National Call Replay: Navigating Noise, Finding Meaning: A Conversation with Brian Portnoy, PhD, CFA
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Thomas Jarecki: Okay, good afternoon, everybody. Thank you for joining the call. My name is Tom Jarecki. I'm the National Director of Wealth Planning at Key Wealth.
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Thomas Jarecki: And I'm super excited about this call. We have a… we have an excellent, we have excellent content for you. There's a lot going on in the world today, needless to say. Before, even before the war in Iran broke out, you know, as investors, we already felt a…
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Thomas Jarecki: heightened degree of uncertainty. Markets sending mixed signals where
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Thomas Jarecki: depending on the month, data looks fine on paper, but for many families, it doesn't always feel so reassuring. We had geopolitical tensions even before these past few days. Trade policy, obviously, has been a huge topic.
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Thomas Jarecki: with tariffs, AI disrupting industries, disrupting work, and even our sense of identity in ways that we're probably just beginning to understand.
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Thomas Jarecki: For investors, this can create a heightened sense of anxiety, and sometimes spreadsheets and just data, you know, isn't enough, and we need to understand the human side of money.
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Thomas Jarecki: And that's why I'm thrilled to have Brian Portnoy with us today to talk about how, in an environment like this, we can make better decisions with our money.
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Thomas Jarecki: But before we get to Brian, given the events of the past few days, we are joined by our Chief Investment Officer, George Mateo, to discuss developments in Iran, impact on markets and portfolios.
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Thomas Jarecki: And so, George, help us understand what's happening. How are markets processing the conflict in the Middle East, and what are you watching most closely?
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George Mateyo: Sure, Tom, thanks for that introduction, and I couldn't think of a better time to talk about navigating the noise, because there certainly is a lot of it. But let me begin, first of all, by stating the fact that when we're talking about war.
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George Mateyo: you know, we're talking about a very real human element, and I don't think that can be understated, and I don't want to triple-seize that. The cost of war is immense, and the human toll it takes is deeply, deeply profound. And so, again, I don't want to minimize that in any way.
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George Mateyo: I'm also going to presume that most of our listeners, probably not maybe all of our listeners, are really well aware of kind of what's happened and how we've arrived at the situation, so I'm not going to spend time talking about some of the details.
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George Mateyo: Nor am I going to opine on whether or not the war was a good thing or not. I'll leave that to the talking heads on TV. But today, I'm going to talk about the impact of war, in particular this war in Iran, and the impact it might have on our economy, might have an impact on investments and our portfolios.
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George Mateyo: So, to some extent, I could probably, in the very simplest terms, just kind of define it this way. You know, we've seen the war break out in the last few days or so.
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George Mateyo: We saw immediately energy prices surge higher. We saw bond yields actually move up a little bit on fears of inflation.
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George Mateyo: And we also saw stock markets around the world start to sink a little bit, and I think in the simplest terms, this is probably enough to know right now, where essentially stocks will stop going down when oil stops going up. And it's pretty much as simple as that in the current environment.
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George Mateyo: So, I could probably end the conversation there. I probably won't, though. I've got a few more things to add, Tom. I would just kind of add, though, that I think we'll come back to this notion at the end.
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George Mateyo: But again, this is kind of the key takeaway. So let me kind of provide some context, though, in terms of what's kind of going on in the broader macro environment.
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George Mateyo: And particularly, you know, I think it's important to kind of identify some things as to what might be some guideposts or some signals that we should watch to determine what happens next, and also think about what investors might consider doing now.
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George Mateyo: In my opinion, I think whoever's announced as the next leader or leaders in Iran, I think will probably be a real pivotal moment in terms of how we go forward from here. That'll kind of dictate, really, what happens next in terms of the duration.
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George Mateyo: And the scope of this conflict, and I'll talk more about that later on. In the near term, though, I think what happens in the all-important state of Hammus, many people have heard about that, I'll explain that in a second.
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George Mateyo: But I think what happens in that particular strait will be very important. That's a really key bottleneck and choke point, as they call it, inside the overall economy with respect to the flow of oil.
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George Mateyo: And what happens there is going to be very important to really kind of determine the outlook for inflation and the economy going forward as well. Notably, I would mention here that China and Asia specifically, and Europe, are more affected than the United States is right now, and probably you're seeing some of that
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George Mateyo: play out in the sense that global markets are kind of recalibrating that very dimension. But at the same time, I think it's also notable that global events such as these, and some of these major supply chain disruptions
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George Mateyo: historically have been really kind of short-lived. In other words, they do crack over time. Sometimes it's a matter of weeks, maybe a month or two, but it doesn't actually persist for very long.
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George Mateyo: That said, because we're talking about regime change and some other things here, the things that we've talked about thus far suggest that the range of outcomes is very wide, and therefore things are deeply uncertain.
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George Mateyo: Nonetheless, though, we would argue that investors should really refrain from making big, abrupt changes to their portfolio. Instead, use this time of volatility to strengthen your overall diversification, meaning look at things that are maybe underperforming and maybe rebalance to some extent, but don't really make any big wholesale changes
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George Mateyo: Given what's happened overseas in the last few days.
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George Mateyo: So, to kind of put things into context, I think I'll just begin by talking about this thing called the Strait of Hormuz. Many people have talked about this. This is an important part of our world in terms of the fact that it sits and really connects the overall Persian Gulf
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George Mateyo: with the Gulf of Oman and the Arabian Sea. It's actually got Oman situated to the south of it, and of course, the southern border of Iran is just to the north of the strait. And probably more importantly is that you can see here, in terms of the overall volume of oil, with kind of forces throughout the world on big… on these big ships.
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George Mateyo: you know, the Strait of Hormuz essentially is responsible for roughly 20% of the overall supply of oil on a daily basis. So roughly one-fifth of the oil that's floating around on oceans trying to make its way to certain ports that can be used in energy and so forth.
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George Mateyo: comes out of that Strait of Hormuz. So that's a really big driver. It's the second largest port of oil around the world.
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George Mateyo: Now, if I could kind of show you on a map really quickly what's happening right now, kind of almost in real time, and you can follow along by certain websites. Kind of a busy slide here, but it just kind of shows you, all those red triangles essentially represent some type of ship, some type of tanker that's trying to send oil to its destination.
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George Mateyo: And I've kind of put a thing… a few things… a few labels here to kind of put this in context. You can see, for example, the gray shading, essentially, is land. Those are bodies of countries or land masses.
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George Mateyo: The white colors are pretty much bodies of water, and I've kind of labeled a couple of bodies of water, like the Atlantic Ocean, to kind of give you some bearing. But really, more importantly, in the center part of your page there, you can see where Iran is situated, and you can also see the Red Sea to the left of that, and again, the all-important Strait of Ramuz to the right of that.
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George Mateyo: And again, if you kind of squint here, you can see those red kind of triangles, if you will, are kind of getting clustered together, suggesting that activity, as you look about things in real time, are starting to kind of grind to a halt.
