How many ways to slice a pizza?
A central banker walks into Beau Jo's Pizza and orders a pizza. The pizza maker asks him if he'd like six or eight slices. The man from the Federal Reserve says, "I'm feeling very hungry right now; you'd better cut it into eight slices."
Current clients, click here for insights from the Litman Gregory research team. This affects some of your portfolio, and explains the asset allocation investments therein. As you may recall, Litman Gregory is one of our key research partners, but not our only partner.
Right now, LG is concerned that the U.S. stock market has had significant growth and has not pulled back. In spite of the crashes and political crises, our central bankers (all around the world) are providing an incredible boost to our stocks with their "keystroke money creation." Usually, this is inflationary. Inevitably, it will be. Here, in our offices, we've fielded quite a few questions recently about "How long can this party last?"
Didn't one of these bankers say, not terribly long ago, that his job was to take away the punch bowl before the party is over? And didn't Chairwoman Yellen just state something along the lines of, "This party is just getting started." Cautious patience is the medicine we need today.
When we invest for the long run, we ask different questions than we hear answered by the news, which usually (by definition) responds to short-term emergencies. When we invest for the long run, we ask, how can I protect my purchasing power? How can I protect my dignity and my independence? What can I afford?
In the long run, we're not protecting principal. We're protecting our ability to use that money for the goods, services, and experiences that mean the most to us: spending it with people we love.
Every day we live, in even these modest inflationary times, central bankers keystroke into existence digital dollars, euros and rubles. When we invest in the great companies of America and the world, we are making a choice to protect the purchasing power of those dollars over the duration of our lives. We are investing with the best chance of long-term success. We are putting the odds on our success.
And the price we pay for this assurance is daily, nonsensical, sometimes frightening volatility, which is temporary and eventually followed by an incredible (albeit common) increase in purchasing power. Regardless how many ways you slice and dice a pizza, the pizza maker always gets paid. Let's invest in great companies, like that pizza maker, and take advantage of the times.