​I can’t remember a time in my life when I didn’t run a business, and every business taught me valuable lessons. Like many others my age, my first business was a lemonade stand at the age of six, which I shared with two of my siblings. I learned a lot in that short-term business, most notably that I didn’t want to deal with any more partners.
 
When I was studying at the university, I took a night shift job driving a snowplow for a janitorial firm. I saw so much potential that I bought a truck and started my own plowing service. Snow plowing is a very unique business. You only work about 20 days a year, yet for the other 345 days you still have maintenance, truck payments and the other operating costs that go into running a business. When it snowed, business was booming. I used to call those snowflakes “white gold” because when they were falling, businesses were desperate to find someone to clear them away, and happy to pay the cost.
 
If you were to evaluate the value of a snowplow business, the only way was to look at multi-year revenue reports. Weather is fickle and the business revenue was 100% dependent upon it. If you tried to value the business from May through October it would have no value, since there would be no revenue. If you valued it during a heavy three-day storm when the trucks were running 24 hours a day and customers were desperate for your services, it would appear to be extremely valuable. But neither approach would give an accurate view.
 
Today the investing world is obsessed with the possible effects of the corona virus, and rightly they should be. The virus is shutting down production facilities, limiting travel and restricting trade. Most businesses will suffer greatly reduced revenues while this situation plays itself out. Since stock prices are tied to revenue, the markets are understandably volatile, and it is normal that prices are going down in a time of much uncertainty.
 
As investors it is our job to calculate the value of the companies in which we invest. But in times like these we need to be careful we are not valuing a snowplow company based on the summer months. It would be even more foolish to value the same company during the 20 days of snow. Neither period accurately reflects the company’s true revenue stream.
 
The present question for investors is whether the corona virus crisis will affect a companys’ long-term prospects. Will it materially affect their 3-10 year revenue projections? Because it is along those timelines that most investments should be made. If you believe as I do that this is a temporary issue which will likely rapidly rebound when the fear begins to subside, then now may be a good time to consider accumulating a few shares, while fearful investors are dumping them. It may be a hot summer, but my own business experience teaches me that the snow will come again. 

​All my life I have loved to fix things. I was never content letting someone else do it. I had to do it myself. At age 7 when my gas-powered airplane wouldn’t start, I put my little brain to work. I knew it needed fuel, air and battery in the right quantities to start. I just needed to figure out which one was off. I soon had it flying again. At 17 years old my Ford Pinto wouldn’t start. Same problem, same solution. Throughout my marriage there has been a similar theme. Call for help? Ask directions? Not going to happen. My wife, sometimes frustrated, knew I was determined to fix it myself.
 
I am an American. I am blessed, sometimes cursed, with that amazing spirit that I can do anything. I can fix anything. That’s what Americans do. It is what we have always done. 
 
It’s now 2020 and our nation has built the biggest and baddest economy the world has ever seen. This economic engine is unstoppable. Then suddenly, without warning, it sputters. We clamor for a solution. Fuel? Air? Battery? What is it missing? What is wrong? The problem, the roadblock, the obstacle is so tiny we can’t even see it. A little virus has clogged our engine and it frightens us. We demand a solution because we are Americans, and we can fix anything. We always have. 
 
Fear of this virus has sent Wall Street into a bear market, the sixth in my career, and people are asking what to do. The best action is taken long before a bear market hits. If your portfolio has suffered losses anywhere near what the Dow Average has done this month, and I mean even half of it, then you were unprepared. Assuming you were well allocated, what do you do next?
 
March 12th gave us a clue. On that day stocks, bonds, U.S. treasuries, gold, even Bitcoin were all down.  It was a remarkable day for future textbooks to analyze. It was the day the investing world stood still with nowhere to flee. So what is a red blooded, “I can fix it” American investor to do? We insist on an answer, but there wasn’t one on that day.
 
Our American nature demands solutions, but sometimes, on some days, there isn’t one. This won’t be easy advice for Americans, it goes against our nature, but, assuming you entered this bear market prepared – take a deep breath, relax, and wait. Tomorrow or next month, an opportunity will surely come. We can’t fix everything. Some things just need to fix themselves. This virus will cause its pain, upset lives, and run its course. Then it will end. The stock market damage has not been caused by the virus, but by fear. When you see fear begin to subside, that will be your opportunity to start reinvesting the cash you have set aside just for times like these.
 
