Sir, How Do I Get One of Those?

I pulled up to my local Starbucks the other day in my not-so-subtle, python green Porsche 911 twin-turbo cabriolet. Admittedly, this car attracts a lot of attention, sometimes wanted and sometimes unwanted (think Highway Patrol here). Out front of the Starbucks, there was a cluster of teenage males who had paused their conversation to ogle at the iconic German sportscar.

As I exited the vehicle, the teens trained their collective gazes on me in an obvious attempt to assess the status of the owner (I know I would do the same). As I got closer to the entrance of the Starbucks, and closer to the teens, one of them initiated conversation by asking the following provocative question: “Sir, how do I get one of those?”

This rather bold, refreshingly honest and direct question was impressive to me, so I paused for a moment before I gave the youth the bold, direct and thoughtful response I thought his question deserved. My response was…

“Focus.”

The pithy retort left the teens speechless; however, by the expressions on their faces I detected their collective contemplation of my reply. Indeed, that was my intent, because I wanted them to think deeply about what is at the core of achievement. In this case, “achievement” came in the form of an iconic sportscar, but achievement comes in all shapes and sizes and through myriad material and non-material values that enhance our lives.

And true to The Deep Woods ethic of always thinking a few layers below the surface, I wanted these kids to start thinking about the root of achievement, and not merely the price of a car.

This incident reminded me of another question I received a few years ago from a friend who asked me to describe my personal “ethos” using just a few key words.

In this case, I knew my answer needed to be appropriately thought out to satisfy my friend’s curiosity. At first, I thought this task would be difficult. Yet, after just a brief period of reflection, I answered with the following three words…

“Focus. Integration. Celebration.”

Naturally, my friend demanded I amplify this answer, and so I went about explaining these “three pillars” of my personal ethos so that each concept would be simple and easy to understand. So, with your permission, I would like to do the same here.

Focus. The first pillar here is the most essential, as it also serves as a basis for all information processing, and for the application of the two other pillars of my ethos. The term “focus” here means much more than just concentration. By focus, I mean focus in the wider, philosophic sense. Perhaps a quote here from my favorite philosopher and novelist, Ayn Rand, will explain what I mean by philosophic focus:

“In any hour and issue of his life, man is free to think or to evade that effort. Thinking requires a state of full, focused awareness. The act of focusing one’s consciousness is volitional. Man can focus his mind to a full, active, purposefully directed awareness of reality — or he can unfocus it and let himself drift in a semiconscious daze, merely reacting to any chance stimulus of the immediate moment, at the mercy of his undirected sensory-perceptual mechanism and of any random, associational connections it might happen to make.”

So, when I say “focus” is the first pillar of my personal ethos, I mean it in this sense. I mean it in the sense that whatever it is I am doing, whether it is writing, speaking, analyzing companies, reading, composing and playing music, horseback riding, weight training, martial arts, combat marksmanship, driving a race car, walking a dog or just petting my cat, I do it in a state of full focus. I do it with the full, volitional and conscious awareness of reality — in the moment.

You’ve no doubt heard about the importance of “living in the moment,” as it has become somewhat of a cliché in the self-help movement. So, let’s avoid this cliché, and just say that living in the moment requires that you live each moment in full focus.

Integration. The second pillar of my ethos comes after you’ve focused your mind on the facts and sensations of reality. Through the process of mental integration, you can categorize the facts, sensations and feelings you’ve experienced in that state of full focus, and you can begin determining what they all mean and how they fit into your broader, and deeper, philosophic premises, such as the things you value.

For example, let’s say you focus your mind on something that is, on the surface, mostly a physical pursuit: weight training. Yet, is it mostly a physical thing? While the actual performance of the movements might be primarily physical, what you’ve likely already integrated before you even decide to begin weight training are the facts that challenging your muscles with progressive resistance loads is a good thing for your physical well-being.

Your editor with his python green Porsche 911 cabriolet alongside friend and Porsche brand ambassador Tony Nguyen.

Indeed, the integration of higher-order concepts of “well-being” requires a long chain of philosophic integration that has to do with the value you place on your existence, your health, your appearance, the maintenance of your functional ability, etc. The wider point here is that the ability to focus on facts and integrate those facts into your philosophic matrix is the necessary second pillar of a rational ethos, and it’s one you must be consciously aware of if you are going to engage in the third pillar of this ethos.

Celebration. Once you’ve focused on reality and integrated those facts with your personal worldview, i.e., your personal philosophic premises, then, and only then, can you rationally indulge in the most pleasurable pillar — celebration. For me, celebration is the result of the focused integration of the concretes of reality and what they represent in my life. Staying with the weight training example, I know that a focus on facts means I need to weight train to stay in good physical shape.

