Dearest Friends,
The core communication program at Mindful Money revolves around our January client letter (this letter) and our Mid-Year reminder that arrives in your inbox in early July. If you go back over the last 15 years, you will find that the length and details of the message changes… but the spirit never does.
We go a little more in depth in the January and July Mindful Money Membership meetings where we also review our 10 Core Beliefs. It’s dubious whether the saying, “If you don’t stand for something, you’ll fall for anything,” originated with Alexander Hamilton, but it is nonetheless an important reflection.
Our 10 Core Beliefs give us a context for our financial choices amidst the constant “Gathering Darkness” of financial media.
We are constantly barraged with catastrophism about the markets and the economy, and the barrage does no one any good. If you don’t have a strong core belief system in place, you are likely to fall prey to some portion of the catastrophism… to deleterious effect on your long-term financial health.
My goal in this letter and in the exposition of our 10 Core Beliefs is lay out a set of general principles which, though unchanging, are especially relevant to investor success because they can be our guide through all the turmoil, anxiety, noise, and deception we encounter in our financial lives.
At the end of the letter – after we’ve laid out the bedrock beliefs – I always offer a few calm comments about the current economic situation as I see it. This is NOT a portfolio report. I’m not doing any benchmark comparisons and I’m not offering any predictions… and I quietly encourage you, the investor, to do likewise.
My dearest friends, I am happy to report on another successful year in our shared pursuit of your most cherished lifetime financial goals. Our plan and our portfolio continue to be driven by those goals… rather than any prognostication of the economy or markets. This will continue to be the case in the coming year, and beyond.
Core Beliefs
We are long-term, goal-focused, plan-driven investors. Our core investment policy is to invest in broadly diversified portfolios of high-quality business (you’ll often hear me refer to them as the “Great Businesses of the US and the World,” instead of “stocks” or “equities”).
We believe that the economy can’t be consistently forecast, nor the markets consistently timed. We conclude from this belief that the ONLY practical way to capture the premium long-term return of equities is to ride out their frequent, unpredictable, sometimes significant, but historically always temporary declines.
We do not react to economic or market events (or the anticipation of such events). As long as our long-term goals remain unchanged, so will our plan for the achievement of those goals.
What could be simpler, right? But… as Mike Tyson said, “Everyone has a plan until they get punched in the mouth.”
We have recently been punched in the mouth – hard and repeatedly. The calls have come in and each caller has been reminded of our core beliefs and pointed to the Mindful Money podcast episodes 91-100 where I lay out all the reasons I love owning diversified shares of great businesses (as opposed to owning anything else or lending to those same businesses).
Current Events
Powered largely by a very few of the very largest technology stocks, the past year was another exceptionally good one for the diversified equity investor. As the year came to a close, the market gave evidence of broadening out to some extent. This would be welcome if it were to continue.
The presidential election result was at least clear and uncontested. The economic backdrop continued favorable, the job market remained fairly strong, though shows subtle signs of cooling due to the tightening of monetary policy. Corporate earnings and dividends reached record highs and are forecast to increase even further in 2025.
Late in the year many investors feared that equity markets had gotten ahead of themselves, as evidenced by somewhat stretched valuations. Since valuations have never proven a reliable timing tool – any more than anything else has – we encouraged clients to keep on keeping on with their plan.
Inflation has, unfortunately, not gone away. Nor, as Fed Chair Powell observed in mid-December, is it going away. A frothy market took this statement rather badly, as indeed it should have, in my opinion.
While the fiscal condition of the U.S. remains undeniably appalling, the consumer is (surprisingly) in very good shape. The household debt service ratio (debt payments as a percentage of disposable personal income), at 10.1% in the third quarter of 2024, is near 40-year lows.
It doesn’t seem reasonable to suppose that the broad equity market can go on compounding at the nearly 16% it’s been producing since the March 2009 Global Financial Crisis lows… nor do we need it to. Our long-term plans assume the hundred-year average return of the S&P 500 at around ten percent.
I cannot say what 2025 holds for markets. The punditry has put forward an average expectation of around 10% positive… but they are rarely correct. Who knows if the end result will be higher… or lower? Whatever comes to pass, I will remind you that we planned for it… it takes a broad variety of returns – some of them much higher than ten percent and some of them much lower – even very negative – to create the average long-term return of ten percent.
