Weekend Warm-Ups

March 27, 2020 - Signposts for Recovery, Corona as Vaccine & Love is Blind

  • After falling from all-time highs in mid-February, the S&P 500 just recorded its quickest three-day advance in ninety years. While the stock index pared its recent gains on Friday, its sudden surge has many investors scratching their heads. Is the worst over? Or is more pain in store? For every optimist who believes this is the beginning up a prolonged upswing in stocks, there exists a pessimist who views the recent gains as transient. Regardless of your viewpoint, it seems that a consensus has emerged regarding what needs to happen in order for global stock markets to achieve sustainable gains: clear signs of a slowing rate of infection or meaningful progress on the development of a vaccine. The massive fiscal stimulus package recently passed by Congress will likely help matters. When we start to get the upper hand on this terrible virus, a combination of investor optimism, repressed consumer demand, and the abovementioned economic stimulus will likely set us on the path to economic recovery. These viewpoints and many others can be found in an article I came across by Joe Zidle, Chief Investment Strategist for Blackstone Group. What makes this piece particularly insightful is that it provides clear indicators (amid our information overload) regarding what needs to occur for everyday life to resume and for the global economy to function normally again. It also looks to the future, drawing some interesting conclusions about Covid-19’s long-term impact on our economy. What nascent trends in the workforce has the virus’s spread accelerated? How will consumption, global supply chains, and connectivity respond to the damage wrought by the pandemic? Read the piece to learn more.
     
  • “If/when this pandemic ends, might we emerge with a stronger immune system: the ability to ramp up hospital beds and ventilators, enhanced systems for learning and cooperation, and a generation that places more importance on cooperation, and less on borders, political ideology, or number of Instagram followers?” If you are looking for any silver lining in the coronavirus pandemic, please read Scott Galloway’s latest piece, Corona as Vaccine. The aforementioned quote is but one of many interesting thoughts posited about how we, as a species, can react positively toward one another during this stressful time. Savoring the sound of your child’s laughter, taking time to deeply care about the well-being of someone else through a phone call, empathizing with medical professionals who are on the front lines battling against this awful virus while exposing themselves to significant stress and risk, these and many other heart-warming thoughts are shared in what just might be exactly what you need to read right now.
     
  • After 14 days of constant togetherness, running around after our three-year-old while sheltering in place and continuing our full-time jobs, my wife and I have begun to socially distance from one another once he goes to bed. While my wife sneaks away with a glass of red wine for some much needed alone time after a day filled with conference calls and parenting, I’ve been left in the unusual position of being fully in control of Netflix. And while I’d like to say that I’ve taken advantage of this liberation to watch a penetrating documentary or a critically acclaimed foreign language film, the truth is that I’ve really needed to veg out. So, I’ve spent the last week watching Love is Blind and I must admit that I kind of like it, albeit in a guilty pleasure sort of way. The show’s concept – singles who meet and get engaged without ever seeing one another face-to-face – compresses the timeline of courtship to marriage to a mere 30 days. A lot happens, very quickly, in these relationships, which is part of the reason this show is so watchable. That and the undeniable fact that many of the show’s participants are more interested in putting their need for attention above their own dignity. You’ll find some of the hottest messes on TV starring in this show, but behind each couple’s drunken blow-ups lies a deep, almost grim, conviction that if they don’t tie the knot now, the opportunity to do so might never again present itself.


Stay safe and healthy!

 

Best,
Zach

February 27, 2020 - Coronavirus, Say Nothing & The Stranger

  • Coronavirus. It is on nearly everyone’s mind as the fight to contain its outbreak continues apace across the globe. Mixed messaging by politicians, murky statistics on the number of infected individuals, and missteps in fighting the respiratory virus’s spread have only served to heighten global anxieties regarding its severity. And while global markets have been roiled of late, no one can say for certain whether or not the virus’s outbreak will have long-term (i.e. decades) negative implications for your investments. And a long-term perspective, dear reader, is how you should frame your thinking when pondering major changes to your investment portfolio. In a recent article I came across, this point was driven home in a straightforward way that may serve as a reminder of just how important it is to avoid knee-jerk reactions to events outside of your control. As the article concludes, “…drastic investment moves are sensible only when there have been drastic changes in your life, like a big new job or consequential medical news. And that hasn’t happened for most of us this week.” Sharp declines are never fun, particularly when they happen in such a compressed period of time. If you have any questions or concerns, please reach out to me to discuss.
     
