​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. 

​As a young boy living in beautiful Yorba Linda, California, I felt like I had it all. A treehouse, swimming pool, horses and miles of open land surrounding our property on which to carry out endless childhood adventures. One such adventure was a lemonade stand my brother and I setup one day on the road outside our home. Though a busy four lane highway today, it was just a country lane when I lived there. We dutifully set up our table with plenty of paper cups and a big jug of lemonade. We had every element necessary for success, at least so we thought. For what seemed like hours, we sat talking and joking and throwing stones at the trees across the road while waiting for a car, any car, to pass by. Finally, we saw one approach and as it slowly passed by us its’ brake lights went on. It stopped and then backed up as our little entrepreneurial hearts leapt with excitement. As the man exited, he called out and asked, “Do you boys know where I can find a gas station near here?”
 
Disheartened, we packed up our supplies as my brother wisely opined, “I think we need a better location.” The deserted conditions that made Rose Drive perfect for playing tag and riding bikes, also made it a terrible place to run a retail business.
 
My family has long since left California, but I thought of this experience as I read in the investment news about yet another major technology company that has announced they are leaving California and moving their headquarters to Texas. The reasons stated for the move included California’s anti-job policies, high taxes, an aggressive regulatory environment and undependable energy sources, to mention a few. This was just one in a long list of companies in recent years who have fled states with burdensome regulations and high taxes in favor of a more business friendly environment.
 
These moves make interesting stories that people read then forget about, but I wonder how many have seriously considered the impact to investors. On the face of it one must consider that such a significant business move would come at a pretty high cost, and a company would only take such drastic measures if it was determined to be in their best long-term interests. In other words, as a former lemonade stand owner myself, you only move the stand if you feel a different location will lead to higher profits.
 
I would suggest that investors might want to pay closer attention to these types of relocation announcements, which are becoming increasingly more common. If in fact a company can move to a new state and end up with lower operating costs and a more favorable regulatory environment, one could expect that increased profits, and higher stock prices, may follow. As my lemonade selling days taught me, location is everything.

​It all started with a 12’ tree. We were preparing a special Christmas celebration with our entire family at our Duck Creek cabin. No detail was overlooked as Launa and I stacked our truck with games, presents and a mountain of food. Our meticulous planning left us confident this would be our family’s most memorable Christmas ever. We drove up weeks early to decorate the cabin and set up that beautiful tree so that everything would be perfect.
 
Finally, the time arrived when we were all to leave from our various locations and join up at the cabin. Then it happened. The worst storm in anyone’s memory hit Cedar Mountain, Utah, knocking out all power and shutting down every road. In less than 24 hours, more than nine feet of heavy snow had fallen. There was no way anyone was getting in or out of Duck Creek for quite a while so other options would have to be considered. Our beautiful tree in the cabin living room would have to celebrate Christmas on the mountain without us. We called our kids and instructed them to come instead to our home. Of course, they were disappointed.
 
Life does not always go as planned. Investors are certainly well aware of this. Wars, natural disasters, elections, recessions and now viruses require us to constantly adjust our strategy. The key is to realize that, like a family reunion, change does not mean we cannot obtain our goals. It just means we may need to adjust our plans a little.
 
Too often investors get fixated on wanting to do things in a certain way and are resistant to make necessary changes that a changing world requires. They mistake the road to their goals, for the goals themselves. The year 2020 will go down in history as one that required maximum flexibility in many areas of life. Those who are able to adjust to the changes will be in a position to enjoy what life offers them and even be better off due to opportunities that always arise.
 
Change is often unwelcomed, but it brings the potential for growth in areas we may not have previously considered. It can open investing opportunities that might have never been possible. Some of the greatest companies in the world were born during a crisis.
 
When we put up our 12’ tree in our cabin that year we were expecting a memorable Christmas. Had we let the storm get us discouraged it would have ruined our reunion. As it turned out, we decided to make the best of it and had a wonderful time, creating many lifelong memories. It was different than planned, but no less memorable. I believe 2020 will likewise be remembered as a very special year and those who maintained a good attitude combined with a willingness to be flexible, will look back and find much about it to be thankful for. 

