Author: Jay Mooreland

The brain may be filled with gray matter, but it hates gray areas. And there are few other places we find gray areas (uncertainty) than in the economies and markets of the world. One word of caution: our innate desire for certainty leaves us prone to fall for the illusion of certainty. Market and economic forecasts often provide an illusion of certainty.

As much as we wish it weren’t the case, the markets are unpredictable – evidenced by the fact that no one can consistently predict them with accuracy. Of course, a certain forecast will be right from time to time, just like a broke­n clock. But market and economic forecasts are not reliable prognosticators, no matter how much we wish they were.

Unlike market and economic forecasts, my forecast is reliable and robust because it is based on enduring investment truths and investor behavior.

My Forecast For 2024

In full disclosure, the following forecast is nearly identical to my forecast from last year and years prior to that.

• The economy/market will do something that surprises us (and the experts)
• The financial media will enrich themselves by emotionalizing headlines and short-term market moves to entice you to click and tune in. It’s nothing more than click bait
• Investors who watch the news and stock market often will experience more stress than those that don’t
• Investors that move to cash, waiting for a “better time,” will suffer significant uncertainty and anxiety about when and how to get back in
• Your investment decisions and reactions to market events will ­­have a significant impact on your personal investment return
• You will be tempted to change your investment strategy based on market performance, expert forecasts, and/or your personal beliefs about the future

Conviction, patience, and discipline are virtues every investor should develop. They aren’t easy, yet they are essential for your success. As your advisor, one of my most important roles is helping you ignore the noise and focus on what really matters to your financial success.

I wish you a prosperous, fulfilling, and happy 2024. Thank you for allowing me to be your trusted partner along the journey.

– Scott

Tis the season of gratitude. Thanksgiving is perhaps one of the most underappreciated holidays, but most needed. Studies have shown that gratitude promotes many positive benefits – increased and lasting happiness being one of them.¹

Happiness is a desirable state of being shared by all people – irrespective of culture, background, or religion. Unfortunately, the pursuit of happiness is often focused on circumstantial happiness rather than enduring happiness.

It is true that some circumstances result in happiness, but such happiness is often temporary in nature, and will change as the situation changes. Enduring happiness is what we really seek. It requires more effort, but it is not subject to the whims of our ever-changing circumstances. We can increase happiness in our lives, no matter where we are or what we are going through, by practicing and expressing gratitude.

Why is Gratitude so Difficult?

Practicing daily gratitude can be difficult. This is because we are never at our “ideal.” There is always something better that we are pursuing. Seeking improvement and progress is a wonderful endeavor, but we shouldn’t become so obsessed with “ideals” that we fail to reflect on past progress and those things we have been blessed with.

What do you do first thing in the morning? Many people check their phones to see news headlines of the day and work emails – things that are often negative and/or stressful. How do you end the day? When we engage in activities that are stressful and/or concerning, it can be more difficult to express gratitude.

Making Gratitude Easier

Engaging in morning and evening activities that are positive in nature can make it easier to express gratitude. Exercising, playing with an animal, engaging in what interests our kids, or writing in a gratitude journal can make it easier to feel and express gratitude.

What one thing are you grateful for today? A great question to reflect on every day. Such reflection encourages positive thoughts, feelings of gratitude, and ultimately greater happiness. Positive activities may take more effort, but it’s worth it!

Thank You

We are grateful for you. Thank you for your trust and confidence in us. Thank you for taking our advice, even when it goes against what may feel right. Thank you for being a patient investor – we know it’s not easy. And thank you for choosing us as your partner on this journey.

– Scott

It is human nature to focus more on the present than the future, which is in line with our basic instinct of survival.

We focus on the present because that is where “life happens” and we experience feelings such as pleasure, pain, anxiety, and peace. Every day we face cost-benefit tradeoffs that not only impact our lives today, but potentially for years to come. Because of our nature, we often select those things that bring immediate gratification while delaying its cost into the future.

