Slow Ride: The Value of Doing Things Deliberately and Patiently

You’ve probably noticed, as I have, that much of business and technology is aimed toward making our lives simpler, faster, and more convenient. What I’d like to point out here is that there are areas where taking your time and being patient will yield benefits that will not usually come quickly and easily.

Stock market investing in individual companies, ETFs, and mutual funds for the long run is a good example. Let’s consider the technology sector. What are some of the companies that have a long-term record of growth and success? How about Alphabet Inc. (better known as Google with the ticker symbol GOOG), Microsoft (MSFT), Apple (AAPL), and Salesforce (CRM)? A couple of good mutual funds are the Fidelity Select Technology Portfolio (FSPTX) and the Columbia Global Technology Growth Fund Institutional Class (CMTFX), while a couple of solid ETFs are the Vanguard Information Technology Index Fund ETF Shares (VGT) and the Invesco S&P 500 Equal Weight Technology ETF (RYT).

These investments all have something in common. Right now, because of inflation, the Federal Reserve, and a few other factors, large and institutional investors who really control the direction of the market are rotating away from technology stocks and investing in other sectors in the stock market. What that means is that right now these are all stocks that are decreasing in value, and may continue to decrease in value for a bit.

Now, if you are a patient and determined long-term investor it’s time grit your teeth and recognize why you made the initial decisions to direct your money toward these companies and funds: excellent leadership, consistent returns, and a track record of success. You’re not in the game for the daily or weekly price fluctuations, you’re in it for the long run.

One easy way to overcome your doubts is to go to the Yahoo Finance web site and look up your fund or company inside the site. Find the chart and click on “5Y” just above the actual chart. What this does is give you the share price chart history of your fund for the past five years. What you need to do is make a note of the current share price and the share price five years ago (at the beginning of the chart). You can use those numbers, along with the calculator on your phone or computer, to find the average return of this stock for the last five years.

Here’s an example. I really like the company Vanguard, so let’s take a look at their information technology ETF, which has the ticker symbol VGT. The current share price is $434 (down about $25 in the last week) and the share price five years ago was $135. That means the price has increased about $300 in the last five years (434 – 135 = 299). To find the percentage increase for five years divide the increase in value by the beginning value and multiply by 100. In this case that means (300/135) x 100 = 222%. (The actual value is a little more than 222.)

You’re almost there. Now if you divide this number by five (for five years), you’ll get the average return for the past five years. For VGT we can see that 222/5 = 44 (actually, again, a little more), which tells us that over the past five years VGT has given us an average return of over 44%! That $25, per share, lost in the last week doesn’t look so bad now, does it?

The point is that, for most of us, looking to make consistent returns, we just need to make deliberate decisions to invest in excellent, established companies (or funds) with a history of strong (average) returns and (in the short run) be patient and trust in our initial decisions.

Another place where we’ll all need patience, at one time or another, is at the intersection of diet, exercise, and weight loss. You want to take an approach that leads to weight loss in a way that is permanent without compromising your health or lifestyle.

If you are patient and determined the journey is a simple one. Exercise more (aerobic, strength, and flexibility), and eat less and better (more fruits and vegetables, less processed food). Not only is it important to make the adjustment slowly, but you also need to get accustomed to losing weight slowly. It depends on where you start from and how hard you work, but it’s okay for many to lose just a few pounds a month.

Ideally, weight loss (or weight maintenance), is just one side benefit of a healthy lifestyle that incorporates working out and a thoughtful approach to eating. As things change (age, responsibilities, etc.) accommodations and adaptations will always be necessary. Always be mindful and patient with yourself.

Focus on Food: Red Sauce

Red sauce is also known as tomato sauce, pasta sauce, and a number of other names. It’s one of the “mother” sauces because it can be the base for many other sauces. Red sauce is the base for pizza sauce, lasagna sauce, etc. My favorite is the Perfect Easy Red Sauce recipe in J. Kenji Lopez-Alt’s book The Food Lab. Your local library should have a copy.

Focus on Exercise: Physical Therapy

One of the reasons you need to keep an open channel of communication with your primary care doctor is that they can refer you to specialists. A physical therapist is a specialist that can help when you have trouble moving around (or even standing) in your daily life. A physical therapist will customize a treatment plan to minimize, or eliminate, your pain.

