​A few years ago, one of my sons who has always been very tech oriented introduced me to Bitcoin, which was trading for about $10 at the time. I felt his pain as he struggled to teach this “baby boomer” about the new digital technology which he insisted was going to flood the earth. In his words, “Dad, the nerds will soon run the world.” In more ways than one I have watched that odd prediction begin to come true.
 
As I struggled to understand the concept of digital currency my son wisely pointed out that 99.9% of my monthly spending was probably already digital. He was right. And so, I set out to understand crypto currency, skeptical at first but over time appreciating the benefits it might offer the world.
 
In my office we do not make recommendations on investing in crypto currencies like Bitcoin, but we are happy to share what we know about them to those who are interested. One of the most common questions we receive regards whether Bitcoin will ever replace the American dollar as the worlds’ currency, as claimed by some of its advocates. The answer to that question begins with how the dollar got to where it is in the first place.
 
Imagine you have a home to sell for $500,000. Would you sell it to someone who offered to pay you in Bitcoin? The vast majority would not, for this reason. Despite its recently soaring price, Bitcoin is extremely volatile. It’s price routinely fluctuates in double digit percentages even on a daily basis. If you accepted Bitcoin for your home, its value by the time you closed the sale would likely be significantly higher or lower than it was on the day the contract was signed. This volatility would make it very difficult for both buyer and seller, not knowing the final price until the day the sale closed.
 
The US dollar is the world’s most accepted currency because it is highly stable. If you agree today to buy a house for $500,000, those dollars will not have noticeably changed in value 30 days later when the deal closes. The stability of the dollar is what makes it desirable for financial transactions at home and abroad. The instability of Bitcoin makes it attractive to high-risk investors and speculators, but much less desirable as a currency with which to perform routine transactions.
 
Bitcoin or other crypto currencies may one day be widely accepted for regular financial transactions, but that won’t likely happen until prices stabilize. Ironically, that stabilization would make them less enticing to speculators. In the meantime, keep an eye on this new technology. As it evolves, I suspect many uses will be discovered not only for the coins, but the blockchain technology that drives them. My son was right. Our world is rapidly changing as “the nerds” take over. Investors should stay informed, so they are ready to invest when appropriate opportunities arise.
 
Investing in Bitcoin or other Crypto Currencies is speculative and carries very high risk. Our office does not make recommendations regarding these types of investments.
 

​When I was 15, I spent a summer living at my cousin’s house working for a local farmer. Farm work is hard but the task that was particularly difficult for me, on an emotional level, was when he sent us out to thin the peach trees. We climbed ladders up into the trees loaded with beautiful young peaches and were given the assignment to pick and toss to the ground 50-75% of them. I was a city kid and couldn’t make any sense of the request to throw away perfectly good fruit. The farmer insisted however, that the trees couldn’t support all the peaches, so thinning was necessary in order to produce a healthy crop.
 
In my logical 15-year-old mind the math just didn’t add up, so I would pick a few peaches and move on, only to have the farmer send me back to my prior trees to thin them again, and again. It wasn’t until the end of the summer when we harvested the large and delicious peaches that I came to appreciate and embrace the value of thinning the trees.
 
The concept of thinning applies to our investments as well. Over time a portfolio can get bogged down with too many different assets. We pick up various positions along the way that start to add up and pretty soon it is difficult to keep track of them all. Although diversification can be good, it is also true that you should not hold more assets than you are able to properly manage. It’s better to own 10 good companies you can keep track of than 100 that you can’t. There is a Wall Street saying that anyone can buy a stock, but it takes a genius to be able to sell one. In other words, we tend to accumulate more than we can manage because we get emotionally attached to our positions and have a difficult time parting with them.
 
Last year was profitable for many investors as the initial virus scare drove the markets down and opened up buying opportunities. This resulted in investors winding up with more positions than they would normally hold. As new companies and more opportunities emerged from the crisis it seemed that a case of FOMO, (fear of missing out) began driving some investor decisions.
 
The new year may be a good time to take a lesson from the farmers. Just because there are countless potential investments out there, doesn’t mean we should own them all. From time to time, it is useful to thin down your portfolio to a manageable number just as a farmer thins a peach tree. Getting rid of investments that have made you money, or that you have held a long time may not be easy, but sometimes it is necessary so that you can give your best attention to the ones you keep. On a tree bursting with young peaches, less is often better, and so it is in investing as well. A strong harvest requires a good thinning now and then.
 

