DEC 20, 2019

Merry Christmas featuring E.T.

BY KEITH THOMSON

For over 10 years the British retailer, John Lewis, has aired what has become an iconic holiday season commercial. Although this year’s version was well done I thought the parody featuring Donald Trump and Greta Thunberg was even better.

However, my favorite 2019 holiday commercial was from Xfinity. I thought it perfectly captured the spirit of Christmas with their E.T. homage that featured the original Elliot from Stephen Spielberg’s classic. Without compromising the brilliance of the original movie this commercial shares how important the season is in bringing together family and friends, sometimes after long periods of being apart and over great distances. As an aside, Spielberg never wanted to film a sequel  but happily (and perhaps surprisingly) signed off on this version.

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So, as 2019 winds down I sincerely hope that you too have the opportunity to spend more time with family and friends.

It is with this message in mind I wish you and your loved ones all the best for the holiday season and a very happy New Year!

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May you never be too grown up to search the skies on Christmas Eve.
Anonymous

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NOV 25, 2019

Steve Jobs was wrong

BY KEITH THOMSON

I know I’m getting older when young adults increasingly ask me for career advice.

 

Most of them are surprised when I suggest that “follow your passion” is dangerous career advice. This contradicts most of what is passed off as vocational wisdom, perhaps never more famously than in the iconic convocation address Steve Jobs gave to Stanford graduates in 2005. If you haven’t watched it I would encourage you to click thru to the video below.

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Here’s the thing … I think Job’s speech is profound except for his “passion hypothesis” he so strongly advocates. A number of years ago I read Cal Newport’s brilliant and counterintuitive “So Good They Can’t Ignore You”.  Newport’s book radically changed my thinking from the conventional “find your passion so that you can be useful to society” to “first be useful to society in order to uncover your passion”. For those of us who would prefer a quick summary to this type of approach to career and life advice, I would encourage your to read Ben Carlson’s excellent “Useless Career Advice”  blog.

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People who tell you to follow your passion are already rich.
Scott Galloway

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OCT 24, 2019

Controlling the "controllables"

BY KEITH THOMSON

Having become an avid follower of Stoic philosophy over the last few years I have come to understand that one of its intellectual pillars is classifying all of life’s experiences into one of two buckets. The first bucket I would call “things that you can control”, with the second one being “things that you can not”. As a result of adopting this philosophy the amount of  stress in my life has been reduced exponentially. I now appreciate that around 80% of the things that happen to me are completely out of my control … and therefore never worth worrying about. And so it is with investing.

Granted 80% of what happens to your portfolio is out of your control (i.e., interest rates, inflation, what the stock market did today, President Trump’s most recent ridiculous Tweet, etc.), but a critical 20% is very much up to you. Frankly, this 20% will make or break your financial future, most importantly, starting with your behaviour, specifically, not panicking out of the market when it has one of its frequent, but temporary, declines. Or, unlike our friend below, make sure to save a significant percentage of your income early, and often well before your retirement.

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For more on this important topic I encourage you to click through to the excellent article from the Daily Stoic on “What Is Luck and What Is Not”.

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Knowing what you don’t know is much more useful in life and business than being brilliant
Charlie Munger

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SEP 24, 2019

Are you a real investor or a make-believe one?

BY KEITH THOMSON

After 33 years in the wealth management business I’ve come to the inescapable conclusion that 80% of one’s long term investment success really comes down to one single variable … behaviour. Specifically, what you do or don’t do, especially during market tops and bottoms, is much more important than your portfolio’s asset allocation, stock selection, taxes, and fees.

I thought Carl Richards from Behavior/Gap  did a great job in highlighting this fact in his six part quiz in which he asks, “Are you a real investor or a make-believe one?”.

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Hey, I have a question for you.

Do you remember being a kid and pretending you could fly?

I sure do. Now, let me ask you another question. Do you remember jumping off a roof to test that theory?

No? Ok, good. Me neither. You know why? Because even as kids, we knew what it meant to make-believe.

Funny how things we know as kids we tend to forget as adults…

For example, a lot of people like to make-believe that they know how to invest. They get some skin in the game, forget they aren’t real investors, and the next thing you know, they’re doing the financial equivalent of jumping off the roof (with equally predictable results).

 

There’s a lot riding on whether you are a real investor or a make-believe investor. Not sure which category you fall into? The following breakdown may help:

1. Make-Believe investors think the stuff they hear on the financial pornography networks is real. Real investors know it might be entertaining, like going to the circus, but they would never make a decision because of what they saw there.

2. Make-Believe investors think it makes sense to change their investments based on politics: There’s a new president, so act! He doesn’t like the Federal Reserve, so trade! He criticized bankers, so buy bank stocks! Real investors know they make changes to their investments based on what happens in their own lives. If their goals change or there is a fundamental change in their financial situation, then they consider an alteration.