Some days, the best thing to do, the wisest thing to do, the most profitable thing to do, is nothing.
 

​Several years ago I began writing columns on computer generated trades, and more recently on the new Robo Advisor platforms. I have mentioned there are pros and cons to allowing computers to make your investment decisions. On the “pro” side, computers may remove emotion from the process. Emotions have damaged many investor portfolios. Although, one could argue that since computers react to market movements, which are often emotion driven, then in some ways the unemotional computers are acting on emotions. Another Pro for the computers is the ability to react quickly. They are always ready, having no other purpose than to look 24/7 for triggers that demand a trade be placed. They are never out on the lake while disaster is happening in the markets. The downside of that is that sometimes patience in investing is a virtue.
 
On the “Con” side, computers cannot analyze non-data sources like a human. An example happened in our office several weeks ago when we decided to move some money to cash as we anticipated the potential negative impact of the new coronavirus spreading in China. As humans we saw a risk rising. A computer knows nothing of any virus and only makes decisions in reaction to what it sees happening in the various markets. The computer would have to wait until the virus news actually impacted some data, then decide what to do about it. In so doing it becomes reactive rather than proactive. As the computer reacts it moves markets more, causing other computers to react. As the reactions escalate it can resemble a bunch of dogs chasing each other’s tails. Thus, you can see why we keep hearing “Biggest single day gain/loss in market history” on the nightly news. Plan on hearing that a lot going forward.
 
I don’t think investors should be particularly concerned about volatility for volatilities sake. It is the nature of the new computer driven investing systems that we have created, and it is here to stay. It is more important to stay focused on the real long-term drivers of the markets and assess how they might affect your portfolio over time. For example, do you believe the current news (virus in this case) will have a significant effect on corporate profits, and for how long?
 
The computer age has created new opportunities for investors. Computers are very quick at making decisions based on data, but their trading speed and algorithms can make them susceptible to over-reacting. The wild market swings they create might open investment opportunities for human investors who have an ability to understand the news beyond the numbers. These swings could potentially give them a chance to add some bargain priced stocks to their portfolio, or on the upside, take profits on some holdings. I do not suggest investors engage in daytrading as that is a very dangerous investing practice. But I simply want to point out that with some common sense you might find ways to enhance your long term portfolio during times of oversized computer-generated volatility.  

​It’s been a wild week on Wall Street with the Dow average falling about 12% over five days. At times like this I look at history for perspective. I got my introduction to market volatility in October of 1987 when the Dow average fell almost 23% in a single day. By today’s standards that would have been a 6,000 point drop. Yet the markets recovered quickly and those who had cash to invest after that day recovered even faster.
 
The real question is not whether the virus that started this decline will cause economic pain because it already has. The real question is whether the effect will be long term or just a short interruption. As I consider that question my mind turns back to my first snowstorm after my family moved to Canada in my youth.
 
Coming from Southern California you can imagine how excited we were to see our first snow hit in early October. We were more excited to learn that school would be cancelled that day. The next day was a Saturday and so our snow holiday continued through the weekend. The snow also meant we couldn’t do our outside chores. No school and no chores. It couldn’t get any better. 
 
Unfortunately, the fun ended on Monday when we arrived at school and learned we would be getting extra homework to make up for the missed day. Later that day, under clearer skies, our dad sent us to take care of the chores we had missed due to the storm. The snowstorm didn’t make our work disappear, it just postponed it.
 
When you evaluate market moving events, it is critical to decide if the events will have a lasting effect on consumer spending, (the number one driver of the economy) or if they will just postpone it temporarily. It may be that analyzing your own personal plans will yield as good an answer as any. If you are afraid to go shopping, will you eat less food or will you deplete what you have and restock your shelves at a later date? If you need a new cell phone but there are none available, will you just keep your old one or will you buy a new one in a few months when inventories return? If you cancelled a vacation you had planned, will you still take one once the danger passes? Our family is not planning any changes to our annual spending. We just might postpone a few things until later this year.
 
But here is my real question. We have had many very dangerous viruses over the years. Why is this one getting so much more attention? Is it possible our instant and mostly negative news is creating more fear than necessary? Consider this - In 2009 the H1N1 flu pandemic killed as many as 500,000 people (over 12,000 in the U.S.), yet it was an excellent year for the stock market. Could fearful investors today be opening up investment opportunities as they did in 1987? I believe so.