​In the Bible a conflicted Pontius Pilate posed the question, “What is Truth?” Those three words sum up much of the human experience. The year 2020 will be remembered as an often-heated battle to find truth. The virus response, racial tension and numerous areas of political debate deeply divided our nation. With each declaring the “truth” by which they claimed the higher ground, the contests were often intense. States argued with states, cities opposed neighboring cities and family and friend relationships were sometimes strained to the breaking point over the search for, or denial of, truth.
 
Two-thousand years after Pilate’s question, the internet with its unlimited resources should have finally provided the answer. But sadly, this avalanche of knowledge seems to have made truth even more elusive.
 
Take the recent GameStop (GME) fiasco. On one side, a group of mostly millennial investors connected in real time through social media joined together like a digital army to take on some of the most powerful financial organizations in the world. Rallying the troops using internet forums that gave them instant access to millions of like-minded individuals, they rapidly gained the upper hand as they drove the price of their favored GME stock to astronomical heights. The rapid attack caused significant financial casualties to their hedge fund foes. It seemed the battle would be swift and decisive. I communicated frequently with millennial warriors who believed their victory would reward them with what they excitedly described as “stupid” levels of wealth.
 
But then, as quickly as it began the enemy struck back, taking the weapon that had been used against them and turning it on the millennial army. Infiltrating the same internet forums that had been used to launch the attack, they spread their own version of “truth” in an attempt to weaken the resolve of their opponents. The public conversation became so confusing that it was impossible to distinguish truth from error. The hedge funds knew if they could get the GME fanbase to begin asking, “What is truth?” their ability to continue the attack would be thwarted.
 
This experience should be a reminder to all investors of the value in finding truth and sticking by it, if they are to be successful. And where is truth to be found? Many internet sites are driven by anonymous contributors, as in the now famous Reddit® forums, but when people are anonymous there is no way of knowing whether they are reliable or not. It is the same lesson 2020 tried to teach those who seek political truth in social media posts from anonymous or questionable sources.
 
Using the GME debacle as a guide, may I offer some guidelines for finding that elusive investing truth. 1 – Reject anonymous sources. 2 – Seek your own knowledge rather than trusting that which is pushed upon you. 3 – Avoid making decisions when you feel your emotions rising. 4 – Run from greed. 5 – Trust what you know to be right, not what is currently popular. 6 – Invest long term, ignoring the daily side-shows.

​In the mid 1950’s a mutual fund family was approached by a convent of nuns who had a couple million dollars to invest. Because of their religious beliefs, they didn’t want any of their money supporting businesses involved in the sale of alcohol, tobacco, or gambling. The fund family had no existing offerings that qualified so they decided to create a new fund for the convent, one which exists to this day. It was an early attempt at a socially responsible fund, created long before they were popular. I suspect few who own this well-known fund even know it still bans investing in those types of companies.
 
I have written a few times this past year about the new millennial investor, and their impact on the markets. I mentioned that I grew up analyzing companies for profitability and invested accordingly. About a decade ago, we started getting more inquiries from clients regarding the specific products and services of the companies we invested in. Like the nuns of the 50’s, they seemed more interested in social values, politically correct attitudes or diversity of management than revenue and profit margin. I thought for a while that it was an anomaly, but in recent years the trend has become more mainstream. Especially with younger investors, we are often seeing them more concerned about how their money is being used to make the world a better place than about profits.
 
A decade ago, a retail video gaming company named Gamestop (GME) was a favorite among the young generation. Now, facing bankruptcy due to changing markets, the company came under attack from a couple of hedge funds attempting to profit from driving it into the ground by short-selling its stock. Enter a massive group of mostly millennial investors who were determined to save their beloved Gamestop from what they viewed as evil hedge fund billionaires. Numbering over two million, this digitally connected army bought up millions of shares of GME, sending the price through the roof and the Hedge Fund managers into a panic.
 
Though the resulting battle made for good T.V., beating up a few hedge fund investors may not hurt many others. In fact, many investors began hoping the stocks they owned would be the next target. What’s more important for most investors is how this might change investing going forward. If you combine the socially responsible attitudes of many millennial investors, with the access to easy trading platforms and a connected army of like-minded people, we could be seeing a lot of more of this type of investing behavior.
 
