Quarterly Market Outlook & Strategy Letter

Third Quarter of 2017

The KPF Global Team

October 2017

1 | P a g e

Planning for an Uncertain Future

Our work at KPF Global is all about planning. From helping clients figure out how much they

need to save for retirement (and how to accomplish that) … to deciding how funds should be

invested to meet long-term goals … assessing whether to buy vs. rent a home, or to refinance a

mortgage … transitioning one’s business to the next generation … selecting a health insurance

policy that makes the most sense for one’s family … determining when to set aside funds for

children’s education … and teaching kids the value of money (aka, time and sacrifice) … For us

it’s all planning, all of the time.

Even the best laid plans involve leaps of faith, and a willingness to revise and adapt as the world

changes. Most of us operate with an understanding of the range of possible outcomes

associated with the plans we make. Put differently, we think we know the distribution of risks

associated with our planning exercises, based on past experience, current policies and

established practices. Increasingly however, life calls into question not only one’s plans, but

entire frameworks for thinking about the future. Rapid change—in the areas of employment

and education, the economy and financial markets, family and social relationships—is pervasive

and disorienting. While many people appreciate the benefits of progress (much of it mediated

by technology), rapid change can feel like taking a drink from a firehose!

Some doubt the value of planning in a world beset by natural disasters, the disintegration of

national and international alliances, threats of nuclear war, and mass murder—not to mention

the sangfroid of a stock market that seems indifferent to such events. Others have escalated

their efforts to prepare for disaster, as “prepper porn” moves from the radical fringe to the

pages of the New York Times.1 Escapist fantasies of rugged individualism run deep in the

American psyche, but how realistic are they? Few of us can manage the financial cost of

escape—and fewer still wish to try, given the emotional costs of separating ourselves from the

people we love and the society we know. You might as well entertain resettlement on Mars, and

how appealing is that? In seeking a compromise between the extremes of nihilistic indifference

and paranoid delusion, many seek to build a financial fortress against an uncertain future.

We’ve all been told that the best things in life are free. Still, it’s tempting to view financial capital

as our most valuable asset since, in principle, it can be stored and later converted into things

that we value even more. Money gives us a measure of control over our lives, which is no small

thing in a world that seems to be spinning out of control.

1 How to Survive the Apocalypse is tongue-in-cheek (it appeared in the Times Style section, after all) but its prescriptions were

surprisingly detailed for satire.

2 | P a g e

The desire for control is understandable—indeed universal. And yet, as Alan Watts observed:

The more one studies attempted solutions to problems in politics and economics…the more

one has the impression of extremely gifted people wearing out their ingenuity at the futile

task of trying to get the water of life into neat and permanent packages.

There are many reasons why this should be particularly evident to a person living today.

We know so much about history, about all the packages which have been tied and which

have duly come apart…Furthermore, science and industry have so increased the tempo and

the violence of living that our packages seem to come apart faster and faster every day.

There is, then, the feeling that we live in a time of unusual insecurity. In the past hundred

years, so many long-established traditions have broken down—traditions of family and

social life, of government, of the economic order, and of religious belief. As the years go

by, there seem to be fewer and fewer rocks to which we can hold, fewer things which we

can regard as absolutely right and true, and fixed for all time.

Watts’s words ring as true today as when he wrote them in 1951.2 Indeed, the same message

was conveyed a hundred years earlier by Henry David Thoreau, who perceptively described the

value of material things, and their connection to life’s meaning:

2 Alan Watts: The Wisdom of Insecurity. Pantheon Books, 1951.

3 | P a g e

The cost of a thing is the amount of what I will call life that is required to be exchanged for

it, immediately or in the long run…All men want, not something to do with, but something

to do, or rather something to be…My greatest skill has been to want but little.3

Notwithstanding these words of wisdom, many people worry that they’ll run out of money.

Paradoxically, we’ve seen that anxiety about whether one will have “enough” is, quite often,

inversely proportional to one’s financial resources. That seems surprising, but should it be?

After all, the more you have, the more there is to lose in a rapidly changing world. History is

replete with examples of fortunes swept away by momentous social and political change. Since

neither life (nor money) offers any guarantees, it is useful to think deeply about one’s intrinsic

needs and goals, to answer the question: What is it all for?

For most of us, there is a happy medium somewhere between Gandhian asceticism and

Trumpian excess, a balance of material comfort and personal fulfillment that feels just right. To

find that balance, one might ask toward what end—for what purposes and priorities—one seeks

financial security. If the best things in life are free, why not pursue them directly? Do we need a

personal trainer (and the requisite financial assets) to get off our asses, or can we just do it?

