The Only Financial Resolution You Need to Make

As I considered an essay to conclude 2014 and begin 2015, a few concepts kept recurring:

  • The importance of having a consistent philosophy.Carl Richards - Focus-thingsthatmatter
  • The value of being consistent.
  • Focusing on things that matter and things that you can control.

The past year has again shown that our consistent investment philosophy is strongly holding up to the long term test of time. We structure client portfolios to be very diversified by utilizing stock funds which are very low-cost, tax-efficient and which have excellent track records, due to their consistent methodologies.

By being globally diversified across many industries and countries, as a matter of philosophy, we do not place huge bets on individual companies, the direction of interest rates, or specific commodities, like the price of oil or gold. We have been very consistent that an approach like that, to make significant predictions and investment bets, is not in our clients’ best interest. That type of investing will not help you reach your goals or sleep well at night.

Most financial “experts” and economists were again totally wrong with their 2014 financial predictions. According to a Wall Street Journal article* recapping their annual economic forecasting survey, the average forecasts of the 49 economists (from major Wall Street firms, academia and other institutions surveyed) were way off on most of their predictions. Here are some of the most important items, as predicted in early January 2014, for 12/31/14:

  • Interest rates, defined as the 10 year US Treasury yield:
    • Prediction: 3.52%
    • Actual: 2.17%
  • Crude oil per barrel:
    • Prediction: $94.65
    • Actual: $52.96 (as of mid-day on 12/31/14)
  • Payroll Growth:
    • Prediction: 200,000 average monthly change over 12 months
    • Actual: 241,000 through November, 2014, 11 months

If you or another financial advisor had made investment decisions based on this guidance, it would not have helped you. These top economists at were not able to accurately predict the future. One of our core beliefs is that we cannot predict the future, which we have often stated to clients and prospects, as well as in these blog posts. That is an important component of our consistent investment strategy, because we do not believe anyone can consistently predict the future over a long period of time.

Relying on predictions and financial guesses is not going to be a winning strategy.

So as 2015 begins, we hope your financial resolution is to be consistent, and to focus on the things which both matter and which you can control. If you do have things in your life which need your attention, which do matter and you can control, we hope you take action on them.

We strive to do this for our clients, our firm, as well as ourselves. What the Economic Forecasters Got Right – and Wrong – in 2014 (12/31/2014)

2014 Book Recommendations

Wonder, by R.J. Palacio is a young adult book I have been reading with my daughter. It is a terrific novel which tells a middle school boy’s experiences with a severe facial deformity, through the voices of many characters. I highly recommend this for adults and children.

The Ghost of My Father, by Scott Berkun, is an intensely personal book. The author shares his family’s relationship experiences to explore the impact his father’s actions caused. This book has caused me to really consider the effect of relationships and memories of past experiences.BW books

Essentialism by Greg McKeown and The One Thing by Gary Keller emphasize doing less is more, and how to strive towards that. Essentialism is one of my favorites of the year. The 100/0 Principle by Al Ritter focuses on business and personal relationships.

What the Dog Saw by Malcolm Gladwell prompted me to read a number of his books this year. I also read David and Goliath, and Outliers. See my blog post on parts of David and Goliath. Gladwell will get you thinking.

Ari Weinzweig, one of the co-founders of the Zingerman’s Community of Businesses had a profound impact on me this year. I read all three of his business/leadership books and will do so many times again in the future. I highly recommend Building a Great Business, Being a Better Leader and Managing Ourselves (this book is for anyone, even if you are not in business).

Jason Womack’s Your Best Just Got Better is an invaluable read on improving yourself. I highly recommend his weekly podcast of the same name (full disclosure: the podcast is produced by my son, Scott, and Jason is my executive coach and has become a wonderful friend).

Seth Godin has just published a wonderful book, What To Do When It’s Your Turn, which is another in his theme of getting motivated, doing and taking chances. I also read two of Steven Pressfield’s books of a similar nature and highly recommend The War of Art, if you want motivation to break down any form of resistance, to start a business, exercising, writing or dieting.


Thank you for your loyalty to our firm, which we greatly appreciate. Thank you for the tremendous support in reading these blog posts, which I committed to writing weekly in June of this year. It has been a great experience, which I hope you have enjoyed and learned from, as I have.

Best wishes for Happy Holidays, a happy, healthy and successful 2015!


How Unexpected Events Can Be Positive (Oil Part II)

The unexpected has occurred. The price of oil has plummeted, far lower than anyone thought possible, in a very quick time.