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George Mateyo: Now, I think that's important to kind of recognize, and maybe kind of put this in a slightly different way. This is probably a much more clear demonstration and depiction
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George Mateyo: what's happening in the Strait. And you can see right now, we've kind of seen the overall shipping volume… the volume fall quite precipitously in the last few days or so. It's not officially closed, though, so contrary to what you might hear and read on news outlets and so forth, it is not officially closed.
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George Mateyo: But it's become very prohibitive to actually keep the straight open, and more specifically, there are major companies that are actually using insurance premiums to kind of jack prices up to make it almost untenable for ships to pass through. So again, you've seen over the last several days or so, the volume fall off quite notably.
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George Mateyo: It does have some seasonality, and we're kind of… you can see that if you look at the chart here, you can see roughly around November, December, typically when the holidays, activity does slow a little bit. It takes a few weeks to then to kind of ramp up.
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George Mateyo: And now, again, we've kind of fallen back down again, given what's happened in Iran more specifically.
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George Mateyo: In response to this, we've also seen that oil prices have started to move sharply higher. Now, notably, I think it's worth noting that we've seen the price of oil move higher in anticipation of this.
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George Mateyo: So, coming into the latest crisis, for example, the price of oil actually started to move higher in the earlier parts of this year. And then, of course, in the last few days or so, it spiked roughly $10 to $12 a barrel. And I think the big question right now in many people's minds is, where is this headed next? And truthfully, nobody really knows.
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George Mateyo: But it has moved higher. Again, it's already kind of moved higher a little bit.
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George Mateyo: And more importantly, people are now trying to calculate and estimate what could be the impact on the economy.
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George Mateyo: One particular strategist has this notion in mind, though, that if the overall impact of oil translates to inflation, we could see roughly 100 basis points increase of inflation relative to where we were. So let me kind of unpack that a little bit. This is kind of based on really where we think… where the consensus forecast was for oil at the beginning of the year, not forecasting any significant conflict in the Middle East, such as what we're seeing right now.
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George Mateyo: So, most forecasters, I think, were estimating that the price of oil would hover roughly around, I don't know, $60, $65 a barrel. This particular forecast suggests that if oil were to spike up another
$50 from that consensus forecast.
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George Mateyo: which would be maybe roughly $110 a barrel, we'll say. You know, that would actually suggest that maybe inflation could be one full percentage points higher
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George Mateyo: than where it otherwise would be. Now, notably, that 110 price target, if you will, or that number, is nowhere close to where we are now, thankfully. We've kind of, again, seen oil price… oil prices move up, but they're kind of in the mid-70s, low 80s right now, so we still have some room to go before this forecast were to come to fruition.
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George Mateyo: And I would also note, Tom, that we also have to acknowledge that tax cuts that were implemented last year could cushion the blow to some extent, right? So there are some things, some offsets there that we have to keep in mind as well.
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George Mateyo: One other thing I would kind of ask people to keep in mind is the fact that the U.S. now is a net exporter of energy.
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George Mateyo: And that's a stark change from where we were the last time we had a significant oil crisis in the early 1970s. Back then, essentially, we were essentially a big consumer of energy, but we relied on foreign countries.
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George Mateyo: for our energy. That's the exact opposite of where we are today. So on this chart, kind of a busy series of data points and so forth, but if you look, for example, at the bottom part of the page, you can see the lines of exports and imports. Exports are in that gold-yellowish color.
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George Mateyo: Imports are in green. And again, you can kind of see over time, over the last several decades or so, we're in a situation more recently that we are actually exporting more energy than we're importing it. So again, we're in a pretty big… in a better position than we were today relative to 50 years ago.
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George Mateyo: We still consume a lot of energy. That's going to change, it doesn't seem like. We're still producing a lot more, too, but notably, again, we're reliant more on our own domestic sources of energy relative to where we were 50 years ago, and that puts us in a really advantageous position, perhaps, to navigate some of these pressures that we're seeing unfold in the Middle East.
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George Mateyo: On the other hand, though, I think it's notable to say that China, and specifically China and Asia, are more reliant on oil from the Strait of Ramuz than they were in the past. So their energy consumption is also going up quite notably, as their economies have been expanding in the past years.
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George Mateyo: But if you look at the chart on the right for a second, you can see that oil, that it really kind of comes out of the Strait of Hormuz, a lot of it goes to China. Roughly one-fifth of the oil from that Strait goes to China, and roughly 80% of Chinese consumed energy and oil comes from the Strait of Hormuz. So again, they're very impacted by this.
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George Mateyo: I would note, however, that China actually has a significant stockpile of energy already in reserve… in reserves, rather, and that should provide some cushion to their economy as well.
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George Mateyo: But nonetheless, we're seeing kind of this play out in the sense that many countries and
economies in Asia and Europe more broadly are also experiencing perhaps more pain than we are at the moment. So, that all depends on kind of what happens next, though, and I think it's kind of fair to say that, you know, what happens next is really going to be predicated, as I said earlier, on what happens with regime change.
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George Mateyo: And here, there's, frankly, a lot of different outcomes that could take place. Many different outcomes that were probably too many to mention, but we've tried to simplify this on this page.
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George Mateyo: I think it's fair to say that there's probably two big dimensions to think through, one of which would be if the current regime stays roughly intact, which, you know, I think there's a moderate chance that that happens. And if that were to happen, there's a chance that maybe the U.S. decides to just kind of, you know, fade away, and maybe they focus on other things, and essentially the status quo is preserved.
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George Mateyo: Maybe there's some deal-making with respect to what happens with Iran's nuclear situation, but frankly, under one scenario, we could essentially see the regime stay roughly intact, despite the fact that the leadership itself has, of course, has been changed.
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George Mateyo: On the situation where the regime change falls, frankly, here, there's a lot of different potential outcomes.
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George Mateyo: In one scenario, we can see the hardliners essentially re-exert more control. That's something clearly that the U.S. does not want, but it's certainly possible.
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George Mateyo: On the other side, what the U.S. probably is really angling for is maybe more of a modern authoritarian regime, where essentially different factions, essentially, would run the country, and in that situation, maybe they could find a deal that could be reached with the U.S. and its nuclear capabilities.
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George Mateyo: That would probably be the best outcome, and that's probably… there's a high chance that would happen so far. Again, these odds could change at any moment.
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George Mateyo: But one thing that probably is not like that happened, essentially, is some type of democratic transition
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George Mateyo: where essentially everybody in Iran, all 90 million people or so, have a chance to express their vote at a ballot box. That's a possible situation, it's not implausible, but I think the odds of that are pretty low.
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George Mateyo: And then conversely, one other situation that we have to be mindful of is that an outright civil war breaks out. And that's something, again, that the U.S. does not want either, but it's certainly in the realm of possibility.