Investing Tradeoffs

Perhaps the most frequent and material tradeoff investors face is whether to sell when markets go down and the outlook is negative (they receive immediate emotional relief) or remain disciplined to the strategy even as account values go down. The former is easy, the latter requires conviction and perseverance. The tradeoff comes down to emotional comfort today vs. potential for greater long-term returns.

“The real key to making money in stocks is not to get scared out of them.”
– Peter Lynch

Smart Today May Not Be Smart Tomorrow

We tend to extrapolate the present into the future, as if things will never change. When times are good, we feel good and may underestimate the risk. When things are bad, it’s about how much worse things are going to get – especially when you have exaggerated headlines that feeds into the doom and gloom.

But things change – they always do. We don’t know when or what may cause the change, but markets and economies are cyclical. What may seem smart today could end up being unwise and costly down the road. That is why your plan is so important. It is the anchor that helps us bridge the present to the future and helps us make sure the decisions we make today will be in your best interest tomorrow.

– Scott

We all want desirable outcomes – those outcomes that bring us happiness, peace, and prosperity. Because we desire such outcomes, we may go into situations having high expectations. But it may be more beneficial to temper our expectations if we want to experience greater contentment in life.

Disappointment & Contentment

Disappointment occurs when a situation or outcome is worse than we expected. By intentionally setting expectations low, such as expecting long lines at the airport and flight delays, we decrease the likelihood of becoming disappointed or angry when “life happens.”

Contentment, on the other hand, results from situations our outcomes that exceed our expectations. When we lower our expectations, we put ourselves in a position to be pleasantly surprised more often, such as when we breeze through security and our flight arrives a few minutes early.

When we set expectations for something, we should consider how much control we have over the situation. If we have a great deal of control, we may feel confident setting high expectations for ourselves. But when things are out of our control, we should consider keeping our expectations low.

Investment Expectations

Most investors want to achieve high rates of return with little fluctuation in value. Assuming a given (and acceptable) level of risk, the higher the return, the better. But we should be careful to keep our investment hopes and desires separate from our investment expectations.

When we temper our investment expectations, we are in a better position to handle market surprises. Every year the market surprises us. Tempered expectations empower us to enjoy the positive surprises and put us in a healthy mindset to handle and adapt to the negative surprises.

I have found that the best expectations for investors are a combination of realistic optimism for the long term coupled with the expectation that, in the short-term, markets may not make sense and often fluctuate considerably.

– Scott

Investing may be simple in principle, but it isn’t easy in practice. Markets and economies are fraught with uncertainty, constantly changing news and markets, and how great some other investment is performing. Warren Buffett is one of the most successful investors of all time. From time to time he shares sage advice that every investor can benefit from.

Buffett’s Advice

I want to share two things that Warren Buffett said in the latest Berkshire Hathaway shareholder meeting. You will see that his counsel is not novel, nothing earth shattering. It is valuable because it helps us think about what really matters in investing and the approach we may want to take for our investment decisions.

“What gives you opportunities is other people doing dumb things… there’s been a great increase in the number of people doing dumb things.”

What kind of dumb things might investors do? In my experience, it almost always has to do with making hasty, emotional decisions. These decisions are often made in response to sensational news headlines, bold predictions, and/or recent market performance.

“The world is overwhelmingly short-term focused.”

Buffett doesn’t pay attention to short-term events, and he seeks to take advantage of those that do. These two comments provide insight to how Buffett has become such a successful investor. There is no talk of algorithms, trends, or fancy methodology. His statements are refreshingly simple.

Profiting From Mistakes

Investors often focus on how well a security will perform and work out in our favor. We seldom ask ourselves how a decision might be “dumb” or how much it could cost us, but that can be very helpful. Everyone makes mistakes. As investors, we can improve our game by minimizing our own mistakes while taking advantage of others’ mistakes.

Buffett’s advice really boils down to becoming a long-term focused investor. That means we do not allow the daily noise to distract us from our long-term view and investment strategy. Simple in principle, difficult in practice – yet potentially very rewarding.

– Scott

 
Source: 2023 Berkshire Hathaway Shareholder Meeting