by Jason Bodner
May 10, 2022
It’s only money.
My best friend says that all the time. It’s pure irony, because to some, money is just about the only thing.
We spend a lot of time and emotional energy worrying about money. How many people have died in wars over their possessions? People get shot in bank robberies trying to hold on to their money. Families split apart. Adult children steal from their parents, but isn’t it really only just paper or electronic ledger entries?
Scroll down and you’ll see I included no charts this week, no sector analysis. Today, I’m just going to provide some perspective on all the anxiety about interest rates, inflation and a potential recession.
The Bare Necessities are All Taken Care Of
Our ancient ancestors worried mostly about bare necessities, like food and shelter. If that was taken care of, they likely led fairly relaxed lives; snoozing when they wanted or lying down and looking up at the stars in wonder. But then something revolutionary happened: They cultivated a form of wild grass called wheat.
Then came the luxury trap. We started farming. That put an end to our nomadic lives. We became slaves to our crops. We needed to water, weed, care for and harvest those crops. We worried about predators or other tribes attacking our village or stealing our crops. We spent long hard days in heat hauling buckets of water and performing back-breaking labor. Eventually, we bred beasts of burden to do our hardest labor.
How many head of oxen or cattle we owned denoted our wealth (cap = head, hence “capitalism), even if sometimes the people counted the number of pigs owned as a measure of prosperity, as in in New Guinea.
When we were hunter gatherers, we didn’t need to worry about protecting the livestock or the crops, just finding that day’s food to feed our bellies, and a safe place to sleep. Some argue that our new dependence on wheat caused disease and sickness. More food also meant more babies. Each new generation led an easier life than their parents did. That’s still true. Imagine telling your great-grandparents that we can potentially 3-D print our hip replacements to accelerate the already-fast healing process?
Eventually, the agricultural society created symbols for wealth, the first being gold and silver, or a natural combination of the two called electrum, in coins first dated around 600 BC. That eventually gave way to paper promissory notes for gold, which became paper money. And now we have digital money.
The “luxury trap” grew from crop dependence. Today, the luxury trap may be a nicer house, a nicer car or great vacations. At age 25, we may tell ourselves that we will work hard for 10 years so we can retire to freedom at 35. Only by then there are mouths to feed, cars and mortgages to pay, and colleges to save for.
Today, we worry about perceived threats the same way early farmers did, but our threats aren’t just to our lives. They are to our money. Shakespeare could have said: “Hell hath no fury like an investor scorned.”
Some stock indexes are down 20% or more this year but imagine talking to your hunter-gatherer fore-bearer about your problems. He’s pondering tomorrow’s nomadic move while you fret about whether the Fed will raise rates three or more times this year and by how many “basis points” (1/100th of one percent).
In your best but anxious early homo-sapiens grunts, you ask: “What will happen to my stock portfolio?!”
Your ancestor has never heard of money, much less basis points or the Federal Reserve or portfolios, so he might grunt back to you, “Do you have food? A cave? Warm clothes? OK, so what’s your problem?”
Folks, it’s only money. Don’t get me wrong: uncertainty over our economic future is certainly a serious matter, but how serious? We live in the most prosperous, healthiest time in human history.
And it will only keep getting better.
What To Do to Bring That Money Back Home to You
I’ve already given clear direction over how to navigate the investment side of these turbulent times:
- Holding cash in a high inflationary environment is certain to waste away your buying power.
- Buying bonds at current rates will likely lead to negative real returns. Stocks are your best bet.
- Conservative investors should buy high dividend stocks for some income, capital preservation, and even historically assured capital appreciation.
- Aggressive long-term investors should buy beaten-down profitable tech stocks with sales and earnings growth, high cash and low debt balance sheets.
Many companies were unfairly punished for being “growth” stocks, but higher interest rates don’t affect companies not borrowing money. In other words, if you have no debt to refinance, so what if rates go up?
That advice still stands. But here’s my added advice to help you live a happier, more fulfilled life:
Until that day when stocks resume consistently rising again, please Stop Worrying. It’s only money.
Stress and anxiety take toxic tolls on our mental and physical health. Indulging in our deepest fears over things we can’t control is futile at best. At worst, it’s wasteful of the only true asset we have: Time.
Sadly, we can’t make more time. Seeing as you are spending some on me, let’s make it worth your while.
- Set aside savings monthly to buy stocks regularly. Set up an investment environment where you don’t really care about what happens to interest rates. Throughout the last 100 years, rates and inflation have zig-zagged but stocks have gone up overall. That’s because stocks represent companies in the business of survival, growth and durability.
- Avoid margin (leverage) at all costs: Leverage will make you giddy on the way up, but it can ruin you on the inevitable way down. (After these two steps, the next two steps should be enjoyable):
- Enjoy the process of researching and selecting businesses to invest in. (We can help you there, it’s what we love to do.) Enjoy knowing that you are investing and compounding your wealth for the long-term future of yourself and successive generations
- Go enjoy something you love, whether it’s golf, music, surfing, writing, walking, appreciating nature or spending time with friends and loved ones, because each moment that ticks by is gone. We won’t get it back. Do you really want to spend your time fretting over what you can’t control?
Ironically, time is the only asset that both wastes and rewards. Each minute passed doesn’t come back, but each moment can also make us richer in the mind – wiser, happier, and more satisfied.
Worrying about inflation, interest rates, COVID, and war won’t make you richer. It will only make the news companies and their advertisers richer at your expense.
To make yourself richer, enact a stable plan over time and stop stressing. Two simple rules to live by:
- Don’t let your fears own you: Free your mind from worry.
- Pursue your passions: Spend the most important asset you have wisely: your time.
Maybe our hunter gathering ancestors inherently knew this. They relaxed and did what they wanted to do until it was time to eat or sleep. Then, when they created food and shelter by easier means, they created luxury which created reliance and enslavement. There was a great line about this in the movie Fight Club:
“The things you own end up owning you. It’s only after we’ve lost everything that we’re free to do anything.”
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Dollar Remains Strong, as Europe and Japan Delay Raising Rates
Income Mail by Bryan Perry
Inflation-Friendly Income That Gets the Job Done
Growth Mail by Gary Alexander
Problems Always Abound, but the. U.S. Remains the World’s Oasis
Global Mail by Ivan Martchev
On The Threshold of Bond Market History
Sector Spotlight by Jason Bodner
It’s Only Money – and It Will Likely Return
View Full Archive
Read Past Issues Here
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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