​As an airplane owner I have had the opportunity lately to spend a fair amount of time contemplating liability, and how risk can spread. We are all aware of the two major crashes of Boeing 737MAX airliners with the hundreds of deaths, and the grounding of a substantial portion of the fleet. Financially, the disaster is anticipated to cost billions to the various manufacturers, the airlines, and their insurers.
 
As a result, owners of private airplanes have been reporting substantial increases in their insurance premiums this year. This makes no sense at a time when private flying accident rates are at historic lows, but the insurers who are facing significant losses from the MAX737 accidents are spreading the cost around. It doesn’t seem fair but things rarely are, and insurance companies need to stay in business.
 
Covid-19 may be a significant health risk today but in the near future it will likely pose a significant liability risk as well. Grocery stores, sports teams, theaters, schools, manufacturers and even churches who are seen to have negligently allowed the disease to spread on their premises will be at high risk of facing court challenges. With this type of personal injury claim it can be difficult to prove the source of the disease but that won’t stop lawyers and plaintiffs from initiating expensive legal battles.
 
I asked my legal counsel and was told that the law requires a person or business to act as a “reasonable” person would act in a given situation. Regardless of how you or I feel about social distancing, masks, one-way aisles etc., an increasing number of businesses are taking the position that in a court of law, a judge and jury will likely assume that the most reasonable action is to follow guidance given by local health departments.
 
All this has gotten me to thinking about the companies we invest in. We have focused on their ability to endure the lockdown by first surviving, and then thriving through the entire crisis. Now I think it is time to take a look at long term liability. For example, I see many people protesting mask requirements at their local big box store. I understand the frustration but I also see that for the business, failure to implement a policy that might be viewed as the “reasonable” thing to do, could expose these deep-pocket companies to huge liabilities. As a shopper I may dislike the policy, but as a stockholder I think I would consider it a wise and necessary business move.
 
Investors are often forced to separate their personal or political beliefs from their investment strategies. If you are one who holds individual stocks, I would take some time and evaluate how those companies are responding to the current crisis through the lense of long term liability. It won’t do you any good if they make a lot of money during the crisis by running full operations, only to have a future court take much of it away in a class action lawsuit. 

A pilot awoke to a beautiful Florida day and decided to go sightseeing in his small plane. Several miles away another gentleman decided it would be a perfect day for jogging on the beach. As he ran along he passed many others who had awaken with the same idea and together they enjoyed the beautiful morning.
 
Suddenly the engine in the small plane jerked to a halt and the pilot was forced to make an emergency landing, on the beach. Thousands of aircraft fly everyday without incident. Millions of joggers run every day without a problem. But on this rare day, a series of unfortunate events brought the two together in a tragic accident that lead to the death of the unsuspecting jogger. Statisticians call these “Black Swan Events” because they are extremely rare.
 
For decades the stock, bond and real estate markets have provided tremendous wealth to investors, but occasionally a rare event throws things temporarily into chaos. Of all the market disrupting events I have witnessed, I don’t think any has come on faster, or created more confusion, than the Covid-19 Crisis. It may well be that future black swan events are referred to as Covids. Let’s take a brief look at this extremely rare crisis.
 
In early February our economy was firing on all cylinders, putting out positive numbers like never before. In late February the virus hit New York city and within days the stock market was in meltdown mode, falling over 30% in a couple of weeks. Soon after, people started losing their jobs and unemployment rose at record speed to incredible highs. The government responded with both parties agreeing to give away money that did not exist, in amounts no human could even comprehend. And then they did it again, and again. Schools and businesses closed, panicked politicians issued executive decrees with questionable authority and without even fully knowing who the enemy was. In its entirety it has been perhaps the most bizarre political and social scene I have witnessed. 
 
After two months of serious panic, the stock market suddenly began to recover, eventually doing something even more unusual. Many stocks rose to all-time highs even as the crisis continued. What are investors to make of it all? What could Wall Street be thinking? Despite all that has gone on, one thing seems clear. This crisis is a rare black swan event, which is actually the good news. “Good news” because it is not likely to repeat itself, especially given what we are learning from it. It may even turn out to be a blessing as we will be better prepared to deal with similar situations in the years to come. It will also lead to wonderful new technologies and advancements in medicine that will make our world safer and more efficient. This is what I believe Wall Street is seeing, and this is why I remain optimistic. This disastrous Black Swan crisis may be one of our greatest investing opportunities. 

