Always enjoy reading your views on the market. Absolutely love that you framed this one around the Artemis II mission.
My wife and I are older than most parents with similar age kids. Having kids now age 8 & 11, and seeing how they’re at a similar age to what we were when the Challenger blew up… that Artemis II mission was a more nerve racking than I’d anticipated. When Artemis finally landed, my wife and I both breathed a huge sigh of relief.
As I think about how people see their retirement savings, it is the exact opposite… we’re afraid our nest eggs will fall back down, return to where it started, and there is no landing. There’s rarely a relief and feeling of having landed. Most retirees wonder well into their final years if they have enough, will it last. We covet safety and certainty when, many times, it’s an illusion.
Appreciate how you drew comparisons between those two events. I’m sure I’ll think about that plenty in years to come.
"There’s rarely a relief and feeling of having landed. Most retirees wonder well into their final years if they have enough, will it last. We covet safety and certainty when, many times, it’s an illusion."
That's what the safety of fixed income is for. Clarity of predictability, albeit for a lower return. For retiree's putting some of their heard earned growth of equities into fixed income is, in a way, returning... landing. Thank you for helping me to see that. In some ways, I wish I would have drawn that distinction at the end of the piece. it's a GREAT frame.
Last and maybe more important, I was in college when the Challenger blew up and I remember we had a small TV in our room and I watched it real time. I remember being shocked and then confused. I think Peter Jennings on ABC didn't even know what was happening or how to interpret what just happened.
For everything to go right, it's practically a miracle of human ingenuity isn't it?
Thanks for taking the time to comment. I appreciate it.
Thank you, James. "Of Money and Meaning" -- the perfect title for your Substack.
You are, and have always been, the steady hand at the tiller, no matter how high the waves go up and down. Whether the subject is money or anything else.
Amba, thank you. With 100% sincerity, I will say that my steady hand at the tiller is a result of my relationship with you over the past thirty years. I'm ever so grateful for you. 🙏
Yes. I know him well. I’ve known him well. For forty years. James is, and has been, a central figure—a hero in my life—- a dear, dear friend, a mentor, a student (of life), a coach, a guide, a sponsor for others, a stalwart champion of my work, a contributor, and a profound contribution to the planet. A unique, steady voice for calm, no matter the outer turbulence.
Amba, if I'm a hero, you are a lighthouse for my seas. Whether calm, or stormy. Seared in my my memory is meeting you for the first time all those years ago, during HOL at the Hansen's Inn in Corvallis. My life, and myself is profoundly deeper and more meaningful of a journey that started that morning. 🙏🙏🙏
Thank you, James. I remember the Hansen's Inn! I can even picture you in your seat, about half way back, I think on the aisle or maybe one or two places over., left side, me facing out. You made an impression, even then! How many years ago? And when you called me fourteen years later, to bring me into Capitol One, and said "Hello. I'm James Bailey...I don't know if you remember me," my memory of you was instantaneous. You are unforgettable. And a treasure.
James—I really loved this. The idea that meaning comes from long term patterns—not reactive moments—really landed for me (pun intended maybe :)). I keep trying to think in those terms whether I'm watching the news, my money, what's going on at work, or being a positive presence at home. You have to live in the moment for sure to enjoy life, but I'm trying not let it point me in the wrong directions with being overly reactive. Your article was thoughtful, and quietly encouraging in the best way. Thanks for writing this.
Kirk, I missed this comment after you sent is and am just seeing it now. I really appreciate your words and how it landed on you. This could be an essay itself:
"You have to live in the moment for sure to enjoy life, but I'm trying not let it point me in the wrong directions with being overly reactive."
Always enjoy your essays - and I understand Artemis' journey better than the market, but you're making it easier to follow. I imagine your clients also find your writing + your guidance incredibly helpful.
On an almost-unrelated note, did you see the gorgeous song that a couple of Gen Z'ers wrote about one of the astronauts naming a crater after his late wife? It has also stuck with me - the purpose of Artemis' journey was more than science and discovery; it was also about hope, love, grief, and renewal.
Serena, I had missed your comment here when you sent it. So very sorry. And wow, I hadn't seen that. WOW.... sooo beautiful. What a voice. She belongs on AGT.
Rob, I'm so glad I just saw this. I had missed it a month ago when you sent it back to me. I think it's very appropriate for investors to be pessimistic in the short run, and optimistic in the long run. :)
Just published another piece this morning - nothing to do with investing, might be my most vulnerable one yet. 😶
Your metaphorical reveals of the DNA of the markets are getting so smooth and skillful James. This is the best yet. Money has its bad rap, everyone willing to say we should pay less attention to it, but it some ways its movement is an accurate reflection of reality which perhaps accounts for its weight in our awareness.
