“The pursuit of happiness can become the source of our unhappiness.” Dan Harris

Good morning & Happy Monday

It’s been a while since I’ve recommended a good read, something I thought might be a beneficial as we head into Thanksgiving weekend up here in Canada. Keep in mind, this is just one title that is interesting, there are certainly a number of books that I’d recommend, particularly given the uncertain times we are in at that the moment.

As we open up and start to attempt to get our lives back to normal, it’s clear to see that angst and anxiety are on the rise. The continuing pandemic and the prospect of a Delta Variant winter; climate change; political uncertainty—rates of concern have already been rising for decades, but in the last two years, they’ve skyrocketed. There’s been no better time than the present ,to try to better understand anxiety within ourselves and how it’s impacting those around us.

Dan Harris: 10 Percent Happier

Dan Harris always believed the restless, relentless, impossible-to-satisfy voice in his head was one of his greatest assets. How else can you climb the ladder in an ultra-competitive field like TV news except through nonstop hand-wringing and hyper vigilance? For a while, his strategy worked. Harris anchored national broadcasts……then he hit the brakes when he had a full-blown panic attack live on the air. What happened next was completely unforeseen. Through a bizarre series of events - involving a disgraced evangelical pastor, a mysterious self-help guru and a fateful gift from his wife - Harris stumbled upon something that helped him tame the voice in his head: meditation

Now, keep in mind…..meditation doesn’t need to take the form of a spiritual ritual. It can be as easy as taking those moments in the day to reflect and appreciate. According to Dan Harris, meditation has the ability to quiet the mind and make us “10% happier.” Yes, it takes time to learn and practice, but once instilled into our routine, it has the ability to change our lives and help us better react to situations at hand.

Because we can’t all have time to sit down and read the entire book, I’ve created a list of the most prominent quotes and lessons from the book to kick start the week.

“Make the present moment your friend rather than your enemy.”

According to Harris, many people live as if the present moment were an obstacle. He suggests that instead of living in order to get to the next moment, it’s important to be happy with where you are…..if you can never be satisfied with the current moment, you will have to live your life in continuous stress.

“What mindfulness does is create some space in your head so you can, as the Buddhists say, “respond” rather than simply “react.”

This quote strives to explain the concept of mindfulness in more detail. According to Buddhists, we are completely out of control of what comes into our head. It all arises as a mystery, yet we spend a lot of time judging ourselves harshly for those feelings. The time and energy spent can be exhausting….instead of allowing our thoughts to take over, we can start learning how to control our reactions for more healthy interactions.

“Striving is fine, as long as it’s tempered by the realization that, in an entropic universe, the final outcome is out of your control.”

This is an excellent takeaway, life is out of our control. The more we strive to control it, as most of us do, the more stress we will feel. Don’t waste your energy on what you cannot change, rather, focus on that in which you can…..doing so will allow you to stay motivated and remain resilient, even if you fail at first.

“Do only one thing at a time. When you’re on the phone, be on the phone. When you’re in a meeting, be there. Set aside an hour to check your email, and then shut off your computer monitor and focus on the task at hand.”

Important and relevant to us all ----- be present in the moment

“We can do more than just think; we also have the power simply to be aware of things—without judgment, without the ego.”

Sometimes it’s best to approach things without much thought. Take them as what they are and try not to overthink it and when you begin to appreciate things for what they are, you will begin to find the beauty in everything.

All in all, every form of mindfulness has it’s ways to improving our lives. If we can all be 10 Percent Happier, imagine how much more enriched our lives will be.

And now, to the markets

Volatility has returned after having been absent from the investing landscape over the past few months. As a result, many global markets have experienced some pressure in recent weeks, although the bouts of weakness have been orderly in nature. There appears to be a host of issues to blame: concerns about U.S. government funding and debt limits, contagion risks from China’s real estate sector, and a sharp move higher in bond yields, to name a few. We briefly address each of these issues and the implications for the investment outlook going forward.