In high school I enjoyed debate. Our teacher did not allow us to choose sides, but randomly assigned us to our positions. Even though I was often assigned to support positions I strongly disagreed with, I put all my energy into studying and defending the side I was assigned to. In the process, I gained insight into the other side that I would not have had otherwise, as well as a greater appreciation for those who disagreed with me.
 
Today our society has lost the ability to have rational “debate,” but instead we dig our heels in and “argue” why we are right and the other side is wrong. I believe this largely comes from the new way we obtain our information. Although the internet has given us access to all the knowledge in the world, it also makes it easier for us to filter what we receive. Take Facebook® as an example. There is a reason people we follow are called “friends.” When we post something, our friends “like” our idea, largely because they tend to think like we do. We call this an “echo-chamber” because social media tends to reflect back at us what we already believe, confirming our foolish belief that everyone agrees with us. The ability to select the sources and political leanings of our information sources, has created an unhealthy environment wherein each side hears what they want to hear, and “unfriends” every other position.
 
This echo-chamber phenomenon can also create serious risks for investors. Once again, the ability to select the source of our information, and to be able to deselect sources we aren’t comfortable hearing from, limits our understanding of what is going on in the financial world. The purpose of investing is to allow money to flow to companies that will use it wisely and efficiently to produce profit. Therefore, the more information an investor can gather from multiple sources, the better able they will be to make informed decisions.
 
If, however, they only seek out information from sources who agree with them, whose methods they relate to, and even whose political beliefs they share, the results may be very one-sided. As a long time student of investing I must say I have been shocked at the valuations of many newer companies these days, while firms with a long history of producing profit and growth seem to be being abandoned. In many ways it’s beginning to feel like 1999 all over again, where people invest based on what they want to be true, or what’s in vogue in their echo-chamber world, rather than on financial reality. The results of this type of investing in the late 90’s was disastrous for many.
 
Investors should be aware of the human tendency to seek out confirmation of what we already believe, and take time to look at opposing research. Debate both sides of any investing issue before you decide and you may learn something from the other side that will ultimately make you a much better investor.

I planted a nice tomato garden this year, given the extra time I have been spending around the home. I took time to tie each plant carefully to a pole and trim the lower leaves to create airflow and avoid disease. I have been pretty proud of that garden which is currently filled with beautiful green tomatoes getting ready to ripen. One evening I was weeding the garden and noticed a nice plump tomato, mostly red and almost ready to eat. I thought I should pick it and leave it on my counter where it would be ripe and waiting for my breakfast the next day. Instead I decided to leave it for the night, thinking that the final day of vine ripening might add just a touch more of sweetness.
 
The next morning I went out on my balcony before breakfast and was admiring that beautiful little garden below. I looked to see if I could find that one nice tomato for my scrambled egg sandwich but could not see if from my vantage point. Then I saw him. On the stucco fence post in the back corner of the garden sat a rust colored squirrel. He had in his hands what was left of my nice ripe tomato. He stopped for a moment to look at me, then without moving his gaze he raised the final piece of the tomato to his mouth and ate it, mocking me in the process. I thought a lot of things about that squirrel, none of which were kind. I was mostly upset that he was enjoying a tomato he had no involvement in growing. The experience left me to reconsider my decision from the night before. It was really my own fault I wasn’t going to enjoy a fresh tomato that morning, as I had my chance to pick it when I first saw it.
 
One of the daily experiences we have in our office is to research and then recommend various investments. For the most part, when we call people they approve our ideas and we go ahead and place the trade. Sometimes we have someone tell us they want to “think about it” for a bit. I never claim to be a market timer, but my experience with investing is that once the research is done and the decision is made, it is time to invest. I have had numerous experiences where failing to take advantage of the opportunity that presented itself led to missing out. Investors sometimes wait for just the right price to buy, or the perfect price to sell, but rarely are able to capture either. Relating this to my tomato, when it was ready to pick I should have picked it. In delaying, hoping for a slightly better result, I lost out to a squirrel.
 
Investing is a long term process where time works to your advantage. When someone asks me when is a good time to invest, I usually tell them, “Whenever you have money available.”