Rick, - so well put. Money does indeed have a bad rap. Thank you for taking the time to comment and for the compliment. I'm really wanting to get back to writing about some meaning topics - less of a bad rap on them but for some reason I'm finding the many drafts I have harder to land these days. 🤷♂️
One more thing. Take a look at Sharpe ratios for the S&P 500 and a 60/40 portfolio. The Sharpe ratio on the S&P will confirm your point of view on riding through the volatility. On the other hand, the Sharpe ratios are telling us that on a risk-adjusted basis, we aren't being paid to hold bonds, even as a diversifier. I haven't acted on this, but it is interesting.
Even Artemis II had its problems, and not just the well-publicized, malfunctioning commode. Did you notice after splashdown how long it took for the Navy boats and divers to get the inflation collar around the capsule? I'm sure that wasn't in the script. And yet by working through the problem, the mission maintained its aura of great success.
There is another element of Artemis that may have some value as a metaphor to investing. Twice the astronauts lost contact and had to take it on faith that they would come out okay. First, when Artemis made the slingshot move around the dark side of the moon (I love that expression - echoes of Pink Floyd.) And again on reentry to the earth's atmosphere when the capsule became a 5,000 degree fireball. The astronauts had faith in the process, training and science. And, although I'm sure that flashes of doubt crossed their minds while going where no person had gone before and while riding in a fireball, that informed faith brought them through without distress. On a more mundane level, that is the kind of faith that a successful long-term investor falls back on when riding the fireball of a volatile market.
Yesterday morning, I had a long meeting with an old friend who has spent most of his career as an instituional portfolio manager. He is now spending a lot of time looking at guages of investor sentiment rather than data driven measures. Similarly, when Mark Carney was head of the Bank of England (before his current gig as head of Canada) he would ask his team to survey UK bank presidents on what they thought was going to happen. They found those surveys to be more valuable than data driven projections. Maybe sentiment and faith are more important in investing than false certainty in quantitative measures and simple explanations.
Drake, so much to comment on in your reply. I always appreciate the depth of your thinking, and understanding.
"Maybe sentiment and faith are more important in investing than false certainty in quantitative measures and simple explanations."
Drake, I've come to believe that faith is THE most important variable as an investor. The reason being, is that investing for growth, (equities) isn't about what is known. It's about what is unknown. Investors in Amazon twenty five years ago were investing in a virtual bookstore. Little did they know they'd be owning a profit juggernaut in Amazon Web Services (AWS), and satellites (a deal announced this week).
But there is a role for investments not based in faith - fixed income. At least when it comes to investment grade or US government FI, the ownership is a contract where you know exactly what you're getting if you hold to maturity. As you point out, your real return is unknown because of inflation.
And I would also offer, base on your next comment, that investing in the long run, means that there will be times when the Sharpe Ratio looks expensive, and times when it looks less expensive. I think owning throughout is better than the alternative of timing into and out of a portfolio based on valuation metrics.
The standard 60/40 portfolio assumes intermediate term duration of the AGG for the 40 piece. I know many practitioners who may use 70/30 instead of 60/40, but with short duration fixed income, because it doesn't carry the volatility of the AGG, and doesn't get up much in return. Ultimately the greater ones tolerance for equities, the higher the expected return in a portfolio.
Great conversation - thank you for stimulating it. :)
James, I base my investment "knowledge" (yes, that word is in quotes for a reason) on what my late, great father used to call the "SWAG" method: Scientific Wild-Assed Guess. By that, I mean guessing on MY part, not on folks like you who know what you're doing.
That said, I love the parallels you draw between the 10-day moon mission and the recent 10-day surge. For me, the bottom line is something you emphasize with wise simplicity: "... only if you stay invested."
In the same way the astronauts trusted the technology, overall infrastructure and Mission Control, I trust the market over decades, not week- month- or even year-long fluctuations. And the operative word here is "trust." I don't know what the hell I'm doing, and I trust my advisor ... and trust myself to stay the course, through thick and thin. If the market "splashes down," I'll just hold on and wait. It'll probably ascend once again, sooner or later.
Always enjoy reading your views on the market. Absolutely love that you framed this one around the Artemis II mission.
My wife and I are older than most parents with similar age kids. Having kids now age 8 & 11, and seeing how they’re at a similar age to what we were when the Challenger blew up… that Artemis II mission was a more nerve racking than I’d anticipated. When Artemis finally landed, my wife and I both breathed a huge sigh of relief.
