Letters category: Letters

Ride the Bull, But Don’t Chase It

March Rate Hike in Play, but May/June more Likely

Happy Presidents Day!

As you know, Presidents Day was originally known as “Washington’s Birthday” in honor of America’s first president, who was born on February 22nd. In many regions, Abraham Lincoln’s birthday (February 12) is also celebrated.

Over the years, the holiday has expanded to become a celebration of all presidents—hence the name “Presidents Day.” And while Washington and Lincoln still tend to get the most press, we think it’s good to remember that many others have served as Chief Executive, too. So many of the rights, freedoms, and privileges we enjoy today are due to men and women whose names and deeds are shrouded by history. This is even true of presidents. Some presidents were better than others were, of course, but all deserve to be commemorated.

Sadly, some presidents were unable to serve for very long due to their untimely deaths. This has often rendered them mere footnotes in history; the answer to a trivia question and nothing more. And yet even these presidents were able to accomplish important things during their time in office. So for this Presidents Day, we thought we could take a brief look at who a few of these men were and what they did.

William Henry Harrison (9th President from March 4 to April 4, 1841)

Harrison holds two unfortunate records: he was the first president to die in office, and the president with the shortest tenure in United States history. Actually, Harrison holds three records, because he is also known for delivering the longest inaugural address on record. The speech lasted almost two hours, and was given on a very cold and rainy day in early March.

About 22 days after the inauguration, Harrison came down with what seemed to be a bad cold. His doctors did everything they could, but Harrison soon grew worse. He died 9 days later, only a month into his term. Scientists now think he succumbed to typhoid fever as a result of drinking contaminated water.

Because he died so early into his presidency, Harrison never had the chance to do much of note other than call a special session of Congress. But there is some evidence that he would have been a very active president. From the start, Harrison was committed to reforming how the government was run, visiting every federal department to see how it operated and how it could be improved. He also seemed intent on making the presidency a more independent office, one that would not be subservient to powerful individuals in Congress and elsewhere.

His last words were made to his doctor, but historians think they were intended for Vice President Tyler: “Sir, I wish you understand the true principles of the government. I wish them carried out. I ask nothing more.”

Zachary Taylor (12th President from March 4, 1849 – July 9, 1850)

Like Harrison, Taylor was a nationally recognized war hero. His reputation was what effectively catapulted him to the White House, as he was a man without a firm political ideology. He took office during a tumultuous time in American history. The southern states were making increasingly loud noises about seceding, while the three new territories acquired during the Mexican-American War were all demanding statehood.

Despite owning slaves himself, Taylor did not wish to see slavery expanded to the new territories. His solution was to admit California to the Union as a free state, which would give the other non-slavery states more power in Congress. Taylor also worked to ensure New Mexico remained a distinct territory rather than be incorporated into Texas. Finally, Taylor proved to be a surprising defender of religious freedom, promising the Mormon Church that they would be allowed to continue practicing their beliefs in relative independence within the newly organized Utah Territory.

Unfortunately, Taylor died of cholera only a year into his presidency. His last words summed up a lifetime of service to the country. “I am about to die. I expect the summons very soon. I have tried to discharge all my duties faithfully, and I regret nothing.”

James A. Garfield (President from March 4, 1881 to September 19, 1881)

Garfield, our nation’s 20th president, was fated to serve only a little longer than Harrison. But, like Harrison, there is evidence that he intended to be an active, transformative president, and he was able to launch an ambitious agenda before he died.

For much of the 19th century, the government operated on something called the “spoils system.” You’ve heard of the phrase “To the victor go the spoils”? That describes how the government used to work. Whichever party won the presidential election made key appointments based solely off of who their friends were, or who had helped them gain power. Garfield (and his predecessor, Hayes) worked to change that by instituting a merit system where only people who met certain qualifications could be considered for government jobs.

Hayes was also somewhat ahead of his time when it came to civil rights. In his inaugural address, he announced a plan to make full citizens of all African Americans, with more secure voting rights and access to a better education.

Sadly, Garfield’s work in undoing the spoils system contributed to his death. Charles Guiteau, a former supporter who had been denied an ambassadorship he wasn’t qualified for, assassinated Garfield in a train station less than a year after the election. Among his last words were, “My work is done.”

Forty-four men have served our country as president. (Donald Trump, of course, is currently the 45th.) Some served for eight years, some for far less. Some had the talent and time to accomplish great things. Others did not. But to quote Zachary Taylor, everyone who has ever served took on perhaps the hardest job in the world and “tried to discharge their duties faithfully.” For that, they deserve remembrance and respect.

So this Presidents Day, spare a thought for not just the Washingtons and the Lincolns, but all those who tried to carry out “the true principles of government.”

On behalf of all of us here at Hudock Capital, we wish you a happy Presidents Day!