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George Mateyo: So, if I think about this all together, one thing I would kind of point out, though, when we think about geopolitical events, as we say here, market returns tend to improve over time, meaning that, essentially, we have the initial shock of the event take place. As I mentioned earlier, markets react very quickly, they readjust almost instantaneously now, but over time.
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George Mateyo: they settle up. They don't settle down, things settle up, meaning essentially stock prices do tend to revert higher over time.
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George Mateyo: Since the, the World War II era of 1940, we can count 23 different geopolitical events, I'm probably leaving a few out, but call two dozen, roughly, or so, political events that took place.
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George Mateyo: And then you can see over time what happened the week after, the month after, 3 months, 6 months, 12 months after.
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George Mateyo: Usually, again, as I say here, most of the time, stocks tend to settle up. I mean, essentially, they do tend to revert higher.
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George Mateyo: Now, there was, of course, one episode in the 1940s. If you're asking yourself on the upper right box, why was the stock market down 22% 12 months after the initial outbreak of war? Well, essentially, that's counting the period of time of 1940, and of course, the war started really in Earth in 1941 and 42.
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George Mateyo: If I were to strip that out into median returns, though, you can see the median returns are still quite positive, well north of double digits, and again, more notably, the percent of time in which markets are positive is really quite high.
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George Mateyo: So again, this is not to say that history is always going to repeat itself, there's a lot of uncertainty, but most of the time, once these geopolitical events take place, markets do settle down, and over time, they do settle up.
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George Mateyo: So lastly, I'll just kind of point out, as I mentioned earlier at the beginning of my comments, rather, that we have seen this environment take place to some extent before, and as I mentioned earlier, when the price of oil stops going up.
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George Mateyo: That's usually about the time that the stock market stops… starts to bottom and starts to move higher. And indeed, we thought that that very thing happened in the last time we had a significant conflict in the Middle East, which was in the 1991 episode when Iraq invaded Kuwait.
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George Mateyo: You can see quite clearly on this slide, the gray bars represent the time a recession occurred. Notably, the stock market actually corrected before the recession actually was officially labeled, so the one thing that's kind of unique about this chart
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George Mateyo: is essentially the people that keep track of dating the economy and dating recessions declared the recession after the market had already rallied significantly. And indeed, actually, the market was already kind of back to new highs by the time that we got around to calling this a recession.
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George Mateyo: But more importantly, the market turns higher and turns good before the fundamentals support themselves, and we think that's going to continue the case.
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George Mateyo: So again, as we said earlier, when you have these moments of volatility, we would not really recommend making abrupt changes, and instead we would use this time of volatility to reassess your portfolio, and really make sure your portfolio is adequately diversified, and perhaps having enhanced your diversification
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George Mateyo: going forward is our best advice. So, Tom, thanks for letting me join, and I'll turn it back to you.
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Thomas Jarecki: Yeah, no, I appreciate you joining, George, especially on a short notice. There is a lot going on. I know you and your team are spending a lot of time following all the developments, not just on the political, geopolitical side, but obviously the implications on the markets.
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Thomas Jarecki: But I'll reiterate what you said in the beginning. At the end of the day, anything like this, there's a human dimension to it all, whether it's thinking about our own service members who are in, you know, flying in these missions and living, and, many living or working in that part of the world.
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Thomas Jarecki: And obviously, folks affected by, you know, by, by everything that's going on. So I appreciate you joining on short notice, George, thank you. For folks who have questions for George.
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Thomas Jarecki: We do have a Q&A box in the Zoom window. We would encourage you to write the question. We won't have time to answer questions on this call, but we will follow up with you. We will have
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Thomas Jarecki: We will have your relationship manager or portfolio strategist, touch base to make sure that we can address and answer your questions. As you can imagine, things will be changing maybe by the hour. Certainly, there's a lot going on. So again, George, thank you. Appreciate it.
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Thomas Jarecki: So I want to switch gears. Brian, Brian Portnoy is a behavioral scientist who has spent his career studying how people make financial decisions. Brian is an author of Geometry of Wealth, founder of Shaping Wealth.
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Thomas Jarecki: Phd from University of Chicago and a CFA, Chartered Financial Analyst.
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Thomas Jarecki: Brian, when you and I started to talk about this call, we had no idea, that we were going to do it on day 5 or 6, or whatever it is of this, of this conflict. So, it works out in a way. We're going to talk about uncertainty, and this is really where I want to start.
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Thomas Jarecki: And a lot of what you wrote, and you've said that we are walking around with 150,000-year-old brains, trying to navigate a modern global economy.
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Thomas Jarecki: Why does uncertainty, more than actual losses, feel so physically uncomfortable for investors?
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Brian Portnoy: Yeah, thanks, Tom, and I appreciate George's comments. There's some great insights there. Well, let's level set on the opening statement, which is that we are, in fact, running ancient software to solve modern problems.
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Brian Portnoy: And this is what behavioral scientists, evolutionary psychologists call the mismatch, or the mismatch theory.
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Brian Portnoy: That you've got, sort of, our brains, which, from an evolutionary point of view, are very, very old.
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Brian Portnoy: and effectively developed in order to solve very different problems. How to stay alive in dangerous physical environments, how to build tribes, how to communicate.
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Brian Portnoy: Money was only invented a few thousand years ago. We think of money as being this omnipresent thing, and it is now. It's this social institution, it's a form of trust. It's not really real, right? It
doesn't grow in the ground or fall from a tree. We made it up, and we've agreed to the rules of it, but they're made-up rules.
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Brian Portnoy: So we've got, like, this ancient brain trying to navigate this, and there's a reason why humans make systematic errors in financial judgment.
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Brian Portnoy: And it's not because we're irrational. Economists use this word, irrational, Tom. It's a fancy word for stupid. No one's really stupid. I like to just level set on the word normal. What we are is normal, and in times of uncertainty.
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Brian Portnoy: there's no question that our fear response kicks in. From a brain chemistry point of view, there's a part of the brain called the amygdala, that's sort of the fear response center. It can sort of overwhelm other elements of the brain.
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Brian Portnoy: And so, the brain doesn't distinguish, really, between, sort of.
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Brian Portnoy: Fighting a creature in the wild.
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Brian Portnoy: Versus red lines on a graph that make you feel like you might not, you know, that your portfolio's gonna shrink
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Brian Portnoy: that you're going to lose a lot of money. I'll wrap this question just by saying that the dynamic that I'd encourage everybody on this call, and it's great to have so many people listening in.
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Brian Portnoy: The dynamic I'd encourage everybody to think about time and again when it comes to their money life is survive and thrive. From an evolutionary point of view, forget money for a second, what do we do? We survive, and we thrive.
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Brian Portnoy: We navigate a dangerous world that's always uncertain, we never know what's gonna happen, and assuming that we do get through the day, we begin to hope for more.
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Brian Portnoy: Same thing with our money life. We want to survive, and we want to thrive, but there's no doubt that big headlines, red lines on the graph, trigger that fear response, and it's normal, it's not irrational.