To address this all-important question, the KPF Global team has broadened our concept of

planning. We have in mind a wider array of resources and arrangements that can help clients

achieve their goals—and peace of mind. We still devote the majority of our attention to

financial capital, of course, but consider other sources of resilience, such personal relationships,

logistical planning, health care arrangements, practical skills, and material resources. We believe

that by addressing these areas directly, in ways that integrate us more tightly with our social and

local communities, we can all feel more secure. Our purpose is not to tell clients how to live

their lives, but to provide tools that may be useful in identifying priorities, making the most of

scarce resources, and enjoying the journey.

Self-reliance and community engagement are not mutually exclusive; they are mutually

reinforcing. By securing your own foundation, you are in a stronger position to help others.

Since everyone’s purposes and preferences are different, we thought it might be fun to illustrate

the concepts with some concrete examples. Each of us has evaluated the strength of our own

foundations across eight dimensions, and developed a personal “resilience plan” (see Appendix

for details). We’re opening the kimono of our personal lives, providing fodder for comparison,

inspiration (and, yes, ridicule!) We know a great deal about our clients, and think it’s high time

to level the playing field. We hope you enjoy our stories!

3 Henry David Thoreau: Walden; or, Life in the Woods. 1854.

4 | P a g e

Barry’s Priority: An Empowered Future

em·pow·er·ment – the process of becoming stronger and more confident, especially in

controlling one’s life and claiming one’s rights

Planning for the future has been a personal journey for Barry since he was a small child. He

always wondered what life had in store for him and how his choices might shape the result.

Growing up with a single mom who worked two jobs to make ends meet had a major impact on

Barry’s thinking; it drove him to focus heavily on school and going to college. Barry saw

education as his ticket out. Success was his for the taking and college was the answer. Barry

planned where he would go to school, and the amazing future he would have. It was easy for

him to forgo the enjoyments of his peers who, unlike Barry, could afford to be children.

Barry’s perceived destination changed many times as he prepared for college, but when he

stepped foot on campus he thought he had accomplished everything he needed to do. It would

be a short walk toward easy street. Boy was he wrong! After graduating from college and

working for years at a job he did not enjoy, Barry took a hard look at his priorities. He realized

he was living someone else’s life, in a style that was not sustainable.

When he joined KPF Global, Barry began a journey

that would transform his way of thinking. By

helping clients achieve their goals, and by teaching

others through Wealth of Wisdom, Barry discovered

exactly who he wants to be, and how to get there.

The key for Barry was embracing the concept of

empowerment: the confidence and self-reliance

that would bring him the fulfillment he had been

seeking all along. Our modern version of success,

with many zeros in the bank account, could never

meet Barry’s needs. Embracing his deeper values—

the same values demonstrated by his hard-working

mom—were the key to preparing him for a realistic

and satisfying future. Barry is ready for the

challenge and eager to take back his life!

Having exposed his sappy life story, Barry has now set to work fulfilling the practical aspects of

his plan. He evaluated his current level of self-reliance and found it to be poor. He and his

bride Marielle live in a small apartment, each with a single source of income. They have a small

emergency fund but it isn’t enough; the same could be said about their retirement savings.

5 | P a g e

Barry has impressive survival skills and a family network that is both broad and deep. He and

Marielle have been together for years and know they can count on one another. However, the

couple has limited resources to deal with a garden-variety emergency, and are not well-

integrated into their local community. Therefore, Barry’s immediate goals include:

Building a healthy mind and body that can perform at a high level

Diversifying their income by turning a hobby into a money-making activity

Investing locally and finding ways to generate passive income

Nurturing skills that will ensure that he and Marielle can thrive in almost any future

Living the most sustainable and self-sufficient manner possible

Planning their time more carefully, to improve and enjoy their lives

That may sound like a tall order, but Barry’s pretty sure he and Marielle can do it. His motto is:

Be the change you want to see!

Allison’s Priority: Living Intentionally

“The purpose of life is not to be happy. It is to be useful, to be honorable, to be

compassionate, to have it make some difference that you have lived and lived well.”

– Ralph Waldo Emerson

6 | P a g e

Allison is grateful to be a part of a firm that recognizes the importance of self-reliance and

community. The lifestyle that our society cultivates is unsustainable on so many levels—partly,

she believes, because everyone is too busy to think about how they’re living. While she’s not

sure what the future holds, Allison will be sure to take time to care for herself, her family, and

our environment. She doesn’t want her life to be buffeted by external forces; she plans to

change the narrative of her life by living intentionally.