Staying in good physical shape is a value to me because I’ve integrated the virtue of good health and the absence of disease in my life as rational values for me to pursue. And despite being on the losing side of my fifties, I am for the most part in excellent physical condition, largely free of disease, strong, flexible and fully functional. It is this combination of focused integration that permits me to celebrate this circumstance.

You see, when you live a life in full focus, and one in which you integrate the ideas and values that really matter to you, then and only then can you rationally celebrate your existence. It is this celebration, in all its glorious forms, that makes life worth living.

Whether that celebration is the pleasure of watching your children grow up, staring into the eyes of the person you love most and feeling that love come right back to you or something as simple as performing a set of intense barbell curls — when you live a life of focused integration, you can justly celebrate life in all of its forms.

For me, the three pillars of focus, integration and celebration comprise the basis of my personal ethos. And thanks to my friend’s question, these three pillars also represent the consistent themes running through my lifestyle website and podcast, Way of the Renaissance Man.

If you want to hear more about the various ways I and others focus, integrate and celebrate life, I invite you to check out the articles, interviews and podcasts available right now at WayoftheRenaissanceman.com.

ETF Talk: Look Small, Think Big

I’m sure you’ve heard the idiom, “big things come in small packages.” Well, this can certainly ring true when it comes to exchange-traded funds (ETFs).

As I noted last week, while the small-cap sector has not met early-year performance expectations, the likelihood of the Fed lowering interest rates later this year means those stocks may outperform by year-end. And with small caps selling cheaply on a price-to-earnings (P/E) basis, there could be a lot to gain in small-cap ETFs. As they say, size isn’t everything.

Now, dear readers, as you likely know, the ETFs I typically recommend here are passively managed, with the goal of tracking a given benchmark index.

This week, however, I’ll be introducing you to an actively managed fund, which has the goal of beating, rather than just tracking, its chosen index. And with potential slowing in the markets due to the Fed’s pause of this year’s anticipated rate cuts, I like the fund’s stated ambition to beat the market.

If you’re looking to the small-cap sector for a big boost, look no further than Avantis US Small Cap Value ETF (NYSEArca: AVUV).

This actively managed fund seeks long-term capital appreciation by picking U.S. small-cap value stocks that management believes are undervalued and highly profitable. Fund managers use a proprietary approach to choose small-cap stocks with high ratios of adjusted cash from operations to book value. Managers overweight the portfolio by using stocks with high profitability and value characteristics to get the best return.

The fund’s benchmark is the Russell 2000 Value Index, and AVUV has been crushing it consistently. AVUV’s one-year annual average return was a whopping 9.22% higher than its benchmark. The fund’s three-year average return also beat the benchmark soundly. Talk about packing a punch.

As of March 31, 2024, the fund has 775 holdings, which smooths any potential volatility from value traps. AVUV’s largest sector weightings are in financials, 27%; consumer discretionary, 19%; industrials, 18% and energy, 16%, with smaller weightings across several other sectors.

So, is there a catch? Remember that small-cap performance is sensitive to shifting interest rates. The Fed has already stated it has no intention of hiking rates this year, which could be a boon to small-cap value stocks. And value stocks tend to outperform during economic downturns or periods of slow growth. That means that if the economy weakens in 2024, small-cap value ETFs may flourish.

And with the wind coming out of the sails in some of the large-cap tech stocks that have been driving the market, there is some possibility of a slowdown this year.

Underperformance in large-caps and hints of weakness in the market mean a positive environment for small-cap value ETF investing.

Even if the best parameters for small-cap success don’t coalesce, recall that AVUV is an active fund. As such, its managers can be responsive to changes in interest rates and market conditions, though AVUV’s portfolio has downplayed sectors like health care that are more susceptible to such changes. This accounts for its excellent stability and performance.

The fund has net assets of $10.65 billion, an expense ratio of 0.25% (low for an actively managed fund) and a dividend yield of 1.67%. The fund is down 5.76% for the last month, up 1.67% for the past three months and down 1.21% year to date.

Chart Courtesy of StockCharts.com.

If you’re looking for high growth potential and exposure to undervalued companies, AVUV has a stellar performance history and packs huge potential for small-cap value investors going forward.

Be aware, however, that small-cap value investing poses higher risk and volatility compared to investing in larger, more established companies. Investors should always do their due diligence before adding any stock, mutual fund or ETF to their holdings.

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.

In case you missed it…

Still a Stormy Case of ‘Word is Bond’

In former President Donald Trump’s universe, last week, there was a severe case of, shall we say, “Stormy weather.”

Now, as much as I would like to say this salacious case of the alleged Trump-Stormy Daniels hush money payment and election interference trial isn’t on my mind, how could it not be? I mean, the optics here are astounding, and the fact that we are still dealing with this sordid issue after all these years is, in my view, sad on multiple levels.

