NWP Monthly Digest | January 2022
Happy New Year to our dear readers and clients. It’s a very sad time here in Colorado…tragically sad. The area near Boulder, specifically the towns of Superior/Louisville/Lafayette to the east of Boulder, is devastated. As of this writing, over 500 homes have burned to the ground and 35,000 people had to be evacuated from their homes at a moment’s notice as a grass fire swept across a very densely populated part of our home state. The fire was allegedly started by a downed power line onto an extraordinarily dry field of grass on Thursday, December 30th. High winds turned that into a wildfire that was called “un-fightable” because it was so out of control - local news crews interviewed firefighters in tears as they sat watching house after house go up in flames.
Harper Lake in Louisville, CO - photos courtesy of Tory Johnson and 9news’ Kyle Clark on Twitter. Top photo dated 12-25-2019, bottom photo in same location dated 12-30-21.
We’ve had just over an inch of precipitation in the Denver metro area in the last 182 days making almost everything, quite literally, a fire hazard. Read that again. Just over an inch of moisture and no accumulated snow in 182 days.
Thankfully, the snow started coming down yesterday across Denver, Boulder, and the entire front range, and this winter storm will do a decent job to help mitigate the areas that are still smoldering. You have to wonder…if that power line managed to stay up for just one more day, would the snow on the ground have provided enough protection against this out-of-control grass fire? Oh, what a difference a day can make.
Just over a year ago, fires in the mountains of Colorado threatened my father’s cabin in Grand Lake. It was terrifying. My family and my best friends from high school and college, along with their families, had been staying there to celebrate multiple birthdays for a weekend getaway. We could see the fire burning just over the top of the ridge in the distance as it bore down on the populated areas of town. While we didn’t have to evacuate (we left a day before the mandatory evacuation orders were issued), we all sat in our Denver-area homes a day later in shock, utterly helpless, as news came in sporadically about friends’ and neighbors’ cabins catching fire.
A week later, we were notified that our cabin was spared. Walking through the area six months after that would show just how close the fire came as the grasses and trees, burned black from the raging flames, were less than 50 yards away from our doorstep.
Had that fire arrived over the ridge one day earlier, what would have happened to us?
I’ve been thinking a lot lately about time, and more specifically, timing.
A couple of months ago, I started writing about this concept in regards to retirement and what we should consider the appropriate retirement age. This is a bit different.
Time is the most valuable resource in the world. We all get the same amount of time each day, and we can never buy more. It is often said that Warren Buffet, now at the ripe old age of 91 years young, would gladly exchange his multiple billions of dollars in financial wealth to be 25 years old again.
Timing is equally valuable, and often due only to good fortune or luck. This is never more true than when talking about timing with investments.
At this point, or at least I hope this is the case, our readers and clients know what a hopeless cause trying to time the market actually is. Countless fortunes have been lost when someone thought a certain stock (or cryptocurrency?) would go up forever. Likewise, the amount of money lost by people that didn’t invest because they were waiting for just the right moment is equally vast.
Based on the types of questions we get from clients, it’s something just about everyone is thinking about. Some samples:
“Is now a good time to invest?”
“Should we be looking at something else besides the bond markets right now?”
“Don’t you think the stock market has gotten a little too high?”
“Do you think buying a house in this environment is a good idea?”
“Should we lock in our interest rates on this refinance right now or wait to see what happens with the Fed and inflation?”
It seems that everyone wants to get the timing perfect, or they think they’ll regret their decision. Unfortunately, absent a crystal ball, there is only one answer to these age-old questions: Nobody knows. Not you. Not me. Not your mortgage broker. Not the financial media networks. Not your neighbor or your brother-in-law….actually, especially not your neighbor or your brother-in-law.
Data and history give us a small glimpse of what could potentially happen, but there is a reason my industry preaches the phrase “past performance is not indicative of future results”. The concept of being able to predict the future should be absurd to all of us.
