Yes, we do planning wrong.

Here at Denk Strategic Wealth Partners we are very fortunate to work with, and for, a lot of very smart people. Some of them even have engineering degrees. These people tend to be very precise. One of those people gave me the idea for this commentary.

It doesn’t matter what kind of planning—financial, business, life… you name it. We’re probably doing it wrong.

Here’s how we typically plan:

1 – We put a stake in the ground where we are today.

2 – We put a stake in the ground where we want to be in the future.

3 – We draw a straight line between the two stakes.

The problem is that because we don’t like flirting with uncertainty, we obsess over making the line as precise and accurate as possible. We think that if we just have a big enough calculator, we can get the line to be an accurate reflection of the future.

But we can’t.

Sorry.

In fact, the only thing we know for sure about that straight line is that it is wrong. We just don’t know why… yet.

But it will be wrong again and again and again because we can’t predict the future, no matter how many numbers we crunch. And that’s frustrating for sure. However, there is good news too. The good news is that not knowing is really OK.

That’s right… it’s okay not to know. It has to be okay because there’s no other option.

We’re not saying that you should not bother to draw the line. For sure, that’s an important part of the planning process. It gives us an approximation, a baseline, a direction to go. What we are saying is don’t confuse the line with reality: it’s just a line.

After the line is drawn, we need to relax into the idea that planning is an ongoing process. We need to understand that what matters far more than the line is how we behave when it’s time to make course corrections.

Straight-line planning is about being precisely correct today (again, something that is not possible).

Reality-based planning, on the other hand, is the process of being less wrong tomorrow. It’s the constant work of narrowing the potential range of outcomes over time.

So instead of trying to carve the perfect plan in stone — as if it’s a monument to the future — let’s write our plans in pencil and stay focused on the process of being a little less wrong tomorrow.

In this crazy world and crazy market environment, we’re working for you to be flexible and make changes and corrections as we go along, being very comfortable that we’ll be able to chart a useful path to your destination.

Ron’s Market Minute — Groundhog Day

For the fifth time in six months, inflation has surprised to the upside.

 The CPI numbers just released by the BLS show for the month of September, Month-on-Month Inflation rose 0.4% and the Year-on-Year number printed at 8.2%. Meanwhile, the ‘Core Inflation’ (excluding food and energy) jumped 0.6% in the month — bounding to a new multi-decade high of 6.6% year over year. It was the fifth time in six months that markets underestimated inflation and its impact on Fed policy. 

 Yes, there are signs that price pressures in SOME sectors are moderating, but we continue to believe that markets are 1) UNDER-estimating the length of time this inflationary environment is likely to remain well above the Fed’s (arbitrary) 2% target and 2) Under-appreciating the significant uncertainty around the Fed’s policy path. 

 The upside CPI (Consumer Price Index) surprise and the markets’ (unsurprising) reaction to it has become a bit of a regular monthly ritual: the S&P Index* has, on average, fallen by -3% in the two days following the past couple of rate hikes, and -5% in the following 10 days. Fed policy is directly in control of market outcomes, and inflation right now has a stranglehold on policy.  

 Each time (of late) we’ve seen the market reaction, one or many of the Fed members seem to have stepped up to assure us that they will do whatever is necessary to slay the inflation dragon, no matter how ugly the markets and economy might be acting.  There’s no way around it, I see the upcoming few months (at least) as a period of just plain ugliness. Ugh!

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite D406A
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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