  • I just finished reading Say Nothing: A True Story of Murder and Memory in Northern Ireland by Patrick Radden Keefe, and I am in awe of this work. The book begins with the abduction of Jean McConville, a widowed mother of 10, who was taken from her Belfast apartment in 1972 by masked militants and not seen again until her body was discovered over 30 years later. Using the murder as a launching pad, the book then delves into a period of time in Northern Ireland’s history known as the Troubles, a three decades-long conflict when Catholic republicans, through their paramilitary unit, the Irish Republican Army (IRA), committed horrific abuses with the goal of creating a united Ireland. What makes this book amazing is that it reads like a detective novel. Not only in the sense that it moves at a brisk clip, following its characters  - gunmen, double agents, hardened foot soldiers -  as they undertake one harrowing mission after another, but also in how it is structured; you forget about certain characters only to have the reappear at the exact moment you least expected. That being said, you never lose sight of the fact that the events described actually happened. The atrocities the IRA committed in the name of a united Ireland, as well as those perpetrated against its members by the British military and Protestant unionists, are unfathomable. This is a book that avoids easy binaries; there are simply no heroes on either side of the conflict, only complicated individuals who participated in events that required an immense amount of passion, betrayal, anguish, and vengeance.
     
  • Finally, a show you may want to check out. I hesitate to give The Stranger, a recent release on Netflix, my full-throated endorsement not because it’s a bad show. It’s actually quite good and hooks you right away. But as the show progresses, it felt, at least to me, that the writers were trying to cram too much into each episode, resulting a myriad of sub-plots that don’t leave a lot of room for character development. The show, based on Harlan Coben’s novel of the same name, takes place in Manchester, England and begins when a stranger upends the life of a well-heeled family through the revelation of a terrible secret. What transpires afterward is a series of events binding multiple characters together as they learn more about the stranger’s motives and past. If you find yourself toggling through Netflix one evening unable to make a decision on what to watch, you won’t regret giving this show a try. Just don’t expect it to leave any lasting impression.

 

Have a great week!

Best,
Zach

January 24, 2020 - Underdogs, Negativity & You

  • The haters. The doubters. Those who don’t believe you will succeed. How does their skepticism affect you? Whether it is a boss who “didn’t believe you were ready”, a romantic interest who ghosted you, or an investor who told you flat out that your business idea was not going to take off, I think we’ve all been in a position where others have expected us to fail or deemed us not worthy of further attention. I know I have, and it sucks. But a recent article I came across, The Upside of Being an Underdog, draws some fascinating insights linking underdog status to better performance (at least in the work place). There is a lot to appreciate in this piece, but two things stand out. The first is that the desire to prove others wrong is an extremely strong motivator; rubbing your success in the face of someone who doubted you is (though perhaps not admirable) a universally great feeling that can drive you to excel. Second, and perhaps more importantly, is the argument that underdog expectations only lead to increased performance when the, “perceived credibility of observers was low.” In other words, when your know-it-all mansplaining uncle - who has no experience in the field in which you want to launch a new business venture – tells you your idea is unlikely to succeed, you should silently rejoice in the additional motivation he unknowingly handed you. Receiving skepticism on your idea from someone with intimate knowledge of the field in which you want to operate, or whom you deeply respect and admire, however, may not have the same effect. As the article goes onto explain in more detail, you may still try to prove the “highly credible” critic wrong, but the desire to do so may come more from a place of anxiety as opposed to pure drive. Also, if you manage others and are looking for ways in which to keep your team motivated, there are quite a few useful insights in the article on how best to do so.
     
