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  • Starting Your New Year The Right Way

    This is the first year that my team's plan for 2020 almost 100% matches my vision for it, without my input. I think that's a good sign that we're taking the right steps.

    We talk a lot about the vision for the next 5, 10, 20 years … but it's easy to have the same target and want to walk different paths. 

    I'm also doing a better job in my personal goals – as mentioned in October

    As we reach the last week of 2019 – and enter a new decade – I want to revisit how I think about personal New Year's resolutions. 

    Happy-new-decade

    Hopefully, you can use some of these concepts.

    • Focus on What You Want.
    • Focus on Why You Want It.
    • Focus on Ways You Might Get it.
    • Focus on the Progress.

    Below, I'll take you through an example each of the four steps.

    Moving Towards a Solution, Rather Than Suffering with the Problem.

    Before I got back into my health, my first instinct was to think "I need to lose weight".  Knowing that "you're fat" isn't helpful … my head, quickly translates that to something a tad more positive, yet generic, like: "I choose to be healthy and vital, and to live a healthy lifestyle".

    Blah, blah … They are just words.  What I needed was something specific, measurable and actionable.  How about: "I will lose 15 pounds and stop eating after dinner."  OK, but that isn't inspiring, and there isn't much for me to do. I can do better than that.

    Figure-Out a Big Enough WHY, Rather Than Worrying about the HOW's.

    This post isn't about health and fitness, it is about the mind-set and techniques you can use to set empowering goals and plans in any situation.

    So, while I could list a lot of ways to lose weight; and I might even remember to do some of them, when you create a driving force, the momentum takes care of itself.  The first step in doing that is knowing WHY you want something.

    I really do want to be healthy and vital (it sure beats the alternatives), and I want to have the energy and confidence to live and enjoy my life fully.  The world is my playground, and I want to take advantage of more opportunities to play with family and friends.  In order to do those things, I must find better ways for me to live a healthy lifestyle.

    The WHYs are just as important for business goals too.

    Focus on Potential Solutions, Rather than Problems or Challenges.

    Obstacles Exist. The bad news: I don't eat fish and I don't like vegetables (unless French Fries are vegetables).  My joints aren't close to healthy from years of violent contact sports. I rarely get 7 hours of sleep, and who'd have thunk it, but being a CEO of a fast-growing startup is stressful.  The good news: is none of those things matter; and even if they did, it just would mean that I have a lot of room for progress.

    It is natural to focus on obstacles. But most obstacles are surmountable – with a big enough WHY, even I'll start to eat vegetables. Instead of dwelling on the limitations,  use them as a reminder to focus on potential solutions instead. They are beacons, pointing the way.

    How do you do it?  To focus on solutions, you can make two action-based lists: one is of things To-Do … and another is of things Not To-Do.

    Here are some of the sample To-Do Items:

    • I will drink more water than coffee.
    • I will stretch, or do basic calisthenics, on days that I do not go to the gym.
    • I will make a healthy shake as a meal replacement rather than a meal supplement.
    • I will focus on relaxation and meditation, as much as I focus on strength & physical exercises.

    Here is the actionable list of Not To-Do Items.

    • I will not buy new pants or wear stretchy pants.
    • I will not eat snacks out their container, and will portion-out what I want first.
    • I will not compare my current level of fitness to what I used to be able to do. Instead, I will focus on my actions and improvement.

    Create Healthier Habits.

    It is easy to follow your routine.  So, make your routine better.  Here are some examples of things you could do to make being healthier happen with less effort.

    • Pre-sort your vitamins into daily doses, and keep them by the coffee machine.
    • Buy healthy snacks, like fruit, raw nuts or organic energy bars (instead of chips).
    • Make exercise time, the time you enjoy listening to music or listen to a book/podcast. Dedicating time to something, doesn't mean you can't be multitasking.
    • Park at the end of the parking lot, so you get to walk.
    • Meet with friends at the gym or at a hiking spot, rather than a bar or restaurant.

