“Lehman, the Lottery, and the Long View”: Jonathan M Satovsky discusses markets 10 years after the Lehman Brothers collapse, describes how consumers’ lottery habits hurt them, and explains his emphasis on the long view when setting investing goals.
“Fear & Eating Your Own Cooking”: Jonathan M Satovsky discusses the importance of developing good savings habits, the distractions caused by feeding into the frenzy of daily headlines, and sustainability options for Satovsky portfolios.
Good afternoon! This is Jonathan Satovsky of Satovsky Asset Management on June 19th 2018 with a video blog update. And today I wanted to talk about habits, headlines and heat. So habits. Daily habits, daily routines whether it’s exercising, eating well, investing, savings, these are things that need to be done in a disciplined way over a long period of time in order to see an inure the benefits. And in investing the reason we invest is because the cost of things continues to rise over time. This is an example of milk but as a Michigan alumni I just booked tickets for a Michigan football weekend and sure enough the flights were 50% more expensive than they were last year. So we have to continue to invest for the future. That’s a habit that’s very important. Another habit is trying to reverse-engineer people’s finances. And when I think about reverse engineering people’s finances I want to enable people to totally chill to be able to enjoy their summer all year round as if they’re living in the summer months. In order to do that the goal is to get to enough financial assets to support someone spending at a two to three percent spend rate. This is the the dream scenario. Now why is this a dream scenario? Here’s a visual example of retiree and view this as if you can weather a material decline in financial markets. Stay on your path, stay in your lanes, and you can weather that and be able to sustain yourself throughout the course of your lifetime. If your spending rate is above 4 percent, 5, 6, 7, 8% the probability of your success diminishes materially. And here’s just another graph that we had constructed internally to show you that the higher your spend rate the more you’re forced to take a lot of risk to give yourself even a chance of sustainability. But if you’re spend rate is extraordinarily low, you really don’t need to take much risk at all, you can maintain a moderate posture and be able to ignore the headlines. And why is it important to get to a point to ignore the headlines? Now everyone isn’t at that asset level they could support two three percent so they feel like the headlines really matter and they’re living on edge. Well the reason they’re living on edge is because they’re spending more than the assets they have. But there’s headlines every day. This the last ten years that gives you a visual depiction of a lot of headlines of reasons to sell and not invest and worry about the future. But that doesn’t really serve anyone very well. I mean certainly you can see the last 12 months there’s been plenty of negative headlines and you know progress does continue. That’s why they call it a risk premium, people earn more money by taking risk. And lastly in terms of the heat, it’s close to, feels like close to a hundred degrees in New York today walking outside. So I don’t know whether you believe in global warming or not. It feels pretty hot to me and it’s sort of oppressive to be outside. So we’ve been introducing some investments leaning on the cheap, small cheap and profitable side of the equation in terms of someone’s investment portfolio. And by just cutting out the small amount of the companies in the Russell 3000 we can actually eliminate 99 percent of potential emissions from reserves. So that’s a very powerful thing and something that at least I’m doing, trying to do my part for the summer months to reduce the heat and give people the ability to chill and with that enjoy your fourth of July holidays and your summer months. Good habits, ignore the headlines and stay out of the heat.