3. Make-Believe investors monitor their investments obsessively. The result tends to be poorly thought out, knee jerk reactions to… what else? The financial pornography networks. Real investors know that it takes a long time for a tree to grow, and it will not help to dig it up to see if the roots are still there. The same rule applies to investments.

4. Make-Believe investors talk the talk. You know, investor jargon: alpha, beta, P/E, market cap, time horizon, long this, short that. Beware of this kind of talk. It sounds kind of impressive if you don’t listen too closely, but it is also a dead give away that you’re not a real investor. Real investors walk the walk. You know, not so much saying as doing. And the thing they tend to be doing is sticking to their financial plan.

5. Make-Believe investors worry endlessly about some far-off part of the world and the impact global politics have on their portfolio. Real investors focus on the things they can control, like saving a bit more next year, keeping their investment costs low, and managing their behavior by not buying high and selling low.

6. Make-Believe investors complain endlessly about volatility in the market and external actions that have a short-term impact on the big bets they have made on individual stocks. Real investors take the long view. Between 1996 and 2016, markets were up more than 180 percent. That included the financial crisis of 2008. Real Investors saw that crisis as a dip; not the end of the world.

 

Think of this as a kind of litmus test. A six-part quiz to see what kind of investor you are.

Look, there’s nothing wrong with playing make-believe. But there is something wrong with acting on it. I’m not telling you to stop using investor jargon and watching the financial news. By all means, watch to your heart’s content.

Just don’t jump off the roof because you convinced yourself you can fly.

-Carl

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If you wish to improve’, Epictetus once said, ‘be content to appear clueless or stupid in extraneous matters.’ One of the most powerful things we can do as a human being in our hyper connected, 24/7 media world is say: ‘I don’t know.’ Or more provocatively, ‘I don’t care.’ Not about everything, of course – just most things. Because most things don’t matter, and most new stories aren’t worth tracking.
Howard Marks

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AUG 22, 2019

Advice for my daughter

BY KEITH THOMSON

My little girl is going into grade nine! If you have children you know the very act of writing this fills me with mixed emotions.

One of the many challenges of parenting is trying to teach our children financial lessons without being boring, condescending, repetitive, etc.

One of my favourite financial writers is Morgan Housel who is none of the above. I hope you and those you love will find his insightful, “Financial Advice For my New Daughter” as meaningful as I do.

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Kiera and I during a recent family trip to the Bahamas.

Financial Advice For My New Daughter

By Morgan Housel

My wife and I welcomed a daughter into the world yesterday.

Her only job now is eating and sleeping. But, one day, when she needs financial advice, here’s what I’ll tell her.

It is easy to assume that wealth and poverty are caused by the choices we make, but it’s even easier to underestimate the role of chance in life.

Everyone’s life is a reflection of the experiences they’ve had and the people they’ve met, a lot of which are out of your control and driven by chance. Being born to different families, with different values, in different countries, in different generations, and the luck of who you happen to meet along the way plays a bigger role in outcomes than most people want to admit.

I want you to believe in the values and rewards of hard work. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.

The highest dividend money pays is providing the ability to control your time. Being able to do what you want, when you want, where you want, with who you want, for as long as you want, provides a lasting level of happiness greater than any amount of fancy stuff can ever offer.

The thrill of having fancy stuff wears off quickly. But a career with flexible hours and a short commute will never get old. Having enough savings to give you time and options during an emergency will never get old. Being able to retire when you’re ready will never get old. The ultimate goal is independence, but independence is not black or white, all or nothing. Every dollar you save is like owning a slice of your future that might otherwise be managed by someone else, and whatever their priorities are.

Your parents will work hard to support you and open the doors of opportunity. But we’re not going to spoil you. We’re not trying to be mean. But no one can learn the value of a dollar without experiencing its scarcity. Learning that you can’t have everything you want is the only way to understand the difference between a need and a desire. It will teach you how to budget, how to save, and how to value what you already have. Learning to be frugal without it hurting is an essential life skill that will come in handy during life’s inevitable ups and downs.

Napoleon’s definition of a military genius is the person “who can do the average thing when everyone else around him is losing his mind.” Managing money is the same. You don’t need to do amazing things to end up OK over time. You just have to consistently not screw up for long periods of time. Avoiding catastrophic mistakes – the biggest of which is burying yourself in debt – is more powerful than any fancy finance tip.

Learning how to live with less is one of the most powerful financial levers, because you have more control over it than things like your income or investment returns. The person who makes $50,000 but only needs $40,000 to be happy is richer than the person who makes $150,000 but needs $151,000 to be happy. And the investor who earns a 5% return with low expenses may be better off than the investor who earns 7% a year and needs every penny of it.