Wherever markets go this year, I encourage you to keep the core beliefs in mind:
- We are long-term, goal-focused, and planning driven.
- We believe (know) the economy cannot be forecast and the market cannot be timed.
- We do not react to economic or market events (nor, mind you, do we react to the anticipation of economic or market events).
We wish all our clients and friends a healthy, happy, prosperous 2025. We’re always here to answer your questions or address your concerns. Thank you for reading my newsletter and, for those of you who are, being our clients.
It is my pleasure to serve you.
A couple lessons that I hope we learn together:
- We can’t predict or control the world, and
- That’s OK.
The way we invest embraces this uncertainty, i.e. We Planned For This. If you aren’t a subscriber to the Weekly Commentary, please go to Mindful.Money and subscribe (and share liberally). It’s the best place to find context for all the craziness happening in the world.
What we can do (all we can do)… is choose how we respond. And, from what I’ve seen thus far, we’ve responded with grace, resilience, introspection, and humor.
I find humor essential these days. Most nights I watch a comedy clip before bed. “Laughter,” they say, is the best medicine… and I choose laughter.
Once again, the markets and life have given us a fair share of curveballs. But, in that space, we’ve continued to make thoughtful choices – and it shows.
After almost 17 years working together, John Madden remains my most trusted partner. He commented last month (when I turned 53) that he was my age when he joined the firm. He is retiring next year after a long and wonderful run together. I’ll never be able to express enough gratitude for his friendship and dedication.
Gail continues to be the glue that makes it all work. Her sincere client focus and care ripples through the Berkeley office. Our planners, Andrea and Monica, and our trading team, Avo and Riley, have continued to support us and elevate our client services, ensuring that we’re equipped for whatever challenges and opportunities 2025 will bring.
Every year, I get to recall and report to you the many big changes in our client community.
This year we celebrated the birth of 5 new babies in our client families (mostly grandkids and great grandkids) and we mourned the loss of 4 clients (a record). One client who died last year was one of my first friends when I entered this business. She basically opened the door to Berkeley for me… introduced me to two different boards, and – even before she was a client – was talking about me to the world and introducing people to the firm.
In the last 5 years, I have seen 4 centenarian clients die. In 2024, we saw one of these amazing people get their promotion (as my grandfather called it before his).
Two businesses were sold, 2 more are in process of selling, 1 house was built, 2 were purchased, 3 were remodeled, and 1 elevator was installed (the knees aren’t what they once were). And, there were 8-10 retirements – depending on what you count as a retirement (does it still count as retirement if you’ve already retired twice???).
Life keeps life-ing. We take it as it comes and navigate the best we can.
2025 is bound to be… interesting-bordering-on-challenging. Between the evolving economy and the new administration’s theatrics, it may feel like we’re navigating a circus.
As we prepare to flip the calendar, I encourage you to be intentional about where you place your attention. Focus on what you can control. Choose to engage with that which fills you with hope and joy. And know that we’re always here – a call or email away – ready to help you navigate whatever comes next.
Lots of people refer to what we do as “financial” planning; but I like to think of it as life planning. Money plays a role, but if it’s at the center… you’re doing it wrong.
On a personal note, I keep hearing rumors of my own retirement. I need to put that to bed. I am not retiring. I love what I do. I love working with you. I love helping people reach their goals. I love that I get to be happy and doing well by doing good in the world.
As many of you know, I have been meditating for longer than I’ve been an advisor. And in 2023-2024, I added “Mindfulness Teacher” to my skillset and taught both an “Introduction to Mindfulness” class and an “Antidote to Anxiety” class. Maybe you will join me in class next year (stay tuned to the Mindful Money Weekly for class schedules)…
The kids, as always, are my reason for being. I am incredibly proud of them. They are totally different people, they have different strengths, but their hearts are in the right place, they care about other people, and they do their best at everything they try. They are so close – texting each other almost daily – even while Eli is away at college. I could not be happier as a parent.
This year, as in every year, I am grateful. Grateful for the work I get to do, for the community we’ve built, and for the privilege of walking alongside each of you as you navigate life’s big decisions.
May you and your loved ones enjoy a warm, safe, happy, and healthy holiday season. Let’s make 2025 a year of growth, connection, and generosity. And maybe – just maybe – a little less news watching.
With love and gratitude,
Jonathan
