Patience is an Octopus's Garden

"We would be so happy you and me,
 No one there to tell us what to do.
I'd like to be under the sea,
 In an octopus's garden with you."
--The Beatles

Linked to the e-mail version of this Periscope (please subscribe if you do not already), you'll find our research partners at Litman/Gregory providing insight into the events of the first three months of the year, and a happy prediction of what might happen next. Perhaps only coincidentally, another research partner of ours has similar observations.

We are at a possible inflection point, when many of us (collectively) stop worrying and start feeling better. Household income is higher than it has been since the great recession; homes are increasing in value; companies are recording record profits; inflation is still low; and unemployment is low. All of these measurements of our economic emotions signal that we are ready for happiness again.

Some of us will still be unhappy. Even if the prognosticators are correct and the financial times ahead are good for our investments, I believe some of us will choose to be unhappy because we are impatient. Some of us will bury our heads in the sand.

I understand if you choose the pessimistic route. After all, we've had good financial times for a while now, and they did not cause as strong of a feeling (joy) as the bad times caused (pain). The markets have risen for years and only now all of these economic measurements of happiness are good. Feeling good, we'll look at anything other than a "shoot the lights out wonderful" portfolio statement and say, "Why isn't the market making more money for me?"

Most likely, I believe there will be headwinds for the short-term market. Some of the companies we're investing with are starting at the top. With so much price increase behind them, they may not be able to persist in their recent rates of growth. They may be running on fumes. They've got record profits; stock prices are at record highs; price/earnings ratios are high; and interest rates are low and will likely someday have to rise. Let's not let these short-term headwinds drown our happiness.

If you read this and you believe it, you're prone to want to act. You may want to make a change now. One of the most important lessons the publicly-traded markets teach us, year after year, amounts to something like this: act on your plan and avoid reacting to anything (the markets, the President, the terrorists, and your neighbor).

So exercise patience if your investments seem "ho hum" in a happy-go-lucky spring. This too shall pass. Instead of burying your head in the sand, let's find your octopus garden, even if it is imaginary, for a little while, until the headwinds pass and the investment returns potentially catch up with our collective good feelings. As they have rebounded in the past, they likely will do so again with time. The future may not repeat, but it might rhyme.

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