Financially Speaking – Wealth of Knowledge

I’m going to start out this article with a little venting. Aren’t you just up to your eyeballs with COVID?

I can’t believe I’m mentioning COVID again like I did in last year’s holiday issue. I can’t go anywhere without hearing or thinking about it, and it’s even affected the due date of this article. As I’m writing this, it’s Sept. 28, and if my local Walmart can have their holiday stuff out already, then so can I! Right now, COVID seems to be a pandemic primarily for the unvaccinated, but it affects all of us. Whether you’re talking case and death counts, 24/7 media coverage, or mandates, COVID is everywhere, physically or virtually. Years ago, it wasn’t a question of whether you would get vaccinated or not. It’s a shame that it’s become a pollical issue that is intensely oversaturated in the media.

I remember my parents piling all of us into the ’56 Chevy Bel Air station wagon and heading to the family doctor. I don’t remember the reason we went except that we all received a paper cup with a sugar cube. Turns out, I had gotten vaccinated for polio that day. Polio was a crippling disease, which affected one of our more famous presidents, Franklin D. Roosevelt, who contracted polio at age 39. Now that I’m older, I can’t imagine my parents not vaccinating us.

There is so much going on that is affecting most of us. This year the kids are back in school, and many of you may still be working remotely or possibly adjusting to the new hybrid model between home and the office. Stock-market volatility has picked up recently; the Federal Reserve is preparing to stop its supportive monetary policy, which helped our economy through the pandemic downturn; and inflation is rearing its ugly head, although the Fed still believes it to be temporary. Due to the shortage of workers over the last year, hourly wages and salaries have gone up, the cost of eating at a restaurant or takeout has certainly increased, and the cost of food at your local supermarkets has increased. So, are these costs temporary? We’ll see if the Fed is right or not.

Let me cherry pick one thing from the all-in Consumer Price Index basket (CPI measures inflation) that we all use in one way or another – West Texas Crude, which is used to make gasoline. Crude oil prices have hit their multiyear highs this week, and natural gas prices have jumped to the highest levels since late 2008. So, as we end the third quarter of the year and head into the winter, heating prices are climbing. Last year on this date (Sept. 28), West Texas Crude traded at $39.29 a barrel, and today it is at $74.88 per barrel. You have certainly felt the pain each time you fill up.

Congress is still struggling with itself, trying to pass legislation. It has gotten to a point where many of our clients have stopped watching the nightly news, due to all of the negativity. We are still waiting on the president’s infrastructure bill, new tax legislation and, of course, the human infrastructure plan. One thing for sure is that many of us will be paying higher taxes next year.

So, as we enter the holiday season, it certainly feels like Congress is going to try to steal our holidays. Don’t let it, since the holidays are about hope, love and peace.

My holiday gift to you is a suggestion to pick up a book I read this summer that I believe you may find valuable. It is not a how-to book, but one that might help you change the way you think about investing and your future: “Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life,” by William Green. The author interviewed these brilliant investors and shared some of their thoughts and core principles. If you take the time to read it, hopefully it will provide some insight that may be beneficial to you and yours. Who knows, next year’s holiday may be just a little brighter than 2021 because of it. You may know the names of some of the people Bill Green interviewed over the past quarter of a century.

The late Jack Bogle, the founder of Vanguard, mentioned a lesson he learned from his mentor, Walter Morgan: “Don’t get carried away. Don’t take excessive risk … Keep your costs low.” He also said, “You don’t need to be great” to thrive as an investor.

Bill Ruane of the Sequoia Fund warned: “Do not borrow money to buy stocks … You don’t act rationally when you’re investing borrowed money.” He also advises to watch out for momentum and proceed with caution when you see markets going crazy either because the herd is panicking and selling off or buying stocks at irrational valuations. He has also never been one to follow market predictions and believes that no one knows what the market will do.

Mohnish Pabrai was a student of the principles of Warren Buffett and Charlie Munger. He entered a charity auction for a power lunch with Buffett and won the lunch for a mere $650,100. He said he learned two invaluable lessons: “One about how to invest, one about how to live.” During the lunch, Buffett mentioned an investor named Rick Guerin and told Pabrai how Guerin used margin loans to leverage his investments because he was in a hurry to get rich. According to Buffett, Guerin was hit with a margin call after suffering a disastrous loss in the 1973-74 market crash, forcing him to sell shares to Buffett that were later worth a fortune. In contrast, Buffett said that he and Munger were never in a hurry because they knew that compounding their investments over decades without making too many mistakes would make them incredibly rich. He said, “If you’re even a slightly above average investor who spends less than you earn, over a lifetime you cannot help but get very wealthy.”

Sir John Templeton mentioned six principles that he believed would help any investor. First, “Beware of emotion: most people get led astray by emotions in investing.” Second, “Beware of your own ignorance … So many people buy something with the tiniest amount of information.” Third, “You should diversify broadly to protect yourself from your own fallibility.” Fourth, “Successful investing requires patience.” Fifth, “The best way to find bargains is to study whichever assets have performed most dismally in the past five years, then to assess whether the cause of those woes is temporary or permanent.” Sixth, “One of the most important things as an investor is not to chase fads.”

These are just a few tidbits from the greatest investors of all time. There are many more throughout the book. The best investors build an overwhelming competitive advantage by adopting habits whose benefits compound over time. Investing is not a sprint but a marathon. My gift this holiday is to whet your appetite to read and feed your brain, improve your life, and, of course, become wealthy.

Merry Christmas or a Happy Hannukah to all, and I hope that 2022 is one of good health, happiness, and prosperity.

Fred Dunbar, CLU®, ChFC®, RFC®, AIF®, is President of Planning Directions, Inc., a registered investment adviser, and Common Cents Planning, Inc. He also offers securities through Commonwealth Financial Network, member FINRA/SIPC. Advisory services offered through Planning Directions, and fixed insurance products and services offered by Common Cents Planning, are separate and unrelated to Commonwealth. Fred may be contacted at 800-647-0762, by e-mail at fdunbar@commoncentsplanning.com or by mail at 239 Baltimore Pike, Glen Mills, PA, 19342. He’s always happy to meet with you “down the shore” at 6606 Central Avenue N. Sea Isle City, NJ, 08243.