Three Words Create a FAB Idea

by | May 27, 2016 | Archives

Here are three steps we can take to have a fabulous lifestyle.

These steps, that can create a fab future, can be summed in three words, “Change… Our… Perception”.

ecuador-car-rentals

This was my first car when I turned 16, a powder blue 58 Chevy.  That seemed like a great car… then.  I would not want to drive it (even if it were new) much now.  Human nature causes us to look at the past as “good old days”.   Production standards have risen a lot in recent decades but, by romancing the past, we can forget how much better so many products are now.

We tend to look at the past with rose colored glasses.  The past becomes “the good old days” even when they were not so good.  This rosy tint is created by a form of memory bias, called “Fading Affect Bias” or FAB.  FAB is caused by a neurobiological reaction in many mammals.  FAB makes positive events in our past more attractive than negative events.  As time passes, we remember the events that made us feel good more than those that made us feel bad.

FAB is great in some ways.  Dwelling on past negatives (except to learn and improve from them) does not get us anywhere.  Nor does “downer thinking” feel good.  The downside is that FAB allows us to fool ourselves into making errors, such as thinking that returning to the past will make the future better.  FAB can rob us of the excitement and adventure of living in such wonderful times of opportunity right now.

For example, a Wall Street Journal article “Economists Disagree With Voters Who See U.S. Worse Off Today Than in 1960s” (1) reviews a poll that asked if life in America is better today than 50 years ago.   A plurality of 46% said things were worse now.  Only 34% said life today is better than in the 1960s.

Yet 88% of economists who were asked in a poll said the U.S. is better today than in 1960 and 87% see today as better than 1980.

The facts are clear.  Industrialized society has seen a six times increase in wealth in the last century.  Almost everyone is richer even though most of the world has become cynical.  Modern communications allow us to better see growing discrepancies between the rich and poor.  This clearer picture of reality creates anger, turmoil, hatred and war.

There are many factors that make it seem like the quality of life has deteriorated in the past few decades.  Wages and available jobs have deteriorated for some groups, especially men without high-school diplomas and men working in manufacturing.  This is a large group so this change is often covered in the news.

Uncertainty is far higher.  Americans, overall, may be wealthier than in the past, but faster change and destructive technology have created more uncertain times in the labor market.  There are not many cradle to grave jobs left.  This might seem like bad news for those who have forgotten the messages contained in “The Man in the Gray Flannel Suit”.

Plus the technology of connectiveness makes the world a less connected place.  Our interface with so many businesses are with computers, recordings, algorithms, websites, instead of people.  No mater how good these contacts are, none of them are much of a match for a human voice that asks, “How are you?  How can I help?” and means it.

When we are turned into numbers instead of names and when we lose human contact, we feel caught in more of a hostile, frustrating, uncaring habitat.

The difference between the rich and the poor everywhere makes many people unhappy.  The US has one of the worst discrepancies between the top and bottom 10% of wealth.  This is good if you want to be really rich.  The US is a great place to become rich but we Americans need to reduce this income discrepancy.

Yet the fact remains that wealth is growing around the world and that US standards and growth are among the best.

One of the core principles of our investing and business philosophy for almost 50 years has been to live, bank and invest where it is best for you, not just where you were born.  This does NOT mean that where you were born and live is not the best place to be or to invest.  

Merri and I have lived all over the world, the US, London, Ecuador, Dominican Republic, Isle of Man, England, Germany and Hong Kong.  We choose to live in the USA.   This is the best place for us, for now, based on our  particular circumstances.  Yet we are not investing in US shares.  The US economy and stock market have incredible opportunity, but right now investors pay way too much for the US shares.  The USA is a great place to be but the US stock market as a whole is overvalued.

Europe is a great place to be right now as well and the MSCI USA Index Price to Book Value is 40% higher than the MSCI Europe Index.  The US Index’s average dividend yield is 71% lower than Europe’s.

keppler chart

The best value is the Keppler Developed Markets Top Value Portfolio.  The price to book value of this portfolio is 1.27 compared to the MSCI US index of 2.81.   We can can enjoy the benefits of living in the US, or wherever is best us, but we can also invest in stocks where they give us the best value.

Here are three ways to change our perceptions so we can enjoy and profit from the “Good Now Days”.

#1: Realize that it is human nature to look at the past through rose colored glasses as well as to resist change.  We can avoid making this error and look for ways that such incorrect thinking creates value in the here and now.

#2: Measure the here and now in factual mathematical terms instead of drama laden daily news.  Use financial information instead of advertising driven, subscription based economic news.

#3:  We can look for and at the current successes all around us instead of focusing on failures.  We can seek understanding of why these successes are working now and look for ways to incorporate such lessons into our lives.

These three steps can help us create a fab lifestyle of excitement, adventure and fulfillment right now.

Gary

(1) http://www.wsj.com/articles/economists-disagree-with-voters-who-see-u-s-worse-off-today-than-in-1960s-1463061602

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