Grow Your Portfolio the Intelligent Way

Harnessing the Power of Kindness 

By Jim Woods

Kindness is a powerful force.

I’ve known that for some time, and the older, and hopefully wiser, I get, the more I realize it. And apparently, I’m not the only one. A few days ago, I read a story about how people underestimate the positive impacts of random acts of kindness.

This story covered a new study published recently in the Journal of Experimental Psychology: General. Through a series of experiments, researchers found that those on the receiving end of a kind gesture typically appreciated it more than the giver anticipated. One reason suggested by the findings may be that recipients feel the warmth behind the gesture, while the giver often overlooks that.

The takeaway here for me is actually quite simple: If you have an opportunity to be more kind, embrace it.

Of course, if you are a long-time reader of The Deep Woods, this embrace of kindness is likely very familiar. In fact, in January 2019, I wrote about the importance and gratification of harnessing the power of kindness as a force for good in society.

Given this latest “kindness news,” I thought it was timely and appropriate to republish that January 2019 article, as what I said then is even more spot on in the light of the new scientific research. And now, I present to you, “Try to Be More Kind.”

Try to Be More Kind 

We live, then we die. 

That’s a reality we all must grapple with each minute. And the fact that life is finite has implications for everything we do. And no matter what your beliefs are about the existence of an afterlife, there is no doubt that life on earth, as we experience it, is going to come to an end for us all.

This admittedly morbid, yet eminently liberating, realization is at the spine of nearly all our decisions, even though many times we fail to realize it. Think about the actions you take each day.

You wake after a night of sleep because your body requires sleep. You consume food because your body requires energy. Then for most of us, we engage in some form of productive activity that nets us financial compensation so that we can attain the capital required to fund our existence.

If we’re lucky, we have family and friends who we love that we can share our lives with, and that allow us to both provide and receive mutual support.

The requirements of a finite life also have a profound effect on your decisions about what to do with your money, how to spend that money, how to invest it and how to plan for a time when you may not be able to, or may no longer want to, work. Then there’s your family, and the work involved in making the right decisions to provide for them when you’re no longer here to do so.

For a special audio essay version of the article “Try to Be More Kind,” click here

Now, much of my newsletter advisory services are aimed at the nuts and bolts of how to put your money to work in the financial markets so that you can maximize this critical aspect of your life. Yet as you likely know, in The Deep Woods, I like to peel back the layers of the onion skin so that we can access the principles at the root of the issue. 

And when you think about it, what is at the essence of our quest to make sure we are financially secure enough to take care of ourselves and the ones we love?

To me, the answer is simple: It’s a desire to be kind.

Indeed, the desire to be kind, i.e., the quality of being caring, attentive, considerate and otherwise thoughtful of others, is something that we all should strive to be motivated by. I know for me, the action I take out of kindness not only feels good, but it’s always in my rational self-interest to do so.

Acting kind doesn’t mean self-sacrifice. Rather, it means acting and interacting with others so that both parties receive maximum benefit from the interaction.

Extended out to the political realm, the desire for kindness is why I am a passionate advocate for laissez-faire capitalism. You see, capitalism is the only social system where men are free to interact with each other based on the principle of exchanged values.

For example, this morning I went to my local Starbucks and paid $4.95 for a latte. I wanted the latte more than I wanted the $4.95, and Starbucks wanted the $4.95 more than they wanted the latte. I didn’t exercise physical force to extort the latte from my barista, and she didn’t wrestle me into the store from the street to confiscate my money. 

Instead, we engaged in a mutually kind exchange of values that also was mutually beneficial. This kindness is the essence of capitalism, and it’s the opposite of the Marxist idea that capitalism exploits the proletariat.

In my view, a prescription for increasing societal happiness is to increase kindness. Not only in terms of our daily human interactions, but also in the wider sense of people interacting with each other via the kindest of all principles — the principle of free exchange.

Finally, I’ll leave you with a powerful quote from philosopher and neuroscientist Sam Harris regarding kindness. As Sam writes: “Consider it: every person you have ever met, every person will suffer the loss of his friends and family. All are going to lose everything they love in this world. Why would one want to be anything but kind to them in the meantime?”

If you want to make yourself and the world a better place, try to be more kind.

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ETF Talk: Small Uranium Fund Offers Unique Approach

Nuclear energy may be a daunting idea to some, but the trend toward using it is likely to continue. Next in my series on funds targeting this industry is VanEck Uranium+Nuclear Energy ETF (NLR).

This fund’s holdings are a little different from those of its peers in the nuclear and uranium segments. It has fewer than 30 holdings, which may make its performance more volatile than that of many exchange-traded funds (ETFs). And those holdings tend more toward utilities rather than energy, which offers a different approach.

Many of the utilities held in NLR tend to be large-cap companies. The fund also offers international exposure, while still having more than half of assets allocated to U.S. stocks. Weighting is market-cap-based, meaning that a few heavy hitters are large drivers of its overall performance.

NLR is down considerably over the last few weeks, which may offer an attractive entry point for investors, particularly any who suspect its recent highs might be re-achievable.

