Your Brain Needs Numbers

Like many, I’m hopelessly dependent on my iPhone, and one of my most-used apps is the Hewlett Packard 10bii Financial Calculator. You have to really know that calculator to pass the Certified Financial Planner exams, and for good reason: It allows you to calculate cashflow and present/future value projections. The nerd in me really has a lot of fun using it, which got me thinking of the importance of numbers, and math formulas in particular, to keep our cognitive functions sharp.

Basic math can be helpful for those dealing with dementia as well. Puzzles like Sudoku encourage the brain to work through logic and memory issues. Sudoku is a number puzzle and the gameboard can be designed for all levels of difficulty; from very easy for those with some cognitive issues, to very difficult for those ready for the challenge. A math puzzle like Sudoku is like a bench press for the brain.

Not long ago I started setting my calculator down and attempting to write out some basic math formulas just to get back in the swing. It is both amazing and embarrassing as to how much I forgot. Here are a few math tricks to motivate you to set down the calculator occasionally:

1. When multiplying a 2-digit number by 11, place the sum of the 2 digits between those digits to get the answer. 45 x 11 (4+5 = 9), so 495 is the answer.  It works with any 2-digit number multiplied by 11.  If the sum of the numbers is 10 or more, it still works, but you add the first digits, place the second digit of the answer in the middle… and remember to carry the 1; 56 x 11 (5+6 = 11, carry the 1, 5+1 = 6), so 616 is the answer.
2. When trying to figure out a percentage of a number, try reversing the percentage number.  What’s 18% of 50? Reverse to 50% of 18. 1/2 of 18 is 9. 18% of 50 = 9.  4% of 75 is the same as 75% of 4 which is 3/4 of 4 = 3.  4% of 75 = 3.
3. Here’s a party trick: Pick any number between 1 and 9. Now multiply that number by 9. Now add the digits together. The answer will always be…9!
4. Finally, here’s a practical trick that helps with your finances. It’s the Rule of 72. If you want to know how many years it will take to double your money at any fixed interest rate, just divide 72 by your interest rate number. (10% interest rate – 72 divided by 10 = 7.2 years.  3% interest rate – 72 divided by 3 = 24 years).

Playing around with numbers is fun and good for your brain, even if you aren’t as mentally quick as you used to be. Have some fun with numbers and your brain will thank you.

Fun fact: The longest mathematical equation is the solution to the Boolean Pythagorean Triples problem (you know the one 😊). The proof is 200 terabytes in size, and it took a supercomputer to generate. A single terabyte is “one million million.”

You Need to Have a Word With Your Family

Here’s a true story: Several years ago, my mother was sitting in her home (probably watching one of her favorite suspense shows) when her cell phone rang. On the other end of the line was an attorney who needed my mother’s help. He was representing one of her grandchildren who was incarcerated on a drunk driving charge and was too embarrassed to tell his parents what happened. He needed $5,000 immediately to get out of jail and have legal representation. At the time my mother could narrow down the possible grandchildren based upon who was old enough to drive and which one didn’t have a lawyer for a father, and sure enough the lawyer confirmed that the first grandchild’s name she threw out was in fact the one in trouble.

My late mother adored her grandchildren and would do anything for them, including pay to get them out of a jam. So, she went back and forth through a few phone calls with the attorney to make sure she know how to write the check and where to overnight it. She was all set and on her way to the post office when her husband, my stepfather, asked her to run this situation by me (the lawyer 😊). She did, and I immediately knew the whole thing was a scam. No troubled grandchild, no real attorney, and no need for $5,000. Just a sophisticated plot to scam grandparents out of money based on trust and emotion. I even called the predator once I got involved and trust me, I had no effect on him. He just hung up, and I’m sure began working on another unsuspecting grandparent.

The story above happened several years ago, and now with AI, predators can be even more sophisticated. For example, they could review an online video of a person, say someone’s grandchild giving a presentation, and use it to mimic the exact voice of the grandchild to the unsuspecting relative. These types of AI scams are already happening, and they will just get worse.

One very effective solution to consider is a family “code word.” Everyone in your immediate family should memorize just one word and then, if grandma receives a call from someone claiming to be her grandson, she can ask for the code word. If it can’t be produced, then she should hang up. Simple but effective. An article in the Wall Street Journal last week gave some good suggestions on how to pick a code word. Here they are:

1. Make it simple but strong. Don’t use your dog’s name or even your wife’s maiden name because lots of personal family information is accessible by criminals on the internet. Perhaps you could use something based on a family joke or even a phrase that family members always laugh at.
2. Keep it safe. If you are worried you will forget it, write it down or store it on a password manager. If you write it down, put it in a safe place so a visitor can’t easily see it.
3. Keep the circle small. The more family members who know the code word, the more chance that it gets stolen. Parents, kids and grandchildren is a good group.
4. Think outside the box. The code could also be a question, like what was the name of our neighbor who lived across from us growing up.