  • Negativity. It seems like it spikes post-holidays. Everyone is back to the grind, you’ve probably already gotten sick at least once in the recent past, and your next vacation seems like an impossibly long way off. As the reasons for being blue mount, it’s altogether too easy to let the negative emotions seep into – and dominate – one’s relationship with one’s spouse or partner. In an interesting piece in the Atlantic, How Negativity Can Kill a Relationship, the “negativity effect” (e.g. the tendency, as the authors state, “to respond more strongly to negative events and emotions than to positive ones”) is explored in greater detail as it pertains to committed relationships. The pernicious role insecurities can play in a relationship, the limited impact of actively seeking out solutions to martial problems, and the extreme importance of not withdrawing after receiving criticism from one’s partner – all this and more is thought-provokingly picked apart in the piece. If you find you don’t have the time to read the article in full (though note that it’s not too long!), its advice for couples can be summarized as follows: “being able to hold your tongue rather than say something nasty or spiteful will do much more for your relationship than a good word or deed.”
     

  • And, finally, a show recommendation. Have you ever wondered what type of show you’d get if you blended Dexter with Gossip Girl? Probably not. But if the end result of that combination sounds intriguing to you, then I recommend checking out You. Its second season recently dropped on Netflix and it’s struck a chord with the masses. The show follows Joe Goldberg (played by Gossip Girl’s Penn Badgley), a charismatic psychopath who goes to great lengths to prey upon young, good-looking women who have unwittingly come into his orbit. And while Joe is certainly creepy and damaged, what makes the show enjoyable is that he’s an outsider in some of the best ways – detached enough to clearly see other’s character flaws, clever in a tech-savvy 21st century type of way, and calculating in his actions – characteristics that manage to humanize him to a certain degree. Squint your eyes just enough while watching this show, and you may just end up seeing why some of Joe’s actions, however deplorable, are defensible.

 

Have a great weekend!

Best,
Zach

March 20, 2020 - Investing in the Age of Coronavirus

  • -7.6%, 4.9%, -4.9%, -9.5%, 9.3%, -12%, 6%, -5.2%. These were the daily returns of the S&P 500 over the course of the last eight days. It was enough to give most investors heartburn, if not an ulcer. There is a high degree of uncertainty surrounding what happens next in the stock market. Optimists believe that the infection rate will peak soon, and that governments around the world will coordinate fiscal, monetary and healthcare policies to mitigate the economic impact that coronavirus has caused. Treatments will developed, vaccines will be distributed, and future outbreaks will be easily contained. As will rebound globally, and stock markets will be off and running, reaching new highs by the end of the year in a fury not seen in decades. Pessimists, on the other hand, see healthcare systems unable to cope, exponential growth in the number of infected individuals, and the actions taken by policymakers to stimulate economic growth as minimally effective at best. People are fearful and depressed and financial markets continue to plummet. Which scenario is most likely to occur? I don’t know, and, quite frankly, no one else does either. But what I do know for certain, according to an article I came across, is that every bear market (i.e., a 20% price decline in securities from recent highs) in the history of U.S. stocks has led to all-time highs in the future. Although things seem bad right now - and the stock market’s decline is not helping matters – I am positive that we’ll get through this and that we will make our money back.
     
  • “Hey, Zach, that’s great and all,” you might be saying to yourself, “but is there anything concrete I should be doing now, instead of just sitting idly by waiting for the eventual stock market recovery?” Yes, of course! One of the simplest ways to take advantage of a stock market’s nosedive is what is called portfolio rebalancing. Specifically, if the money in your investment portfolio is split 60-40 or 70-30 between shares of stocks and bonds, it behooves you to sell the bonds that have gone up in price - since interest rates have decreased recently – and to buy shares of stocks that have fallen in price and are therefore now much cheaper than in February. By so doing, you are picking up stocks at a bargain and setting yourself up to reap a greater return when their prices eventually bounce back. If you are DIY investor, please keep portfolio rebalancing in mind. And if you work with a professional, now is a good time to put in a call to see if s/he is implementing this strategy. Big drawdown are scary, but they present opportunities. Rest assured, if you are a client of mine, I am rebalancing your portfolio.
     