I just returned from my annual recurrent training required to maintain my ability to fly. Flying is important to me because it allows me to travel long distances to visit with clients who for many reasons are not able to see me in my office. But more important than visiting my clients is being safe while doing so. Safety is my number one concern related to flying, and without hesitation I will cancel a trip if conditions are not within my prescribed limits.
 
Flight training not only sharpens technical skills, but perhaps more importantly it improves decision making. Each pilot and plane has different capabilities, so flight decisions are very personal. Powerful commercial airliners with two professional pilots on board routinely land at my airport in weather I would not, and should not fly in. I know a pro pilot who once cancelled a flight with 180 people on board because he had a family crisis and suddenly was not in a good state of mind for flying. Many passengers complained, but they should have thanked him.
 
Pilots are trained to do a personal evaluation before each flight by asking the following questions. Am I physically healthy? Is my mind alert, and free from undue distractions? Is the weather acceptable? Is the plane airworthy? Am I current in my training for this type of flight? Are there unusual external pressures pushing me to make this flight? Should I consider seeking advice about this flight from another pilot or instructor? Pilots who answer these questions honestly and are not afraid to cancel a flight when an answer is not a good one are far more likely to live to fly another day. And I might add, the passengers should never complain about the decision.  
 
My flight training led me to wonder how these critical questions might also help investors when faced with major investment or financial decisions. They would sound something like this. Are my finances currently healthy enough to support this decision, even if it doesn’t turn out as planned? Am I in a good state of mind, having all the critical information I need to make this decision? Are the current conditions in the relevant financial markets acceptable, such that they are likely to lead to a good outcome for me? Have I carefully inspected the financial vehicles I am considering using and found them to be sound and suitable for my needs? Am I current in my financial knowledge so that I am able to make a good decision? Are there any outside pressures pushing me to make a decision in haste, or without considering other options? Should I consider calling another professional for advice before proceeding?
 
I think it would be very valuable if investors created a similar checklist, and followed it, before making any major investment or financial decision. Like a pilot, it may lead to them missing the occasional opportunity, but on the bright side they would be much more likely, financially, to live to enjoy many more days.
 

​My wife’s grandfather was a brilliant investor. Though limited to a high school education, he taught himself to analyze a stock like few I have known. Whenever we visited, he would call me into his den to discuss the financial markets. Our discussions always involved a fat resource book that he received in the mail every month. It contained an amazing amount of raw financial data about most of the major companies on Wall Street. The hundreds of pages were filled with highlights and notes Grandpa had made, which book he would pass to me when the new one arrived. He also watched market news on T.V. but felt most commentators were more entertainer than financial expert.
 
I thought of Grandpa recently when I turned on the news to see a random analyst talking under the headline, “Wall Street surges as investors welcome likelihood of (candidates name) victory.”  Presumptive headlines like this are common and leave me wondering where this “expert” got their information. I had placed several trades that day and no one checked in to see what my reasons were. I didn’t see any surveys or read any real data to suggest why investors were making their decisions that day. What it likely came down to is the stock market just happened to be up, for any number of reasons, but this analyst took it upon himself to play the expert who could discern the thoughts of the millions of investors in the world. As I listened to his ramblings, my Dad’s common phrase, “hogwash” came to mind.
 
There are plenty of media “experts” willing to tell us how to think, or how we are already thinking. Political pollsters have done this all year. Their embarrassing, and recurring failures should be evidence of the value of their opinions. But on the other hand, maybe there are too many who are willing to turn over their thinking to media experts, who they don’t personally know, and whose qualifications and motivations may be suspect. I was listening to a younger person speak about where he got his information and he said, “I’m very busy so I just get everything from Instagram.” “Oh wonderful,” I thought, “I feel so much better about our nation’s future now.”
 
I mention this because as the media noise gets louder, and more intrusive in our lives, we have an even greater need to slow down, and do some good learning on our own. Investing is serious business, and a very personal one. Try reading a good book. I’m sure they still make them. Taking advice from someone you don’t know, or whose goals may not align with yours, can be risky. Media personality comments about what other investors are thinking, with the implication that you should be thinking the same way, should carry little weight in your decisions. That commentator doesn’t really know what investors are thinking, and even if they did, it may have nothing to do with what is best for you.
 