​In our office investment committee meeting, we made the decision a couple weeks back to make a few changes in many of our client accounts in response to the Corona Virus scare. As a result, we had a few clients call for more clarification on the changes.
 
It would come as no surprise to people who know me that I begin these discussions with a reference to flying. One of the first challenges a prospective pilot faces is the realization that flying is much different than driving a car. Automobiles turn left and right. Airplanes turn left and right, but they also pitch up and down and roll. Controlling a plane in three dimensions can lead to frustration until you learn an important principle. It is that when the plane is off course, the key is to make very small adjustments to correct it. You then wait to see how the plane responds before making additional tiny adjustments as needed. A good pilot holds the controls lightly in his fingertips and makes changes that are barely noticeable to his passengers.
 
Modern airplanes are largely flown by autopilots. Before I start my engine, I load a flight plan into the plane’s computer which includes the departure and destination airports, and all the waypoints in between. Once airborne I can turn on the autopilot and then monitor the trip while the plane does the flying. If you pay close attention you can see the autopilot at work as the airplanes’ yoke, and the trim wheels move constantly in tiny increments.
 
In an ironic reality of flight, airplanes spend most of their time flying off course. The wind, turbulence, and imperfections in the airplanes’ structure are continually causing it to drift. In frequent but very small adjustments, the pilot, or autopilot brings the plane back on course.
 
It is also a reality that even though investors may have a long-term destination in sight, every day the winds of politics, economics, natural disasters and even viruses are constantly causing their portfolio to drift off course. The temptation is to overreact, which in a plane just makes the problem worse, as well as with a portfolio. The wiser approach is to make regular but small adjustments, and then wait and see how the portfolio reacts. As additional winds blow, apply additional small changes.
 
With this in mind, I view the coronavirus, at this stage in its lifecycle as a higher risk to certain investments and certain areas of the world. From a risk management point of view, it seems appropriate to make some small adjustments to avoid these risks for a time. There are plenty of other opportunities elsewhere, so we decided to make a few small changes and then watch to see if more are needed. Guiding a portfolio is like flying a plane. Avoid sudden or large movements but apply regular small corrections as needed to stay on course. 

​Ten years ago I published an article informing those in their 70’s, that many would live to be 100. I thought the column would be viewed as good news but the responses I received were generally the opposite. One man summed up what several others had said with these words: “With all the trouble in the world, my retired friends and I were at least comforted in knowing that we only had about 10 years left. Your article on longevity effectively committed us to 30 more years of investing hell.” He then closed by saying, “Can you please give us some words of hope?”
 
I responded to him in my next column, as follows in part here:
 
“Perhaps the best way to find hope for the next thirty years is to look backwards and see what has happened since 1980. During the past 30 years we have suffered through 4 recessions. Unemployment hit 10.8% (1982). We fought several wars. We had a president nearly assassinated. Control of the government bounced from Democrat to Republican and back several times. Terrorists attacked New York, forever changing the way we view our own security. Earthquakes, hurricanes and tornadoes wreaked billions in damages. Junk bonds, Savings and Loan Collapses and several market crashes left us with plenty to worry about. Surely, we have been through difficult times.
 
Yet, despite all the trials, we have been privileged to enjoy an unprecedented boom in both the economy as well as the quality of our lives. This was made possible by once unimaginable advances in technology and medicine that have made life safer, easier and more enjoyable.” I ended by saying, “Thinking of all the advancements of the past 30 years, what might the next 30 years hold? New industries will emerge, new technologies will make today’s amazing gadgets obsolete and young entrepreneurs will continue to find ways to make our lives better. All this growth will fuel the investment futures of those who still believe in America. Since 1776 we have survived 47 recessions. I see no reason why we can’t manage a few more.”
 
I had great hopes back then but today I marvel at how the reality of the past 10 years has surpassed even my most optimistic dreams in 2010. We have self-driving electric cars, watches that track our fitness and pay our bills, delivery trucks that bring us anything we want in one day or dinner from a local restaurant in one hour, the ability to speak face to face with someone anywhere in the world – for free, and my favorite of all – robotic vacuums, and countless other wonderful modern conveniences. On top of that, we have free education available on every possible topic on the internet. What a wonderful time we live in.
 
