Same as it ever was – until it wasn’t!

There is no certainty that the future will repeat the past. Every year is an adventure.

~ Will and Ariel Durant, The Lessons of History, New York: Simon & Schuster, 1968, page 88

By Doug Page

Same As Ever: A Guide to What Never Changes, Morgan Housel’s latest book, is a clever title, perhaps even a malaprop. The only thing that never changes is people, including our propensity to compare ourselves to others, to hold fast to our wants, needs and desires, to become filled with greed, infatuation, and optimism, and, sometimes, failing to see beyond our horizons, leading us into the delusion that tomorrow will be better than today, most certainly than yesterday.

In other words, people are tremendously flawed and acutely predictable. Just review your mistakes or those of others for proof.

That’s the great lesson Housel, a former Wall Street Journal columnist, provides in this book, which follows up his earlier one, The Psychology of Money. He dispenses wisdom many of us likely need: Tomorrow isn’t guaranteed, and the surefire thing – whether a career, a job, an investment, or a relationship – is filled with risk we’re rarely prescient enough to consider.

“Look at the big news stories that move the needle – COVID-19, 9/11, Pearl Harbor, The Great Depression. Their common trait isn’t necessarily that they were big; it’s that they were surprises, on virtually no one’s radar until they arrived,” Housel writes.

This book is no downer. It’s a warning about managing risk and uncertainty. Housel shows the biggest ones are often in front of us and rarely are they seen.

“If you knew what the biggest risk was you would do something about it, and doing something about it would make it less risky,” he writes. “What your imagination can’t fathom is the dangerous stuff, and it’s why risk can never be mastered.”

Consider, he suggests, a particular moment on a specific day that continues to haunt us.

A newscaster in New York City said, “Good morning; sixty-four degrees at eight. It’s Tuesday, September eleventh … It’s going to a beautiful day today; sunshine throughout. Really a splendid September day. The afternoon temperature is about eighty degrees.”

About 45 minutes later, without warning, horror struck, sealing the day into memory.

And as much as the most left-brained among us might have a grip on the financial risks in business decisions or fully comprehend the costs of homes, possessions, and cars, especially the financial burden to replace them, often, said one CEO, there’s a risk and value to what’s never considered.

“’The real value of … our eyesight or relationships or freedom can be hidden to us, because money is not changing hands,’” writes Housel, quoting Peter Kaufman, CEO of Glenair, a sizable manufacturer and military contractor headquartered in California.

So, how does this apply to your investments?

The right stock to own today, like Amazon, might not be the right one to own tomorrow. Based on what Housel writes, there’s no guarantee Amazon’s fate will be any different from that of Sears, which, over the last 30 years, went from being a retail behemoth to about 10 stores today, showing, as Barron’s recently reported, “that dominance, while powerful, isn’t permanent.”

The only certainties in life are death and taxes, says the adage. As Housel adroitly points out – with many teaching moments – that’s true. A company that becomes successful can become arrogant, filled with hubris, with its executives certain that small, lowly competitors aren’t to be taken seriously.

But today, Target, Walmart, Costco, and Kroger, as well as Amazon, dominate U.S. retail shopping. Why? Discount prices are easier on the wallet, and shopping in bulk, sometimes even for top brands, is commonly accepted. Why did yesterday’s successful retail industry executive fail? They likely didn’t foresee a shift in consumer values – especially the recent bout of inflation – which changed their spending habits.

So, if someone who was once successful can get tomorrow wrong, how can the rest of us mere mortals guard against our own lives going astray?

Based on Housel’s book, it’s this: Keep an open mind, understand the potential for change to come without warning, and, finally, be aware that somewhere, someone wants to scrap life as we know it today.

The Mind of the Moolah

By Doug Page

With fluctuations and uncertainties highlighting the stock market, and many a financial wizard bamboozled while deciphering where the global and U.S. economies are headed, and the resulting distress over 401(k) plans and investments, it’s the optimum moment to review a book that many may have missed – but remains invaluable today.

How do you view your money? Do your friends and loved ones manage theirs in a way contrary to yours? Do you go into a blue funk when the stock market takes a nosedive – or do you take it in stride, figuring it’s a short-term blip and brighter days are ahead?

That’s the raison d’etre for The Psychology of Money: Timeless Lessons on Wealth, Happiness and Greed, by Morgan Housel, a former columnist at The Wall Street Journal and The Motley Fool, a website offering financial and investment advice.

Given the recent takedown by Moody’s over the U.S. government’s ability to pay back its debt, over $36 trillion says the U.S. Treasury Department, which could lead to higher interest rates, there are many reasons to be concerned about the value of money and how you manage yours in these tricky times and in the future.

How money is used sheds a glistering light on the human condition, he writes, “that apply to many areas of life, like risk, confidence and happiness. Few topics offer a more powerful magnifying glass that helps explain why people behave the way they do than money.

“It’s one of the greatest shows on Earth,” he adds.

If your loved ones experienced the Great Depression, you might notice their inclination to save; if you know people who lost their house during the 2008 Financial Crisis, their children may not own a home because they think it’s more secure to rent an apartment, instead. Or they saved up a sizable downpayment, so their mortgage is smaller (proportionally, of course) than that of their parents.

Experiences are foundational, says Housel, determining how people manage their money, investments, and, likely, many other aspects of their lives. Are you an optimist or a pessimist? One or two events may set that into place.

“If you grew up when inflation was high, you invested less of your money in bonds later in life compared to those who grew up when inflation was low,” Housel writes. “If you happened to grow up when the stock market was strong, you invested more of your money in stocks later in life compared to those who grew up when stocks were weak.”

Are people misguided when it comes to managing their money?

Not according to the author.

Every “financial decision a person makes, makes sense to them in that moment and checks the boxes they need to check,” Housel writes. “They tell themselves a story about what they’re doing and why they’re doing it, and that story has been shaped by their own unique experiences.”

Then there’s a lesson about becoming rich and staying that way.

Wealth, gotten through the stock market, starting and selling a business, real estate, or buying the winning lottery ticket, requires a particular mindset: The willingness to take risks and remain optimistic.

Keeping it demands a very different one – paranoia.

“It requires humility, and fear that what you’ve made can be taken away from you just as fast,” Housel writes. “It requires frugality and an acceptance that at least some of what you made is attributable to luck.”

Additional lessons on wealth are offered, too, and, likely, they’re far from obvious, adding to the book’s distinction. Few people, readers learn, make financial decisions based on the numbers they crunched into an Excel file.

The Psychology of Money: Timeless Lessons on Wealth, Happiness and Greed is time and money well spent, especially if you’re confused about managing it and the influences, potentially the demons, you fight. One need not hold a bachelor’s or master’s degree in finance or mathematics to understand it. It’s written in plain English.

This book was released during COVID-19, in September 2020, so if you missed it, don’t go kicking yourself. Likely many readers missed great reads during those freakish days – and perhaps a few stock tips, too.