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Thomas Jarecki: Yeah, that's actually, it ties in nicely to my follow-up on this, so it's… do you feel like today
is objectively more
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Thomas Jarecki: uncertain than the past, or are we just more aware of uncertainty because of the information overload and real-time news that's coming at us from all kinds of sources? Social media, TV, radio, podcasts, etc?
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Brian Portnoy: It's absolutely the second. There's no evidence, and it would even be hard to measure, that things are more uncertain than they, now than they were last week or two years ago.
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Brian Portnoy: you can, and I'm sure George has seen… produced graphs like this. You can go calendar year by calendar year. You could actually go quarter by quarter
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Brian Portnoy: And the graph is always… everyone calls the graph the same thing because it's the perfect name. Quote, it's always something.
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Brian Portnoy: It's always something. So we can think about, for example, market history. Post the great financial crisis of 2007 and 2009, we kind of think of 2010 to
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Brian Portnoy: up until the pandemic, so call it 2010 through 2019, as a calm period. And there's reasons to, you know, there's evidence that, you know, from a market volatility point of view, that that was true.
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Brian Portnoy: Tom, go year by year, quarter by quarter. There was always something for people to worry about.
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Brian Portnoy: Your point about the media environment.
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Brian Portnoy: communication, technologies. Now, that's really important. You know, a few centuries ago, when you didn't get news until a few days later via horseback, it was kind of hard to worry about what's going on in the world.
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Brian Portnoy: Now, we are tick by tick, all aware. And Tom, I know you've heard me quote this, like, 73 times, so I apologize to you for repeating myself, but one of my favorite lines in our field comes from J.P. Morgan, the original John Pierpont Morgan.
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Brian Portnoy: Who said that nothing corrupts your financial judgment more than the sight of your neighbor
getting rich.
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Brian Portnoy: The problem now is that everybody's our neighbor.
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Brian Portnoy: Facebook, TikTok, Instagram, go through all of the social media. We see each other all the time. For 99.7% of human history, we operated in small tribes of less than 150 people. Now it's 8 billion people staring at each other all day, every day. This… this ain't normal.
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Brian Portnoy: And we're figuring out how to react. Investors on this call are figuring out how to act. Economists are figuring it out. Financial advisors are figuring it out. In the grand scheme of things, this is brand new.
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Thomas Jarecki: Yeah. So, talk about investor anxiety. What are some of the most common behavioral mistakes you see
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Thomas Jarecki: you know, during time… during times of, you know, when anxiety is heightened, uncertainty feels more pronounced, what are some of the most common behavioral mistakes that you see people, making? Taking too much risk, pulling back too much?
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Thomas Jarecki: What have you seen observed in previous periods of heightened uncertainty?
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Brian Portnoy: Well, let's reserve judgment before we level set. So let's talk about reactions and behavior before we label them mistakes, because I want to really always go back to the idea that what we're doing here is being normal, and if anyone wants to use a fancy term, they could say we're being adaptive.
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Brian Portnoy: Okay, so, we, over a long period of time, adapted to dangerous environments.
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Brian Portnoy: And we bring… remember, ancient software, modern problems. When we encounter market volatility, really bad news. Market actually drops by 10%, we feel like our wealth is disappearing. There's a few…
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Brian Portnoy: ancient adaptations that we built that have helped us survive. Let's keep this in mind. These have been part of our survival path, but they can disrupt financial judgment, and yes, they can lead to mistakes. What are those? There's a bunch. One is hurting.
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Brian Portnoy: We are, by nature, tribal creatures. We're born into groups, and groups not only give us physical safety, they give us meaning. It wasn't until, you know, a few millennia ago, we operated in very small groups. Now, we're part of these global communities of millions and billions of people.
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Brian Portnoy: And so, when we feel fear, when we encounter that uncertainty.
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Brian Portnoy: we look to see what everybody else is doing, because that… it does bring a sense of safety. And it might not be the right decision, but it's what everybody else is doing.
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Brian Portnoy: And I'll tell you from an anthropological point of view, if you're in the group and decide to start acting like someone outside the group, that is so physically uncomfortable. It's like, boy, am I really gonna cut against the grain here? So we tend to chase trends. It could be, hey, gold is soaring, I'm gonna buy into gold.
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Brian Portnoy: Crypto is tanking. I'm gonna sell my position. My overall portfolio's down a few percent. Boy, others seem to be nervous, so I'm gonna go there.
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Brian Portnoy: Another thing that happens during these times, Tom, is that we have something called, present bias. All things equal, humans value today versus tomorrow. It makes perfect sense, right? You gotta get through today before you get to tomorrow, remember? To survive and thrive.
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Brian Portnoy: dynamic. Well, when things are relatively calm, when we're feeling like, okay, we sort of understand what's happening in our world.
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Brian Portnoy: We relax a little bit, and we allow ourselves to think longer term.
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Brian Portnoy: Okay, economists use the term temporal discounting, and that discount level can vary depending on how we feel about what's happening.
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Brian Portnoy: When things are calm, when you feel calm, it's more likely that you can think years in the… into the future. Keep in mind.
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Brian Portnoy: always goes back to the way we're wired. Humans are wired to think in terms of seasonal cycles, when to plant the crops.
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Brian Portnoy: We're not wired to think in terms of decades, so if you're 32 and you've got 33 years to go until you retire, we're asking of that person something deeply unnatural to think decades in advance. What happens during these uncertain times? Boom. Things collapse.
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Brian Portnoy: what was… whatever future thinking you had, it comes to the right now, because your survival instinct is critical. The last thing I'll flag is that we have an action bias.
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Brian Portnoy: You know, you know, don't, don't just, you know, you feel the need to, to do something.
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Brian Portnoy: Okay? To just sit there when you feel danger, You know, we have fight.
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Brian Portnoy: flight-type responses. We want to do something, and that action bias can cause problems, because you have to scratch the itch. You just can't sit there and take it. So, again, we're being normal, we're being adaptive, but sometimes those adaptations can disrupt our financial judgment.
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Thomas Jarecki: Yeah. You know, this is just another… you talk about having 8 billion neighbors,
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Thomas Jarecki: It's so true. But you know what's scary is thinking about
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Thomas Jarecki: they're literally… we're gaming… gamifying news, right? You have these new applications that essentially allow people to trade against each other based on news, and you know, it's almost taking it to a whole new level. I don't know why it made me think of places like Calci or Polymarket, but that's essentially what it is. It's trying to take advantage of
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Thomas Jarecki: how people consume the noise and trade on that noise. It's just, you know, I don't even.
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Brian Portnoy: There's a…
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Thomas Jarecki: Yeah, go ahead.
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Brian Portnoy: Look, we could do a whole thing about the evolving modern gambling culture, the idea that we're creating markets out of literally everything, and we're able to bet on those futures, whether it be a political outcome.