Technology continues to advance at an increasing rate, so to my now 80-year-old readers from 2010 I say, I hope you have your seatbelt on because I believe the best is yet to come. Those are my words of hope for 2020.

In my youth I loved to sail. Sailing can be a very rewarding experience. As much as I love sitting behind the 800 horsepower turbine engine in my airplane, there is something very special about a quiet, beautiful day on the water, gliding peacefully along under the power of the wind. In recent times my son Jared has joined me in my renewed interest in sailing.
 
Generally, as a pilot the wind is not your friend. It is a constant battle to keep the plane on course while the wind is usually pushing you somewhere else. Flying against the wind requires raw power and determination. Sadly, on those days when you get a nice tailwind, the benefit is more than negated by the headwinds going home. The physics of flight are such that a headwind hurts you more than a tailwind helps you. It works much like an investment where a 10% drop in value is not recovered by a 10% gain, so you have to plan carefully.
 
A captain of a sailboat views the wind much differently than a pilot. It is no longer his enemy but his friend. It has always fascinated me that ancient mariners were able to cross the seas both directions using the same wind. Modern sailboats are even more capable at using the wind to move them the direction they want to go. The wind provides the energy that moves the boat, but the captain decides the direction by the way he sets the sails and the rudder. As Ella Wilcox’s famous poem reminds us, “Tis the set of the sails and not the gales which tells us the way to go.”
The last couple of years have been pivotal in American politics. To say that contrary winds are blowing might be an understatement. The polarization has reached such dramatic levels that government struggles to function properly. Historically, presidents like Reagan and Clinton worked across the aisle with a divided congress and were able to get the country’s work done. The current environment may be so toxic that changes in Washington may have a more dramatic effect on our lives, and our investments. Elections may have much higher consequences. Past politicians were very divided on the campaign trail but after the elections they largely worked together to get things done. That does not appear to be the case anymore.
 
As such, I encourage investors to be more pro-active in planning how their portfolios might need to be adjusted depending on changes that may occur in November. It would be wise to assume that changes in control of the branches of government could have a more significant effect on investors than they have in the past. In the coming months I will share some of my specific ideas on this relatively new challenge for investors, along with its potentially increased risks. Like good sailors, we must find ways to move toward our destination, regardless of which way the powerful political winds may blow our nation.

​In his 1933 inaugural address, Franklin Roosevelt made his famous statement regarding the Great Depression saying, “…the only thing we have to fear is fear itself…”.  Throughout my career as a financial advisor I have had many opportunities to reflect on that quote. I have watched as investors have reacted with fear to the many economic and political cycles that have come and gone.
 
The emotion of fear is uncomfortable but necessary to protect us from the real dangers of our world. If we did not fear, we would not survive very long. I recently watched a documentary about an amazing man who spends his life in the dangerous world of free climbing. This is a sport where people climb steep rock faces without any ropes. As one who has a personal fear of heights, it was hard for me to even watch the movie of this man climbing those cliffs. At one point in the documentary he mentioned how he had no fear of heights and for the most part, was not afraid to die.  A little bit later in the show when the interviewer asked about his climbing friends he eerily and almost too casually responded that most of them had died in falls.
 
Somewhere between myself and this climber lies a healthy fear of heights. A little fear might help this climber to live longer. If I had less fear of heights I might better enjoy when a hotel gives me a room with a top floor view. Ironically the same emotion can save your life or be crippling.
 
Finding balance as you manage fear as an investor is a challenge. The problem is exaggerated by the constant and unavoidable barrage of frightening news. If we always respond with fear to the negativity, we could find ourselves unhappily locked behind the walls of our homes. If we ignore fear completely, we risk falling off a few cliffs. Fear can protect an investor or hinder them.
 
A real-world example of this dilemma is the current coronavirus scare. A cruise ship this week quarantined 7000 people because one passenger appeared to be infected. Now, suddenly people are cancelling cruises, airlines are refusing to give out blankets, and some stocks are falling. The fear seems to be outgrowing reality at this point.
 
Nobody knows how the Coronavirus problem will end or how it might affect investors. I suspect, like so many other “fears” it will run its cycle and eventually have very little effect on the worlds’ economy. As for investors I kind of agree with FDR that the fear of the problem is often more dangerous than the problem itself, because it can lead to poor decisions and even greater problems.
 