    You get the idea.  Get in the habit of looking for ways to create better habits.  What habits could you alter slightly, to make a big difference?  Which things can you automate or outsource?

    Focus on Your Progress.

    In this case, it really is about the journey.  Instead of keeping track of how far you have to go … notice how far you've come. Utilize an internal locus of control. It is about creating energy, momentum and a sense of possibility.  You may have a big, hairy, audacious goal in mind.  That's fine, as long as you realize that reaching each milestone along the way is still an accomplishment.

    • Find shoes that don't hurt your feet.
    • Pick a gym, or a personal trainer.
    • Run more than two laps without stopping.

    It doesn't matter what they are are … they all count, as long as you know that you are moving in the right direction.

    Summary

    The point of this exercise as was not really to focus on fitness. These techniques and goal-setting tools work in any situation. The principles are:

    1. First, figure out what you want, and why it is important to you. 
    2. Second, find something you can do, right now, which moves you in the right direction.
    3. Third, notice which things create (rather than take) energy. Spend your time on those, and automate or create routines to take care of the rest.
    4. Fourth,  plan forwards, but measure backwards. Set milestones so that you can recognize and celebrate your progress.

    In business, this translates to Capitalogix having a mission and vision – it's what we want, and why it's important to us. I then create a yearly "Big 3" goals that move us toward that long-term vision. My team creates SMARTs (goals that are specific, measurable, attainable, relevant, and timely) and KPIs (key performance indicators) so they know where to spend there time, and what milestones tell them they're on the right track.

    Hope this helped.  

  • Beware The Siren Song

    Imagine that aliens have landed on earth, and of everyone on the planet – they end up in front of you. It's now your responsibility to explain the rules of life to these hypothetical aliens.

    Like you, they are facing a new year and an opportunity for a new journey. 

    Would you tell them to let the media, politicians, and the economists determine what kind of a year they would have?

    Or would you explain that they have a lot of freedoms, one of the most important being the freedom of thought; that they can think and make whatever plans they choose.

    Admittedly, this is rather ridiculous question, as we both know you are not going to be instructing any aliens (or are you?!). But, it is a thought experiment to get you focused on the positive polarity.

    We are facing a new year and we do have freedom of thought. You and I can plan to enjoy tremendous results this year. However, with all the negative energy swirling around the us, it's important to be deliberate. Without such plans it's easy to be swept into the "I can't because …" rut, and it's way easier to maintain a habit than to dig yourself out of a bad one.

    Positive framing won't substitute for hard work and intelligence – but it will act as a force function. 

    Beware of Stories!

    On a related note, here's an interesting TedTalk.

    Economist Tyler Cowen loves a good story. But he asks us to step away from thinking of our lives — and our messy, irrational world — in terms of simple narrative.

     

    Tyler Cowen via TEDx

    The moral: pay attention to what's really happening and respond intelligently. 

    It's not what humans are best at – it's why I love robots – but, it's an important task nonetheless. 

    We're headed into a new decade … honestly ask yourself how the last year, and the last 10 were, and then ask yourself what you need to do to make the next ten better than the last ten. 

     

  • To Infinity and Beyond!

    Thursday was Halloween … even though my son is old enough that he doesn’t want to go trick or treating with me (who could guess why) he still bought me a costume so we could dress up for our annual Capitalogix Costume Contest.

    IMG_7363

    They said one size fits all … but they didn't say it would fit well. 

    IMG_1115

  • Here Are Some Links For Your Weekly Reading – November 3rd, 2019

    Around the world, people are protesting – with amazing representation from our youth. The sparks that started these blazes may seem small, but they're indicative of great unrest. In Chile, there was a hike in metro prices … in Lebanon, a tax on WhatsApp… in Hong Kong, a proposed extradition bill

    These sparks brought light to deep-rooted inequalities, frustrations, and government control. As a result, we're seeing the protests continue even after the initial complaint is addressed. 

    It's harrowing seeing the need for protests and the violence from both sides that inevitably occur, but it's encouraging to see these people fighting for their rights and equality and instrumenting change. 