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Brian Portnoy: Or, you know, whether a particular basketball player has more or less than 4 assists during a game. Like, all of that is on offer.
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Brian Portnoy: You know, I'm not going to get overly cynical, because I'm having a good day, but to some extent, we're bored as a species, and we need something to do to that action bias, so you may as well bet on something. You know, as a father of three young adults, I don't think that's the healthiest of behaviors, but I'm not going to get on my soapbox today.
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Thomas Jarecki: Yeah, I'm with you there, for sure. Well, this brings me to something that's, become potential to how I think about advising our clients. It actually comes directly from your work. You distinguish between being rich and being wealthy.
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Thomas Jarecki: Most people use those interchangeably. So I'd love for you to walk us through that distinction. You know, you've described rich as a quest for more, and wealthy as a state of mind.
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Thomas Jarecki: Why is the quest for rich usually a losing game? Is it a losing game?
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Brian Portnoy: It can be, for sure. So, page 1 of the Geometry of Wealth, I published that book in 2018. I'm very, very, very proud of that book. I actually dedicated it to my three kids, and
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Brian Portnoy: it's a meditation on where money fits into a meaningful life with a relatively concrete financial planning framework. And so, it's not a mistake that on page 1, I say there's a fork in the road between being rich and being wealthy. And as you say, and, you know, look, these are the words that I'm using, different people use them differently, but this is my…
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Brian Portnoy: you know, this is how I think about it. Rich is the search for more. You have a million bucks, you want two. You have two million bucks, you want four. We know from empirical research that people usually want at least twice of what they have.
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Brian Portnoy: The hardwiring in our brains and in our systems for more is actually quite healthy. It's quite necessary. I hope everyone's gonna find me a broken record by the top of the hour. Survive and thrive.
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Brian Portnoy: Our survival instinct, and then our quest to thrive is driven by that quest for more. And why is that? Because humans are hardwired from a DNA perspective to be slightly miserable all of the time.
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Brian Portnoy: If we are overly satisfied with what we've achieved, think of going… go back 10,000, 50,000
years, if those folks were really happy with the food that they collected, the shelter they found, the tribe that they built, and they just became complacent, decent chance that their DNA didn't make us to today. So it was those who always fought for more.
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Brian Portnoy: The problem is, and we know this, again, through very rigorous and well-founded behavioral science.
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Brian Portnoy: is that… and it's what psychologists call hedonic adaptation. That's a lot of sentences, a lot of syllables. What does that mean? Hedonic adaptation basically says that no matter how happy you are when something happens.
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Brian Portnoy: The experience of that happiness is going to be shorter than you expect it to be.
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Brian Portnoy: And, you're gonna then want to move on to the next thing. My second favorite show of all time behind Breaking Bad is Mad Men.
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Brian Portnoy: And Don Draper in Mad Men said that happiness is the feeling right before you want more happiness. This is hedonic adaptation.
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Brian Portnoy: You have a goal, you want the promotion at work, you want to have enough to retire, you want your kids to do well, to graduate, to have a family, all those things. Well, generally speaking, when those things happen, you might have that moment of happiness, and maybe it lasts for 5 minutes or 5 weeks, but it's a relatively short period of time.
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Brian Portnoy: And then you say, well, what's next? Generally, I would encourage people to think about the fact that humans are happiest when they're on their way toward a goal, as opposed to the sense
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Brian Portnoy: As opposed to actually having received, achieved that goal. Wealthy is different. Wealthy is sort of a state of mind, it's being present, and it's being still, and I use the term funded contentment.
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Brian Portnoy: The idea that true wealth is the ability to underwrite a life that's meaningful to you, however you choose to define that, and however you update that through all of life's ups and downs.
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Brian Portnoy: Fortunately, and I'm going to assume that 100% of the people on this call have food on the table, a warm home to go to, a safe community. Once you have those things, more money doesn't bring more happiness. There's gargantuan amounts of evidence that show that.
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Brian Portnoy: So, when we talk about true wealth.
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Brian Portnoy: we can begin to think about, first, what are the things that really matter to me? And we can, if you want, we could dive into those factors. I've got a framework for thinking about that. But what are the things that are truly meaningful to me? What brings joy and contentment into my life? And then secondly.
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Brian Portnoy: What do those things cost? How can I afford them? How do I underwrite those things?
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Brian Portnoy: This isn't a search for more, this is actually a calibration of enough. And when, you know, an individual or a couple or a family can sort of find peace in their own definition of enough, they are, by definition, wealthy.
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Thomas Jarecki: Yeah, no, it's fascinating. I mean, it's… it's such a beautiful, simple, framing of funded contentment. So, why do so many people with significant assets
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Thomas Jarecki: still feel financially insecure. I think you kind of hinted at that in your definition of this, but what's driving this gap between objective security and subjective anxiety?
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Thomas Jarecki: If that makes sense.
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Brian Portnoy: Yeah, well, a few reasons, and we touched on them, so let me kind of bring those together quickly. Survive and thrive. We never feel entirely safe, and money as this new invention is a lightning rod for every major emotion.
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Brian Portnoy: Fear, greed, envy, joy, regret, you name it. And so, money triggers those things in us.
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Brian Portnoy: regardless of whether we have a $50,000 portfolio or a $50 billion portfolio. The thing is, when we get into folks who have a fair amount of wealth, or I should say, that are very rich.
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Brian Portnoy: Is that they're still human.
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Brian Portnoy: And they're still solving problems. And there's actually… I don't think there's much question about the fact that more money brings more complexity, and more complexity brings more stress and
anxiety, and also different forms of uncertainty.
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Brian Portnoy: So, you're really never off of that treadmill of having to figure things out. That you have more money, number one, doesn't mean you're financially more sophisticated, and number two.
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Brian Portnoy: It doesn't have anything to do with the fact that you are hardwired exactly the same as the other 7.9 billion people on the planet.
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Thomas Jarecki: Yeah, it's, it is, it is a, you know, it feels like, you know, for most humans, it's… and what you're just describing is it's a human, you know, it's just a human, human nature, our DNA, this chase for more, and, you know.
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Thomas Jarecki: This brings me to this idea of defining success, which…
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Thomas Jarecki: You know, in the years that I've done this, it's always been something that I've tried to quantify or define maybe a little differently. And just reading through and studying the idea of rich versus wealthy.
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Thomas Jarecki: You know, how do you help someone, or is it even possible? How do you help someone who's been sort of on that treadmill, chasing more their whole life, shift toward a different definition of success? Is there a moment when it clicks?
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Thomas Jarecki: You know, do we ever reach a point of satisfaction where we feel like, okay.
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Thomas Jarecki: The chase is over, we are happy with what we have, and this is… this is our definition of success. We've achieved what we wanted.
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Brian Portnoy: So, you know, with apologies for bringing up both Greek and French philosophy at lunchtime on a Wednesday, let me refer to the myth of Sisyphus.
