Retaining Perspective in a Crazy World
A friend tells me that she now spends the evenings watching I Love Lucy reruns to take her mind off the news.
I can think of worse coping mechanisms.
The headlines are mostly grim, and I know that many of my generation worry most about what they may mean for our children and grandchildren. But as we are told on every flight, we must first secure our own oxygen mask before helping others. So here are a few personal reflections, in the hope that they may prove useful. In my experience, testing – and retesting – our predilections and tolerance for risk is the best way we can prepare for the future.
Politics: We can control our media exposure, staying informed without doom scrolling or rewarding those that peddle hype or falsehoods. And we can engage, as we wish our politicians did, across the aisle – getting to know people with different views. At the least, we’ll gain insight. At best, we’ll find common ground and do some good in this world. And, of course, we can vote.
Health: It wasn’t long ago that the news was dominated by a single headline – an experience that has made us all more aware of our health. Diet, exercise, regular checkups, vaccines and, increasingly, technology can help position us to take full advantage of the trend to increased longevity. (Contact your advisor to view my discussion about “silver tech” with Andy Miller of the AARP’s innovation unit). But 100-year life spans need to be protected and funded. Long-term healthcare policies, a healthcare proxy, durable power of attorney, and a revocable trust, which allows a designated successor trustee to take care of finances in the event of cognitive impairment, can all play important roles in protecting us as we age.
Home: In theory, a single storm could take out both of my houses, on the east coast of Florida and in Long Island. But for me, five days of pure terror are so far a reasonable price to pay for 360 days of joy. Having made that choice, there’s a limit to how much I can control, beyond hoping that personal lifestyle, philanthropic, investing, and voting choices are the right ones. But I can keep up to date with relevant technological, landscaping and maintenance techniques. And I can make sound decisions on insurance, to the extent that market conditions allow. (Contact your advisor if you would like to view our recent webinar on property casualty coverage.)
Personal finances: I have spent the last 50 years worrying about financial risks for clients, institutions, and my family. In that time, there have been six bear markets, with an average drawdown of 41%, and an average recovery time of 2.8 years. Understanding our risk tolerance – where we fall in the “eat well versus sleep well” scale – is a very personal determination, and one that is likely to evolve. Some clients wish to take only limited risk and are content with 100% of their assets allocated to a laddered bond portfolio; others simply don’t invest in bonds because of the relatively low return potential. Most of us are somewhere in the middle.
Personally, at this stage in my life, I do not want to have a pit in my stomach during a significant drawdown. I therefore maintain sufficient cash and bonds to cover five years of spending. On that basis, I am more aggressive with my other assets, investing in illiquid private equity and real estate where I personally expect higher returns. When the drawdown does occur – because it will – I can tap my reserves for spending and meeting capital calls.
Perspective: Attitude really is everything, so we should all strive to keep calm and carry on, come what may. I’ve learned, on occasion the hard way, that keeping busy and optimistic is the best way to live. So, when headlines feel overwhelming, try looking for the good. It’s there too.
“I’m not funny,” Lucille Ball once said. “What I am is brave.”
Jeff Maurer is the Chairman of Evercore Wealth Management and Evercore Trust Company. He can be contacted at maurer@evercore.com.
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