Dear valued client,
Markets gained this week as positive news on Capitol Hill from both President Biden and House Speaker Kevin McCarthy garnered confidence that a debt ceiling deal to prevent a U.S. default would be forthcoming.
In economic news, U.S. retail sales for the month of April increased from two months prior as people spent more on cars, dining out, and home projects. This is cause for optimism as consumer spending is a primary driver of economic growth.
The more melancholic side of this equation is the report released this week on household debt. The New York Fed found a record-high debt level of $17 trillion, persistent credit card debt, and rising delinquency rates in Q1 of 2023. A typical first quarter sees credit card balances decline as people pay off what they spent over the holidays. But that isn’t the case this year as balances remained flat. The rising cost of pretty much all goods and services is the likely main culprit for this development.
The Canadian inflation report showed prices ticked up to 4.4% this month (compared to 4.3% in March and 5.2% in Feb.). Many are blaming the Liberals’ spending campaign as outlined in their 2023 budget. Regardless of who is to blame, this will likely ignite fears of a more hawkish Bank of Canada in the coming months.
I’d like to close this week’s newsletter with a quote from the Daily Stoic on the importance of clarity in prioritization:
“Warren Buffett, whose net worth is north of $100 billion, lives in the same house he bought in 1958 for $31,500. The NFL lineman turned mathematician John Urschel is worth millions but manages to live on $25,000 a year. Well past signing a $94 million dollar contract, the NBA star Kawhi Leonard drove the 1997 Chevy Tahoe he had since he was a teenager.
Cato, who came from a wealthy and powerful family, walked around bareheaded and barefooted and generally abstained from unnecessary luxuries. He could have afforded to do otherwise, he chose not to. ‘Nothing is cheap,’ his great-grandfather had famously said, ‘if it is superfluous.’
Some might say these men were just cheap, but that’s too simple and too unfair.
These successful people didn’t get to where they are by accident. Their success is the result of prioritizing. The things that are important to them are cheap, the rest of what they earn is extra. They don’t turn that extra down of course, they just keep their head down, do what they do, and the result is that that wealth grows and compounds. Their work generates income, their frugality means that income is saved and then invested and the prudent investments pay off over the long term. Their discipline, their focus, plus the power of time add up to something huge–in Buffet’s case, one of the great fortunes in history (and one of the largest charitable efforts as well)
This kind of clarity—about what they love most in the world—means they can enjoy their lives. Through even the ups and downs of the markets and athletics and politics, they are rich in all senses of the word.
What Buffett, Urschel, and Leonard understood was the ancient Stoic principle that your needs, your lifestyle, your relationship with money and finances are actually much more important than the balance in your bank account, the type of car you drive, or the size of your house.”
Have a terrific weekend,
PW