NLR’s year to date performance, down 4.78%, is still far better than the dismal results in the S&P 500 over that same time of -23.31%. And the fund was up for the year as recently as Sept. 22. NLR has also performed much better this year than many of its more typically organized peers, such as Global X Uranium ETF (URA), which is down 13.6% in the same period.

The 0.60% expense ratio attached to this fund is run-of-the-mill and compensated for by its 2.05% yield. The ETF’s assets under management total just $51.7 million, which means it does fall under my recommended threshold for investment. However, the fund’s strategy is nonetheless interesting and worthy of discussion.

Chart courtesy of www.StockCharts.com

Top holdings for this fund include Public Service Enterprise Group Inc. (PEG), 7.93%; Dominion Energy Inc. (D), 7.87%; Constellation Energy Corp. (CEG), 7.47%; Fortum Oyj, 6.53%; and Entergy Corp. (ETR), 6.44%. The top 10 holdings account for over 60% of its assets.

In addition to the 52.6% weighting in the United States, the other nations most prominently represented include Japan, Canada and France.

For investors looking for ways to invest in the uranium industry, VanEck Uranium+Nuclear Energy ETF (NLR) offers a unique approach to consider.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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In case you missed it…

The Hawkish Taste of the ‘Dots’

Have you ever noticed that childhood memories come about in all sorts of seemingly unconnected ways? Perhaps it’s just the way human memory functions, which is more like an association machine than a tape recorder. But when I see or hear words and/or concepts that evoke strong remembrances of things past, my mind is shuttled directly into a Proustian recollection.

I had one of those recollections today that was prompted by the Federal Reserve, and it was, of all things, about gumdrops.

You see, in my youth I liked a candy called “DOTS,” which during my research for this article I discovered was the No.1-selling gumdrop brand. As the Tootsie website states, DOTS are “a snacking staple for both moviegoers and candy enthusiasts everywhere… Tootsie produces more than 4 billion DOTS annually from its Chicago plant…”

Well, I haven’t eaten DOTS in a long time, but I have been digesting the “dots” for many years now, and today I was served up a hawkish-tasting and bitter dose of the dots courtesy of the Federal Open Market Committee (FOMC).

The term “dots” is Wall Street shorthand for the “dot plot,” and basically this is a chart that plots out where each Federal Reserve member thinks the federal funds rate will be at the end of a specific period. The graphic here from today’s FOMC data release shows where Fed members expect rates will be at the end of each of the next several years.

Here, the dots show that the medium projection for the federal funds rate at the end of this year to be at least by another 125 basis points to a range between 4.25% and 4.5%. So, after today’s announced 75-basis-point hike in the federal funds rate to between 3% and 3.5%, and considering the Fed has two more meetings this year (November and December), that means that there will likely be another 75-basis-point hike at the November FOMC meeting and a 50-basis-point hike at the December meeting.

Those numbers are why I say the Fed has served the markets a hawkish dish of dots, because before today’s FOMC meeting announcement, the market was only pricing in a 50-basis-point hike at the November meeting and a 25-basis-point hike at the December meeting.

Perhaps more importantly, the FOMC now has projected that the so-called “terminal rate,” or the level at which rate hikes would stop, at a range between 4.5% and 4.75%. Interestingly, after the June FOMC meeting, the median projection was for the terminal rate was around 3.75%.

The reason this terminal rate matters is because, at this point, investors just want to know when rate hikes are going to stop. Over the past two weeks, the main reason stocks have declined is because the market priced in a higher terminal rate than was previously expected, from 3.875% – 4.125% to 4.25% – 4.50%. Today’s even higher terminal rate now increases the chances the Fed will engineer an economic “hard landing” rather than a “soft landing.” That, in turn, has weighed on stocks.

As for the market reaction to today’s FOMC news, we initially saw stocks sell off right at the 2 p.m. EDT announcement. Yet when Federal Reserve Chairman Jerome Powell took to the podium for his press conference, the markets mounted a rally that sent the major indices into positive territory.

So, now the equity market is at yet another inflection point, as the smart money continues to price in the highest cost of money in more than 14 years. Will that new pricing mean more bitter-tasting bearish trading ahead?

While no one can say for certain, today’s hawkish taste of the Fed dots certainly doesn’t offer us a very sweet box of bullish gumdrops.

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Just Feel Everything 

My heart’s made of parts of all that surround me

And that’s why the devil just can’t get around me

Every single night’s alright, every single night’s a fight

And every single fight’s alright with my brain

I just want to feel everything…

— Fiona Apple, “Every Single Night” 

The intense, musically quirky, and always deeply personal songwriting of the sublime Fiona Apple is must-listen music for those who aren’t afraid to feel everything. And while her biggest hit is the amazingly luscious 1997 release “Criminal,” my two favorites of hers are 2005’s “Extraordinary Machine” and her 2012 release, “Every Single Night.” 

In the lyrics from the latter, Apple tells us that if you allow yourself to feel, and to embrace the struggle within, you can keep life’s demons at bay. So, be like Fiona, feel everything, and just embrace the fight.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

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