When she first started thinking about this project, Allison assumed that her family had a long

way to go before they could consider themselves to be self-reliant. However, after she spent

time assessing their situation, she was pleasantly surprised to realize that she and her husband

Chris operate naturally within a framework of self-reliance and community support.

Allison has always understood the value of time, and has been able to prioritize what is most

important to her—making room for the small things she appreciates in her daily life. She and

her husband, their family and friends have an array of practical skills; rarely do they rely on

professionals for home or automobile repairs and maintenance. They avoid excess

consumerism, which robs them of time and money to maintain a lifestyle they don’t need. Not

tempted by lavish entertainment, Allison and Chris are perfectly happy spending time together

at home with their baby Luke and two dogs. Although the Bolia home is small by today’s

standards, they like it that way; it minimizes possessions and prompts them to get outdoors and

connect with nature.

That said, Allison aims to further her family’s self-reliance by working toward the following goals:

Improving their eating habits and independence by growing/raising their own

food. They live in an area where this is possible, and it would save money, promote

healthy eating, and teach their son that food does not come from a grocery store!

Stocking the pantry to support the family for at least two weeks

Since they live in a car-dependent area, and have a baby, Allison wants to make sure

they are always prepared to travel if there is an emergency

Continue strengthening her practical skills, such as gardening, cooking, first aid, and

animal husbandry, to pass along to family and friends

Tending to her personal well-being by focusing on fitness and self-care. Allison has

found that time spent in nature is very grounding – she and her son are outdoors daily,

and she wants to make sure that habit continues

7 | P a g e

Even though the world is evolving at an

unprecedented pace, Allison believes most

things remain within our control. Above all,

we control our mindset and how we care for

ourselves and those around us. Focusing on

what matters most, and living sustainably, are

simple steps that everyone can take to achieve

mindfulness, and preparedness, during this

complex time.

Sean’s Priority: Perspective

Sean’s twin goals are happiness and security. For him, happiness comes from a loving family,

close friends, an active lifestyle, and good health. Security is what allows happiness to blossom.

For Sean, that means not only financial security, but physical and psychological resilience as well.

Sean was born to plan. He once overheard his mother telling a friend that when he was a child,

he took all of the newly purchased toilet paper and stashed it under his bed so that he’d never

run out. Sean was a pint-sized prepper!!

As an adult, Sean realizes that being prepared is a

matter of perspective. Although he maintains a frugal

lifestyle, he is mindful that financial security not come

at the cost of building a family. He has to put himself

in the situations that will allow him to meet Mrs.

McMullen! Good health is a priority; he realizes that

he may have to pay more for the kind of food that will

keep him that way. Sean is fortunate to have some

amazing friends, and knows he’ll need to nurture

those relationships in order to see them through life’s

journey. Sean believes that life’s greatest asset is

time. That’s where the rubber meets the road, and

Sean wants to make sure he uses his time wisely.

In thinking about what it means to be resilient, it

occurred to Sean that his greatest dependency (as for

so many of us) is reliance on the internet. So many

vital parts of his life are tied to technology:

8 | P a g e

his professional skill set, his financial accounts, opportunities for social interaction,

entertainment options, etc. An engineer by temperament, Sean has created an action plan for

developing and diversifying each area of his life. He plans to invest in material as well as

financial capital. He is going to learn to cook without relying on online recipes. He aims to

build a workout program that is based on natural challenges (and coed sports ) while devoting

more time to family and friends.

In sum, to balance his goals of happiness and security, Sean will prioritize activities that both

enhance his personal resilience, and bring him closer to others. After all, what’s the point of

being prepared if you have nothing to prepare for?

Jeff’s Priority: Developing Resilience

Jeff and his girlfriend Alison (Ali) rent 800 square feet of space in Boston, where population

growth is outpacing local infrastructure. As a remedy, the city is considering raising the

permissible height of buildings in coveted areas such as Copley Square, which would bathe the

historic Trinity Church in shadow. Jeff has noticed that Boston’s highly-educated residents

eschew eye contact with their neighbors in favor of personal gadgets. It is an increasingly

congested, segregated, and inward-looking place.

Jeff’s Athena colleagues gave him an

autographed hoe as a parting gift, to help him

adapt to life on the KPF Global “farm.”

Although it was a joke, Jeff has found that he

likes the fresh air, wide-open spaces and quiet

time to think about markets and investing.