How much you make doesn’t determine how much you have. And how much you have doesn’t determine how much you need.

It’s OK to change your mind. Almost no one has their life figured out by age 18, so it’s fine if you pick a major you end up not enjoying, or even get a degree in a field that isn’t your passion. It’s fine if you work in a career and then decide you want to do something else, and it’s fine to admit that your values and goals have evolved. Forgiving yourself for changing your mind is a superpower, especially when you’re young.

Everything has a price, and I’m not just talking about price tags. The price of a busy career is time away from friends and family. The price of long-term market returns is uncertainty and volatility. The price of spoiling kids is their sheltered life. Everything worthwhile has a price, and most of those prices are hidden. They’re often worth paying, but never ignore that they are true costs. When you accept this you’ll view things like time, relationships, autonomy, and creativity as currencies that are as valuable as cash.

True success is when the people who you want to love you do love you. And that love comes overwhelmingly from how you treat people, rather than a level of net worth. The most important financial advice I can give is that money won’t provide the thing that you and almost everyone want most. No amount of money can compensate for a lack of character, honesty, and genuine empathy towards others.

Your world will be different than mine, just as mine is different from my parents’. So it’s OK to reject any of this advice. Everyone’s different, and no one has all the right answers. Never take anyone’s advice without contextualizing it with your own values, goals, and circumstances.

Your parents love you. Welcome to the world. Please let us sleep.

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It takes tremendous strength and resolve to allow your kids to suffer the consequences of their decisions.
Anonymous

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JUL 11, 2019

How much is too much

BY KEITH THOMSON

Reflecting on my past two blogs Money Can Buy You Happiness and The Three Levels of WealthI seem to have inadvertently written about and/or stumbled upon the personal utility of money. I promise this will be my last missive on the theme … at least for now.

My favourite cocktail is a Negroni . I was introduced to it by a close friend at Noce  in December of 2007. (Yes, I actually remember the place and date!) For me no other drink comes close to replicating its sweet/bitter taste profile deriving from a simple one third combination of gin, vermouth, and Campari. Given my passion for the Negroni I have been known to go to ridiculous lengths to make sure it is accompanied by the perfect slightly toasted orange peel slice and the world’s greatest ice ball maker.

Here’s the thing:

I love that first Negroni!

The second, not-so-much.

The third? Not only does it not taste that great but, given the alcohol content, I am absolutely guaranteed to pay the price the following day.

I encourage you to read Carl Richards’ article which expands on exactly the same topic, specifically, How Much is Too Much?”

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Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.
Will Rogers

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JUN 19, 2019

Money can buy you happiness

BY KEITH THOMSON

In last month’s Wealth with Wisdom I discussed “The Three Levels of Wealth” . On a related topic, and contrary to popular opinion, I would suggest that money can indeed buy happiness. This perspective would appear to contradict the massive body of research reflecting (like the chart below) that at about $80,000 of income further emotional “happiness gains” are hard to come by. But here’s the thing … if you think more money can’t buy you happiness, I’m going to suggest you are spending it on the wrong things!

For the 7 spending keys to “happiness gains” I invite you to click through to the following article:

Money CAN Buy Happiness 

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These monthly blog posts are sent with my hope to provide context and content around “Wealth with Wisdom”.

 

MAY 16, 2019

The 3 levels of wealth

BY KEITH THOMSON

What is your definition of wealth? I’m certain I would hear 100 different answers if I asked 100 people.

I read an article about the Canadian entrepreneur, Stewart Butterfield, the co-founder of Flickr (acquired by Yahoo in 2005) and Slack. The latter company after its most recent round of fundraising is now valued north of $5 billion. Not surprisingly this has made Mr. Butterfield an extremely wealthy man.

When Butterfield was asked how his enormous wealth impacted his life he stated what I thought was one of the best definitions of “wealth”. After mentioning the often repeated assertion that past a certain level excessive wealth does not make your life any better, he went on to share his unique definition of wealth broken down into three relatable levels:

Level 1. I’m not stressed out about debt: People who no longer have to worry about their credit card debt or student loans.


Level 2. I don’t care what stuff costs in restaurants: How much you spend on a particular meal isn’t impacted by your finances.


Level 3. I don’t care what a vacation costs: People who don’t care how expensive the hotel is or which flight they go on.

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Of course Butterfield’s three levels of wealth are only one man’s opinion, but I like how it allows us to frame the concept in a way that all of us can appreciate and understand.

