Dear friends,

Welcome to the New Year!

And to an odd question: why is it a New Year? That is, why January 1? Most calendrical events correspond to something: cycles of the moon and stars, movement of the seasons, conclusions of wars or deaths of Great Men.

But why January 1? It corresponds with nothing.

The short version of the answer is that the ancient Roman calendar was a holy mess. Literally: the new year started on the day that the high priest, the pontifex, said it started. Understandably, the pontifex was open to … uhh, reason when it came to choosing the date on which the year began. He might shorten the rule of one leader by moving up the date of New Year’s or delaying the inauguration of another ruler by lengthening the preceding year.

In 45 B.C., Julius Caesar had had enough and, with the help of the astronomer Sosigenes, moved Rome from a 10 month calendar with a floating start day and lots of days that didn’t fall in any month to a version of the calendar we use today.

Except that it had a bit of trouble accommodating the fact that the solar year, which isn’t precisely 365 days long. We got far enough out of sync that they had to add seven days to the year 1000 and 10 more days in the mid 15^th century. In 1582, Pope Gregory had had enough and, with the help of Vatican astronomers, created today’s calendar.

Which, by the way, still didn’t have a New Year’s Day and required eliminating 10 entire days from the calendar that year. New Year’s was the solstice in some spots, December 25^th in others and March 25^th, the spring equinox, in others. The pope finally put his foot down and we got January 1^st.

So, why exactly does it make sense for you to gloat, or worry, about how your portfolio did in 2017? The end date of the year is arbitrary. It corresponds neither to the market’s annual flux nor to the longer seven(ish) year cycles in which the market normally rises and falls, much less your own financial needs and resources.

In short, it’s time to look forward with hope and renewed resolve, rather than back with glee or regret.

And so, on to 2018!

It’s deceptively easy to believe that our world is going to hell in a handbasket because the only thing we hear each day is that day’s horrors. Someone got shot. Somewhere got poisoned. Something blew up. Someone betrayed us.

Why all the bad news? Two reasons:

1. News media report on what’s new; that is, they tell us what happened today that was different from what happened yesterday. They’re looking at individual occurrences, especially if they come with striking visual images. We’re not asked to think about the big picture, because the big picture didn’t happen today. And so we fixate on all the little things that did transpire.
2. Bad news sells; more particular, bad news delivered in a howling tone generates outrage and clicks. For political parties, it also generates revenue and delivers votes.

But that’s not the actual story of our lives, is it?

Things are getting better.

At the most superficial level, everything made money in 2017. The only fund categories in the red were bear market funds and energy funds. Once you got into the world of straightforward, diversified investing, everything worked. Every category of US diversified equity fund made money, and every category of international diversified equity fund made more money. The top performing domestic category was large growth, up 27% and paced by funds from Quantified STF, Kinetics and Zevenbergen, all of which topped 50% gains. And even that category gain trailed nine international fund categories. The handful of India funds, for example, averaged 48% gains last year. Emerging markets bonds posted double digit returns, while all other bonds make gains in the single digits. On whole, it wasn’t rational but it was profitable.

Not everything is getting better. Not every day and not every year. But the important things are, year after year, decade after decade, century after century, getting better. They’re getting better because it’s in our nature to seek better, rather than to surrender to worse. For every idiot in the news, ten thousand of us work – quietly and without expectation of attention – to make things better. That’s a great ratio. And greater still if you make it 10,001.

Next steps, part one

Our challenges are very real (and terrifying). But they’ve been very real (and terrifying) for centuries. The question is not “will things get better?” so much as “what’s your plan to make it better in 2018?” With off-year elections impending, will you finally decide it’s worth your while to be heard? Will you plant a rain garden or volunteer in your schools? Will you walk more, be consciously grateful, notice others more? Will you spend less time with your portfolio and more with your neighbors? Will you fuss less about this quarter’s returns and more about the pattern of intentional consumption (see “Life After,” below) and serious savings (as a nation, we hit a decade-low in our savings rate last year) that will support your most important goals?

Will you put down your phone, leave tweeting to the birds and step away from an Amazon-induced impulse to buy? Jonathan Clement shared the link to a really thoughtful piece entitled “Life After Amazon,” chronicling nine discoveries one gentleman made after he shut down his Amazon account and returned to buying real things from real people in the real world. It’s worth reading.

I have faith in you.

Next steps, part two

Charles, our endlessly energetic colleague and major domo of MFO Premium, is offering two online seminars, both on January 4^th, to help acquaint users – new and old – with its offerings and use. There are details in New Year, New Tools in this issue.

Coming in February: new profiles, a discussion of two strategies for hedging your portfolio for the inevitable change of direction in the market, an Elevator Talk with a cool multi-alts manager, my annual portfolio disclosure, word of Chip’s first equity fund (at least in her non-retirement account) and more!

See you then!