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Brian Portnoy: My favorite myth.
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Brian Portnoy: Sisyphus was kind of a jerk, and way, way, way back, mythically. And the gods said, you know what, we don't like this guy, we're gonna torture him for eternity by making him push a rock up to the top of the mountain.
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Brian Portnoy: And right as the rock begins to crest, it falls all the way back to the bottom, and for all of eternity, his job is to push the rock up, and it falls back down, and over and over and over again.
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Brian Portnoy: All of us, to some extent, it doesn't matter if you have $50 million or $500 million, we're all pushing that rock up, and it inevitably falls down. It's always something, to the point that George and I were making at the very start, quarter by quarter, year by year. It is always something.
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Brian Portnoy: The reason why I really do enjoy sharing this idea of funded contentment with people is that it doesn't…
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Brian Portnoy: change the Sisyphean task, per se, but it might make it more enjoyable.
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Brian Portnoy: Because it basically says we're never done figuring out not just what we want, but who we are. We're not humans doing, and we're not humans having, we're humans being, right? And so when we think about human nature.
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Brian Portnoy: And the true sources of happiness, and based on modern neuroscience and modern psychology, we know a lot more about the nature of contentment and joy than we did, call it a hundred.
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Brian Portnoy: 100 years ago, I think we can be anchoring on what I would consider four different areas of contentment, and as we come to terms with those, and we can dig in if you want.
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Brian Portnoy: We then can level set, and we could define success not as an endpoint or as a goal, but as a state of mind that we inhabit
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Brian Portnoy: Fully or less fully, and we sort of work toward that.
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Thomas Jarecki: Yeah
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Thomas Jarecki: No, for sure. I mean, it's, it's, it is, it's, again, fascinating to, to try to understand the psychology of how we make decisions and what's motivating us to, to be on that journey, is, is, is quite, you know, it, you know, it's certainly enlightening, and helps us think about
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Thomas Jarecki: how we process decisions, any decisions, but money decisions in particular, one thing you talked about earlier is money doesn't grow, it, you know, it's an invention, right? It's a human invention, and so…
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Thomas Jarecki: But it is a finite resource at the end of the day, and I think that's, you know, causing, you know, stress and anxiety with, you know, in how we make decisions. So I want to shift a little bit
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Thomas Jarecki: So…
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Thomas Jarecki: I think… we didn't really necessarily explicitly say this, but I think we could agree, and I don't know if you do, but I'd love for you to comment on this.
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Thomas Jarecki: we can… we sometimes have this illusion of control as investors. Like, we… that we can't control markets, we can't control geopolitical events.
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Thomas Jarecki: What can we control as investors, or as humans?
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Thomas Jarecki: And wondering, you know, how does a well-built financial plan
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Thomas Jarecki: Change the way, or can change the way, that people experience volatility, not just mathematically, but emotionally.
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Brian Portnoy: Well, I'm glad you brought up the illusion of control, because we all suffer from it, including me, and I do this for a living. Again, there's no escaping human nature. It's more, can we understand and accommodate the ebbs and flows of its implications?
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Brian Portnoy: We don't control much of anything. The world's gonna do what it's gonna do. The only thing that's really in our control
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Brian Portnoy: Is our own decisions, and to some extent, our own mindset.
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Brian Portnoy: One of the most important things that has happened in the modern financial services industry over the last generation is a relatively large embrace of the financial plan as a guide toward achieving funded contentmentment.
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Brian Portnoy: The financial plan, you know, can be seen in mathematical terms. You know, you could just say, hey, you know, I want to retire.
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Brian Portnoy: you know, I want to retire at age 65, with a $2 million nest egg, so that at a 4% withdrawal rate, I'd have $80,000 in income, not including Social Security. Okay, that's fine. It's sort of an engineering document.
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Brian Portnoy: But I'd encourage people to think of a financial plan less in terms of math or engineering, and more in terms of psychology and decision, because what it allows for is a robust conversation.
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Brian Portnoy: First of all, in your own head, in terms of not just what you want to do, but who you want to be. A conversation with your partner, a conversation with your kids, or your parents, or people in your community that you love, and also with your financial advisor.
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Brian Portnoy: In terms of setting expectations for the life that you want to live, and how you're going to make decisions in the context.
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Brian Portnoy: of an uncertain and unpredictable world. You know, the objective here is not certainty, it's preparedness.
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Brian Portnoy: And I'd throw on top of that, that because we don't know what's going to happen… I mean, just think about this world, guys, over the last few weeks, few months, I mean.
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Brian Portnoy: a couple years, you know, going back through, you know, this decade, all of the things that, you know, on Jan… Jan 1, 2020, could any of us have predicted, like, the 19 big things that have happened?
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Brian Portnoy: Absolutely not. We can't do it. You can't predict the future, but you can think about risk.
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Brian Portnoy: generally, and how you respond to it, and then you can build a financial plan that's going to be appropriate for you, with the understanding that the day after you and your advisor write a financial plan, it's going to be outdated. And that's not a bad thing, because if you think of a plan as a… a financial plan as a product.
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Brian Portnoy: then you're dealing with something that's fixed in time, and it's going to be outdated. If you
think of it as a process, but also, like, a shared commitment to an open conversation and a decision framework, you're going to be in really good shape, or at least you're going to be in good a shape as you possibly can
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Brian Portnoy: Because that sort of plan, that sort of planning mindset, Allows you to adapt.
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Brian Portnoy: And, you know, if folks walk away with one thought about their financial plan, think of it in terms of adaptability. Is your financial plan a catalog of your goals and what it costs to achieve or afford those goals? Absolutely.
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Brian Portnoy: But does your plan have baked into it the adaptive mindset so that when the world does something that you can't expect, and there's a 100% chance that that's true, the plan and you and your advisor or other loved ones in your world can adapt to this new world that you didn't see coming?
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Thomas Jarecki: Yeah, and then life happens. I mean, it's, you know, setting aside the mathematical angle of financial planning, to your point, it absolutely becomes outdated the next day.
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Thomas Jarecki: But, there are life events that we will experience that we have no idea, not only the external factors that you mentioned, whether it's COVID that you were alluding to with the January 2020, or this war that just broke out in the Middle East, you know, any of the events, the invasion of Russia, of Ukraine by Russia, etc, like, those things are out of our control.
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Thomas Jarecki: there are other things that are out of our own control, and I'm wondering how you think about
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Thomas Jarecki: Financial planning within the context of managing decisions that require maybe a quicker
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Thomas Jarecki: reaction, because something happened in our life. We… you know, maybe we're adding to a family, maybe there's a divorce, maybe somebody fell ill, maybe unexpected death, maybe it's some… it could be something happening in our lives. I'm curious, how you try to… how you reconcile life and the events that are unexpected
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Thomas Jarecki: With… within the context of the readiness of a financial plan, as opposed to being certain about the outcomes of the financial plan.