  • Finally, I want to acknowledge the severity crisis that we are facing. It’s unlike anything that we have ever seen. There is going to be an economic slowdown. How long will it last and how bad will it be? I don’t know. And while it makes sense to invest in the stock market to take advantage of lower prices if you have cash to do so, I recognize that even far-sighted investment decisions can feel like the wrong ones to make during times of acute stress. It is entirely possible that money you have sitting in cash would be better served as an addition to your rainy day fund to help get you through any potential career or personal troubles that may arise in the coming months. To be clear, I am not suggesting that you hoard your money, but you certainly should not invest in the stock market if you need the money for everyday expenses or to meet other liabilities such as your mortgage, car, or student loan payments. What’s more, you probably are taking advantage of cheaper stock prices through regular contributions to your workplace retirement plan (e.g. 401(k), 403(b), etc.). Try and keep your emotions in check, and if you have any questions, please reach out.

 

Best,
Zach

January 31, 2020 - Home Buying, Empty Skyscrapers & Sex Education

  • Hardly a week goes by that I don’t field a question regarding real estate from either a client or friend. Whether one is buying a home for the first time, mulling over an investment property, or thinking about purchasing a second home, the desire to own real estate is as strong as I can remember. Whether or not this is due to the fact that real estate – unlike a boring mutual fund – gives people something to talk about with their friends, or because it provides a sense of permanence and stability most of us crave at one point or another, there are undoubtedly many good reasons to buy a home. But before making what could be the largest purchase of your life, it is important to consider the downsides of owning. In a recent podcast I came across, these drawbacks are discussed in greater detail. What’s good about this podcast – and what I often counsel folks to consider – is that it delves into the emotional aspects of owning a home, which are probably as important, if not more, than the financial implications. Peer pressure, anticipated price appreciation, "not paying someone else’s rent” – these and many other oft-cited reasons for purchasing real estate are explored in greater detail. I’d encourage anyone strongly considering purchasing real estate as a home to listen. 
     
  • Continuing with real estate, it’s hard to think about much else while walking through Manhattan. Luxury apartment buildings seem to be mushrooming across the borough, transforming its skyline over the course of the last five years. But with prices for newly built luxury condos reaching an average of nearly 4 million dollars, one can’t help but ask who can afford to buy. The answer? No one. According to a recent article I came across in The Atlantic, Why Manhattan’s Skyscrapers Are Empty, nearly half of these condos are unoccupied. The reasons for the vacancies – a dearth of rich foreign buyers, the Treasury Department’s clampdown on money laundering attempts through dodgy real estate transactions, and the reluctance among real estate developers to cut prices – all seem to point in the same direction; owning real estate, unlike in previous generations, has become a luxury too few people can afford. And while real estate prices in New York are certainly extreme, they reflect a national trend: middle-class home construction has cratered. This, in turn, has resulted in a severe undersupply of affordable homes, exacerbating a host of societal ills across the country. According to the piece, lower rates of entrepreneurship, decreased social mobility, and increased regional inequality can all be linked to unaffordable housing. Read this piece in its entirety if you are interested in learning more about how real estate – more than a decade after the Great Recession – is once again wreaking havoc on the lives of millions of Americans.
     

  • And, finally, a show recommendation. I don’t know about you, but I find it hard to turn away from a good high school drama. Particularly if it accurately depicts the angst, awkwardness, and pressure that many of us felt at one point or another during what are perhaps the most vulnerable years of our lives. Season 1 of Sex Education does just that and much, much more in a heartfelt, endearing way that will have you laughing out loud one moment and cringing to the point of embarrassment the next. The show follows the trials and travails of Otis Milburn (played by Asa Butterfield), an unpopular teenager who is, let’s just say, grappling with his sexual awakening. It’s not that Otis doesn’t know anything about how complicated relationships can be – as the son of prominent sexual therapists he is more than well-versed from secretly listening to his parents’ advice to their clients over the years – rather, he lacks real-world experience. But what Otis perceives as a weakness turns out to be a strength, at least in the eyes of an enterprising classmate, Maeve (played by Emma MacKey), who urges him to start a “sex clinic”, dispensing advice to romantically distraught classmates for a tidy sum each session. At heart this is a show about teenagers – and also adults – struggling with how best to articulate their emotions and actions regarding the oftentimes fraught subject of love. No one has it entirely figured out, and Sex Education reminds us that’s okay.

