Thursday, June 12, 2025

You Have To Figure It Out For Yourself

Tadas Viskanta wrote a post titled Everyone Is Running Their Own Race. Included in there was "the more decisions we make, the most chances we have to mess up" which I find to be a great way to articulate what we talk about here in terms of letting the stock market's natural tendency to move from the lower left to the upper right work in your favor. The fancy word for this inertia is ergodicity. 

In client portfolios, I have quite a few names that I've owned since I started in this part of the business more than 20 years ago and quite a few others that have been in there more than 10 years. I believe the best way to manage a portfolio is to maintain a nucleus of core positions and then make more regular changes around how I dial up or dial down the portfolio's equity beta using the various alts we regularly talk about. Occasionally of course, changes to the nucleus need to be made but when you look at a long term chart and say I wish I would have just held it, that's my race, to put it in Tadas' terms. 

Weaving in an article from Yahoo about Americans flunking a six question retirement quiz, "most respondents bombed big time" the article said. Beliefs about retirement are our own race, our own thing to figure out for ourselves. We all know people who retired at 50 versus a video my wife was telling me about, a furniture upholsterer who is 94 and still works in the same shop that he and his wife have owned for 47 years. We all know people very well prepared for retirement and people who would appear to be in a lot of trouble. We all know people who make a full time gig out of planning and managing retirement and others who give it zero thought whatsoever. It's our own race. 

The article touches on decisions about Social Security noting that most people don't know they should wait. Should wait is not the correct framing. What matters far more, is making an informed decision about waiting or taking it late. A friend turns 58 this month and in four years she can take the early payout. Her husband works. I think they each make enough that they would be best off each taking their own payout not one taking the spousal. 

Taking their example and making it more general because I don't know about their particulars beyond this point, if she really dislikes her job, maybe she should retire at 62 and start to take SS while her husband who might like his job continues to work. We all run our own race and there is nothing wrong with taking advantage of some flexibility if you can. Maybe my friend, or switch it around to her husband not liking his job, can retire at 62 and with the safety net of knowing he, or she, could take Social Security, can figure out how to monetize something else to maybe push back Social Security. 

Another friend is going through something very serious with a medical thing. I can see where this sort of event might cause someone to decide to retire, life is too short and so on which would be their race, perfectly valid. I was sick for a year as a kid and for me, my race was to keep every aspect of my life as normal as I could possibly make it and I don't believe that has changed, that would be my race and perfectly valid. 

There was a quick but thin mention of what's your (retirement) number? I would reiterate the point we've been making here forever which is that having a number of some sort along with some understanding of what that number can or cannot do is important but whatever your number was, it has no relevance to what you end up with. Who cares about a $2 million goal when you end up with $1.3 million. Spending 4% of $2 million when the account balance is $1.3 million is probably going to end badly. 

There are a few comments on the Yahoo article noting how poor the education system has been at teaching personal finance. I do not know the extent of how bad or good it has been over the last 40 year or so since I graduated high school. I remember one project in sixth grade where we all picked a stock but that's it. If the Joe Moglia quote I throw around about no one caring more about your retirement than you resonates, then it is incumbent upon us individually to learn what we need to in order to have a successful outcome. 

An important thing to learn is what to avoid which we'll close out on regarding the spat on Bloomberg between Michael Saylor and Jim Chanos, they were interviewed separately. Chanos called what Saylor is doing with issuing convertibles and now preferred to buy more Bitcoin financial gibberish. 

Saylor very calmly replied that what Chanos doesn't understand is that Strategy is "actually the largest issuer of bitcoin backed credit instruments in the world." Ok, um that's something Saylor made up along with the term Bitcoin yield. He went on to say they "borrowed money that we never need to pay back." There are a couple different ways we could go with that one. He was asked something about Bitcoin going down and he pretty much said it wasn't going to go down but spelled out some more financial gibberish about why that would be ok for them too. 

The risk here is enormous. If Bitcoin keeps going up and never trades below $100,000 ever again then there may never be a consequence for all the risk embedded Strategy's common, the converts and the preferreds not to mention the ETF ecosystem of MSTR funds but the risk is absolutely there and it is enormous (repeated for emphasis). 

I'm not sure what happens to Strategy if the road from here to $1 million (Tom Lee said $3 million) goes through $40,000 and it languishes at $40,000 for a couple of years and of course it could all turn out to be bullshit. People love volatility on the way up. For my money a little Bitcoin has plenty of volatility. Speculating on it with a relatively small dollar amount is my race, not the 3 or 4 x leverage of owning MSTR. If that is your race, by all means. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.

2 comments:

Unknown said...

"People love volatility on the way up." Classic, Roger: I love it!

Roger Nusbaum said...

XD

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