One thing to think about for your 2023 financial life. It will matter.

Several years ago I asked a friend of mine, who ran a division of over 100 Advisors at a national firm, if he had seen any Advisor statistically outperform over the years. "Oh yes," he said, "We had an Advisor who was not a great investor whose clients were among the wealthiest in my division."


"For a long time his clients didn't even like him. He was kind of annoying to them, but he did one thing right, and he did it well, and now they are forever grateful."


"He got them to save money. He was relentless about it, almost religious about it, and it worked. You cannot be a capitalist without capital, and generally you can't get capital without saving. Those behaviors injected into an even mediocre investment program produced fantastic results." (1) (2)

So it's January, and it's time to get our school-marm hat on here. The good news is you don't need to make Mark Zuckerberg richer to get your daily dose of endorphins! You can get endorphins from *cutting* personal expenses, and January is a good time to do it.

Then talk to your advisor about what we call "Pay Yourself First," where we set up an automatic savings plan into your investment accounts. I cannot recommend this idea enough; in my opinion it is *by far* the best financial planning approach I have seen. Putting things on autopilot works; it solves many of the behavioral challenges that plague investors. If you do this three years from now it is nowhere near as good, mathematically, as doing it next week. The math of savings with an excellent investment plan compounds geometrically. But you have to do both: save, then invest.

The U.S. personal savings rate dropped to 2.3% last fall, which is near record lows. If this does not rise next month we know either 1. the entire United States is not on this newsletter or 2. They all are, but are ignoring me. Here is the U.S. savings rate chart from Federal Reserve data:

People ask me all the time where I think the markets are going. From the extraordinary investor John Templeton (who, I note, was extremely thrifty himself. Even today his foundation encourages thrift, saving, and investing.):

Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria,” he said.

Sentiment matters. The good news is that a lot more people dislike the markets than a year and a half ago. I'm not sure we've reached peak pessimism in either the markets or the economy. But the period where it was fun and appeared to be an easy game is over. Lots of novices got wiped out. As an investor you do not generally want euphoria (unless you are only selling). So the increase in general pessimism is definitely a positive signal for future returns.

Dan Cunningham

1. This conversation is paraphrased a bit as I wrote parts of it down but don't have the exact wording.
2. We prefer an excellent investment program, but the point is made.

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