Focus on Investing: Meta (ticker symbol FB)

One of the hottest areas in the technology sector of the finance world is the metaverse, with it’s potential to alter the way the people connect and interact. If you’re looking to invest in the metaverse the most established and consistent company is this area is Meta (formerly known as Facebook).

Spreading It Around: Diversification and Variety

It’s the finance equivalent of not putting all of your eggs in one basket. Diversification is usually associated with risk management in investing. You invest in a variety of financial instruments because different investments don’t move together and are affected by different factors. Ideally, all investments are always increasing in value, but most investors will never be that lucky. With diversification when some investments are decreasing in value, others are increasing. You are protected not only from the risk of taking devasting losses, but from the psychological roller coaster an undiversified portfolio may take you on.

You can diversify with different asset classes by investing in real estate, stocks, bonds, and cash. In addition, it’s prudent to drill down and diversify within asset classes: commercial real estate and residential real estate, technology stocks and energy stocks, or corporate bonds and municipal bonds.

How can the average person diversify? Start by buying a house rather than renting. All of the money that goes toward you dwelling is then an investment. Open a bank account with savings and checking and store some money there to act as your cash investment. An additional benefit here is that your money is a bank account has FDIC federal protection. You will never lose it.

Then open up an online account with the investment management company Vanguard to invest in stocks and bonds. Vanguard provides a number of diversified products which do the work of inter-asset class variety for you. For example, Vanguard offers a Total Bond Market Index Fund (ticker symbol BND) and a Total Stock Market Index Fund ETF (ticker symbol VTI).

One interesting aside, and contrary argument, could be formed around the incredible advancement of large-cap technology stocks since 2008. If you had invested only in Apple, Facebook, Microsoft, Amazon, and Google at that time you would likely now be very rich. Even today its hard to not consider this approach. These are clearly five of the largest, most successful, and talented companies in the world today.

A chart comparing the share price advancement of these companies since 2008 indicates that they don’t really move together. But, as enticing as this strategy sounds most investment professionals would agree that this this lack of diversification would put the investor in a precarious and vulnerable position.

Diversification is also important in food and eating as it helps to manage your risk of illness. The easiest and most intuitive way to integrate all of the nutrients (both micro and macro) that your body needs into your life is to consciously purchase and consume a wide, diverse variety of fruits and vegetables. Each vegetable provides its own particular subset of nutrients. Rice, corn, and beans topped with avocado slices, and garnished with lime and cilantro provides you with a (delicious) full set of all macronutrients because of the diversity of nutrient subsets.

What’s especially straightforward is that nature supplies you with a simple method for insuring that your diet is diversified: color. Eat a wide variety of different colored fruits and vegetables and there’s your nutritional diversity. Naturally, some colors tend to be a little more nutrient-dense (green) and some foods supply an especially rich mix of nutrients (so-called “superfoods”) but color variety is an exceptional starting point.

How about exercise? Is diversity important in your workout regimen? The answer is a resounding “yes” and the reason why is because your physical being, your body, is made up of different muscles and systems and needs to be able to comfortably make all kinds of different movements. When you vary your workouts it’s a guarantee that your body will be tuned to function at its highest level while you manage your risk of injury.

Exercise can roughly be broken down into three complementary areas: aerobic (running, walking, swimming, biking), strength (weight training, bodyweight exercises), and flexibility (stretching). Flexibility and strength training work and stretch your muscles, joints, ligaments, and tendons; while aerobic exercise conditions your heart, lungs, and circulatory system. While aerobic activity is most essential you need the diversity of all three types of exercise to maximize your workout benefits.

To wrap it up I’d like to recognize that diversity in all of its forms is not only the correct approach to diet, exercise, and investing it will also provide you with a higher quality of life. You will feel better and be better. Diversify.