I favor value-based investing. But value isn’t measured solely in monetary terms. Millennial investors place a high value on social issues. As their wealth increases, their ability to support the companies and causes they believe in will increase as well. Investors of the future may find good opportunities looking outside the traditional valuation models and consider those companies that this powerful younger generation will be looking to support.

As we move further into 2021 and see the policies of the new administration unfold, it will be good for investors to keep a close eye on the intended, and perhaps more importantly, the unintended consequences of the various actions.
 
One of the Biden administration’s stated policy goals is to revoke the Trump tax cuts and raise the corporate tax rate. The almost unlimited ability to tax is one of the greatest powers of government and is regularly used to alter consumer behavior. An example are the tax credits for buying electric cars, which increase demand for those vehicles. Government can also reduce demand for products by raising taxes on them. In Europe very high gasoline taxes reduces driving as well as demand for large vehicles. Cigarette taxes are used to reduce their consumption. Ronald Reagan summed this up when he taught that if you tax something you get less of it and if you reduce taxes on something you will have more of it. By using this simple principle, a new administration with different policy goals can get people and businesses to redirect their financial resources by altering the tax code. Investors who pay attention to these changes might find clues as to where money flow might increase. They might ask themselves, what will the new tax code lead to “more of?”
 
Consider the following story: A man named Jeremy drove an ice cream truck as his family business. He parked it near the community playground on warm days where there were lots of children. One day a lady was at the park handing out dollar bills to all the kids, who immediately ran to buy ice cream. This resulted in a lot of happy people. The children were happy with their free ice cream. Jeremy was happy with his dramatic increase in business. And the lady was happy because both Jeremy and the kids loved her for “stimulating” the playground’s ice cream economy.
 
But there was a problem with the scenario that went unnoticed. While Jeremy was not paying attention, the lady was actually taking some dollars out of his cash drawer and giving them to the children. The increase in his sales was from his own money coming back to him. In this story think of the lady as the federal government taking tax dollars from Jeremy and handing them out to the kids so they could buy ice cream. Though this action benefits the kids, and even the lady who became the most popular person on the playground, it doesn’t help Jeremy’s profits at all. But it does help someone. Who would that be? A wise investor would look to the company that was supplying the ice cream to Jeremy’s truck.
 
As the year proceeds, I will be watching for changes to tax policy that will have the effect of redirecting money flow and see if that opens up investment opportunities that we can get in front of. 

It has been said that boats are safe in the harbor, but boats weren’t made for the harbor. I love sailing and I recently read a book by Jessica Watson, the 16-year-old Australian who sailed her 34-foot yacht nonstop and single-handedly around the world. Her story is one of amazing preparation and courage. Though I sail a larger 41-foot boat I prefer to sail safely within sight of land and in good weather. Jessica fought 40-foot seas and gale force winds in the dangerous southern oceans, often in the dark of night. On several occasions her little boat was knocked down and at one point, was completely upside down. When asked how she faced such frightening situations she responded with “I learned at sea that there are very, very few situations that can’t be turned around and made more positive and less threatening by just looking at things in a different way… there was no point in wasting a single minute of my time feeling miserable.”
 
I have heard many complaints about 2020 but as I look at my own life and those around me, much good was accomplished during that year. For many investors, the year brought amazing opportunities and much growth. As we head into 2021 half of America is happy and half is discouraged over the election. And yet all of America has much to be thankful for. We have survived yet another year and come out better than we started. I believe 2021 will be the same. If we can learn to look at those crashing waves and fierce winds of change in a different way, we may find they aren’t so bad after all. Rather than viewing our regular election cycles as moments of winning and losing, let’s try instead to see them as opportunities and not spend “one minute feeling miserable” about it.
 
Jessica Watson experienced many dangerous storms, but she also tells of beautiful seas and unimaginable sunsets that few have experienced. She spent 210 days alone at sea, the majority of which were in lovely weather. Her story reminded me that there is danger in all areas of life, but those who are guided by fear are never able to enjoy the beautiful opportunities. Half of America complains when the political pendulum swings, forgetting that unchanging political environments are the things oppressive dictatorships are made of. Investors also complain about change, forgetting that stable and unchanging investments (like bank CD’s) are what historically low rates of return are made of. I much prefer the opportunities the changing seas of investing offer. It just requires us to look at things a little differently.
 