The stock market has reacted in a volatile manner to the movements of the price of oil. This may continue, as the stock market digests the lower price of oil and its various implications.

The price of oil, at around $56 per barrel, will provide winners and losers, both domestically and internationally.

The significant drop in the price of oil (and thus, gasoline), and a reactive decline in US interest rates, are positive developments. In the long run, this will be reflected by global stock markets.

We believe the best long-term strategy to benefit from these developments is to be globally diversified, patient and accept that there will be volatility.

We cannot predict the ups and downs that will occur in the future. At some point, maybe just as suddenly, oil and gas prices will increase. We cannot control this. However, we can provide good planning and a sound investment strategy, so you can reach your financial goals. Carl Richards - current-reality-goal

What Plunging Oil Prices Mean

Over the past months, oil prices have steadily declined, dropping below $60 per barrel on Thursday for the first time in over 5 years. This has resulted in a gasoline prices declining from nearly $4 per gallon in mid-summer to approximately $2.60 per gallon. What does this mean? What are the implications of this sudden change?

How much has the price of oil declined?

Oil prices have declined over 45% in nearly six months.

  • During the summer of 2014, oil traded in a range of $90-110 per barrel.
  • In early October, the price per barrel was $90.
  • On November 5th, oil traded around $80 per barrel.
  • On December 5th, oil traded around $66 per barrel.
  • On Thursday, December 11th, oil closed at $59.95 per barrel.

What has caused this decline in oil prices and how long will it last?

Oil prices, as a commodity, fluctuate based on supply and demand, as well as political and economic factors. Financial traders also can significantly affect prices, and may even exacerbate the price swings.

The recent price decline has most likely been caused by a huge rise in US oil production over the past few years, as well as a decrease in worldwide demand for oil. The US has been steadily producing more oil in recent years, due to shale and fracking innovations. While supply has increased, OPEC nations have not reduced their production.

In the past week, the further price declines were caused by new information. US data released on Wednesday showed that US oil supplies rose far above predicted amounts (oil inventory levels), while US production increased to its highest level in decades.

The future direction of the price of oil is very difficult to predict, as is any commodity or stock. There would have been few, if any, economists or oil analysts who would have predicted oil prices at these levels at the beginning of 2014. We doubt that few would have predicted prices below $60 per barrel of oil even a month or two ago. The pace and extent of the price decline is an unexpected event which could not have been anticipated or accurately predicted.

We cannot predict the future price of oil. However, we do know that we can learn from the past, which teaches us that oil prices tend to move dramatically, both up and down, and often quickly and unpredictably.

According to some reports, the current global production of oil is greater than demand by as much as a million barrels of oil per day. Saudi Arabia and other OPEC nations have not indicated that they will cut their production, as they need the revenue. In the short term, US oil production will likely remain the same or increase over the next year. If oil prices remain low, it appears that oil companies will eventually cut back on new project investments, which could reduce future production. This may take time to occur and impact future supply levels, and then, future oil and gasoline prices.

What are the investment lessons?

The sudden decline in the price of oil and gasoline confirms our belief that relying on predictions to make investment decisions is not a valid strategy. Unexpected events can and will occur.

The market impact of the sudden decline in oil prices confirms our philosophy of being well diversified across many companies, industries and countries throughout the world. By being very broadly diversified, our clients will not be dramatically affected by companies, industry sectors or countries which may be adversely impacted by these events.

Yes, our clients will feel the impact of the decline in oil stocks which are held in portfolios, but these may be offset by other companies which benefit from the price decline. More importantly, we do not make huge bets on specific stocks or sectors like energy, so while an oil company stock may have declined 20-40%, the impact of this on our client portfolios will be muted.

Beyond stock prices, there is now growing concern in the junk bond market about the ability of many energy production companies to repay debt which they have issued in recent years, under the assumption of much higher production prices. We have a policy of only buying very high quality debt on behalf of our clients. This risk-reward tradeoff is the proper philosophy.

Another major lesson:

During the depths of the financial crisis of 2008-09 and in subsequent years, I have stressed the resiliency of companies and countries to innovate and develop new technologies. This is a major influence on our long term positive view of the world and financial markets. While cognizant of problems throughout the world, the impact of the new innovations, like fracking, will now benefit many individuals and companies in the form of much lower gas prices, which will positively impact the economy.


“U.S. Oil Prices Drop Below $60,” 12/11/2014, online,

“Capital Journal,” WSJ, 12/9/14

“Plunging Oil Prices Won’t Dent Supply in Short Term”, WSJ, 12/12/14