnormally, I think, the longest time actually it is.
Tim: 27:29
And it brought a lot of pain to a lot of
Dan: 27:31
people. And that's right. So you remember. It totally makes sense. Don't forget it. That's dangerous for you to forget it. But the reality here, too, is 10 mentioned job loss. So the reason why for most people, T. 2008 was so significant compared to the 2000 one's 2001 we saw fairly similar market decreases. But 2001 year talked 1.5 million job losses compared to 2008 where I believe the number was more like six
Tim: 27:58
something I was close to set to go back to our block and look at the numbers. But
Dan: 28:02
whoa, that's a significant difference. So that's where a lot of that fear is coming from because it's one thing to see your market the market go down and you don't have. You can't retired three years. You know when you thought you were going to. It's another when you can't pay your bills cause you don't have a job. Not all recessions with the same effect. None have. Look the same. So you know you don't know what that's going to look. But again, you remember what you remember. I'm bringing a conversation I actually had yesterday. I was talking to a friend of mine who's who's She's a She's a medical specialist, Dr Really intelligent, wonderful woman, really intelligent person. We're talking about this. This is not the first the Corona virus pandemic to ever hit hit the world. It's just not and it's not gonna be the last. But you're also talking variations of that. I mean of 1930 in 1976 in 1988. So I'm talking to this person saying, Look, it's not the first time we've seen this in the person's response to It was, Well, it's the first time we've seen this in our adult life, so I mean this this person is in their in their thirties and it actually isn't, But you don't you don't remember that Because it may not be a media may have been an exact impact on you. In 2003 we had stars in 2000 and nine in April 2009 until August of 2000 and 10 we were looking at another version of the swine flu, so So I think that was a tch one and one. So regardless, we're going to see these kind of things. But we remember what we want to remember. And I think we have to get past staff to really handle these situations in a safe manner,
Tim: 29:33
which is interesting that damn Brian brings that up because and I would say, Please go read Robert Schiller's narrative economics. It's a fascinating book, and it puts a different lens on downturns. And overall, the machine that is the media, it's it's quite fascinating, but you know, he does mention within that book that what's interesting about this is that the fear is riel, right? Regardless, if we want to say Oh, you know, it's it's it's irrational and all that that irrationally does create problems, but once again, their short term problems it. But I'm not going to sit here and say that it's not a problem because Dan is right. People are gonna look back at 2000 and it's amazing. Even just we have the luxury to talk to multiple people about this and hear different concerns from people. All cost aboard and everyone is scared of 2008. You know, we had I had talked to one individual. It's like he's like it brings up that stress, that feeling that I felt in 2008 when you know, credit facilities washed up and I couldn't go on get anything. It was like, I feel that right now, even though I know that it may not happen But it's like it brings it back up with psychologically speaking is very riel, but you have to then, as nothing else says very often in this room, keep calm, carry on right. But it's not easy, but it is the rational thing to do, and to continue to prepare yourself in position yourself for those type of events because I just keep thinking is we're literally were literally living history right now, and hopefully in 10 years I'm gonna go back to J. P. Morgan sheet where it lays out the S and P. And then it shows all of these things that have happened across history in 2008. The oil embargo. Yes, I love that graph. Because I'm just like, Oh, now we have the Corona virus, and they're gonna That's gonna be the new dot This could be the Corona virus back in 2020 and, you know, and then whoever that we may bring on and that they're young, they're like, Well, it's a corrupt A virus, you know? It's like, Oh, well, it was this thing. I was dumb. It wasn't done at the time. Uh, you know, But then you look at the stock market. It's increased significantly, right? What, Since the 19 twenties? Yeah, Um, and it's just fascinating because it depends on the lens that you're looking at. And I will give credit to Lawrence University School that I went to that they always talked about what if you're an alien, right, living in the universe, looking down on earth and they always gave example of they would probably think that dogs were the controllers because the dogs were having the humans pick up their poop right. So it depends on what? Lens here looking at the world in its good point. Right? So this is also a lens because you're looking at it from very specific time frame. But sometimes you have to extend your lens and look at it in a different way. Yeah, and it then goes back to positioning both asset management and Fash planning.