Focus on Food: Roasting

While it’s usually affiliated with meat, roasting is an essential technique that anyone can use to be more plant-based and incorporate more vegetables into their diet. Roasting is surrounding food (uncovered) with hot air and is usually accomplished in an oven. With a light coating of extra-virgin olive oil and a little salt and pepper roasting can bring out the flavor and sweetness in all kinds of vegetables: Brussel sprouts, cauliflower, sweet potatoes, carrots, bell peppers, mushrooms, eggplant, asparagus, squash, etc.

Focus on Exercise: Aerobic Fitness

Exercise should be an essential element in any healthy lifestyle. Exercise can roughly be divided into three areas: strength training, flexibility, and aerobic activity. Aerobic (or “cardio”) training is the one that gets your heart pumping by walking, running, riding a bike, swimming, cross-country skiing, etc. If you are pressed for time and can’t fit all of these in make aerobic your priority and reap its many benefits.

Focus on Investing: Nvidia (ticker symbol NVDA)

Nvidia is one of the leaders in manufacturing computer microchips at a time when the world is suffering from a microchip shortage. They supply chips for a rapidly expanding variety of products and businesses including artificial intelligence, robotics, gaming, and vehicles. Nvidia’s share price has increased tenfold (from $25 to $250) in the last five years. Potential investors should be on the lookout for an entry point.

Connecting the Great Recession of 2008 to the Capital Insurrection of 2021

Since the first time I saw the terrific documentary Inside Job (narrated by Matt Damon, the new pitchman for Crypto.com) I’ve been fascinated by the events leading up to and surrounding the Great Recession of 2008. It just felt like complete lawlessness, out in the open, as people and businesses at so many levels of American society ignored and broke with norms, and in some cases, laws. A lot of money was being made for all the wrong reasons.

The story of the Great Recession began with a great idea, a financial instrument called the mortgage-backed security (or “MBS”), which was invented by a bond trader named Lewis Ranieri at Solomon Brothers in the 1970’s. It allowed their customers to invest in an MBS and they would profit from the interest stream created by the list of mortgages that made up a mortgage-backed security.

What happened over the next three decades was an explosion in similar, and increasingly complicated, financial derivatives (they “derive” their value from something other than the investment itself) instruments. The virtual machinery that created and distributed these derivatives was known as the “Securitization Food Chain.” In its simplest form, this included the homeowners, mortgage lenders, investment banks, and investors. This system could have worked beautifully, as long as everyone used common sense and no one got greedy.

Instead, what occurred was self-interest run amuck at every link in the chain. Those wanting to own a home borrowed sums of money they couldn’t possibly repay, mortgage lenders continually lowered their underwriting standards to make increasingly risky loans, and investment banks were the most reckless of all, building financial derivative businesses with more and more borrowed money.

This looming disaster was no secret. Brooksley Born and the Commodity Futures Trading Commission lobbied Congress and the President for permission to oversee the derivatives market and were not only shot down, but eventually inspired legislation that banned the regulation of financial derivatives. A professor of finance from the University of Chicago’s famed Booth School of Business, Raghuram G. Rajan, circulated an article entitled “Has Financial Development Made the World Riskier?” It was widely panned. Many other papers and books were written and the International Monetary Fund (an international financial institution designed to foster financial stability) attempted to intervene.

Eventually, the entire mess lurched on and morphed into a giant de facto Ponzi Scheme, ready to blow. Warren Buffet, in fact, referred to derivatives as “Financial Weapons of Mass Destruction.” In the end, the Great Recession had a devasting effect on the lives of tens of millions of people and led to the loss of $2 trillion of global economic wealth. What is most amazing though, is that almost no one, at any level was held responsible.

On January 6th, 2021 a few thousand followers of former President Donald Trump broke from a mostly peaceful protest and conducted a violent attack on the U.S. Capitol Building in Washington D.C. in an attempt to disrupt the counting of the electoral votes that would formalize the election of incoming President Joe Biden. Watching the attackers; with their swastikas, confederate flags, and Trump swag; chilled me in the same way the Great Recession did. It was also lawlessness happening right out in the open, and almost no one was doing anything or trying to stop it.

The Insurrection’s devastation occurred in a much more immediate and spectacular fashion. Assailants trashed the Capitol, assaulted the police, and threatened the legislators working inside. People died and, while the world watched, an important symbol of American democracy was vandalized by citizens, feeling marginalized and inspired by conspiracy.

