NWP Monthly Digest | May 2020
Our Fast Mind
How’s everyone holding up out there?
Hard to believe, but today is May 1st. There has been but one thing on everyone’s mind for what feels like the entire year, and not much progress has been made toward a resolution.
There have been so many fascinating behavioral shifts in our society, it would be hard to pick just one to write about. Probably the most interesting to me, however, has simply been the passage of time. March seemed to take forever, crawling by, day by day as we endlessly checked our phones and social media for some good news. April, however, was gone in an instant.
I’m no psychologist (and Grant isn’t, either) but I find these types of things to be very constructive when it comes to how we view our personal finances and process of “building” things up, like savings accounts and retirement accounts.
Building anything of consequence, whether that be a custom house or your own personal financial independence, takes years and extraordinary patience. You have to be exacting and disciplined, showing up every day to do the little things, sometimes without your work showing any sign of progress to the naked eye.
Yet, an instant, those things can be destroyed.
A week ago, I was moving an ottoman from my family room to my basement to get it out of the way. I accidentally dropped it down the stairs and watched it roll, out of control, toward the wall at the bottom of the staircase. Without much effort, it punched a 2’ x 2’ hole through the drywall. While it took about 2 seconds, the whole fiasco unraveled from my vantage point in super slow motion. I remember having the thought, “on no! I hope the ottoman doesn’t break!”. I had no idea that the wall would be the first to give in.
Have you experienced this phenomenon? Walking down the street and tripping in mid-stride, or watching in terror as your young child walks toward the stairs for the first time? Maybe you’ve seen a car accident happen right in front of you? Our senses seem to slow everything down for a brief second, a phenomenon that is common in first responders and occasionally referred to as tachypsychia, which roughly translates as “fast mind.” While just an illusion, tachypsychia is attributed to your brain moving into overdrive as all of your senses are needed in a time of potential crisis.
Watching the pandemic unfold in March, not to mention the crashing of the stock market and the forced closures of businesses around the world, most likely caused all of us to experience some form of this “fast mind”.
Our primitive human brains, however, are also really good at becoming desensitized to the news. As March turned into April, we became more likely to shrug off the bad news and focus on the good news and how it was going to make all of this come to an end as we went back to normal. Whatever that means.
April turned out to be the best month for stock market performance since 1987, as the S&P 500 gained 13%. Better still, the same index is up about 28% from the March 23rd lows. From these levels, it would take another 18% increase for us to get back to the all-time highs and approximately a 22% fall to hit the low point, again. We’re basically stuck right in the middle. How apropos.
While the stock market is technically never correct, it has extraordinary powers to be constantly pursuing the correct price. Like a pendulum, the stock market will wildly overreact to potentially negative or positive news, only to settle down in its tireless effort to be “right”. Both the best and worst days, weeks, and months tend to be clustered together.
This has frustrated many in the finance community as they try to understand why we can have roughly 30 million people lose their jobs in six weeks (more than all of the jobs created since the Great Financial Crisis) and simultaneously have the stock market react with a 28% bounce up from the lows.
There is no right answer to this conundrum. It would not surprise us to see the stock market see some tough times ahead and possibly re-test the lows. Quite frankly, it wouldn’t surprise us to see the market move back toward the all-time highs, either. Personally, I never like to bet against the ingenuity of American businesses and the strength of our human resolve.
We’ll get through this, too.
Noble Wealth Pro Tip of the Month
If you have kids in college and you received or will be receiving a refund check from their college or university, be aware of whether or not that money came from your 529 plan. If it did, you could plan to use that money in the fall when they go back to school for qualified expenses (same calendar year), or you need to make sure you deposit that money back into your 529 account to avoid it being considered an unqualified withdrawal for 2020.
There are also a couple of significant updates to how you can use money from your 529 plan. The following items are now considered qualified expenses:
Fees, books, supplies, and equipment for participation in a registered apprentice program
Repayment of principal and interest on any qualified education loan up to a $10,000 lifetime limit for the designated beneficiary and/or sibling of the beneficiary
What We’re Reading
The Spider Network - The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History by David Enrich
In 2006, an oddball group of bankers and traders from some of the world’s largest financial institutions made a startling realization: Libor—the London interbank offered rate, which determines the interest rates on trillions of dollars in loans worldwide—was set daily by a small team of easily manipulated functionaries, and that they could reap huge profits by nudging it to suit their trading portfolios.
What Have We Been Doing?
Quarantining, just like you. Oh, and learning to patch drywall.