If you let the political winds govern your happiness or your optimism for the future, then you will miss out on many beautiful sunsets. You will overlook the amazing opportunities that lie in the political plans of the incoming administration. Investors should take a lesson from a 16-year-old sailor and prepare well, then invest with courage. Do not waste a minute of this opportunity. 

​My Dad had a traditional activity at family reunions he called a “scrambles.” He first gathered all the children in a semi-circle in front of him. In his arms was a huge box filled with candy which he would toss into the screaming crowd while yelling, “Scrambles.” This wild event was always very popular with the young kids in the family. As we grew up, we would introduce the grandkids to the tradition, who loved it as much as we did. After all, who doesn’t love free stuff? The downside was that by the end of the day, many felt the effects of overindulging on all that candy.
 
In his closing argument to the people of Georgia before the senate runoff elections, president-elect Biden said that if Georgia voted blue, $2000 stimulus checks would “go out the door immediately.” Apparently, the message was well-received. Even as adults, who doesn’t get excited about someone tossing out free stuff? As I have mentioned in past columns, the various rounds of “stimulus” packages have also been popular with Wall Street as they know who eventually winds up with much of that money. With the election officially behind us, and the promise of even larger stimulus packages on the horizon, I am beginning to feel like we have become like a bunch of excited children running about chasing the free candy. The government keeps yelling “Scrambles” and the people seem to be responding with glee.
 
We had a great time during those “Scrambles” at our reunions but eventually my dad would turn the box upside down and say, “All gone,” much to the sorrow of the kids. My dad was a generous guy, but his candy supply couldn’t last forever.
 
In 2021, Wall Street continues to hit new highs as trillions of dollars are tossed out with promises that the free stuff will continue. I suppose it can go on for a while, perhaps even much of the year, but eventually the government candy box will run dry. Math always wins and the math of printing excessive amounts of money eventually turns against you.
 
I have said publicly that I do not generally approve of the ongoing stimulus packages. There are better ways to get money flowing again, which largely involve getting people back to work. But so long as government is keen to continue tossing out free money, and devaluing existing money in the process, investors should be looking for investments that are most likely to benefit from that policy.
 
I expect stocks in general to continue rising for much of the year. Bonds will struggle with low interest rates, but those same low rates should help stocks as well as continue to bolster real estate markets. Investors might also find opportunities in green energy but be aware of a tendency for markets to often overvalue politically trendy companies. And most importantly, in a “Scrambles” year, be prepared to make quick changes when the candy box runs dry. 

​Ronald Reagan warned us to fear the words, “I’m from the government and I’m here to help.” With congress obsessed over trillion-dollar stimulus packages to “help” struggling Americans, let me share an analogy from college football. Imagine for a moment that the Rose Bowl game will be played this year with 100,000 fans in attendance. Before kickoff, it is announced that $10 in cash for snacks will be given to every fan. As the money is passed around the crowds rush to the various snack shack locations to snatch up hotdogs, sodas and treats.
 
Who really benefits from this giveaway? The fans would be happy with their free snacks, but the small amount has very little lasting value to any of them. So, who really benefits? Though only $10 per person, the total giveaway amounts to $1,000,000, almost all of which will find its way into the pockets of the snack shack owners.
 
Now consider a national stimulus bill that hands out a couple thousand dollars to most households. Those who receive it can buy food, some luxuries or pay a few payments, but would it really make a lasting difference? For most people the answer would be no. So, who would really benefit? Though a couple thousand dollars won’t change the lives of most families, as a collective trillion dollars works its way into the pockets of relatively few national businesses, you can begin to see one reason why Wall Street keeps hitting record highs during a period of economic weakness. They are the snack shack.
 
The downside of stimulus is that printing and distributing money does not add wealth to our economy. It merely transfers it. By printing additional dollars, it devalues the dollars already in existence. By giving people money to spend that wasn’t earned doing productive work, it tips the economic scales in favor of the “demand” side. That means there is more money but fewer things to buy because we are producing less, which pushes prices up. Both of these economic events, devaluing dollars and increasing inflation, tend to hurt the most vulnerable in the long term. Those are the same people the stimulus is supposed to be helping.
 
If I were cynical about government efforts to “help,” (I usually am), I would encourage people to take their stimulus checks and buy stock in the large companies that may eventually wind up with most of the stimulus money. This is essentially what Wall Street is doing because they know deficit spending mostly hurts those on fixed incomes and who keep their money in cash type savings accounts. Large businesses have the luxury of protecting themselves from inflation by raising their prices, as they are already doing.
 
