“Don’t explain your philosophy. Embody it.” Epictetus

Good morning,

I trust those that were out last night for Halloween have rested on the same conclusion…..giving candy to any child on a Sunday evening after 7pm can ruin a goodnight’s sleep – for all.

We did have rules for 8 year old Dorothy from Wizard of Oz and 6 year old Olivia Newton-John (aka Sandy) from Grease….only two candies before bed. Well, despite them listening to the rules, a scary week of “halloweening” and two candies was more than enough to keep them up last night. Pretty cute, and actually hilarious that the 19 month old Dinosaur was the one that slept peacefully. (he’s still sleeping)

Defining your rules

I was reading over the weekend, a number of writings around defining ones “rules for life”. Interesting contemplation that follows the exercise that we do with clients, in reflecting on personal and family values while establishing your vision and goals. It was the first time that I had expanded this thinking of when we take the time to understand our values and make the time to define and refine our vision, it’s an excellent time to structure some rules for life for you to life by. Define your rules & live by them….don’t talk about it, be about it. It’s the act of virtue, not the act of talking about virtue. Or reading about it. Or writing about it. It’s about embodying your rules and principles. Letting your actions speak for you.

“When the standards have been set,” Epictetus said, “the work of philosophy is just this, to examine and uphold the standards, but the work of a truly good person is in using those standards when they know them.”

I thought I’d share this thinking as I believe it’s an excellent extension of the work that we do with clients, albeit taking it a step further and creating personal rules as defined by you, very cool. As we begin review meetings, this will be another exercise that we’ll begin to incorporate into how we work with our clients through comprehensive wealth planning.

Having thought about this, I thought I’d share just some examples that may illuminate your own path to defining your rules…..

• Focus on what you can control.
• Ask yourself, “Is this essential?”
• Value time more than money/possessions.
• You are the product of your habits.
• Own the morning.
• Don’t suffer imagined troubles.
• Try to see the good in people.
• Two ears, one mouth…for a reason (Zeno)
• There is always something you can do.
• Don’t compare yourself to others.
• Be strict with yourself and tolerant with others.
• Put every impression, emotion, to the test before acting on it.
• Learn something from everyone.  Every person is an opportunity for kindness (Seneca)
• Say no (a lot).
• Don’t be afraid to ask for help.
• Find one thing that makes you wiser every day.
• What’s bad for the hive is bad for the bee (Marcus Aurelius)
• Don’t judge other people.
• Forgive, forgive, forgive.
• Make a little progress each day.
• Journal.
• Look for the poetry in ordinary things.
• To do wrong to one, is to do wrong to yourself. (sympatheia)
• Associate only with people that make you better.
• If someone offends you, realize you are complicit in taking offense.
• Possessions are yours only in trust.
• Accept success without arrogance, handle failure with indifference.

Courage. Temperance. Justice. Wisdom.

And now, to the markets

Global equity markets have staged a bit of a comeback in recent weeks, with a few having made new highs. Some of the concerns that troubled investors a month ago: Chinese property sector, fading global economic momentum, sharply rising bond yields, and inflation, continue to linger. But, they have largely taken a back seat to the third quarter earnings being reported by hundreds of companies around the world. We discuss key takeaways from the results, and address the logistical bottlenecks, and shortages of materials and labor that are plaguing many companies these days.

Corporate earnings have been on the rise ever since economies began to reopen over a year ago. Since then, research analysts that track companies very closely have largely been raising their quarterly earnings estimates for most stocks, driven by broadening economic momentum. But, that trend started to change a few months ago, with the pace of upward revisions to earnings estimates slowing markedly. In other words, expectations heading into this quarter’s earnings season were relatively low.

Nearly half of the earnings season is now complete. Encouragingly, results reported thus far have been good enough, and have served to reassure investors. More specifically, many companies have indicated that demand has been strong and that backlogs (indicative of future sales) are also healthy. But, many companies made it abundantly clear that the availability of materials and the logistical infrastructure required to move supplies and product is facing significant strain. Moreover, many of them are finding it increasingly more difficult to attract and retain workers.

Some management teams suggested the supply chain situation may deteriorate in the nearterm, and may persist through the first half of the year. They are hard at work finding ways to manage their situations by sourcing materials and components from new suppliers, offsetting cost increases with price increases of their own, and in some cases going as far as reengineering their products. These measures helped many companies protect their profit margins this past quarter despite the challenges.

At the very least, some of these supply issues should get resolved over time. Factories forced to shut down are still in the process of reopening. Meanwhile, capital expenditures are ramping up in areas like the semiconductor industry which should eventually alleviate the stress on chip supply. And transportation bottlenecks may eventually improve as the trucking, rail, aviation, and shipping industries are working on a host of measures to hopefully ease the high levels of congestion at ports and railyards. It will undoubtedly take time, but these supply chain issues are not insurmountable.

The labor shortage is another conundrum. In essence, the pool of available workers in various regions seems to have shrunk. This has led to a high number of job postings that have yet to be filled. For example, in the U.S., there are just over 10 million job openings currently, well above the 7 million seen just a few years ago. It’s a similar issue in Canada. And it’s not clear how easy it will be to rectify the situation. The pandemic likely caused some people to leave the work force for a host of reasons: early retirement, child care, concern for personal safety, or simply because the government assistance they received provided little incentive to look for work. Low immigration levels are also somewhat responsible for the elevated level of job vacancies. Some of this may reverse over time as life increasingly returns to normal. But, there is some risk that a labor shortage could result in sustained wage pressure as the market for workers becomes increasingly competitive. This would add to the inflation narrative that already exists in the marketplace today and present a potential headwind to company profit margins.

Overall, the third quarter earnings reports have been met with a sigh of relief from most investors. But they also confirmed that the supply-related pressures that have been so well documented of late are meaningful, and likely to persist to varying degrees next year. It is something we will continue to watch closely given the implications for central bank policy (i.e. interest rates) and corporate earnings, both of which underpin our positive bias towards equities.

As we cruise into the week, start to think about your own rules for life. Of course, these rules can and will change, they are a perfect place to start setting some rules to live by……all with keeping in mind that time is your most valuable resource.

You’ve gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life. Warren Buffett

Be well & enjoy the moments

Derek