Interestingly, last week, I was speaking with a friend who is also a regular reader of The Deep Woods. He reminded me that he really liked what I had written about this Stormy Daniels issue a few years ago. Now, I must confess that I vaguely remembered the details of what I had written. I mean, when you write as much as I do, it’s actually hard to keep track of it all.

So, I looked up my original article on the Trump-Stormy Daniels issue. Not surprisingly, I was pleased with what I had written, because true to The Deep Woods form, it wasn’t about the surface level details of the incident, but rather about the underlying principles at issue. In this case, the underlying, deeper issue involved is when someone fails to keep their word.

Today, I want to republish my original piece for you, as what it said about the sacrosanct concept of keeping your word, or what I call, “word is bond,” and the failure of so many to live that principle in earnest, is one of the deepest wounds afflicting society. And given that this situation is front and center in every news source around the globe today, these thoughts still very much apply to the events of the day.

The following is my article, “The Recent Storm of Contract Dysfunction,” which was originally published March 28, 2018, (all references therein apply to that time period). One interesting note is that the Trump-Stormy Daniels issue addressed here is far less important in the long run than the deeper issue pertaining to the Second Amendment. The former could definitely influence the election in November, while the latter could influence your rights as Americans — permanently.

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Word is bond.

That’s the phrase that keeps coming to mind for me amidst the two most prominent political stories of the day — the Stormy Daniels affair and the latest push to restrict gun rights.

Now, “word is bond” is urban slang shorthand for the longer phrase “your word is your bond,” meaning that if you give someone your word, then you also are giving them your solemn promise.

In the case of Stormy Daniels, the former adult film actress gave her legal promise (which included the signing of a non-disclosure agreement, or NDA) that she would not reveal the details of her alleged affair with Donald Trump. In exchange for that promise, Daniels would receive the sum of $130,000.

That payment was made, yet Daniels still talked.

Her recent appearance on “60 Minutes” was just the latest violation of the word-is-bond ethic.

Now, I want to go on record here as saying that I think the whole Stormy Daniels/Donald Trump incident is repugnant on many fronts. And I am most definitely not arguing for the propriety of Mr. Trump and his associates in this matter. I also am not an attorney, so I can’t attest to the relevance of any lack of signature on the agreement by Donald Trump via an alias, or to whether that legally invalidates the contract. These legal intricacies are all extraneous to my concerns.

What I am saying is that when you make an agreement with another party, and then you violate your part of the agreement, you are guilty of what I consider the most serious ethical breach… i.e., the breach of “word is bond.”

In my own business career, I have signed many NDAs having to do with the trade secrets, methods and practices of my employers. And if I were to violate those agreements, I would rightly deserve the social and legal scorn coming to me.

Call me old fashioned, but I believe the principle that “word is bond” is sacrosanct.

I also believe that when it comes to our rights as Americans, the word-is-bond ethic also applies. That’s why it’s been disturbing to me to see the latest push for a restriction of our Second Amendment rights.

The March for Our Lives protest last weekend in Washington, D.C., and in dozens of cities around the world, has focused attention on ending the horrific gun violence and mass shooting incidents that afflict our society. And while I sympathize and agree with the need to make our society safer for all Americans, I also can’t help but think that the focus on restricting gun rights is a violation of the word-is-bond ethic in the United States Constitution.

You see, the Founding Fathers were intent on creating a nation free from government tyranny.

That’s why it is no accident that the ability to speak freely (the First Amendment) as well as the means by which to protect oneself from government-initiated physical force (the Second Amendment) are bedrock foundations of a tyranny-free state.

I see the Constitution as a kind of word-is-bond agreement between the Founders and future generations of Americans. A word-is-bond agreement that ensures and safeguards our liberties better than any other document in world history. Now, however, there are those who wish to essentially default on that agreement because they think it will make society safer.

Indeed, even a former Supreme Court justice thinks we should alter our Constitutional bond, arguing that the Second Amendment is a “relic of the 18th century.”

Of course, part of the brilliance of the Constitution is the provisions in it that allows Americans to alter that agreement provided there is enough consensus. So, if we want to have that debate, then we should have it.

If we do, I suspect we’ll discover the true wisdom in the concluding text of our Founders’ promise, “…the right of the people to keep and bear Arms, shall not be infringed.”

Word is bond.

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Let the Beautiful Stuff Out

“We are cups, constantly and quietly being filled. The trick is, knowing how to tip ourselves over and let the beautiful stuff out.”

–Ray Bradbury

The genius science fiction writer was a man who let the beautiful stuff out throughout his marvelous literary career. Unfortunately, his dire warning about censorship and the suppression of ideas in “Fahrenheit 451” is as applicable today as it was when it was originally published in 1953. The fact is that ANY suppression of ideas is bad for a free society. If you want freedom to thrive, you must let the beautiful (and the ugly) stuff of thought out. Because not only is sunlight the greatest disinfectant, it’s also the only source of photosynthesis.

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.

In the name of the best within us,

Jim Woods