Saturday, July 8, 2017


After throwing out my lower back—Again!—last February, I decided to supplement walking with weight machines and a Yoga class for a more balanced exercise program. In the months since, I have discovered that of the eight weight machines that I was instructed to use, two of them just plain don’t like me. Most of the machines tolerate my presence without many comments. One of them likes me so much that I am looking forward to maxing out the contraption. I suspect there is more than a little ego in this dream, but dreams are the first step on the road to reality.

This past Monday, I was waiting for a young body builder to finish his reps on the Triceps Press machine, one of the two machines that have it in for me. When he finished, I asked him why he was using the seatbelt. He replied that since he could press more than his body weight, the seat belt prevented him from lifting his body off the machine. I laughed, replying that certainly wasn’t my problem.

After this brief conversation, I set up the machine for my lifts. I thought I pegged the weights at eleven. I have been stuck at eleven for so long, I forget the last time I was able to increase the weight on this machine. I noticed I was having a difficult time performing this exercise in a correct manner, but I managed to complete the required ten repetitions, although some of them shouldn’t have been counted as complete and proper. Then I noticed that I had the machine pinned at twelve. Suddenly, instead of wondering why I was having more trouble than usual, I was surprised that I was able to do any reps at that weight. Just for grins, after finishing my circuit, I returned to try the Triceps Press machine at twelve a second time to see what would happen. I managed to perform eight more substandard lifts.

On my next visit to the gym, I returned the setting to eleven, but this time I was able to complete fourteen acceptable repetitions, enough to increase the setting to twelve. Yesterday, I managed a ten count at the highest setting, a personal record.

A Yoga master once observed, “For a committed man, there is no such thing as failure.” For me, the commitment to finding financial freedom seemed a fairly natural extension of the values I had internalized from my parents and later from those around me whom I respected. While paying off my mortgage, I maintained a spread sheet that calculated the amount of money I was saving every time I made an extra payment to principal. During the stretch run to retirement, I tracked the increase in my account balances until 2008. Then I made additional efforts to pour more money into my declining accounts. Ultimately, I achieved my goal.

I wasn’t raised to value physical exercise. In fact, if there was any risk involved in an activity, I was ordered to avoid it. Now, at age 66, I am discovering that the same methods that worked for me in saving and investing for long term goals are working in the area of physical fitness. I keep track of my weekly mileage (in my head) and my activities with the weigh machines (on paper). The numbers are increasing slowly on two of the machines and rapidly on one of the machines, but they are increasing on all of the machines.

Yes, you can hit a hard stop in your checkbook or in the gym. A few days ago, I spoke with a man of my age. I learned he was there rehabilitating from knee replacement surgery. Talk about a hard stop, but for the committed man there is no such thing as failure. Losing your job or suffering a major health problem without insurance certainly are examples of hard stops, but even after such disasters, I have seen men get up off the ground and try even harder to find their way to financial freedom.

Keep trying, maybe someday, even though you don’t believe it is possible, you might discover you can lift a twelve.

Sunday, July 2, 2017


This morning I scanned a stock report I receive every two months. I didn’t spend a lot of time reading it, as it is long and says very little that would cause me to change my behavior in any substantive way. During the last two years, the time I have been on their email list, I can summarize twenty four reports, each coincidently of 24 pages with one sentence. Everything is overvalued but some sectors are more overvalued than others.

Mark Twain famously observed, “OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February.”

There is always some reason not to invest in the market unless the Shiller Price Earnings Ratio is at or near a historic low. Barring massive actions by the world’s central banks, as has happened over the last decade, one of these opportunities will appear every twelve years or so. It pleases us to call such events recessions or depressions.

Repeat after me, “I can’t predict the future.”

I can look at facts, such as the growth of debt in the private and public sector, and make the reasonable assumption that this will not end well, but I can’t say with certainty when or how it will end. Puerto Rico just went bankrupt. In the next few days, Illinois may become the first state to see its credit rating lowered to junk bond status. What happens when the world’s markets lose confidence in the Federal Reserve Bank, the European Central Bank, or the People’s Bank of China?

As I read a report that simultaneously said yes and no to every possible option, I was reminded that investing is really pretty simple if you have made a contract with yourself.

In my case, it would look something like this:

1)The Prime Directive If I don’t understand it, I am not going to buy it.

2) I will maintain a roughly 50%/50% balance between equities and high quality income producing assets (this 50% includes about 10% in highly liquid positions like money market funds), through good times and bad.

3) I believe that dividends will create about ½ of the growth produced by my stock portfolio. Therefore, “Why should I buy this if it doesn’t pay a dividend?” is a serious question. Also, “Is this dividend sustainable?” becomes an important issue.

4) I don’t sell individual bonds or bond funds, unless I need to rebalance my portfolio. I will ride them to maturity and then reinvest as appropriate.

5) I will have a clear reason for making any investment, since this action will make me an owner of this company. The factors involved could include the size of the moat around the company’s business model, quality of management, record of increasing dividends, or a big story. I recently took a somewhat speculative (for me) position in Zimmer Biomet. I thought it an attractively priced opportunity to get into the business of selling artificial joints to aging Baby Boomers. That would be an example of a big story.

Those are the most important clauses in my contract with myself. This has worked out pretty well for me, but these guidelines are certainly not the only possible rules for investment. Your age, your net worth, your fixed expenses and income, your personality, level of risk tolerance, and the amount of time you are willing to spend performing research will all contribute to the final contract you sign with yourself.

Keep It Simple Stupid is always good advice.

Treat your contract with yourself as seriously as you would any legal document that requires your signature.

Start investing today, because there will be a tomorrow, if not for you, there will be a tomorrow for someone you love.