    231420

    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

     

     

    Trading Links:

     

  • November Round Table with John DeTore – Part 1

    Peak Capital is running an online roundtable in November with our CIO John DeTore, John Mauldin, Sam Stovall.  You can check with them to get the full answers from the various panelists, but I wanted to share some of John's answers ahead of time. 

    It's a lot of information, so I'm going to split it between two weeks. 

    November 2019 PCM Roundtable 

    Peak: Let's kick things off in a very different way. It is April 2021 and we just completed the first 100 days of the Warren Administration. What are you most concerned or excited about?

    John:

    • Finding the bottom of the US stock market.
    • Concerned because there is further to go.
    • Excited because of my short positions.

     

    (Listen, I can see that she is trying to do good things for humanity:  Free healthcare, tuition, and so forth will help people.  But, ahem, it isn’t free, is it.  Taxpayers pay for it.  So, the stock market "don’t likey".)

    Despite one’s political leanings, and there are a lot of interesting ideas being kicked about, the market will hate a flirtation with socialism.  The market is probably off 20% from November 2020 (or its previous high if it became obvious she was winning earlier than November). Many analysts in April 2021 are looking for a bottom.  They are early.

    Remember the Obama recovery? (in RED below, it's the only one where the recovery is obviously not symmetrical.) While he shouldn’t be blamed for the financial crisis he inherited, he immediately moved to work on healthcare while we were in the depths of the crisis.  Taxes increased, and regulations expanded.  We can see how that recovery was different than any other in recent history, drawn around 2011:

    Picture1

    via calculatedriskblog

    I doubt that Warren will do any better with the economy and I fear she will do worse.

    Thinking about how inaccurate political polling has become, I believe economic forecasting errors have also risen dramatically. Formerly reliable indicators and data points seem less reliable in today's market. How are you addressing this reality?

    Statistical analysis is relatively easy and can be learned in a few college classes.  Forecasting is maddeningly hard and often largely based on the forecaster’s training, assumptions, biases, and experience.

    What happened to the notoriously inaccurate polls of 2016? 

    Party affiliation, likelihood of voting, age, sex, state of residence all affect candidate choice — even the most careful survey will find that the sample pool is different than the total voting population.  All pollsters adjust their sample demographics to what they assume the voting population is.  But how many of each will show up on the big day?

    Many pollsters in 2016 assumed they could use the turnout in 2012.  The election had a large black, young, liberal turnout … are we surprised given the first black U.S. president was elected?  Did we think Hillary would get the same response?  Most pollsters did, but does that make sense?  Several pollsters who saw Trump as having a decent chance were publicly describing this specific statistical error.

    Regarding economic forecasting:  It suffers from the same phenomenon.

    Example: we can dutifully correlate “yield curve inversion” to subsequent recessions.  And I read about this about 50 times a day when the curve inverts.  But let’s look a little deeper:

    • A simplified theory: 10-year Treasuries represent a market view of forward inflation. As such, we might suggest it’s a nice neutral point for Fed policy to set the Fed Funds rate.  (Maybe a little lower because we believe in term premium but let us not split hairs.)  If the Fed pushes up short rates higher than this, it’s hitting the breaks.  They tend to overdo things, causing recessions (occasionally on purpose?).
    • Do we believe that 10-year Treasuries still represent a market view of inflation? There are reasons to be suspicious, with QE now affecting long rates and a strange influence on foreign buying from markets with negative real rates.
    • If long-rates are depressed below that of long-term inflation expectations, then I for one lose faith in the usefulness of the indicator.
    • (For what it's worth, I think rates are set by the supply and demand for bonds. The supply is going through the roof given deficit spending.  I can reach no other conclusion that demand is growing faster. I suspect Dodd-Frank, Basel III and the like for creating new sovereign debt demand.  If someone has data on this, write to me!)

    Economic forecasting is an art best practiced by people who understand the economy.  Which means most of us should stop doing it.