​Writing a weekly column for so many years has allowed me to create a pretty good journal of world economic events. With the election only a few days away I re-read my thoughts from the prior presidential election. Just two days before the 2016 contest I finished my article with this line, “It has been an ugly fight and we are all tired of it.” I am pretty sure both sides today would agree with me on that sentiment.
 
History offers an amazing education and if we could just learn from it, we would be much better off. There are certain things in life that tend to repeat frequently, especially in economics and investing. It is very useful to learn from past events and a whole lot cheaper than making the same mistakes repeatedly. As we face the prospect of the presidential election finally being over this week (although the outcome may take a while to unfold), it is useful to consider what we have learned from the past that we can use to help make our investment decisions today.
 
One of the most important things an elections’ outcome does for investors is eliminate some uncertainty. Wall Street really likes to know what the future holds and the higher the uncertainty, the higher the volatility is likely to be. This past week has been evidence of that with its wild swings in the face of a number of unknowns.
 
For what it is worth, a few weeks ago most pollsters and pundits expected a Biden victory. That the markets were more stable back then would indicate such an outcome was largely priced in. After the second presidential debate the polling numbers began to shift and with it, volatility returned. It wasn’t that Wall Street doesn’t like Donald Trump but more that the shift created some uncertainty. We saw the same activity in 2016 when the markets had assumed a Clinton victory, then when it didn’t happen there was an immediate large drop in stock prices. Investors just needed a moment to work through the new uncertainty. It didn’t take long before they realized a Trump presidency would be favorable to the markets and stocks began a very long and fairly steep climb.
 
Based on history I am going to go out on a limb here and make a prediction. If Trump is elected, I think investors would be pleased because they already know his history and what to expect, although we could repeat the initial market shock after the win. If Biden wins, I would expect him to pursue a large stimulus bill like the one already passed in the house. His history in the Obama administration would indicate some bold stimulus action. The potential for such a stimulus, for better or worse in the long term, would likely be very welcomed on Wall Street. In either case, once the election outcome is assured, I am looking for markets to move higher.
 

A referees’ job is to fairly enforce the rules of the competition. Nothing annoys a sports fan more than a referee who gets involved in deciding the outcome of the game. Watching the financial news this year, I feel more like a sports fan watching a game officiated by a group of biased referees. Unsurprisingly, in business as well as in sports, the team whose side is being benefitted by the unfair refs, rarely complains about the bad calls.
 
I am referring to Wall Streets’ daily obsession with ongoing government Stimulus. I equate this to a spoiled trust-fund child worrying whether Mommy and Daddy will keep the money flowing. The stimulus is cheered on by Wall Street, and it increases stock prices, but does it really add any wealth to society?
 
In our free market, wealth is created when a company produces a product or service that improves life such that others are willing to pay for it. The system works because companies that create wealth are rewarded, while those who do not will fail. Take the computer industry as an example. The founders of the PC and the MAC made huge fortunes for themselves, but their billions are grains of sand compared to the wealth those products created for others. Computer companies that did not add to society’s wealth have long since failed – as they should have.
 
Governments’ role is to act somewhat like the referee, establishing rules of play and seeing that they are followed. It is not governments job to put points on the board, partly because it does not have points to give. Unlike a business, government does not create wealth, it can only transfer it. If a referee gives 10 yards to one team in a football game, it can only do so by taking 10 yards from the other. Likewise, if a government hands out a stimulus dollar, it must take that dollar from someone else.
 
If, for example, government lowers interest rates, all it is really doing is taking wealth away from savers and giving it to borrowers. When government uses deficit spending, it is taking wealth from future generations to give to the current one. If these behaviors create inflation it is essentially taking value from the poorest among us, those who own little, and transferring it to the richest who own the assets whose value is inflating.
 
So, if government cannot create wealth but only transfer it, why is Wall Street so excited about more stimulus checks? Why do they want government referees to step in and put points on the board? Because they are the team who will be getting those points. Wall Street should remember, the bad referee that helps you today may hurt you tomorrow.
 
Regardless of what Wall Street is doing, investors should remember to focus on companies that provide products and services they believe society will want in the future. Only by continually creating wealth, can a business grow its real long-term value. And those great companies don’t need the referee’s unfair help.
 