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Brian Portnoy: Yeah, so a financial plan, can be thought of as a pre-commitment device.
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Brian Portnoy: Which is a kind of a fancy term from decision theory. Let me just say, by way of background, that research shows that, you know, your typical adult between 18 and age 60 goes through between 30 and 40 life transitions.
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Brian Portnoy: And 3 to 5 of them are what is known as life quakes. Really big things that change not only your world, but almost your identity. Death of a loved one, a major career event, an external political event that changes the world around you.
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Brian Portnoy: So keep in mind that, you know, as adults, we're experiencing, you know, every year or two, two or three changes that we need to think through.
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Brian Portnoy: The plan as a pre-commitment device means that there should be in there some gesture toward, okay, we can't predict the future, we know things are going to change, sometimes for the better, but we'll be more worried about, you know, when things are for the worse.
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Brian Portnoy: How are we going to… Quickly.
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Brian Portnoy: Go through that next decision.
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Brian Portnoy: So you can think of it as a pregame or practice for the real world. You don't know what's going to happen, but you know you're going to need to make a decision, maybe relatively quickly. There aren't that many things that happen where you need to
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Brian Portnoy: radically alter your portfolio. I would strongly recommend against that in almost all circumstances.
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Brian Portnoy: Which is a point that George made in his kind of closing comments. But, you know, as a way to structure the way you as an investor, as an individual, as a father, as a husband, as a wife, you know, as a mother.
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Brian Portnoy: Think of it as a way ahead of time to think about how you're going to make a decision under duress, under times of extreme uncertainty.
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Brian Portnoy: And at least you can say to yourself, or your advisor can say to you, we did talk about this, we did expect something like this might happen, we weren't sure exactly how, and here it is. And what we
said a month ago, or two and a half years ago, or whenever it was.
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Brian Portnoy: this is the way we would deal with it. Let's at least start with that moment. Let's talk about what we thought during very calm times, when nothing really was going on pertaining to this, you know, specific issue. We said, when something like this comes up.
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Brian Portnoy: Death of a loved one, or changes, you know, in your children's lives that you need to accommodate, or career
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Brian Portnoy: volatility or whatever, when we talked about that two and a half years ago, or 17 months ago, we thought this is the way we should do it. So first.
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Brian Portnoy: Were we thinking about it the right way back then?
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Brian Portnoy: yes or no? And maybe the answer's no, but the chances are probably yes. This is the way we were gonna, like, go through this decision. Let's assume that we were thinking about it the right way. Here we are.
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Brian Portnoy: The amygdala is firing, we're afraid, there's just a lot of stuff going on, let's go to the plan. The plan has become a pre-commitment device to making decisions under calm circumstances when things aren't calm.
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Brian Portnoy: It's… this isn't always or even often the way people think about their financial plan, but I'd strongly encourage them to do so. It becomes such an unbelievable tool for navigating uncertain times, because times are always uncertain.
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Thomas Jarecki: Yeah, and the pre-experience, I mean, we… I'll highlight, this is not a plug for any thing that we do, but we do, financial planning, stress testing is a huge part of what we focus on. I mean, letting people pre-experience.
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Thomas Jarecki: an event that is, you know, undefined at the moment, and we could do that in a variety of different ways. You know, an unexpected expense, but it also could be something, you know, what if
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Thomas Jarecki: You know, we do have a market, an unexpected, you know, market, volatility that causes a certain decline in value, and how does that ultimately affect or change, if anything?
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Thomas Jarecki: In terms of the client's ability to achieve their goals, and so I, I'm 100% with you. It's such an important… it really becomes a guide to better decision making. You know, more than… more than the math itself, it's… it's really about having that,
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Thomas Jarecki: not your peace of mind, but certainly the readiness, being… feeling prepared and feeling confident and clear about, you know, how to make decisions on a go-for basis. I want to hit one more topic related to planning that's… it's a concept that you and I, Brian, talked about, so I hope this doesn't come at you as a curveball, but you also talk about
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Thomas Jarecki: I really like this, because I think that is motivating folks to think about really documenting goals and concerns. You talk about this idea of anti-goals, right? We always talk about financial planning as, well, I'd like to retire at 65, I'd like to live on 100, you know, $20,000, $200,000, whatever, you know, a year.
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Thomas Jarecki: But you talk about the idea of anti-goals as motivators that could actually provide a lot more clarity within the context of a financial plan. Can you just briefly elaborate on this idea of anti-goals?
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Brian Portnoy: Yeah, yeah, I'd encourage everyone to, you know, sort of, at some point today, get out a note card, or a pad of paper, or type on their phone, something that really annoys them, that they don't ever want to have happen again.
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Brian Portnoy: I don't want to go see that particular relative. I don't want to commute this long to work. I don't want to have this sort of obligation.
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Brian Portnoy: you know, humans are more motivated by things that we don't want than things that we do. When you ask somebody, what are your goals? What do you really hope for? Our brain doesn't… our brain glitches a little bit. It's a little bit hard to answer that open-ended question, and we end up saying.
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Brian Portnoy: you know, important and true things, but they could be quite vague. Like, you know, I want to retire, you know, with enough wealth to, you know, do the things that I want to do, and to live in dignity, and to help continue to support my kids, or things like that. And that's a good thing, but you ask somebody, what really frosts you?
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Brian Portnoy: They probably have, like, 2 or 3 things.
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Brian Portnoy: bake those into your financial plan, because if you plan for what you called what I call anti-goals.
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Brian Portnoy: your opportunity to notch some wins, to feel like you've really made some progress, are significantly higher. And, you know, we encounter something, Tom, in
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Brian Portnoy: you know, the behavioral literature, it's almost the origins of behavioral finance, the psychology of money going back 60 years, something called loss aversion. It's the idea that pains, that losses are more painful than gains are pleasurable.
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Brian Portnoy: It's a rough number, and there's a lot of context here, but I'll share it anyway, that we've observed that a $100 loss is twice as painful as a $100 gain feels good. So you go to the casino, you win a few bucks, you're like, heh, you lose a few bucks, you're kind of disproportionately annoyed.
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Brian Portnoy: That's loss aversion in action. Well, if you take the principle of loss aversion to, you know, to be generally accurate about how we are as risk takers, that we're more interested in preventing losses than we are achieving gains.
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Brian Portnoy: Why not just bake that mindset into the portfolio and say, this is what I don't want in my future. These are the things that I don't want to do.
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Brian Portnoy: And then, when you plan for those.
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Brian Portnoy: I mean, it's going to be the dog that didn't bark, right? So, you won't have done the thing, but you can reflect on the fact, boy, that used to drive me crazy, and I don't do that anymore.
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Thomas Jarecki: that's a really nice feeling, so yes. Think about what really annoys you.
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Brian Portnoy: And some… think about what it would cost for it to not annoy you, and put it in your financial plan.
