3 things I'm thinking about this week…
1 – Tariff Time. On the minds of many since the election are tariffs…taxes imposed by one country on goods and/or services imported from another country – with the purpose of influence, revenue generation or to protect competitive advantages (per Investopedia). This article from The Wall Street Journal lays out the expected impact from the Trump Administration's tariffs on China (possibly as high as 60%) and other trading partners, notably Mexico and Canada. A summary by country is illustrated below. My take is that tariffs and other government interventions in free market activity are typically counterproductive and doesn’t always lead to the results policymakers seek.
2 – Cart Before The Horse? In a call last week, the first question from a prospective client was about specific investments. And that’s OK, certainly important…but starting there felt a little like going to the doctor and asking for a prescription right when you’re asked to sit down on that weird paper-covered bench.
As in medicine, the first step needs to be diagnosis of your current condition. Determining your goals…where do you want to go? What values and approach are right for you? Your portfolio then should be allocated and constructed to serve your plan and not the other way around. We ask questions and use software to project out different scenarios for clients and determine portfolio strategy.
3 – Timing…Out. Behavior is an essential factor in investing outcomes. But the term “behavior” can be a little abstract...what does it mean? Well – one example is when investments are traded on a short-term basis with the hope of higher returns…a tendency to conflate activity with investment results is fairly common. What I see working in practice tends to be exactly the opposite. The tendency for traders to buy high and sell low is real – and costly to long-term compounding of wealth. This article in The Wall Street Journal summarizes how market timing has cut into mutual fund investor returns.
…and one more thing
Art can come from anywhere…Andy Warhol’s famous soup can images are now worth millions. This example was created by a Strava user, an app I use to track my bike rides. Users have used their runs/walks/cycles to create drawings or even recently an animation (see it at this link from The Washington Post). Tried doing this once, it’s tricky.