​Winter is arriving and that presents new challenges for pilots. On the positive side, the terrible summer turbulence will be gone. I won’t have my family complaining about the rough afternoon approaches into my desert airport. I love flying in the heavy, cool winter air where the engine can breathe better, the air is smoother, and the wings generate more lift, making for easier take-offs.
 
On the downside, the northern Jetstream will be finding its way down into the lower 48 states. A Jetstream is a mostly narrow, meandering band of air that circles the globe in a west to east pattern. The speed varies significantly depending on altitude but where I fly at 27,000 feet, it is very common to see it travelling at over 100 mph. In a plane that does 300 mph, it can take a big bite out of your groundspeed when heading west, although it feels great when you are eastbound. Unfortunately, the laws of wind-math work against all pilots.
 
A headwind will hurt you more than a tailwind can help you. Despite what seems logical, a round trip flight is not a wash when it comes to winds. As an example, a 200-mph plane with a 190-mph tailwind, would move across the ground at nearly double its normal speed. But when it turns around to go home into that 190-mph headwind, it would actually only be travelling 10 mph across the ground. That would be a long trip.
 
The headwind principle applies to many other areas of life. Bad things can happen quickly, but then take a much longer time to correct. This is especially true in investing. For investors it works like this. If your account suffers a 20% loss in a bad market, it takes a 25% gain to get back to where you started. If you suffer a 50% loss, as many did in 2008, then you need to gain 100% just to get back to even. Market losses measured in percentages, like headwinds, hurt you more than the same market gains will help you.
 
As a pilot in the winter it is not uncommon to take a route that is less direct, in order to avoid the headwinds of the Jetstream. You find yourself travelling farther, but the time to your destination can actually be faster. As an investor it is equally important to avoid headwinds, or losses. Taking what might appear to be a slightly longer route because it is less risky, may actually get you to your destination more quickly if that route helps you avoid significant losses along the way.
 
When you look at expected investment returns, don’t focus solely on the biggest numbers but also pay attention to the volatility you might incur while attempting to hit those numbers. Like headwinds to a pilot, a market loss can hurt you more than tomorrows market tailwinds may help you, so it’s best to plan your retirement trip accordingly.

​I recently read a particularly troubling story about an advisor who had stolen millions of dollars from his clients over many years. He had done so largely by forging client signatures on transfer documents. Many of the clients were single and elderly and so the advisor likely felt he would be less likely to be discovered.
 
The story reminded me of an experience when a local law firm asked if I would analyze the financial plan of one of their clients. As I reviewed the clients’ account, I discovered a couple of suspicious looking insurance policy statements. After some quick research I confirmed that the lady had literally spent over a million dollars on life insurance with companies that did not exist. The client was a widow, age 85, with no children. She thought she was buying large insurance policies to benefit her chosen charities. The agent was pocketing the money and creating the statements on his own computer, assuming when the client died no one would be around to discover his crime.
 
These examples teach at least two methods investors can use to help protect their accounts against fraud. In the first case, millions of dollars in cash was transferred out of the client accounts using forged documents. Though the clients may not have seen the forgery, they certainly could have noticed the money leaving their accounts. In order for fraud to occur, there has to be a movement of money or assets. One of the best ways to protect against this is to read your monthly statements. You may need help from a friend or family member but it is something all investors should make a habit of doing. While reading the statement, pay particular attention to any transfers out of the account. If you don’t recognize why it was done, call your advisor for an explanation. This simple procedure would have stopped the forgery fraud very early, yet it surprisingly went on for at least 10 years.
 
In the case of the 85-year-old widow, discovering this fraud would have been a little more challenging. In the age of the internet however, it is not too difficult to do a quick search of companies you invest in, especially when it involves money leaving your account as was the case here. If you don’t know how to do such a search, seek help from someone who does.
 
The good news in both of these cases is that the agents represented large, established investment firms that had policies and insurance in place to help protect their clients against fraud. In both cases the agents were sentenced, and the victims accounts were restored. Investors should ask their advisors what policies exist, and what insurance may be in place to protect their account in case of fraud or insolvency. The vast majority of financial advisors operate with integrity, but you want to know what your protections will be if you happen to choose one who does not.