Short-Term vs Long-Term Thinking

November 14, 2022by Hoy Grimm0

In Steven Covey’s book “7 Habits of Highly Effective People” the second habit he espouses is “Begin with the end in mind.” This is a simple phrase that is packed with meaning. I wonder how Dr. Covey would teach this in today’s social media obsessed society where emotions and actions are driven by fleeting interactions that last a few seconds? It doesn’t seem like folks on social media are thinking long-term.

Elon Musk paid over 40 billion dollars to buy Twitter. He took over a few weeks ago and now has to figure out how to make money from his user’s momentary interactions on the platform. While some pundits question why Musk bought Twitter (political reasons), there is evidence that he has already developed an idea of how to capture value for users, advertisers and himself.

Market turmoil this year is in some ways unprecedented. One-year Treasury rates started the year at less than ½ of 1 percent, as of this writing they are over 4.5%. This is a result of the Fed pushing rates up as they attempt to slow down runaway inflation. Had the Fed been prone to “Begin with the end in mind”, they would have started raising rates in 2021. Instead, the Federal Reserve forced extra-large rate increases through the economy in the first 10 months of this year. The Federal reserve allowed their hubris regarding inflation (“It’s temporary and no big deal”) to distract them from the effect on everyday Americans.

The primary benefit of following Covey’s second habit lies in the focus that it forces. If you begin with the end in mind, you need to define that endpoint (graduation, retirement). With that endpoint defined, you have something to focus on. By focusing your thoughts, efforts and actions on that goal you force out distractions.

After skyrocketing, interest rates are providing a massive opportunity for income-oriented investors to lock in a level of income security for decades. Prior to 2022 retired investors were trying to generate 4-5% from a mix of low yielding 2% bonds and riskier dividend paying stocks for their annual income needs. Right now, investment grade corporate bonds yield more than 7% and investors can lock these yields in for decades. This is a gift for investors who can force out the distractions of this year’s financial pain and stay focused on their long-term goals.

Hoy Grimm

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