With a trillion-dollar stimulus package the government may actually be here to help. But, pay attention to who it is they are helping the most. My advice to investors is, as long as government continues down this foolish path of out-of-control deficit spending, try to position yourself as the one who owns the snack shack.

​In 1897 the New York Sun responded to young Virginia O’Hanlon’s simple question about Santa Claus. She had heard conflicting opinions on the issue of Santa Claus but her Papa had assured her that she could find the truth by asking the paper because, 'If you see it in The Sun, it's so.'
 
The response to Virginia’s question has become a matter of Christmas folklore, and causes some longing for the better days of the past. But within the response from Francis Church, the editor, we find surprising similarities to our day. The nation at the time was just emerging from a serious multi-year economic depression, and many feared that the great America they had come to love had been lost. Mr. Church used his response to a child’s question about Santa Claus, to address a much larger issue at the time, the issue of hope.
 
One of my favorite Christmas songs is “I heard the Bells on Christmas Day.” I wonder how many have ever noticed the sorrow in the words. The song began as a poem actually written on Christmas Day in 1864 by Henry Wadsworth Longfellow. At the time, the civil war was still being fought and the lines of the poem, along with the two stanzas that have since been omitted, indicate the level of sorrow felt by the poet over the conditions in the world. The poem, filled with despair, contains his hope for the future. Almost 150 years later we still share with Longfellow his concern about the lack of Peace on Earth, and like him, we too hope that the “wrong shall fail and the right prevail.”
 
Like us, Virginia and Longfellow both lived at a time when life was tough, faith was failing, and hope was hard to come by. History is valuable because it reminds us that nothing really changes all that much. We think the times we live in are so bad. We look back on the past and long for the “better days,” failing to recognize that the people of the past didn’t usually see their days as being all that great.
 
If there is one thing to remember this Christmas season, it is that despair and hope have always been part of the human experience. It falls to us then to decide which of those two will determine our own lives. Are we going to spend our lives, and plan for our future, based on our fears? Or will we cling to the hope for a better tomorrow that shines so brightly at Christmas? As Mr. Church wrote in his response to Virginia, “The most real things in the world are those that neither children nor men can see.” It is so easy to see what is wrong with the world, but the message of Christmas reminds us to look for what is right.
 
The lesson of history teaches us that the future always has, and always will, belong to those who hope. This is true in investing, in our families, and in life. Merry Christmas!
 

When I renew the company airplane insurance, I have to fill out a questionnaire that lists how many hours I have flown in my lifetime, in the prior year, and during the last 90 days. Pilots love to brag about their total hours, with the commercial guys routinely claiming 30,000 or more. That’s an impressive number, but my agent tells me that the most important number is not the lifetime hours, but how many have been flown in the past 90 days in the plane that is being insured. This is known as “currency,” and lack of currency is the reason one might find a highly trained commercial pilot involved in a small plane accident that they haven’t spent much recent time in. They have lots of hours, but not necessarily the hours that matter most. 
 
I had this discussion with a pilot friend who is the head of surgery at a large hospital and he laughed as he told me that it is well known that if you want a good surgeon, your usual best bet is not to pick the department head. Though he has done thousands of surgeries over his career, he spends much less time performing them in his administrative position. He is very experienced, but not current. He said a better choice is usually to choose a resident who does surgeries all day long.
 
The concept of currency translates to most areas of life. As a personal example, I am extremely good at business and investment related math. It comes easy to me and I can do most of it in my head because I continue to do it every day in my job. But if you asked me to work through an algebra problem I would struggle, even though I aced algebra in school. My career doesn’t require me to stay current in algebra, so I have lost the ability to do it.
 
I have read many financial articles about the tendency of investors to overstate their personal investing skills. They believe they are better at it than they actually are. My personal experience with investors is that as with any skill, they may have been very good at one point in their life when they had the desire and ambition to study it every day, but as they age other things in life start to take priority. In pilot terms, they may have 30,000 lifetime investing hours, but have those skills been kept current?
 
Managing investments is not a passive activity. If you have been successful at it, be aware of the tendency to fall behind in your currency as you move into and through retirement. The world is increasingly more complex and if you are unable or unwilling to maintain the same level of study and research you once did, think seriously about getting someone to guide you. You don’t want to be that retired commercial pilot who makes a fatal, amateur mistake in a plane you are not current in.