A disciplined weekly review of the forces shaping risk and return.¹

Key Points

• Markets up slightly this week with gold leading the way with 3.0% gain.
• Core inflation still cooling long-term with latest print at 2.6%.
• Anchoring affects everyone. Even you. Take a moment to root it out.
• AI is everywhere, but humans crave human interaction. The next step is obvious.

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Markets

• The Russel 2000 is up over 3% this week along with gold and copper both seeing quite a jump.
• Gold is still on a tear at 71% gain in the last year.
• International is now beating the S&P 500 and Dow Jones in the last year.

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Macro

Core Inflation

Core inflation continues to trend down coming in at 2.6%:

This is signaling a continued cooling of the economy.

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Education

Watch Out For Anchoring

Anchoring affects us all, and one of the things we can do to protect ourselves from this bias is to educate ourselves. After all, an investors worst enemy is poor behavior.

What is anchoring? Most of us have a natural tendency to react slowly to new relevant information because of an irrational attachment to what we thought was true: perceived value. Even when faced with new information, we cling to the old information.

One of the best ways to protect ourselves from Anchoring is to continually ask ourselves “What new pieces of information are required to have an accurate view here?” Like all great tasks, this is much easier said than done.

This shows up in the portfolios by investors anchoring themselves to the initial buy price in a favored stock. A common subconscious thought goes like this “I bought the stock at 100 dollars, it must be worth 100 dollars!”

Watch out for new relevant information that affects the intrinsic value. (A wonderful thought experiment in and of itself).

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Quote of The Week

The Edge of Competence

I think that if you have competence, you almost automatically have a feeling of where the edge of the competence is. Because, after all, it wouldn’t be much of a competence if you didn’t know it’s boundary … My guess is you do know what you’re perfectly competent to do in all kinds of areas. And you have all kinds of other areas where you know you would be out of your depth. You’re not trying to play chess against Bobby Fischer or do stunts on the high trapeze if you’ve had no training for it. My guess is you know pretty well where the boundaries of your competence lies, and also where you want to stretch the boundary. You stretch the boundary by working at it, including practice.

Charlie Munger, 2002 Berkshire Hathaway Annual Shareholders Meeting

This jumped out at me this week since I’m launching this newsletter. It’s outside of my circle of competence, for now, but not for long.

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Michael’s Corner

The 80/20 Rule Is Everywhere

We are all on different phases in our financial journeys. One thing that I find keeps providing value for individuals in their perspective journeys is encouraging asking the question “What should I be focusing on right now?”

Usually it’s not something like saving a dollar with coupons, or picking the next hot stock, but something more tangible and immediate, like tackling debt.

This is the 80/20 rule. Find the 20% input that gets you 80% of the results for where you are right now. The answer to the question is slightly different for every person, but the themes remain similar: chances are, you are not focusing on the most important for your situation.

The Market for Quality and Human Connection

AI is everywhere, and growing fast. The thing is, we can tell when something is made by AI. We might not be able to tell right away, but over time we can sniff things out pretty good.

Why does the dissapointment spike so high when we find out something was made by AI? It’s because we humans crave human connection, myself included. This is why I am commited to writing this newsletter the old-fashioned way and only using AI for compliance reasons. (That’s right—not even for proofreading purposes).

The thing is, quality can mean different things over time, and over technological evolution. In this new era, I think “made by a real human” and “high quality” will by synonymous. The gap will grow as AI takes brain-power away from those who would so easily give away their writing practice.²

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Disclaimer

This newsletter is provided for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Walsh Financial is a Registered Investment Adviser.

The content is general in nature and is not intended to be advice tailored to any particular person, circumstances, or investment objectives. Any references to individual companies, securities, sectors, asset classes, market indexes, commodities, or economic and market conditions are for general commentary and discussion only and should not be construed as a recommendation or a call to take any specific action.

This information is not intended to provide, and should not be relied upon for, accounting, legal, tax, or insurance advice. Readers should consult with their financial advisor and/or other qualified professionals regarding their specific situation and the then-current applicable laws and rules before making any financial decisions.

All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. This newsletter may include opinions, projections, or forward-looking statements (including views on economic conditions, market trends, or broad investment themes). Such views are as of the date published, may change without notice, and there is no guarantee that any opinions or forecasts will prove to be correct.

Information is obtained from sources believed to be reliable; however, Walsh Financial does not warrant its accuracy, completeness, or timeliness.

Indexes are unmanaged and cannot be invested in directly.

For additional information about Walsh Financial, including our Form ADV and important disclosures, please visit the SEC’s Investment Adviser Public Disclosure (IAPD) page at https://adviserinfo.sec.gov/firm/summary/337759.

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1. This first edition is a “beta test”. The brevity is intentional. You can expect commentary to expand over time. ↩︎
2. This newsletter is made by me, Michael, at a desk, with a keyboard. (Hence the quiks, errors, etc.). ↩︎