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Wealth: Any income that is at least one hundred dollars more a year than the income of one’s wife’s sister’s husband.
H. L. Mencken

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APR 16, 2019

Time in the market

BY KEITH THOMSON

I had a conversation with a client who shared with me that a close friend of hers bailed out of the stock market. Why? Because he simply could not stomach what turned out to be the very short term decline of the market during the last few months of 2018. (As an aside, the U.S. market in 2019 has had its best start since 1987)

Study after study show that investors underperform their own investments. How can this be!? It happens simply because individuals let their emotions get the better of themselves. As I constantly repeat to the families I work with, 80% of one’s investment success is 100% due to the person who stares back at you from the bathroom mirror every morning! How could this not be when there has never been a twenty year period since 1872 when the U.S. market has had a negative return. For an interesting animated visual reflecting this fact, I encourage you to click the below link:

https://www.visualcapitalist.com/stock-market-returns-time-periods-1872-2018/

 

And always remember …  its time in the market, not market timing, that is the key to long term investment success.

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Our capital markets are simply a relocation center; they relocate the wealth from the impatient to the patient.
Warren Buffet

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FEB 26, 2019

Time to pluck the goose

BY KEITH THOMSON

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Please find below two Stonegate tax resources which may assist you in dealing with your 2018 and 2019 tax reporting.
Personal income tax organizer
Personal tax calendar

 

As we prepare for this year’s “plucking” perhaps the article below will help minimize the “hissing”. The article, written by Ryan Holiday, it is directed towards an American audience (with a Stoic bent). However, if you change the date to April 30th, the message is no different for us Canadians.

The Taxes of Life
Daily Stoic

April 17th is the day that Americans pay their taxes. It’s a day of mixed reactions depending on your outlook and politics. Some choose to focus on the good things their taxes pay for and have paid for since Roman times—the roads, the armies, services for the poor. Others focus on the waste (tax corruption and waste is also as old as Rome) or question the morality of the system altogether. Last year when we posted a note about taxes, a number of comments wrote angrily that “taxation is theft!” while others angrily responded to those commenters with defenses of their own. (All this anger being somewhat ironic for Stoics.)

In a way, this misses the point. What we should be doing is zooming out and looking at the larger picture: People have been complaining about their taxes since the beginning of civilization. And what has become of it? Taxes are higher than ever and they’re dead. Death and taxes. There is no escape. So let us waste no time and create no misery kicking and screaming about it. Let us not add to our tax bracket the cost of frustration and resentment.

Taxes are inevitable part of life. There is a cost to everything we do. As Seneca wrote to Lucilius, “All the things which cause complaint or dread are like the taxes of life—things from which, my dear Lucilius, you should never hope for exemption or seek escape.” Income taxes are not the only taxes you pay in life. They are just the financial form. Everything we do has a toll attached to it. Waiting around is a tax on traveling. Rumors and gossip are the taxes that come from acquiring a public persona. Disagreements and occasional frustration are taxes placed on even the happiest of relationships. Theft is a tax on abundance and having things that other people want. Stress and problems are tariffs that come attached to success. And on and on and on.

There’s no reason or time to be angry about any of this. Instead, we should be grateful. Because taxes—literal or figurative—are impossible without wealth. So what are you going to focus on? That you owe something, or that you are lucky enough to own something that can be taxed.

Daily Stoic
April 17th is the day that Americans pay their taxes. It’s a day of mixed reactions depending on your outlook and politics. Some choose to focus on the good things their taxes pay for and have paid for since Roman times—the roads, the armies, services for the poor. Others focus on the waste (tax corruption and waste is also as old as Rome) or question the morality of the system altogether. Last year when we posted a note about taxes, a number of comments wrote angrily that “taxation is theft!” while others angrily responded to those commenters with defenses of their own. (All this anger being somewhat ironic for Stoics.)

In a way, this misses the point. What we should be doing is zooming out and looking at the larger picture: People have been complaining about their taxes since the beginning of civilization. And what has become of it? Taxes are higher than ever and they’re dead. Death and taxes. There is no escape. So let us waste no time and create no misery kicking and screaming about it. Let us not add to our tax bracket the cost of frustration and resentment.

Taxes are inevitable part of life. There is a cost to everything we do. As Seneca wrote to Lucilius, “All the things which cause complaint or dread are like the taxes of life—things from which, my dear Lucilius, you should never hope for exemption or seek escape.” Income taxes are not the only taxes you pay in life. They are just the financial form. Everything we do has a toll attached to it. Waiting around is a tax on traveling. Rumors and gossip are the taxes that come from acquiring a public persona. Disagreements and occasional frustration are taxes placed on even the happiest of relationships. Theft is a tax on abundance and having things that other people want. Stress and problems are tariffs that come attached to success. And on and on and on.

There’s no reason or time to be angry about any of this. Instead, we should be grateful. Because taxes—literal or figurative—are impossible without wealth. So what are you going to focus on? That you owe something, or that you are lucky enough to own something that can be taxed.

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The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.
Jean-Baptiste Colbert

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