I encourage investors to be aware of the risks around them, while resisting the temptation to allow fear to take more control over their decisions than is prudent. FDR was only partially correct. Fear may not be the only problem, but too much of it can exaggerate the problem while hindering the solution. 

​I doubt many of my readers spend a lot of time studying, or caring about, Rule 144A from the Securities Act of 1933, but let me point out how a recently proposed change to that rule might affect them.* The rule requires investors in the private capital markets to qualify as “Accredited Investors.” This means they must meet minimum thresholds for net worth and/or income levels. The theory is that private offerings may have higher risks and therefore are only suitable for individuals with enough financial resources to bear those risks.
 
The SEC is proposing changing the definition of “Accredited Investor” and in one area of change it relates to financial advisors who hold certain licensing. For these advisors the income and asset minimums would be waived. The SEC believes that a financial advisor who can legally give advice to others on these products should be knowledgeable enough to decide whether they should personally own them.
 
I understand the logic the SEC is using in reaching this conclusion, but in my opinion, they are overlooking a key element that may have unintended negative side effects for investors. I believe that good financial advisors must first be financially sound in their own lives. They become sound by demonstrating, over time, an ability to save and invest in a manner that will naturally lead them to becoming accredited investors themselves. Let them go through the same process they teach to their clients. Along the way they will not only strengthen their own finances, but increase their ability to give advice to others.
 
Private offerings carry unique risks and if advisors are permitted to invest in them before they are “financially” prepared, they risk getting themselves into financial difficulty. You would never want to get financial advice from an advisor who was in financial trouble. Such a situation could lead to the advice being biased by the advisors need for income. While counseling another financial advisor some years ago who I could see was giving advice based on his personal need for a commission, I asked him the question, “Are you planning your clients’ retirement or your own with this advice?”
 
It is my opinion that if advisors are allowed under this new rule to take more risks in their own investments than would otherwise be appropriate, the potential exists for those advisors to get themselves into financial trouble.  I do not believe the SEC should change the accredited investor rules to allow certain financial advisors to bypass the income and asset requirements. I believe doing so may put them and their clients at risk. Let them save their money, invest wisely, build a solid portfolio, and demonstrate by a lifetime of sound investing that they are ready to move on to potentially higher risks in the private capital markets. If they are unable to do so, then maybe it’s an indication that they shouldn’t be giving financial advice in the first place.
 

​My mother will be celebrating her 90th birthday this week. I am not sure what her plans are, but I suspect they will include swimming, which she has done six days a week for many years. Keeping her body and mind in shape has always been very important to her and perhaps a key to her longevity.
 
I have another relative who recently turned 90. In his career he was very influential in the community and state, and well loved and respected by all who knew him. Whenever the occasion occurred to mention that he was my relative, the positive responses and declarations of admiration for this man were universal. He was an individual who could do, and did do, everything he set his mind to. Like my mother, he exercised daily to stay in shape. But now at age 90 things are much different.
 
We recently visited with this wonderful man at the memory care area of the senior facility where he lives. It was a tough visit. The long pauses between questions and the often-incoherent answers, no way resembled the vibrant and intellectually stimulating man we had known for so long. Watching him attempt to get a single piece of food in his mouth on his own was disheartening. A once healthy and brilliant man now struggles to remember, comprehend and function at even a basic level. Aging affects everyone differently and you never know until you get there how it will affect you. Thus, planning early for that time in life is so critical.
 
As I looked around the care center, something about it stood out to me. In the room full of people, I only saw four men among dozens of women. Launa, who regularly donates her time singing in a retirement home, commented that it is the same there as well; mostly women. It should not have surprised me since the largest demographic in my office client base is women.
 
Research shows the startling reality that about 80% of women die single.*  That means most women will be responsible for their own retirement at some point. The challenge gets greater when you consider that many married men who die before their wives, deal with expensive mobility and healthcare issues in their final years that can put a strain on family finances. This often leaves their spouse with less resources than originally planned. Even though my father died from a condition incident with old age, my mom has still outlived him by more than two decades. I am certain she never expected that to happen.
 
Out-living your money is a risk to retirees that largely falls upon women. It makes sense that women should take an active role in family finances, budgeting, investing and retirement planning since they are most likely to be left alone with these matters at some point. The best time to prepare is long before that happens.