    Peak: How will the trade war with China get resolved?

    John: It won’t.  Trump famously started his trade war tour with claims that it's easy to win a trade war with China because they have so much more to lose.  He thought they would be the first to resolve USMCA, the UK post-Brexit, Europe, and various Asian markets would follow … even India.

    He is correct they have more to lose … much more, since they hardly buy anything from us.  But to me, this was an obvious tactical mistake by the master negotiator.  President Xi feels no pressure.  His limo still has fuel, his meals are still exquisite, and there is no political pressure on him.  It would benefit their economy to cave to Trump, but they have no incentive.  They play the long game.

    Trump is right to pressure them and even to play hardball.  We might get real intellectual property relief.  It will be quite a slog … my prediction is there will be a string of broken promises, and once we have concessions they won’t live up to their end of the bargain.

    If Trump is really hard on them, they will just drag their feet for 5 years and try again.  It will shave a couple of percent off their GDP.  No one in China will complain.

    Peak: What is the long-term impact of Brexit?

    John: I fear the real result is to box Brussels into a difficult position.  The UK is leaving because politically the EU is too left-leaning and quick to impose their views on member countries.  The UK will survive this better than the EU will.  The only saving grace is that the UK was a reluctant participant in the first place … retaining the Pound as their currency.

    This does open the possibility, though, that the relations with one of our strongest partners improves.  US-UK relations are due to be renegotiated and this could be material.  In fact, to me this looks like the UK is trading in Europe for the US as their best buddy.   I think they will do fine. 

    Worry it hurts Europe.

    Peak: Is impeachment a threat to the stock market?

    John: Continue to believe this is political theater and not a serious impeachment case.  It's unclear what the charge is or whether the house will even take a vote.

    As an influence on the market, its probably already there.  For instance, if the impeachment effort dissolved, it would be enough for the stock market to eek up to new highs, maybe breakthrough.

    But if the market begins to believe that the Senate could actually convict … the market would react badly.

    Peak: Could the Turkey-Syria conflict spiral out of control?

    John: It could.  It’s not clear how badly this could hurt the US economy though.

    I doubt any of us really know what is going on behind closed doors.  The U.S. has no primary fight in that battle.  Turkey, Russia, and Iran all have strategic interests.  We have issues with all three, but if “the enemy of my enemy is my friend” what we are really all about is diminishing Iran’s influence.

    We will not be obvious about what we want.  It will not be public what is being said to Putin and Erdogan.  It will be a quagmire of deception and influence.

    But it won’t shave multiple percents off our GDP or cause our stock market to drop 10%. (If it does, BUY)

    Peak: Recessions are typically not formerly declared until months after they actually began. What is the probability the U.S. economy is in a recession by next June that would impact the 2020 election?

    John: The economy is strong, unemployment low, confidence high.  There are small snippets of bad news that come out all the time and are ignored by the stock market.

    The question implies, I think, that GDP would decline both in the 1st and 2nd quarters of 2020. 

    The combination of full employment, strong profitability, and very low rates rarely ever happens.  When you are at the summit of a mountain, every path leads downhill.  It's not that things aren’t good, they are.  It’s just that it’s hard to see them improving much from here … every macroeconomic variable is maxing out.

    Certainly, it could happen.  After many months of >200K new payroll, we are reaching what could be called full employment.  We have worked our way through a shadow economy of functionally unemployed, returning people to the workforce that was shed in the 2008  financial crisis (they weren’t retired after all). Interest rates are of course very low.

    It would take more than this to really hurt the stock market though.  Over the long-term, it’s surprising how S&P forecast eps yield are tracked by 10-year Treasuries.  

    • That forward eps yield is now 177/3022=5.9%! Even the dividend yield is 1.9%, ahead of the 10-Year’s 1.8%.  
    • While I don’t expect the eps yield to fall to 2% (which means the P/E ratio would head to 50x!), it is reasonable to think in this environment (strong economy, strong earnings and growth, and paradoxically very low rates) the multiple should be above average, and it’s not.