As I think about how people see their retirement savings, it is the exact opposite… we’re afraid our nest eggs will fall back down, return to where it started, and there is no landing. There’s rarely a relief and feeling of having landed. Most retirees wonder well into their final years if they have enough, will it last. We covet safety and certainty when, many times, it’s an illusion.
Appreciate how you drew comparisons between those two events. I’m sure I’ll think about that plenty in years to come.
Boy Matt, do you capture it here:
"There’s rarely a relief and feeling of having landed. Most retirees wonder well into their final years if they have enough, will it last. We covet safety and certainty when, many times, it’s an illusion."
That's what the safety of fixed income is for. Clarity of predictability, albeit for a lower return. For retiree's putting some of their heard earned growth of equities into fixed income is, in a way, returning... landing. Thank you for helping me to see that. In some ways, I wish I would have drawn that distinction at the end of the piece. it's a GREAT frame.
Last and maybe more important, I was in college when the Challenger blew up and I remember we had a small TV in our room and I watched it real time. I remember being shocked and then confused. I think Peter Jennings on ABC didn't even know what was happening or how to interpret what just happened.
For everything to go right, it's practically a miracle of human ingenuity isn't it?
Thanks for taking the time to comment. I appreciate it.
Thank you, James. "Of Money and Meaning" -- the perfect title for your Substack.
You are, and have always been, the steady hand at the tiller, no matter how high the waves go up and down. Whether the subject is money or anything else.
Amba, thank you. With 100% sincerity, I will say that my steady hand at the tiller is a result of my relationship with you over the past thirty years. I'm ever so grateful for you. 🙏
That's an articulate summation of James's character Amba.
Thank you Rick. I'm character like ours likes to surround itself with character like ours. I'm so glad the universe connected us. 😊
Yes. I know him well. I’ve known him well. For forty years. James is, and has been, a central figure—a hero in my life—- a dear, dear friend, a mentor, a student (of life), a coach, a guide, a sponsor for others, a stalwart champion of my work, a contributor, and a profound contribution to the planet. A unique, steady voice for calm, no matter the outer turbulence.
Amba, if I'm a hero, you are a lighthouse for my seas. Whether calm, or stormy. Seared in my my memory is meeting you for the first time all those years ago, during HOL at the Hansen's Inn in Corvallis. My life, and myself is profoundly deeper and more meaningful of a journey that started that morning. 🙏🙏🙏
Thank you, James. I remember the Hansen's Inn! I can even picture you in your seat, about half way back, I think on the aisle or maybe one or two places over., left side, me facing out. You made an impression, even then! How many years ago? And when you called me fourteen years later, to bring me into Capitol One, and said "Hello. I'm James Bailey...I don't know if you remember me," my memory of you was instantaneous. You are unforgettable. And a treasure.
!!!!
James—I really loved this. The idea that meaning comes from long term patterns—not reactive moments—really landed for me (pun intended maybe :)). I keep trying to think in those terms whether I'm watching the news, my money, what's going on at work, or being a positive presence at home. You have to live in the moment for sure to enjoy life, but I'm trying not let it point me in the wrong directions with being overly reactive. Your article was thoughtful, and quietly encouraging in the best way. Thanks for writing this.
Kirk, I missed this comment after you sent is and am just seeing it now. I really appreciate your words and how it landed on you. This could be an essay itself:
"You have to live in the moment for sure to enjoy life, but I'm trying not let it point me in the wrong directions with being overly reactive."
I hope you are doing well. :)
Always enjoy your essays - and I understand Artemis' journey better than the market, but you're making it easier to follow. I imagine your clients also find your writing + your guidance incredibly helpful.
On an almost-unrelated note, did you see the gorgeous song that a couple of Gen Z'ers wrote about one of the astronauts naming a crater after his late wife? It has also stuck with me - the purpose of Artemis' journey was more than science and discovery; it was also about hope, love, grief, and renewal.
https://www.instagram.com/reel/DXPay96iqSj/?utm_source=ig_web_copy_link&igsh=NTc4MTIwNjQ2YQ==
Serena, I had missed your comment here when you sent it. So very sorry. And wow, I hadn't seen that. WOW.... sooo beautiful. What a voice. She belongs on AGT.
Thank you again for being here :)
Thank you, James—I needed this. I'm a very skittish but hopeful long-term investor. I hope you and yours are doing well.