Many investors bailed out in the crash of 2008, and missed out on the many great years of investing that followed. I am already seeing investors who bailed out during the current crisis and are perhaps also afraid to get back in.
 
One of the most important facets of investing is understanding human nature. That nature creates opportunities for those who study it and risks for those who do not. One quality of human nature is the ability to adapt. I experienced this personally many years ago when I attended a family reunion. The organizer had scheduled us all to stay in a motel that did not look in real life anything like it looked in the sales brochure.
 
As we entered our room and noticed the worn carpet, the odd smell and the stained fixtures, one of our daughters said, “Dad, can’t we just go find a Hilton?” Given the logistics involved I encouraged the kids to just try and make the best of it.
 
On the last day of our vacation we returned to the motel and sat around laughing and reminiscing about the wonderful reunion. It was then I realized that none of us even noticed the smelly old room anymore. It was a great lesson in the ability of humans to adapt to their environment.
 
Our amazing adaptability kicks in when a crisis hits. Immediately we fear and our “fight or flight” mechanism kicks in. Maybe I will call it the “Find me a Hilton” response. This can lead to immediate, drastic action. In time, as we get more comfortable with the crisis we slowly began to accept the new risk as a normal part of life.
 
Consider the response to the virus in early March. Initially people isolated themselves to keep their families safe. Roads were largely empty, stores were closed, and life quickly ground to a halt. I remember looking out my picture window at the vacant city and wondering when things would be normal again. As time went by, people began emerging from their homes, going for walks and visiting the stores etc.. Now it is early July and if I go to a store in my area I may see a few wearing masks but for the most part people seem to be returning to a fairly normal life. By appearances one would think the crisis is mostly over. Yet the reality is, the virus that began this crisis is still actively with us. All that has really changed is we have adapted to it, and begun to accept the new risk.
 
If investors understood this concept, they would be slower to bail on a crisis, and more confident as they invest in the future. Whether the virus is with us or not, it is my experience that people will adapt and life will normalize. That is the way humans are. Recognizing that quality and looking for those depressed industries that are most likely to recover, as we all adapt, may be today’s great investing opportunity.
 

In the Wizard of Oz, Glenda warns the wicked witch of the west that she’d better watch out, “Before someone drops a house on you too.” I think many people are feeling this way today as we wait for the next disaster, wondering if it might land on us. Government actions have consequences. Dramatic actions such as quarantines and trillions in stimulus create collateral damages far beyond the scope of the original actions. I have already written about how the pricing of stocks on Wall Street needs to be taken with the proverbial grain of salt, since it is very difficult to assess real value in such a false economy. As an example, the hotel industry recently reported many of the major chains are “up to” about 20% occupancy. Obviously a hotel is not viable with 80% vacancy so investors are left to make estimates about if or when those rates will return to a profitable level. Many other areas of the economy are likewise filled with uncertainty.
 
While many have been focused on how current events might affect their investment accounts, some other side effects may have been slipping by unnoticed. As an example, I generally recommend people form a family trust as part of the financial planning process. In most cases, the cost of a trust is minimal compared to the legal process of going through probate. (Ask your lawyer to assess your needs.) But during this time of crisis a new issue has arisen. With the court system bogged down by virus restrictions, we are seeing examples of what was once a fairly straight forward probate process being dragged out for many months. Recently a friend was told their probate would take at least six months, which will be a significant financial burden to the family. This collateral effect of the quarantine makes me an even stronger proponent of having a trust.
 
The crisis has resulted in a squeeze on the supply side of our economy. Have you tried to buy a new automobile lately? With factories closed or operating at reduced capacity the supply is very small, and prices are going up accordingly. Such is the case with many commodities. A quick visit to your neighborhood grocery store will reveal that some items are in short supply, and many items have increased in price. Inflation may very well be the next big shoe to fall.
 
Financing is another affected area. With very low interest rates many have rushed to refinance their homes. The initial surge created so much pressure on the banks that several raised their rates significantly because they essentially wanted to stop the loan applications. Like other markets, the lending markets have become volatile and inconsistent, so anyone looking to borrow money should shop rates very carefully.
 
The virus was initially a medical issue. The response to it has created major economic and social issues with collateral damage likely to continue into the foreseeable future. I suggest being continually alert to changes you might not otherwise think of, less this crisis drop a house on you too. 