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Thomas Jarecki: Yeah, so important, for sure. No, I appreciate you,
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Thomas Jarecki: going over that. So, just to kind of synthesize a lot of what we discussed, for someone listening today who may be feeling anxious about markets or the future.
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Thomas Jarecki: What are one or two mindset shifts that could improve their decision making?
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Brian Portnoy: So, first of all, let me… I'll make a couple very specific suggestions, but let me first, validate.
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Brian Portnoy: that,
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Brian Portnoy: to feel afraid to be kind of overwhelmed by the uncertainty of the world around us is completely normal. It is the way that we're wired. Ancient software solving modern problems.
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Brian Portnoy: that ancient software worked so unbelievably well that now we're a flourishing species of 8 billion people. Not that long ago.
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Brian Portnoy: weren't that many of us, and so those who survived kind of had the software, so to speak, to, you know, really have robust lives. So if you're worried
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Brian Portnoy: Don't think of yourself as different, irrational, stupid, anything like that. Just think of yourself as normal, and that your old protective software has kicked in, and that's cool.
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Brian Portnoy: So what can we do specifically? I'll suggest a few things, and it sort of will echo where we've been over the call. Focus on the things that you can control versus those that you don't.
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Brian Portnoy: I appreciate this is easier said than done, trust me. I struggle with it as well, as a normal person, not a behavioral scientist. Focus on what you can control, not on what you can't. You know, so what can you control?
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Brian Portnoy: While you can control your decisions, you can control, you know, your conversations, you can control what media you consume. There's things in your orbit that can help make things a little bit better.
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Brian Portnoy: you know, as I hopefully made abundantly clear, I'm a huge fan of… a fan of modern financial planning.
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Brian Portnoy: You can control your financial plan. And like I said, the day after you walk out of your advisor's office, that plan's outdated.
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Brian Portnoy: So where does it stand now, and is it truly that adaptive document that we want it to be? So, that's one. The second thing is that we should see emotions as signals
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Brian Portnoy: Not as noise or instructions. There's a wonderful insight from modern neuroscience that says that human beings
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Brian Portnoy: are not thinking creatures who feel, we're feeling creatures who think. In the way our brains are wired, emotion precedes cognition. Now, I was a professional investor for a very long time, 15, 17 years, something like that, and job number one was to take the emotions out of investing.
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Brian Portnoy: That's like taking the gravity out of a room.
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Brian Portnoy: It's not a thing. Emotions are everywhere. Emotions are social gravity. Like, they're just here. But what we know
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Brian Portnoy: both on research and anecdote, is that emotions are information. What is our gut reaction to this telling us?
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Brian Portnoy: Second, can we control that gut reaction before we make a rash decision? Can we use that information to better understand ourselves and the world around us? And then lastly, the thing I'd suggest to everybody, choose the right benchmark.
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Brian Portnoy: The benchmark for your success is not the S&P 500. It's not a blended 60-40 portfolio. Your benchmark is your life. It is the goals and the hopes and the dreams that you have for you and your loved ones.
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Brian Portnoy: As things happen, and the market falls, and your portfolio value declines, how does that actually impact how close you are to achieving the things that you want? There's probably a decent chance, if you do run the numbers, that a market decline of, you know, a few percent, or even more than a few percent.
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Brian Portnoy: doesn't really get you much off track. And so, make sure that when you think about your benchmark, what are you really trying to achieve? There's no doubt, from a compliance point of view, we have to see portfolios vis-a-vis S&P 500, Barclays Aggregate, all these, you know, different types of market benchmarks. That's cool. That's totally fine.
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Brian Portnoy: But for yourself, and the conversations with your loved ones, ask, what's our true benchmark? And it brings us back to funded contentment. What's truly important to you?
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Brian Portnoy: Okay, your connection to your family and your community, your sense of freedom and independence, your being good at a job that you really value and care about, being connected to the world more broadly because of your faith, or your patriotism, or your hometown pride. There's many, many different sources of contentment.
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Brian Portnoy: You can control your focus on those and make those your benchmark, not the market.
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Thomas Jarecki: Yeah, and the challenge with that… thank you, I mean, I think that's really good advice, and I love the concept of having a benchmark that isn't any market… we speak in that language, though, in a way, as an industry, because we communicate performance
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Thomas Jarecki: as a mathematical outcome relative to a benchmark, and I think it's important to separate that. That's not… not important, right? It is…
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Brian Portnoy: Right!
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Thomas Jarecki: Critically important for us to understand the success of the portfolio, but it is…
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Thomas Jarecki: just one of the many elements that ultimately make up that big benchmark, which is, am I actually getting to where I want to go? Am I achieving
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Thomas Jarecki: what I'm looking to achieve with my money for myself and for my family. So I think that distinction is so hard for us to make, because all of the literature, going back to where we restarted, all the noise, is kind of built on the idea of looking at the math.
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Thomas Jarecki: And and it's, you know, it's so important for us to pause and step away a little bit and just think about the bigger picture.
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Thomas Jarecki: So… Well, Brian, thank you. This was…
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Thomas Jarecki: really great. I, I, you know, what strikes me about this conversation
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Thomas Jarecki: is just a simple and powerful idea, and I think, you know, we've talked about this, we maybe are aware of it, in… we can't control uncertainty, but we can control how we respond to it.
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Thomas Jarecki: The goal isn't to predict the future, it's to know what you're solving for. We just talked about this. To have a plan.
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Thomas Jarecki: And stress test that plan, not just against bad markets, a potentially bad market event or outcome that might occur, but against our own
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Thomas Jarecki: human instincts. And that's the foundation for funded contentment, as you described it. This is exactly why we focus so much at Key Wealth on planning and stress testing.
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Thomas Jarecki: left about predicting the future, we can't, and we are humble enough to admit that, but to help clients live through that future. Really thank you, Brian, George, for your insights. Again, for questions that may have come up along the way for our participants.
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Thomas Jarecki: We will, answer those questions, you know, we'll follow up with you on those questions and make sure that we have that conversation with you.
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Thomas Jarecki: But for now, Brian, thank you. George, thank you, and thank you all for joining us on the call today, and we'll speak to you next time.
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Thomas Jarecki: Thank you.
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Brian Portnoy: Thanks.
Key Takeaways:
In a time of heightened uncertainty, this conversation offers perspective and practical guidance to help investors stay grounded and confident. This conversation offers perspective on today’s market environment and investor decision-making, including:
- While conflicts such as the current situation involving Iran can drive short-term market volatility, history shows that markets tend to stabilize over time. This reinforces the importance of diversification and avoiding sudden portfolio changes.
- Learn why uncertainty often feels more uncomfortable than actual losses and how understanding our natural emotional responses can support calmer, more intentional financial decisions.
- Explore the distinction between being rich and being wealthy and how the concept of funded contentment helps align financial choices with what truly matters in your life.
- Discover how a thoughtful, adaptable financial plan can support confidence during market volatility and life changes, helping you respond with clarity rather than react emotionally.