News From the Control Tower:

It can be easy to get distracted by the new shiny objects in investing, but what about the tried and true? This can be seen in Warren Buffet's investment approach – it’s hard to argue with his performance even if his style might feel a little boring. This weekend is the Berkshire Hathaway annual meeting and that is an event that’s never boring. But what about that classic advice of “Sell in May and go away”? The article below breaks down some of the numbers, but on average, this adage doesn’t hold water. The S&P500 has risen 70% of the time between May and October since 1990. Checking in on the latest news with the banking system: things could be better. The government just took over First Republic, further contributing to bank consolidation. Meanwhile, Pacific Western bank is starting to have trouble. Something is amiss on the West Coast. Finally, we frequently warn clients on the risks of being house poor. The recent case before the Supreme Court (Tyler v. Hennepin County) illustrates yet another reason why this can be dangerous: you need liquid funds to pay your property tax bill. If you can’t pay your property tax, many state governments have the power to seize your property, sell it to pay the tax, and then they also pocket the overage. The moral of the story? Don’t put yourself in this position.

If you’ve been watching the new season of Succession, the power games that the characters play can make you dizzy. So can some of the numbers they throw out. The Financial Times this week breaks down some of the economics behind the story. I love a good story about the perils of using a robo-advisor. (Unfortunately there are way too many of them.) In this one, clients lost money because of material misstatements made by Betterment. The SEC settled for $9 Million, but what did the clients get, other than bad advice? Where is the accountability? We advocate hiring a fiduciary for a reason, if for nothing else than you can hold them personally accountable if they mess something up. Meanwhile, First Republic was undone by kowtowing to wealthy clients, and car dealers wanted to get in on the inflation action by marking up cars even more. Finally, homebuilders are cutting so many corners that no one wants to buy a house built post-2010.

News from the Control Tower: Our weekly curated list of news stories affecting you and your finances. Happening in plain sight all around us are seemingly innocuous things. A one-off might feel like no big deal, but as the one-offs begin to compound, they start to become consequential. Take for example, the market for temporary license tags issued by car dealers. The lax regulations in New Jersey and Georgia allow NYC drivers to acquire temporary tags, thereby skirting speed cams and red light tickets. More and more drivers blowing off traffic laws means more car accidents and the city will have to change their enforcement tactics. Same could be said of the market for eel for American sushi. The recent story in USA Today suggests organized crime is behind the illegal eel finding its way into our unagi rolls. Eating just one of a protected species may go without notice, but eat too many and the whole species will collapse. Speaking of cheats, tax season is very much here. Which one of your neighbors is under-reporting income on their tax return? The new IRS budget allows the agency to increase their audit rates: expect the US government to stop looking the other way. Meanwhile, some market analysts think that the recent bank failures only revealed a portion of the underlying market turmoil caused by the Fed’s rapid rate hikes. More “naked swimmers” remain to be exposed. Has the commercial real estate market been skinny dipping? The Odd Lots Podcast gives some great background on the stresses there. Finally, many workers open 401(k)s through a job, switch employers, and then promptly forget about those funds. The New York Times this week walks through what happens to some of those forgotten funds, and how to track down your own.

I do love DIY, but sometimes you have to recognize that professionals have valuable skills that aren’t easily reproduced. The Washington Post story quotes a survey that 50% of men, with no training or experience, think they could land a passenger airplane in an emergency. Meanwhile, pilots say there’s no way. Is anyone surprised? Speaking of experts, the esteemed tax reporter for The Wall Street Journal, Laura Saunders, has a great write-up on how brokerage accounts can be a very beneficial part of your tax strategy in retirement. Read more of our continual advice to take advantage of different tax buckets during your savings years in this recent post: Retirement Tax Buckets: Plant the Right Seeds this Spring.

A current running through all of the news stories this week is how people and organizations may benefit from a shift in thinking. A great illustration of this mental shift appears in the Guest Essay in The New York Times this week, written by a man who found his gradual blindness exhilarating once he embraced his condition. A nationwide GOP push to ban ESG considerations is causing some local Republicans to question the purported benefits of these bills in light of their immense costs. Meanwhile, in the publishing world, celebrity authors got caught up in a plagiarism scandal. They want the general public to think they wrote their books, but then want to disclaim responsibility once their ghostwriter is caught plagiarizing.

I’m currently reading and really enjoying Lauren Hough’s book of essays, “Leaving Isn’t the Hardest Thing”. When I saw she had a new piece published in Texas Highways, I stopped to read it. Her story, which explores her grandfather’s (tall?) tales of growing up in the Texas panhandle, turned out to have great parallels to today. He grew up in the Dust Bowl, where his family lost their farm to a bank. In his view, it was the bank who stole his horse. He grew up daydreaming of robbing a bank, and told stories of aiding Bonnie & Clyde.

A lot of financial news this week given the bank run on Silicon Valley Bank. First, if you’re worried about your own bank, I’ve included a link to Bauer Financial’s website, where you can search your bank to find its financial health. There has been some great reporting around recent events and I’m sure there’s more to come. I’ve included a pair of articles from The Wall Street Journal: one on what CEO Greg Becker was doing (or not doing) leading up to his bank’s failure, and one on what the regulators were doing (or not doing) as Silicon Valley Bank crashed. We will see how the politics of this bank failure shakes out, and potential impacts on banking regulations going forward. Meanwhile, some other companies have been dealing with their own political maelstrom. Walgreens entered the fight over abortion pills, and major credit card companies fell to pressure on firearms codes. Finally, I’ve included a satirical open letter to the billionaire Powerball winner who bought a $25 million mansion in Los Angeles this week, which actually contains some decent financial advice.

News from the Control Tower: Our weekly curated list of news stories affecting you and your finances. Some people know very young what they want out of life, and others can struggle their whole lives to find meaning. While it’s almost impossible to go through life without comparing yourself to your peers, many do find their own drum to beat. The post-Covid zeitgeist feels that more people are looking to beat their own drums and define success on their own terms, rather than by traditional metrics. I saw this feeling reflected in two separate articles recently: One from a 30-something and one in middle age. A similar sentiment seems to motivate communities beginning to reject the proliferation of dollar stores.

I was intrigued by The New York Review of Books' recent essay on forgetfulness. I found it a very interesting way to approach forgetfulness as we age. I personally experienced a period of forgetfulness after a medical procedure last fall that required painkillers for a number of days. I was warned about the forgetfulness, but I still found it incredibly disorienting. And the not-knowing if I’d forgotten something made me question almost everything that I did remember. I found solace in this piece that forgetting was necessary and part of healing. What does any of this have to do with personal finance? We often see clients who approach money the way that their parents did. I’d advocate that forgetting some of your parent’s approach is necessary to get ahead. Market conditions change, as do tax laws and retirement rules. More emotionally fraught, I also see this come up in inherited wealth. Not wanting to sell certain securities that the passed loved one had selected. Selling out of these positions is not about forgetting the person. It’s about your time horizon, risk tolerance, and your own objectives. Your loved one would more than likely want the funds to benefit you, not to become a drag on your own financial planning and circumstances.

News from the Control Tower: Our weekly curated list of news stories affecting you and your finances. Many people this week were talking about the Fleischman Effect, referring to the 2019 book by Taffy Brodesser-Akner, and now a TV series, “Fleishman is in Trouble.” The Fleischman Effect describes a type of privileged angst experienced by those with significant affluence who still feel they don’t have “enough”. This is not a new feeling - just a new name. It all comes down to what does money mean to you and your life? Do you want to play keeping up with the Joneses or do you want to find a drive in your life beyond money? These are evergreen questions for us all.