​The cause of most airplane accidents boils down to two pilot related issues, insufficient knowledge and poor judgement. Although knowledge doesn’t always result in good judgement, the lack of it will usually lead to bad decisions. One of my favorite childhood cartoon shorts ended with the phrase, “Knowledge is power.” That phrase never left me and over the years I have learned that “power” means an increased likelihood of success, while minimizing risk. Thus, in everything that interested me growing up, I always wanted to gain all the knowledge I could.
 
In my youth I Iearned by reading books. It was a marvelous day when I got my first computer and was able to use the popular “AskJeeves” search engine to answer any question I could think of. I spent hours typing random questions and being thrilled with how quickly the answers came. It was a dream come true for me.
 
I thought the internet would solve many of the world’s problems with its ability to freely provide all available human knowledge to every living person. In time we all realized that the worldwide source for all knowledge was also the source for all lies and deceptions. It became clear it would still require good judgement to separate truth from error.
 
The other day Launa expressed frustration with an online purchase. The product was poorly made despite having over 2000 five-star reviews. When she asked to return it, the company reached out and offered a full refund plus a bonus $20 gift certificate. All she had to do was post a five-star review. She declined the offer and posted an honest review instead. The company responded a week later by increasing their offer to $30 if she would take down her review. Thus, the review process which was once designed to inform consumers was being abused to deceive them.
 
When it comes to investors who are dealing with their life savings and future, not just some minor kitchen tool, how is someone to find accurate product knowledge so they can make good decisions? My answer to that has come full circle back to where I was before the internet existed. It just takes a lot of hard work. Obtaining knowledge has never been easy and just because access to it is at our fingertips, doesn’t necessarily make it a shorter process. In some ways it has become more difficult. The non-stop contradictory information on the current virus is evidence enough that finding truth rarely comes without a dedicated effort.
 
I have found these tools essential to discovering investing knowledge today. 1 – Make learning a daily experience, using multiple sources. 2 – Question everything, verifying the underlying data as much as possible.  3 – Research the key individuals involved. As much as possible I like to know the people behind the product. 4 – Invest with the understanding that you will sometimes be wrong. The big picture is more important than individual successes and failures. 5 – Use your own good judgement.

​Our family has a little thing we do when, if we really want to buy something that is too expensive we say, “Imagine what it would cost if you bought it at Disneyland?” This always generates a chuckle and then makes whatever we want to buy seem cheap in comparison. I‘m pretty sure this is what lead me to feel comfortable paying $7 a pint for that delicious fresh squeezed orange juice at our local market. I have taught my kids that the Disneyland model of pricing is a false or artificial market, not a free one, because it is controlled.
 
From my perspective we are currently living in a false economy. It is a basic law of economics that if you tax something, you will have less of it. Conversely, if you give something away for free, a long line will form. Our government is giving free money away left and right. Some people are actually being paid more to not work than when they were working. So it should come as no surprise that unemployment numbers are artificially being pushed through the roof.
 
Another example of our artificial economy was the report last week that mortgage delinquencies hit the highest number on record. The report said people were included who were never late until their bank had “offered” them payment waivers. My own bank sent out letters in February offering their customers to skip four months of mortgage payments. I imagined that if they were going to send those letters to all their customers, certainly many would likely take advantage of it. There are many other aspects of our otherwise free market that have become temporarily artificial.
 
This current economic mess is part virus driven and part government imposed. As such, I caution about making too much out of stock prices. It is a very difficult time to find true value since many companies are not producing, and others are being artificially supported. In such a market I am certain there are great investing opportunities out there, but there are also great risks.
 
This sort of reminds me of 2012 when a city dam broke and flooded my home. It was listed at the time for about $600,000. As I stood on my porch a man came by, saw the for sale sign buried in mud, and offered me $250,000 cash for it. Neither one of those numbers represented its real value since the flood and all the mess had created a temporary false market, so we cleaned the place up and sold it 18 months later in a real market and at a fair price.
 
My advice is if you are looking to buy stock, or tracking the prices of things you already own, be aware that in our current manipulated economy, finding the real value of a company can be elusive. Try to look ahead to when this is over because stock prices today may be as false as our economy.
 

