Taking Measure: December 2017

We are now entering the quiet season where we reflect and take measure of the past twelve months. For better or worse, the investment year is basically over. Unless a cataclysmic event occurs soon after this letter is put to rest, we will find that the markets have been mostly kind to us in 2017. As usual, there are concerns going into the new year and probability suggests that we will likely see a return of volatility in the future. But those are next year’s concerns. For a few weeks, these worries will be gently pushed over the horizon as thoughts bring many of us to friends, family and holiday cheer. It is wise, then, to spend a few moments to pause and reflect. As such, if this letter is less about investing than others, you will perhaps forgive my musings.

I have been working with clients in the investment business since August of 1987, not too long before the great crash of that year. I have seen both good and bad markets, periods where investors were giddy with excitement and others where they were mired in despair. Yet, I don’t remember a time like now when such an undercurrent of anxiety lurked beneath what has, for the most part, been generally healthy markets.

You can call me an optimist, but lost in the negative news of the year are some wondrous discoveries and events. We are closer today to driverless cars, drone delivery, and reusable rockets. We have witnessed significant advances in nanotechnology and robotics. We have seen breakthrough medical initiatives that will grow organs and regenerate tissues, a reduction of deaths globally from diseases such as malaria, as well as new treatments for HIV/AIDS and Alzheimer's. Additionally, there have been announcements of new drugs to fight diseases like Multiple Sclerosis and certain forms of cancer. Because of these and other advances, one of the major health problems of our time is obesity, not starvation.

Inventor and industrialist Elon Musk talks about colonies on Mars and boring holes for a hyperloop. Others speak of mining asteroids for profit. There is an estimate out there (although its authors admit it's far-fetched nature) that the asteroid belt has potentially $700 quintillion in untapped valuable minerals. If you’re having trouble imagining that amount, it’s a 7 with eighteen zeros behind it. What might not be so hard to believe is an estimate by the same author that the $339 billion worldwide space market today could grow to $2.7 trillion by 2045.  All of these advances signal jobs and should also lead to economic growth.

Speaking of economic growth, the U.S. GDP will likely average around 3% this year and should be close to that in 2018. Unemployment is the lowest it’s been in years and many Americans’ net worth is now the highest it’s been since before the start of the Great Recession. If the economy continues to grow, then stock prices have the potential of moving upward over the next few years. So don't be blinded by the rhetoric out of Washington or from the press. Follow the money; this year it's voted for stocks.

I believe much of our negativity is still a hangover from last year’s election. Many are uncomfortable with our President. Others are turned off by the endless pattern of partisanship we seem to see at all levels of government. Also, decent people cannot help but be disgusted by the actions of some of our politicians and the higher echelons of the entertainment and business industries. It is right to feel this way but I believe it is wrong to attribute this, as some do, to the American people at large. Most are good decent folk, people who have families and concerns similar to you. I also don't believe Americans are as divided as those on the extreme right and left would have you believe. Unfortunately, though, they're usually the ones on the media soapbox. We're a country of over 330 million people, living in multiple regions and coming from many different backgrounds. There will always be someone or some event that fits into the expectancy bias of the most vocal voices on both the right and the left. For the most part, though, the rest of us have opinions and beliefs that generally fall into the center.  

In this era of divisiveness and rancor, it’s hard to believe that we’ve been here before. But while watching the remarkable Ken Burns series on the Vietnam war, I was reminded how bad things were then as well. In many ways, our current tenor mirrors that period. We somehow managed to work our way through all the chaos back then and I’d like to hope we’ll be able to do so again.

The Wall Street Journal runs a duo set of editorials around Thanksgiving written by their long-time columnist Vermont C. Royster (now deceased). The first, “The Desolate Wilderness” is an accounting attributed to William Bradford of the Pilgrims leaving Delfshaven in Holland on their journey to the New World. Its companion piece “And the Fair Land” is partly the inspiration for this letter because the content could have been plucked out of today’s headlines. In it, Royster mentions how “his countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure.” One cannot help but think of our young people manning walls in places many of us would be hard-pressed to find on a map. Or when he mentions “the good and pleasant bounty that surrounds [us] can be destroyed in an instant by a single bomb,” it takes very little imagination to see the back and forth nuclear threats between our President and the leader of North Korea instead of the Cold War era rulers of the Soviet Union.

Mirroring some of our current domestic issues the editorial also asks, “How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places—only to find those men as frail as any others.”

It is important to note that Royster wrote this column in 1961 before Vietnam became a national crisis, before the political assassinations and social chaos of the 1960s, long before our current culture wars and long before Americans began to seriously question the integrity of those they elected to political office. Richard Nixon had not yet resigned and Bill Clinton had not yet been impeached. Presidents Trump, Bill Clinton, and George Bush were teenagers and Barack Obama was a baby. My guess is that Royster could have expressed these same sentiments in 1798, 1815, 1865, 1932, 1946, 2001 or 2017 instead of 1961, and found them not off the mark.

Why, when we are beset by both internal problems and external threats as we have been many times before, do we continue to thrive as a nation? The editorial makes two key points. First, “We can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men [and I would add the women] that took its measure.” It is the resourcefulness of the American people and their inherent resolve and decency that has allowed this country to grow and prosper. We are certainly not perfect, but these measures have held us in good service all these years.

Secondly, as noted, “We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.” America has a ways to go before we finally arrive at that “more perfect Union” the Framers of our Constitution hoped to achieve. But I would like to believe that we in our own admittedly mortal ways scratch, claw, work and endeavor to make this place closer to that beacon, that “shining city on a hill”, so envisioned by our earliest immigrants. It is my wish and belief that America remains that way for those that hope to come here someday, for those of us who are already lucky enough to be here, and those yet unborn generations to come. I will always believe we can do that.

I hope my optimistic tone is not too much for many of you this holiday season. I am well aware of our nation’s problems, as was Royster in 1961. However, it is a season of hope and it is in that vein this letter is offered. We’ll get back to the usual investment analysis as winter engulfs us here in January. Until then, it is my wish that however you celebrate this season it finds you healthy and happy. Here’s also to a prosperous 2018!  Finally, as always, thank you for your continued trust and support.

Happy holidays and peace to you during this season!

About Chris

Christopher R. English is the President and founder of Lumen Capital Management, LLC-a Registered Investment Advisor regulated by the State of Illinois. A copy of our ADV Part II is available upon request. We manage portfolios for investors, developing customized portfolios that reflect a client’s unique risk/reward parameters.   We also manage a private partnership currently closed to outside investors.   Mr. English has over three decades of experience working with individuals, families, businesses, and foundations. Based in the greater Chicago area, he serves clients throughout Illinois, as well as Florida, Massachusetts, California, Indiana, and other states. To schedule a complimentary portfolio review, contact Chris today by calling 708.488.0115 or emailing him at lumencapital@hotmail.com.

 

*You can access both “The Desolate Wilderness” and “And the Fair Land” through the footnote link above, but I have also included a reprint of “And the Fair Land” below.

And the Fair Land

“Any one whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful.

This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.

And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.

So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that hangs everywhere.

For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.

His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far-off corners of the globe.

How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair; yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places—only to find those men as frail as any others.

So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?

Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.

But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere—in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.

We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.

And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.”