Rob, I'm so glad I just saw this. I had missed it a month ago when you sent it back to me. I think it's very appropriate for investors to be pessimistic in the short run, and optimistic in the long run. :)
Just published another piece this morning - nothing to do with investing, might be my most vulnerable one yet. 😶
Grateful for you.
Your metaphorical reveals of the DNA of the markets are getting so smooth and skillful James. This is the best yet. Money has its bad rap, everyone willing to say we should pay less attention to it, but it some ways its movement is an accurate reflection of reality which perhaps accounts for its weight in our awareness.
Rick, - so well put. Money does indeed have a bad rap. Thank you for taking the time to comment and for the compliment. I'm really wanting to get back to writing about some meaning topics - less of a bad rap on them but for some reason I'm finding the many drafts I have harder to land these days. 🤷♂️
One more thing. Take a look at Sharpe ratios for the S&P 500 and a 60/40 portfolio. The Sharpe ratio on the S&P will confirm your point of view on riding through the volatility. On the other hand, the Sharpe ratios are telling us that on a risk-adjusted basis, we aren't being paid to hold bonds, even as a diversifier. I haven't acted on this, but it is interesting.
Wise and reassuring words.
Even Artemis II had its problems, and not just the well-publicized, malfunctioning commode. Did you notice after splashdown how long it took for the Navy boats and divers to get the inflation collar around the capsule? I'm sure that wasn't in the script. And yet by working through the problem, the mission maintained its aura of great success.
There is another element of Artemis that may have some value as a metaphor to investing. Twice the astronauts lost contact and had to take it on faith that they would come out okay. First, when Artemis made the slingshot move around the dark side of the moon (I love that expression - echoes of Pink Floyd.) And again on reentry to the earth's atmosphere when the capsule became a 5,000 degree fireball. The astronauts had faith in the process, training and science. And, although I'm sure that flashes of doubt crossed their minds while going where no person had gone before and while riding in a fireball, that informed faith brought them through without distress. On a more mundane level, that is the kind of faith that a successful long-term investor falls back on when riding the fireball of a volatile market.
Yesterday morning, I had a long meeting with an old friend who has spent most of his career as an instituional portfolio manager. He is now spending a lot of time looking at guages of investor sentiment rather than data driven measures. Similarly, when Mark Carney was head of the Bank of England (before his current gig as head of Canada) he would ask his team to survey UK bank presidents on what they thought was going to happen. They found those surveys to be more valuable than data driven projections. Maybe sentiment and faith are more important in investing than false certainty in quantitative measures and simple explanations.
Drake, so much to comment on in your reply. I always appreciate the depth of your thinking, and understanding.
"Maybe sentiment and faith are more important in investing than false certainty in quantitative measures and simple explanations."
Drake, I've come to believe that faith is THE most important variable as an investor. The reason being, is that investing for growth, (equities) isn't about what is known. It's about what is unknown. Investors in Amazon twenty five years ago were investing in a virtual bookstore. Little did they know they'd be owning a profit juggernaut in Amazon Web Services (AWS), and satellites (a deal announced this week).
But there is a role for investments not based in faith - fixed income. At least when it comes to investment grade or US government FI, the ownership is a contract where you know exactly what you're getting if you hold to maturity. As you point out, your real return is unknown because of inflation.
And I would also offer, base on your next comment, that investing in the long run, means that there will be times when the Sharpe Ratio looks expensive, and times when it looks less expensive. I think owning throughout is better than the alternative of timing into and out of a portfolio based on valuation metrics.
The standard 60/40 portfolio assumes intermediate term duration of the AGG for the 40 piece. I know many practitioners who may use 70/30 instead of 60/40, but with short duration fixed income, because it doesn't carry the volatility of the AGG, and doesn't get up much in return. Ultimately the greater ones tolerance for equities, the higher the expected return in a portfolio.
Great conversation - thank you for stimulating it. :)
James, I base my investment "knowledge" (yes, that word is in quotes for a reason) on what my late, great father used to call the "SWAG" method: Scientific Wild-Assed Guess. By that, I mean guessing on MY part, not on folks like you who know what you're doing.
That said, I love the parallels you draw between the 10-day moon mission and the recent 10-day surge. For me, the bottom line is something you emphasize with wise simplicity: "... only if you stay invested."
In the same way the astronauts trusted the technology, overall infrastructure and Mission Control, I trust the market over decades, not week- month- or even year-long fluctuations. And the operative word here is "trust." I don't know what the hell I'm doing, and I trust my advisor ... and trust myself to stay the course, through thick and thin. If the market "splashes down," I'll just hold on and wait. It'll probably ascend once again, sooner or later.