Family Update
My son, Alex, went up to Georgia with his cousin and uncle to work on the cabin. His uncle recently purchased a couple of rental properties that they’re renovating. Between projects, they plan to hike, fish, camp, go ziplining, tubing, and sit around the fire.
There are two things I really miss about living in Pittsburgh: fireplaces and basements. Up north, basements are a special place for kids. They’re your own space. It’s where you hang out with your friends and just be a kid. I was devastated when I found out there are no basements in Florida.
But when we moved into our new house on all this acreage, I was blessed with a detached garage. We just installed an air conditioner and painted the walls, and now I finally have what I’ve always dreamed of- a Florida basement! The kids are excited to turn it into their own.
Orchid season is in full swing. June is usually peak bloom time. Above, you can see what is probably my favorite of all orchids: Myrmecophila christinae ‘Emmanuel’.
Joe was an engineer and considered himself a pretty smart guy. He worked at an electrical plant and was responsible for quality control. He enjoyed his work, but as he entered his 50s, he began paying closer attention to the stock market. He knew that once he retired, those investments would be what he lived on.
One day, Joe came across an article in The Globe and Mail titled:
“Cyclical Declines, Structural Resilience.” An equity strategist at JPMorgan wrote it. Sounded important.
The article began:
“We caution investors to expect a lower return relative to prior years.” (No, you shouldn't.)
He kept reading:
“Our base case assumes some alleviation, but in a manner that sustains economic activity into 2023. Earnings growth is the primary tailwind for equities. Our 5,100 S&P 500 target implies a 23.1x P/E on the top-down earnings projection, which approximates the current level. Gradual supply-chain relief should favor the more economically sensitive Value style.”
Joe blinked. That’s... sophisticated. He felt like he needed to keep reading these kinds of articles. This was stuff smart investors must know, right?
He started following JPMorgan analysts. “These guys really know what they’re talking about,” Joe thought. “I’ve got to study this more.”
Soon after, Joe noticed there was a JPMorgan branch downtown, not far from work. He decided to stop in and see what they had to say.
They brought him into an advisor’s office, where a sharply dressed man began describing JPMorgan’s research and investment capabilities.
“Our interest rate strategists forecast a continued rise in real interest rates that will lift the nominal 10-year Treasury yield to 5% by year-end 2023. However, we expect the ERP [equity risk premium] to compress modestly from current levels while economic policy uncertainty surrounding potential reconciliation legislation passes.”
Joe’s eyes widened. “This is amazing,” he thought. “These guys are helping regular people like me. They must usually work with billionaires.”
So Joe transferred his accounts and handed over his investments to JPMorgan.
End of story.
Now let me tell you a secret. A secret that took me many years to uncover. A secret so well-hidden that most people never figure it out:
These firms intentionally make this stuff complicated.
Joe’s experience? That’s the goal. JPMorgan wants Joe to feel impressed, slightly overwhelmed, and relieved that “someone smart” is managing his money.
But here’s the truth: All that fancy language means nothing. It’s gobbledygook.
What if instead of all that, they simply said: “A diversified portfolio of stocks and bonds will serve you well over time. You need to stick to a plan.”
That’s actually good advice. But it’s not flashy. It doesn’t make them stand out. So instead, they wrap everything in a fog of technical jargon.
That’s how they attract clients.
And look, I don’t think JPMorgan analysts or mutual fund managers are bad people. I really don’t. I believe most of them truly think they’re helping. They believe in their products.
But the facts are clear: Their funds don’t outperform. There’s overwhelming academic evidence to back that up. Knowing big words does not increase returns.
Still, the system persists because there’s a substantial amount of money involved for them. The more confused you are, the more you lean on “experts.”
And that’s where CNBC comes in. CNBC figured out that if people are trying to understand investing, they’ll watch their channel all day long. Not because it helps. But because it feels like learning. They just put guys in suits on TV to spew buzzwords and opinions.
The Harsh Truth?
If CNBC stopped airing programs, nothing would change.
The same goes for Money Magazine. They know confused people will buy issues like:
"Private Equity’s Illiquidity Premium: Myth, Mirage, or Measurable Advantage?"(huh?)
But who actually profits? The magazine does. The mutual fund companies do. You don’t. You just get more confused and more emotional about your money.
A complete mess. And there’s no real fix, unless you learn the truth and stick to it. If you ever hear someone spouting jargon like Joe heard, just smile and say:
“I’m on to you. Sounding smart is very different from being smart.”
Be Blessed,
Dave