U.S. government funding and debt

The U.S. government has been grappling with yet another case of political gridlock in recent weeks that had it teetering on the edge of having to shut down. Such a situation occurs when Congress is unable to approve funding for the government’s upcoming fiscal year. While sounding dramatic, these episodes are more common that one would expect, with the government having done so fourteen times since 1980, with the most recent experience just a few years ago. In recent days, Republicans and Democrats were able to negotiate a short-term agreement that will avoid a shut down for the time being. More concerning is the risk of government default. The U.S. government is approaching its debt ceiling, a limit on the amount of money it is allowed to borrow. As a result, it needs to raise the limit, like it has so many times before, or risk default. The current deadline is expected to be mid-October. The Republicans and Democrats both acknowledge the need to raise it. But, both parties disagree on the procedures by which it should be lifted, largely because of political posturing more than anything. The risk of default is a serious threat. It would be destabilizing for the world’s largest economy. We expect one of two outcomes, though we acknowledge it may come down to the wire. Either an agreement may eventually be reached between the two sides. Alternatively, the Democrats may lift the limit on their own, despite their preference of having the backing of their Republican colleagues. The Democrats have control of both chambers of Congress and should have the required votes to raise the limit.

China and Evergrande

China’s second largest property developer, Evergrande, has been under stress this year, with its bonds and share price selling off significantly, suggesting high risk of bankruptcy. An excessive use of leverage, and forays into businesses outside of its core real estate operations are to blame. The company recently missed a deadline to pay interest payments on a few of its bonds, and has now entered a thirty-day grace period, with default being a real possibility if that deadline passes with no payment. There are a few reasons this is important for global investors: 1) the risk of financial contagion given the sheer size of the property developer and the interconnectedness of global credit markets; and 2) the risk to the Chinese economy, which is the world’s second largest. Encouragingly, global credit markets, where bonds of companies from around the world are bought and sold by investors, are behaving relatively well in the face of the Evergrande debacle. This suggests the risk of contagion outside of Chinese financial markets may be low. The bigger risk may be the Chinese economy which has already seen its momentum wane this year. It is at risk of slowing further given the size and importance of the property market and ancillary activities. The Chinese government has a delicate situation on its hands as it aims to ensure stability and affordability of housing, while attempting to rein in corporate mismanagement, monopolistic behavior, and excess leverage.

Bond yields

In the past week, Canadian and U.S. government bond yields have abruptly risen. Bond prices and yields have an inverse relationship. So, a rise in bond yields suggests investors are selling bonds, thereby driving prices lower. There was an even sharper move in bond yields earlier this year when investors grew concerned about rising inflationary pressures. That move drove weakness in equities, and in particular “high growth” stocks like those in the technology sector which are particularly vulnerable to bond yields and the interest rate outlook given how future cash flows are valued by investors.

Bond markets eventually settled down and yields gradually declined for the past few months. We suspect the recent bout of bond yield volatility can be attributed to two issues. First, the U.S. Federal Reserve recently confirmed that it will reduce its monthly purchases of bonds given there is less need to support the lending markets and overall economy. It also indicated that it may begin to raise interest rates later next year. Investors are now preparing for a less accommodative central bank. Secondly, inflationary pressures continue to mount, and are being exacerbated by supply chain issues across the globe. Not surprisingly, growth stocks have borne the brunt of the equity market weakness through this recent move higher in bond yields, just as they did earlier this year.

We believe the inflation outlook is difficult to assess. Even Jerome Powell, Chairman of the U.S. Federal Reserve, acknowledged as much recently and indicated that pressures are likely to persist into next year. As a result, periods of volatility and the tug of war between growth and so-called value or cyclical stocks, is something we continue to be prepared for as we move through the rest of the year and into 2022.

Enjoy the week and for those in Canada, have a wonderful thanksgiving weekend. Whether it be meditation, breath work, or awareness, remember that it’s important to take breaks throughout the day. Find a few moments between tasks to focus on your breathing, it could help you to become more focused on what’s important and help you be even 10 Percent Happier.

“May you be happy. May you be safe and protected from harm. May you be healthy and strong. May you live with ease.” Dan Harris

Be well & enjoy the moments

Derek