Sincerely,

Barbara B. Hudock, CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J.Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

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20,000 DOW

Imagine you are driving a car down a lonely highway at night. You have no idea where you’re going or why you started driving in the first place. Because the sun isn’t out, and because you don’t have a compass, you have no idea which direction you’re going. It’s disorienting, but you have no choice but to keep driving—because at least if you keep driving, you know you’ll end up somewhere.

Then, all of a sudden, you see it: a green sign on the side of the road that reads

MILE 32

That seems encouraging, but a few minutes later, you see another sign that says “Mile 33.” Then Mile 34, 35, and so on. The brief spark of excitement you felt is gone, because it doesn’t take long for you to realize the truth:

Milestones tell you where you are. But they can’t tell you where you’re going.

Why am I asking you to imagine all this? Because it’s a useful exercise in light of the recent news out of Wall Street: for the first time ever, the Dow has hit 20,000.

The media always makes a big fuss whenever an index (or an average, as the Dow technically is) hits a milestone. That’s because milestones are inherently interesting to humans. They suggest a good story, and humans have always been suckers for a good story.

But for investors, market milestones shouldn’t be seen as particularly meaningful.

Of course, that’s not to say milestones serve no purpose. After all, if you’re driving down the highway and you do know where you’re headed, a milestone becomes a useful barometer of your progress. Similarly, if you’ve set a goal for yourself, milestones can be a great motivator. A form of encouragement to keep going.

As far as the markets go, however, a milestone can be a bit like fool’s gold: shiny and exciting, but of little value in and of itself. It can even be a little dangerous, because it suggests a story while masquerading as a statistic. Because it fools us into thinking it’s the needle on a compass rather than a mere measurement of distance traveled. (A number feels high, so the markets will probably keep going higher! Or, a number feels low, and will probably just keep getting lower!) But really, milestones tell us no such thing. They only let us know where we are. Not where we’re going.

The circumstances behind this particular milestone confirm this. Ask just about any market analyst and they’ll tell you the Dow hit 20,000 by riding a wave of optimism about President Trump’s economic agenda. Take this line from a recent New York Times article:

The recent postelection surge toward 20,000 has been driven by what investors are calling a reflation trade, or a bet that the economy under President Trump will benefit from proposed tax cuts and a move toward more aggressive government spending.1

Or this one from CNN:

Wall Street is clearly betting that Trump’s plans to slash taxes, ramp up infrastructure spending and cut regulation will make the American economy grow faster.2

The key word in both passages is “bet.” Investors don’t know how much of Trump’s agenda will actually be enacted, or if it will work, or if it’s even possible. They’re simply betting on it. This is a perfectly natural thing to do, because investors have always tried to get ahead by setting educated expectations for the future.

But when that big, round 20,000 is achieved on the back of a bet, it doesn’t look quite so momentous, does it? It tells us what investors are doing and feeling right now. It tells us where we are. But it doesn’t tell us where we’re going.

The point of all this is not to say that the Dow hitting 20,000 is a bad thing. The point is that it’s just a milestone, just a story, and we should be properly cautious about both. That’s especially true with regards to the Dow. As you probably know, the Dow is comprised of only 30 companies. Important companies, to be sure, but hardly representative of the overall economy. So 20,000 is not only a story, but a fairly limited one. It would be like watching only the first 30 seconds of the Super Bowl, and then trying to predict the outcome.

So as you read about this milestone or any other, don’t allow yourself to get too caught up in the story that goes with it. Don’t try to predict where we’re going just by looking at where we are.

Instead, do this:

Whenever the markets hit a new milestone, turn off the TV or shut down that internet browser. Try to tune out the noise. Then, focus on your own personal financial journey. Ask yourself: “Do I still know which direction I’m heading? Has anything changed that may have put me off track?” In essence, pull out your personal compass and see which way the needle is pointing. Are you going north or south? Then, make a list of your own milestones. What great things have you achieved lately? How far have you come? And what milestones are you looking forward to reaching over the next few years?

By doing this every time the financial media starts selling the latest story, you’ll actually be setting a wonderful habit: consistently reviewing your financial situation and planning your financial future. If there’s anything we’ve learned over the course of our careers, it’s that this is the road to success.

After all, milestones are only meaningful when you know where you’re going … and on the road to success, the only story that matters is yours.

We at Hudock Capital will continue watching the markets, tracking your portfolio, and keeping your financial compass pointing north. In the meantime, please let us know if you have any questions or if there is ever anything we can do to help you work toward your own personal milestones!

Sincerely,

Barbara B. Hudock, CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Sources:

1 Landon Thomas, “The Dow Hit 20,000. Now What?” The New York Times, January 25, 2017. https://www.nytimes.com/…/dow-20000-stock-market-milestone.…

2 Matt Egan, “Boom: Dow hits 20,000 for first time ever.” CNN Money, January 25, 2017. http://money.cnn.com/2017/01/25/investing/dow-20000-stocks/

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