​In Utah, a largely desert land, we have endured many flash floods. One that hit in 2012 destroyed a dam which severely damaged my home and 65 of my neighbors’ as well. Within an hour volunteers showed up at my home to shovel, clean and tear down that which was destroyed. The community help was massive, touching, and desperately needed. They unselfishly came with a “We’re in this together” attitude, and worked hard to help us through those tough days. After the initial cleanup was complete, the volunteers left, the charities took down their tents, and the city went back to its business. It was then we realized we would have to face the long process of rebuilding largely on our own.
 
In that flood crisis, and in our current national crisis, there is a tendency to expect government to fix all problems. Government is neither capable of, nor responsible for, righting all wrongs or saving us from all disasters. Government may provide support and some direction, but in the end, it is dependent on individual Americans to rise to the task of rebuilding. That process begins with not getting bogged down in fear or self-pity. Those natural human reactions to a crisis serve no good purpose. I felt both while looking at my flooded house, but neither one helped put the house back together.
 
In the Covid crisis I find some similarity to the energy crisis of 1979. Americans were deeply discouraged and fearful. Our entire way of life was being threatened by an outside force we could not control. (A political virus you might say) In the midst of the crisis, President Carter gave a gloomy speech, later known as his “Malaise” speech, wherein he largely blamed Americans for the problem. Reagan seized on Carter’s pessimism and declared that America remained a “City on a Hill” whose light still shone. Reagan’s optimism led to his landslide victory and subsequent 3.6% annual economic growth over the next eight years. He believed America had a great future and he inspired Americans with his attitude.
 
Rebuilding America today will require that same spirit. It will require Americans individually to decide we cannot wait for this problem to solve itself. We must move forward and solve it ourselves. The solutions will take ingenuity, creativity and courage. It will require Americans to realize that despite what Washington does, 70% of our economy is in the hands of the American consumer. If that consumer displays confidence, the economy will rebound with great strength.
 
After the cleanup crews left our severely damaged home, Launa and I put together a game plan. We couldn’t do everything at once, but each day we could do something. We took full responsibility for our own destiny. My plan for rebuilding America is based on the same principle. It requires individual American families to make the decision that it’s time to move forward. Rather than worry about what we can’t do, let’s focus on what we can do. Washington politicians can print money, but only hard working Americans can create real wealth. Let’s go out there and do it! Again.
 

​In the midst of our current huge financial crisis, a prominent national publication released its annual list of the top financial advisors in America. I suppose maybe this is a good time for people to know who to turn to for their financial advice, so I read through the article. In the very small print at the end (you know, the stuff no one reads – but I always read) I found the criteria for being selected to the list. The researchers considered things like total dollars under management. That’s good to know since you wouldn’t want an advisor who only had a couple of clients. They also looked for total revenue. Hmm. I had to think about this for a while. I have no problem with people making money but is that a good criteria for determining how good their advice is? There were other items such as investment selections and book keeping procedures. But then I came upon a line that stood out boldly, even though written in very small print. I will quote it here exactly: “Portfolio performance was not a criteria for selection to this list.” You have got to be kidding me! A person can be listed as a top financial advisor without any consideration of whether their advice was any good or not?
 
I thought of other career fields and wondered how long they would stay in business if they were evaluated using the same criteria. Imagine ranking an auto mechanic without considering whether the cars he worked on ran properly. What about rating a doctor without considering the outcome of her treatments? Would anyone use a lawyer who lost most of his cases? I chuckled at the thought of ranking the top college football coaches in America with a notation, “A coach’s win-loss record was not a criteria for selection to this list.”
 
Let’s get back to reality here folks. Critical to the evaluation of a good financial advisor is measuring the results of their advice. Portfolio performance at some level is essential. Now that is not to say it needs to beat some arbitrary index, or generate a specific return for a client in excess of what their neighbor may be earning. Finances are a very personal matter with each coming to the table with different needs and varying resources with which to address them. The best financial advisors in America are those who help each client on their own individual level, and within a framework of risk they are comfortable with, to reach their unique goals.
 
Because of the individualized nature of financial planning, I feel there is no way to truly award “The Top Financial Advisors in America” because each client uses a different criteria for measuring success. An advisor who might be top for one person would be a lot of sleepless nights for another. So find someone who shares you ideals, is well educated, certainly a CFP®, and with whom you have a good relationship.