And the reason it should be absurd is that all of these things, of course, are things we have absolutely no control over. I would argue that if you are going to be upset that you bought a house “at the high point in the market”…well then, you’re not ready to buy a house. If you are going to evaluate how your investments perform over a few weeks or a few months…then you’ve already lost the investment game.
My piece of advice? Zoom out. Expand your time horizon and the timing of your decisions become much less important and, consequently, easier. Having a 20-year time horizon for your decisions reduces the need to be so precise.
And I’ll leave you with a personal example to illustrate the point. My wife and I purchased our house in the spring of 2006. Timing-wise, it wasn’t that bad of a decision, but it wasn’t good either. It was in the middle of a huge real estate boom that preceded the financial crisis. As the financial horrors began to unfold in the stock market in late 2007, a new company called Zillow allowed us, the residential homeowner, the ability to track the price of our home in real-time. How exciting, right! Not really…
The home we purchased in April 2006 was $40k underwater just 18 months after we bought it. Sobering, indeed. If our goal was to buy a house and make money on it within 18 months, well, that would have been a very bad decision. But we didn’t buy our house as an investment, we bought it so we would have a place to live, call our own, and raise our kids.
Fast forward 15 years and the value of our home has increased over 100%. Zooming out for the win!
Understand your financial goals. Have a plan. Create an investment policy that allows you to sleep well at night so you don’t have to log in to an app 10 times a day to check the value of your wealth. Give yourself a larger runway to make these important decisions and don’t lose sight of the reason you’re actually investing.
Noble Wealth Pro Tip of the Month
Goal setting is the name of the game at the start of every year. For our clients, the first part of 2022 will revolve around cash flow modeling and setting targets for the amount of cash they want to put away for the year to help them achieve the goals that are important to them, both short and long-term. We’ll also be re-evaluating all of their financial goals and checking in with them on anything they have added to their list.
Take out a pen and paper, a calculator, and your most recent paystub. Figure out how much money you’re going to make this year and remove how much you’re going to spend. Understanding your savings capacity is a great place to start, and then be very intentional on how you intend to execute that savings plan. 15% to your 401k? Great. Max out your HSA? Awesome. Taking advantage of a Roth IRA? Even better…now you’re cooking with gas.
While New Year’s Resolutions have become passé, setting goals and tracking your progress never goes out of style.
Things We’re Reading and Enjoying
The Subtle Art of Not Giving a F**k | by Mark Manson
Grant loves this book and recommended it to me a while back. My local library FINALLY got a copy. I’ve dug in and really enjoy the concept, while at the same time getting used to reading the “f-word” more times than I ever thought was possible.
#1 New York Times Bestseller - Over 10 million copies sold
In this generation-defining self-help guide, a superstar blogger cuts through the crap to show us how to stop trying to be "positive" all the time so that we can truly become better, happier people. Manson makes the argument, backed both by academic research and well-timed poop jokes, that improving our lives hinges not on our ability to turn lemons into lemonade, but on learning to stomach lemons better. Human beings are flawed and limited—"not everybody can be extraordinary, there are winners and losers in society, and some of it is not fair or your fault." Manson advises us to get to know our limitations and accept them.
Welcome to Earth | starring Will Smith (Disney+/National Geographic)
If you had any love for your National Geographic magazines in your youth the way I did, this is a heck of a show to have on in the background and the visuals are mindblowing.
It might seem humans have mapped every inch of our planet’s surface, but look closer and you’ll discover that there is still so much more to uncover — the age of exploration is far from over! 'Welcome to Earth,' a Disney+ original series from National Geographic, follows two-time Academy Award® nominee Will Smith on an extraordinary, once-in-a-lifetime adventure around the world to explore Earth’s greatest wonders and reveal its most hidden secrets.
Here’s to the great year that we know 2022 can be…
-Your team at Noble Wealth Partners
“There is nothing noble about being superior to your fellow man. True nobility is being superior to your former self.” Ernest Hemingway