The NorthFork View

Since last November’s election, we have been working diligently to gauge the shift in our country’s politics and understand the implications. It has not been easy. It reminds me of my first attempts at surfing many years ago off Ocean Beach. Choppy sets, short board – for three days I tumbled about, determined to stand up for more than a couple of seconds before getting my sinuses cleaned out again.

This effort to find something solid to stand upon as we get tossed around by a seemingly endless barrage of unprecedented actions on behalf of our nation’s elected leadership, has led me to the following: Be mindful of what you can control and work diligently to help make the world a better place. One of those things we can control is how we relate to others and how we share our perspective of the world.

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Perhaps one of the greatest threats today is that truth seems absent in the popular imagination. It is difficult to envision a more poignant challenge to the Enlightenment’s gifts of rational inquiry and the ideals of life, liberty, and universal equality. Instead, we serve propagandists who have successfully undermined our ability to even hear one another, much less believe one another.

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Trump’s election is not an aberration, but is the result of many years of history. It is important to recognize the sentiments that elected him are born from perceptions and circumstances that were either manufactured for consumption or that actually exist. We can change those perceptions and circumstances if we so choose.

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They say the four most dangerous words in investing are “this time is different.”

The idea, of course, is that the sun will continue to rise and set, the seasons will change, the markets will rise and fall and we’ll continue to visit the grocery. Life isn’t clockwork, but even in the midst of major disruptive events like the Great Depression or the rise of Hitler and the onset of the Second World War, we continue on.

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Spring is a time of transition. Since it is a rite more than a routine, it is a time of reflection as well.

I’ve previously mentioned Novruz Bayram and one of the rituals of the Persian New Year that occurs around the time of the Spring Equinox. Participants leap over a fire, casting the previous year’s troubles into the flames to greet the new year unburdened. No less this year, a fresh perspective helps us remember that the past yields many lessons, but should not necessarily be considered a blueprint for the constructing our future.

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Well, here we are again – the government is shut down and we’re on the brink of hitting the debt ceiling limit, which would trigger a default on many trillions of dollars in Treasury obligations. (Talk about reputational risk!) It’s a good thing Jefferson, Madison, Hamilton, and the other founders didn’t play slash and burn politics or we still wouldn’t have a nation to call home.

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Almost like clockwork, the switch flipped a couple of weeks ago, and here in Bozeman we went from spring and scattered snow showers to summer thunderstorms.

A different switch flipped in the markets about the same time. Between Federal Reserve Chairman Bernanke’s definitive comments that the Fed will increase short-term interest rates sometime in the future (although still not until 2014, so they say) and China’s overnight clampdown on its “shadow banking system,” the markets saw a quick shock that brought into question the foundation upon which the stock market’s current rally had been based. To no-one’s surprise, Bernanke’s comments sent bond prices down by as much as 10% or more on longer-term maturities.

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Far more than our Gregorian new year, spring is the season of renewal. Maybe that’s why New Years’ resolutions have so little staying power – we just seek them at the wrong time. We force the context and try to move the ocean.

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Having survived the end of the Mayan calendar (I thought at least the earth’s magnetic poles were going to change and the whirlpools in the bathtub would spin in the opposite direction), we now get to fasten our seatbelts, make sure our seats and tray tables are in the upright and locked position and that our carry on items are safely stowed under our seats or in the overhead bins while we watch the ongoing saga of the “fiscal cliff.” (Apparently, Europe, China and the rest of the world are at least temporarily irrelevant.)

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“As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.” – Albert Einstein

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It seems a Spanish greeting might be appropriate for this update since it appears Spain is the latest of our European cousins to find their backs against the wall.

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It is officially spring and we should all be emerging from our comfortable hibernation and blinking our eyes as we step into the warm sunshine. With the U.S. stock market gaining ground during winter’s darkness, it would seem that all is well in fair Marketland. With the S&P 500 up 12% in the first quarter and up nearly 20% from last fall’s low point, all (mostly) quiet on the Western (European) Front, and the market apparently ignoring the structural problems in the U.S. and a slowdown in China for the time being, it looked like many investors had taken on some appetite for risk and jumped on board for the ride.

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It’s been awhile since we’ve put out any market updates or commentary and now that we are less constrained, except of course by the various regulatory entities that govern anything and everything financial, we hope to share a multitude of perspectives for the good of the order.

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