Fold, Again

Marie Kondo made the bestseller lists again with her recent tome, Spark Joy, a companion piece to her other hit, The Life Changing Magic of Tidying Up. While her first book was an ode to de-cluttering and the fine art of folding, Spark Joy focuses on the intrinsic pleasure, nay, joy, our stuff gives us. She recommends sifting through our closets, cradling each item— salt-stained leather boots, umpteenth black cocktail dress, or lumpy handbag—and asking ourselves: Does this boot/dress/bag still give me joy? If the answer is negative, then we should thank them for their services and give them the boot.

That Kondo has become a publishing superstar tells you she’s tapped into our desire for a less encumbered life. Cleaning out our closets is the first step in getting above the smog-line. Before the holidays I tackled the kitchen cabinets, tossing out old packages of noodles, cans of expired mung beans and editing my burgeoning tea collection, especially those jumbo bags of roiboos that I will never drink.  For the next few days whenever I went into the kitchen I opened the cupboards and felt, yes, joy, at the order I had created.

Hoarding and de-cluttering are the push/pull of our lives. We want to travel lightly but not so lightly that we give up creature comforts. I tossed out a kilo of roiboos but I still travel with my own kettle because I like a proper cup of tea. And I hoard moisturizers and hair styling products like they’re potatoes in a famine reasoning that when Armageddon comes, I’ll greet it with soft skin and frizz-free hair.

Fear is what drives our hoarding behavior. It’s an evolutionary advantage to put aside a little extra for lean times. But the key with anything is to keep things in circulation, not to hoard. We don’t sit all-day to conserve energy. It only grows when we spend it on daily chores and moderate exercise. We don’t feel more love by withholding it, only by giving it. Likewise, we don’t get wealthy by not investing it.

Today, Canadians are holding a record $75 billion dollars in cash accounts. This massive hoarding of cash is in response to the economic shocks of 2008 and, more recently, the rout in global, and especially, Canadian equities. Essentially, the average Canadian has folded in on herself like one of Kondo’s de-cluttering demonstrations. She’s shrunk her investment footprint down to a teensy-tiny size.

Great for closet space in tiny condos, lousy for future returns.

No one enjoys being whipsawed by the markets but by capitulating Canadians are sure to miss out on the inevitable market recovery. As asset prices recover people will start to get excited about investing again. If the past is any predictor of investor behavior, only as prices froth will people feel confident enough to join the party. At this point they will over-pay, lower the potential for gains, and reduce their margin of safety on those investments. Hey-ho.

So, these days, as you contemplate de-cluttering your life of pain-points and you look at your portfolio and mentally hold each ETF, equity or bond, ask yourself whether it still gives you joy. But don’t be too hasty to toss it if the answer is, “No joy. Whatsoever.”

Discarding over-worked winter boots is one thing, forfeiting future returns is quite another.

Mood Board

Last week my quarterly investment statement arrived. I flipped to the last page and there in italicized mouse-type was the tally. Given the recent lacklustre performance of the markets, I was not surprised by the soggy number.

It’s foolish to expect investments to only go up. Pundits will even say that for accumulators a down market is a boon. Your favourite mangoes now sell for 75-cents a piece instead of a dollar. But emotionally it’s a downer. And, like a bout of melancholy, the sluggish stock market invites introspection, not only about mundane things like asset allocation, but also about the hazards of tying one’s personal worth, or at least daily mood, to the vagaries of global finance.

I have an unproved theory that people who are prone to melancholia may be better equipped to withstand the ups-and-downs of the market than those who feel compelled to be commercially, relentlessly cheery. Melancholics don’t expect the world to always be filled with unicorns and cotton candy. Thus down market days are not exactly welcomed but nevertheless accepted  as old friends bringing sad news.

In her recent essay in The New York Times, Laren Stover writes about melancholy perfumes and how “rainy” scents can be matched to our wistful moods. Given our society’s current fascination with happiness, (judging by the raft of books on the subject), it’s not easy to find one of these gems. One has to reach back to some of the Guerlain classics from the early 20th century like L’Heure Bleue, Jicky, and Mitsouko (my favourite), as well as some new-ish ones from niche “noses” Serge Lutens (Iris Silver Mist) and Frédérick Malle (En Passant). Stover neglects to mention Guerlain’s Après L’Ondée, literally, “After the rain shower”, a green fragrance with top notes of aniseed and rose and heart notes of violet and hawthorn.

Some years ago I took a perfumery workshop in Grasse, the heart of France’s fragrance industry. Each member of our small group had her own station equipped with a miniature “fragrance organ” of different essential oils. Our guide, a charming older gentleman who had worked for leading French perfumeries, gave us some basic instructions and off we went.

I already knew the fragrance I wanted to create: the olfactory expression of looking out a window on a rainy day in London, a good book and a tray of strong black tea (with milk) on the nearby table. It was to be a wisp of a scent composed of bergamot, chypre, licorice, lavender, lemony rose de mai, and a dash of iris root for that powdery, flinty touch.

My little masterpiece was coming along nicely, one tender drop at a time. As we were all novices, the instructor was free with praise. Until he came to me. He took one sniff and immediately reached for the aldehydes to “brighten” the scent. It was the equivalent of a burst of fluorescent bulbs where previously there had only been soft candlelight. I’m sure he meant well but I think he couldn’t imagine that I wouldn’t want an “up” scent.

This is like a lot of investors. We imagine that the market can only go up, up, up. When it pauses or reverses, panic sets in. You could say that quantitative easing, the US government’s program of printing money to buy bonds, was the financial equivalent of dosing perfumes with aldehydes, synthetic compounds that juice a scent giving it sparkle and fizz like popped Champagne. (The 1980s blockbuster fragrance Giorgio Beverly Hills is the Frankenstein of aldehydes.) Come December, when U.S. interest rates are likely to go up, equity markets may wilt like meadow flowers under a cool, steady rain.

When this happens it will be good to remember that there’s a season for everything. Much of the recent market froth was related to abnormally low interest rates, highly-leveraged trades and speculation. When the bubble bursts—and it will—say ‘Ciao, Giorgio Beverly Hills’ and ‘Bonjour, L’Heure Bleu’.