Dan: 32:30
It reminds me of, um reminds me a lot of just over 20 years ago. I was a student just over 20 years ago, and, uh, and I remember my job that year. My part time job well was working in a grocery store and I remember Y two k. Come on. You remember that? Yeah. And I don't I don't recall what it did to the market, honestly, but because we don't remember pieces, right. But what I do to calls remember, swarms of people coming in remember, sweating, bullets, bagging groceries, just taking everything. They could have the shadows because things were going to crash next week. They didn't. It's just interesting when you take segments like that. So this is actually really great. We hope at least people are audience thinks this way. A really great intro into a podcast Siri's that we're looking to release sometime later this year, and one of the things that we like to do that is really kind of wrap it up with a thought toe, leave our listeners to and I think, really that probably fear is blinding. We know that. So maybe that we should have a theme to this thought. I think that theme probably should be. What should you do? And we can give our opinions and what you should d'oh! And I'll kick it off since to give these other two gentlemen some more time to think about it. But what should you do? You should talk about it. Fear is a natural feeling. You should talk about it. There are other people feeling that as well. Thio and I think sounding boards air really important. Steve Jobs. Not a huge fan of Steve Jobs, but he did some pretty remarkable things Steve Jobs would talk about zooming out. And what that meant to Steve Jobs is and meant you stop what you're doing and you go for a walk and you clear had and you try to get some fresh air and think about something rationally because you know your nature is not to that. Zooming out zooming out makes a lot of sense. If you need help doing this because because you can't get out of yourself, that makes sense. Then find other people that can help you with that. Whether it's a professional like us that you know, you realize this is not your cup of tea and someone could do it better. And it's an opportunity cost and great talk to them, whether it's a family member or friend, great. But talk about it and give your chance, your chance to give your mind a zooming out periods that you could be rational about it.
Tim: 34:50
Yeah, um, and kind of stole mine, But he said it very way more articulate than I probably would have. Um, but I will say to kind of just piggyback off it at a little bit more to it is, you know, in today's day and age, which is just another fascinating piece of where we are today in this world is information. We are in the information age on information can be blasted out. You just like we're plastic, can't you right now on a lot of different angles, either through vlogs, blog's podcasts, social books, social media, Twitter, you just have to be careful on what you're reading. As Dan mentioned earlier on in this in this episode that, you know, there are some times articles that you can read both sides of the story, that this is gonna be fine. This is the end of the world. This is, you know, gonna create, you know, swarms on area 51. You know, I mean, there's just so much that can come at you. You have to pay very conscious of number one, echo chambers within what you're listening to and who you follow on social media. They may just be reiterating that same thought process. And I would say I would implore you to make sure you look at all sides and then make sure you look at the information that's given and the incentives behind giving that information right Dan did hit on the head media is will promote the bad to getyou viewership in. So you have to take the information, understand it and make sure that you're looking at it from all angles and applying your own thought process independently, right? Don't get swayed one way or the other. Look at the real information and then go back and look at your situation financially. Not your neighbors. Not your grand parents. Not your parents, not your siblings. Where do you sit? It is my job stable. Is it different than others? Where might really at? And it doesn't matter what everyone else in this world is doing other than your household and your family. So that's what I would I would do is look at it singular. Not as like, you know, don't take on other people's stuff. It's all about you on making decisions for you. So that's definitely in a situation of any fearful event. That's what I would do.
Dan: 36:57
Well, you said, I think it's actually better than what I said, too. Well, you're right. I wasn't really good to think about things from an absolute standpoint. Yes, dead on
Nathaniel: 37:05
mind simple. Be rational. Really, this is the time I like to say that a lot, but we all need to be rational. But if I understand that, sometimes people can be irrational and that's OK, it's OK. Is both Dan Tim said to be fearful it's important to communicate those fears to other individuals that can help you with those fears. I'm human too. I feel fear just like anybody else. I feel stress. I'm not inhuman, But it's also my job to be rational. So I'm gonna continue to do that. I'm gonna continue to execute on our investment process. I'm going to continue to research new companies, maintain the research on our current investments, and I am going to continue when cash is available, uh, to invest that cash. Uh, corrections happen all the time. You never know when they're gonna happen, but they're gonna happen. And when they do, they're healthy. It's a healthy thing for the markets to correct like this. And we mitigate those corrections by making sure that our investment process is constantly working in the background, constantly revising your process, making it better, making it stronger. And we will continue to do that.
Tim: 38:38
Well, I just forget I thought so.
Dan: 38:41
Too hopeful. That helps and, uh, and thank you for your confidence in us. We appreciate you very much and let us know if there's any other questions we're here and happy to talk about any fuss concerns or fear is a person maybe having.
Tim: 38:53
And Dan had mentioned that we are looking to release our own podcast, hopefully here in 2020. And so please look forward. Thio hearing us talk about things that we love and we will talk to next time. Thank you. Thank you for taking the time to start your journey of thinking differently and listening to lbw talk about stuff they love until next time. The opinions expressed in this program are for general informational purposes on Lee and are not intended to provide specific advice or recommendations for any individual on any specific security on any specific broker, dealer or custodian. It is only intended to provide education about the financial industry to determine which investments, broker, dealer or custodian may be appropriate for you. Consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. As always, please remember, investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. All opinions expressed by podcast participants are silly, their own and do not reflect the opinion of leech Big More and Weiss Wealth Management LLC leech Bickmore Unwise Wealth Management LLC is a registered investment adviser. Advisory service is our only offered to clients or prospective clients or leech. Bickmore and Weiss Wealth Management LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Leech Bickmore and Wise Wealth Management LLC unless a client service agreement is in place.