Like in 2008 there were warning signs that were largely ignored. Trump had invited sycophants via Twitter, claiming “Be there. Will be wild.” Everyone saw this. The Secret Service prepared a brief entitled “Wild Protest.” There were numerous red flags popping up all over social media. Facebook was later revealed to be too slow to react to the spread of conspiracy misinformation and inciteful content. Locally, the Capitol Hill police had received numerous threats of violence.

Like in the Great Recession there were those who saw that what was happening was wrong and tried to intervene and stop things, and they too were woefully undermanned. But here it was the Capitol police, and protecting the Capitol Building was their job. Like Brooksley Born and Raghuram G. Rajan, they were completely outnumbered and overwhelmed (in this case) by the planners and participants in the Insurrection.

While many of the vandals responsible for the actual damage done on that day have been arrested and convicted, as of this writing, none of the planners who planted the seeds of destruction have yet been held responsible. It’s this escape from culpability that seems so reminiscent of the Great Recession. Many pointed to Section 3 of the 14th Amendment to the Constitution, which says that no Federally-elected official (including the President) should engage in insurrection against the United States. As of this writing there is still a United States House Select Committee investigating the attack, so this story is not quite over.

You could point to the Tea Party (a movement whose foundation is that ordinary people are ignored by the government and the elites) as the crucial link between these two events, as part of the inspiration for the Tea Party was a reaction to Barack Obama’s handling of the Great Recession. That populist philosophy is what fueled the Trump followers who blitzed the Capitol building.

In a more general sense, what seems to connect these events is the quest of a goal (whether it be political power or economic profit) without regard for the fate of others. Most of the players in both of these situations acted without honesty, integrity, or character. In both cases, it felt like I was watching a colossal bank robbery that was happening out in the open and, for the most part, nobody was doing anything about it.

To stretch the thesis a little further, and have some fun with it, the emergence of the University of Oregon Ducks college football program in the late 1990’s and throughout the 2000’s hit me in a similar fashion. After going through a decade or so spending all of my time working, I finally started watching some sports again.

One of the first things I saw was Oregon Ducks football and it floored me. Their offense moved quickly from play to play and there was no huddle between plays. They used crazy formations and pulled out a lot of trick plays. Instead of punting on fourth down they went for it. Even something that was usually mundane and automatic, like the extra point after a touchdown, became a spectacle. You just never knew what was going to happen.

An Oregon quarterback might scramble or run on any play. Wide receivers were routinely used as running backs and some of the players were also stars on Oregon’s track and field team, in the spring. They had all kinds of crazy uniforms because of their direct connection to footwear and apparel giant Nike and its colorful founder, Phil Knight. It didn’t occur to me at the time, but what Oregon was doing was breaking norms, albeit in a positive and groundbreaking way. Today, you can see aspects of the Oregon approach everywhere, at every level of competition.

Focus on Food: Panini Press

In my short stint working at Facebook, I grew to love the panini press. You use this electronic device to melt the cheese inside and toast the bread outside. It’s kind of a like a waffle iron for sandwiches and will set you back between $25 and $125 for a good one. It just elevates the sandwich to a whole new level and is highly underrated. If you have room on your counter and like sandwiches, well, this is a nice little way to treat yourself.

Focus on Exercise: No Equipment No Gym Strength Training

Even before the Covid-19 pandemic hit I was doing my own version of the cobbled-together no equipment strength workout while watching college football and basketball games. My only pieces of “equipment” are the kitchen table, the coffee table, and the living room rug. The workout incorporates physical therapy, yoga, and your standard old-school exercises like push-ups, crunches, and lunges. Use Google, the internet, and the advice of your doctor to put one together.

Focus on Investing: Vanguard S&P 500 ETF (ticker symbol VOO)

This is your standard go-to low-cost index fund that is a legitimate gauge of the entire U.S. stock market. If you just want to invest in a broad-based fund that trades like the stock of an individual company and tracks the entire stock market this is the one you want. The returns include your piece of the dividends of the companies in the index and the cost is just three basis points (.03%, or three one-hundredths of one per cent).