 

Have a great weekend!

Best,
Zach

January 10, 2020 - 2020 Market Predictions, Brittany Runs a Marathon & Serotonin

  • With 2020 underway, there is no shortage of forecasts about what will happen in the stock market in the coming year. And while legions of market analysts trumpet their projections for where they believe the stock market will end up (or down) at the conclusion of the year, it is important to keep in mind that one-year predictions are short-term. Investing successfully in the stock market, on the other hand, involves thinking long-term (i.e. decades). That’s why it was refreshing to come across a recent post highlighting some of the key considerations one should keep in mind when thinking about how best to invest not only in 2020, but also for years to come. In short: focus less on things that are out of your control and more on those which are within it. For example, don’t spend time thinking about which particular sector (e.g. technology, consumer staples, natural resources, etc.) or geographic region of the world’s economy may go gangbusters in 2020, which you cannot control. Rather, diversify your investments to gain exposure to all sectors and regions. Yes, hedging your bets through diversification may theoretically make you feel silly if portions of your investment portfolio do well and others do not – but history tells us that economic cycles will eventually change, thereby boosting previously underperforming assets classes. And when the economic shift does happen, you, as an investor, will be the beneficiary of a greater rate of return since you took advantage of a cheap entry point when the asset class was out of fashion. In other words, accepting the occasional strike out (short-term loss, or period of mediocre performance) is important if you want to win the game (long-term investing success). A financial advisor can really help you think through how to be properly diversified in your investment portfolio if you are uncertain whether or not you are (or should be).
     
  • Brittany Runs a Marathon. Yep, she certainly does. And while that is certainly a major accomplishment, it was, at least to me, the most uninteresting part of a pretty good movie. Based on the life of Brittany O’Neill, the director’s roommate, the movie follows the fictional Brittany (played by Jillian Bell of Workaholics fame) as she comes to terms with a life that has fallen off the rails. At 28, Brittany considers herself overweight, abuses prescription meds, is trapped in a dead-end job, and is enmeshed in a toxic relationship with her roommate that only serves to reinforce her low self-esteem. As one can guess, Brittany decides to make a change – literally one step at a time – and in the process meets a hilarious cast of characters who help her regain control of her life. Like a lot of good movies, this film is deeply relatable. Who amongst us has never been a rut, either personally or professionally, at one point in time? You know how this movie ends before you even begin watching, but the path to the film’s conclusion is enjoyable (if at times a bit cheesy).
     

  • I just finished Serotonin by Michel Houellebecq, and I feel like I do when I wake up with a really bad headache. This book wore me out mentally, not only because its protagonist, Florent-Claude, is about as unlikeable as they come, but also because the novel’s themes – social isolation, rampant consumerism, spiritual malaise – point uneasily toward the impossibility of obtaining happiness in one’s life in the modern-age. So why even give this book a try? For starters, this novel, much like Houellebecq’s other works, is exceptionally well-written and extremely thought-provoking. In the section when Florent-Claude, an agronomist by trade, travels to Normandy and witnesses the devastating impact that the European Union’s free trade policies have had on small-scale farmers’ sense of identity and financial well-being, the reader can easily grasp why modern-day political movements with a populist bent – whether it’s Brexit, the dismantlement of free trade agreements, or street violence triggered by small price increases to daily services – have spawned globally.  What happens to those who are left behind by globalization? The novel is sexually graphic, startlingly irreverent, and, at its core, deeply sad. In other words, a tough read - so many of society’s ills are reflected in this work – but worth the time if you can stomach the discomfort.

 

Have a great weekend!

Best,
Zach