Growing up in an economy that values

technological literacy and specialization of

labor, Jeff is highly skilled and well adapted to

succeed in the modern world. Moreover, he

comes from a large, close-knit family and

enjoys a strong relationship with his dear

Ali. Still, Jeff worries that he has few of the

general skills needed to maintain a self-

sustaining household and a strong

community. Boston is not the ideal location to

build a resilient lifestyle!

9 | P a g e

Jeff doesn’t now have the financial resources to purchase a home and invest in a community

outside of the city. However, being a savvy investor, he hopes to preserve and increase his

wealth in the next economic downturn, allowing him to convert some of his financial capital into

real estate at an affordable price. A longer-term goal of Jeff’s is to own a bookstore in whatever

community he chooses to settle in.

Jeff and Ali are developing a list of practical skills they’d like to acquire in the coming years. The

most immediate are basic needs-related, e.g. first aid. Jeff’s also been doing a good deal of

gardening with Ali’s family, an activity that allows him to build useful skills while helping those

close to him. Jeff and Ali want to master other activities that we take for granted, such as home

electricity (Ali) and car maintenance (Jeff). Finally, Jeff wants to refresh his dexterity at the piano,

since entertainment and the arts are both fulfilling to him, and widely appreciated by others.

Karen’s Priority: The Freedom to Serve

You might have heard of The Four Tendencies, Gretchen Rubin’s illuminating new book on

personality. Rubin’s frame of reference is individuals’ willingness to respond to outer vs. inner

expectations of themselves. Karen wasn’t surprised to learn that she falls into the Rebel camp;

her Big 3 needs are freedom, autonomy and agency (but hey—aren’t those all the same thing?!)

Karen doesn’t care much about her own comfort or convenience; she’s more focused on the

welfare of others. You might call her a bleeding heart libertarian.

Karen’s financial profile is similar to that of her clients, although she followed an unusual path to

get there. She left a fancy job in Boston so that she could expand her intellectual and

professional horizons, while being a great mother to her children. Woohoo! — after ten years

building a successful advisory business, Karen now earns a bit more than she made on Wall

Street two decades ago. She could make a lot more, but doesn’t want to. Being free to serve

clients with integrity and creativity was worth every penny to her, and the kids are doing well.

As a rebel, Karen’s not been too concerned with planning her own life; she just tries to make

good decisions, one at a time. Rather than figure out how much she needs, she flips the

question on its head and asks: “How little do we need?” Karen thinks the answer to that

question is: “very little, actually.” She learned from living in Chile, Nigeria and Mexico that it’s

easy to adapt to material constraints; happiness is built on strong personal relationships and

meaningful work. To Karen’s way of thinking, the less she needs, the freer she is—and the more

there is for others.

10 | P a g e

Ditching the suit and commute created a window of opportunity for Karen to support her

community. An amateur singer, she started a choral group, Journey Song, to serenade people

on hospice. On weekends, Karen has fun with her Little Sister, while embarrassing herself at

open mic gigs around the Seacoast. Helping others to achieve financial resilience through

Wealth of Wisdom has been most rewarding; she thinks teaching is incredibly fun!

Karen has prioritized her children’s education and dreams with her beloved Peter of turning

their property into a working farm before she dies. Karen’s actually good at planning and

doesn’t want to waste money. Peter is brilliant and adaptable. She figures they’ll figure it out

together.

Karen’s biggest concern is making sure she can fulfill her commitments to others (most

especially her KPF Global clients and talented team) in the event that the world throws us a

major curveball. Karen has seen quite a few of them, and thinks curveballs are to be expected.

She has built her business around the principles of resilience. Her next priority is to get herself

into great physical shape, so that she can be ready for anything. Karen chose freely to make

some big commitments, and she intends to deliver on them. She has promises to keep, and

miles to go before she sleeps.

11 | P a g e

Conclusion

Many people feel that they have relatively little control over their lives, and in the short run, this

is often true. The commitments we make, and responsibilities we assume, limit our immediate

choices. However, over the longer term, we have almost complete control over our lives, and

especially our attitudes. In Man’s Search for Meaning, one of the most powerful books ever

written, Viktor Frankl reminded us that one can lose almost everything, but retain the most

important thing—the autonomy and dignity of one’s soul. Millennia have passed since humans

first walked the earth, and virtually everything in this world has changed since then. What has

not changed is the human capacity to innovate, collaborate and, above all, to care for one

another.

For the 8 concepts of capital framework, we thank Chris Martenson & Adam Taggart, authors of Prosper! (2015).