My mother dodged a bullet, but many people don’t realize they are being scammed until it’s too late. Make sure you and your family take the time to protect yourselves.

Fun Fact: The bloodhound is known to have the best sense of smell among canines. Originally bred to hunt deer and wild boar, they are now used by police and rescue teams. Bloodhounds have been known to follow a scent for over 130 miles, providing not only a strong nose, but a tenacious character as well. The most famous bloodhound was named Nick Carter, a canine detective credited with solving over 600 cases in the early 1900s. He once followed the scent of a missing 6-year-old girl for over 5 miles through fields and streams and led authorities straight to her.

Supercalifragilisticexpialidocious

Did you know that’s a real word? Look it up. It’s been used so much since it was introduced in the 1964 Disney musical film Mary Poppins that it made its way into formal lexicon. According to the Cambridge Dictionary it means “extremely good” – and that’s what financial life has been like for stock investors the last few years. I wouldn’t be surprised to hear someone humming that delightful song after taking a peek at their investment gains recently.

But let me also point out a phrase from the opening scene of the movie Mary Poppins. The London chimney sweep Bert (brilliantly played by Dick Van Dyke) abruptly stops his song and dance in the park, looks up to the sky with a quizzical expression and says: “Wind’s in the East, mist coming in; like something is brewing, and ‘bout to begin…”  (Bert’s quote to be continued below).

Something is indeed brewing in all sorts of assets…speculation. Gold, bitcoin and, yes, stocks are all reaching record setting values. As we all know, nothing goes up forever and there are a few interesting signs that values are getting ahead of themselves. By way of example:

1. A graph of the average YTD performance of companies shows that the highest returns (34%) have been from companies listed on the Nasdaq with no (read that as “0”) revenue. That means companies with apparent potential, but no profit to show for it, are going up in value the fastest.
2. That same graph also shows the average YTD return for money losing companies on the Nasdaq is 18%. Apparently, these money losers are sought after for their potential, too.
3. The concentration in the S&P 500 Index is increasing dramatically. There are around 500 companies that make up the S&P 500, but 39% of the total value of that index is made up of just 10 tech stocks. That index has never had so few stocks make up such a great amount of its total value.
4. One day last week when the Nasdaq Index as a whole was up 0.6% to a new all-time high, there were actually 2 times more companies that were down for the day than up. The smaller number of companies that went up more than made up for the vastly larger number of companies that went down. When that happens, we call it a lack of breadth in the market and it has not happened to that extent since 2021, just before a market correction.
5. I’ll stop with the above, but understand this list could keep going, and include the government shutdown, China, war in Ukraine, and so on.

Believe it or not, the information above is not intended to scare you. It’s intended to condition you so that you are ready—intellectually and emotionally—for the inevitable. Sooner or later—and I honestly have no idea when—the stock market as a whole will drop to lower values. It could come tomorrow, and/or it could not come for months or years, but it is indeed coming. I say that with confidence because, well, market corrections always come, especially after valuations get ahead of themselves.

If you are a committed long-term investor, you will be ready for the market drop, and you will, with the help of your seasoned advisor, stay the course with your investment plan that (hopefully) is tailored just for you — in good times and in bad. Great companies have always sustained their inevitable march toward your financial goals. Sometimes they march up big mountains of gains (like today) and sometimes they march down vast valleys of market drops, but the market has always slowly and inevitably marched forward, led by great companies in great capitalistic systems.

Look, the market on average is down 10% every 19 months, and down 20% once every 6-10 years. We are due, even without the factors described above. The real issue isn’t the market, it’s whether you will do something silly (like abandon your investment plan) when that happens. There are lots of investor newbies now jumping into the market like there’s no tomorrow. Many of them have never really lived through a market correction and they will cut and run at the first sign of trouble.

When the heavy weather does indeed come and the urge to head for the door is whispering in your ear, harken back to the beginning of Mary Poppins and remember the rest of Bert’s line: “…can’t put me finger on what lies in store, but I feel what’s to happen, all happened before.” Nothing here is new. Get in the right state of mind to be a successful investor.

Fun Fact: If you ever used the monorail system at Disney you might be interested to know that the success of the hit movie Mary Poppins funded its development. The system is named MAPO (MAry POppins) in honor of the film.