In Defense of Food

Obama has been very focused on healthcare this week. On Monday, he met with insurers, drug manufacturers and other health-industry stakeholders, who pledged to slash spending by 1.5% a year. On Tuesday, he met with chief executives of corporations to discuss cost-saving programs they're putting in place. Obama's Wednesday meeting with House Democrats came in the wake of Medicare and Social Security trustees' grim assessments of the programs' finances. The trustees said Medicare's hospital insurance trust fund will be insolvent in 2017, two years earlier than predicted last year.

We know our country is in a health care crisis, but all the focus seems to be on treating illness at a lower cost versus asking how we can become a healthier, less drug dependent population to begin with. Many studies have shown that health care expenses are one of the biggest threats to a financially secure retirement, and staying healthy is your best defense. We all know what we need to do – exercise and eat healthy, but what does eating healthy really mean?

Michael Pollan, the author of In Defense of Food, makes a convincing argument that America has become a paradox: a very unhealthy population obsessed with nutrition, dieting and the idea of eating healthy. With his motto, “Eat Food, Not too Much, Mostly Plants,” Pollan introduces a guide for eating that avoids the confusing low carb, high protein, low fat directives that have been handed down by nutritionists over the last 30 years. Instead of counting calories and studying the nutrition content of manufactured snacks, we should eat only foods that our great grandmothers would recognize: fruits, vegetables, nuts, whole grains, fish and meat.

Mr. Pollan does an excellent job of chronicling the evolution of the Western diet, and how our eating habits have led to chronic high blood pressure, diabetes, cancer and other diseases that have escaladed over the past 30 years. If we stay on our current path, I doubt that there will be any amount of government spending that can keep us well.

If you want to start a new healthcare trend by helping yourself instead of popping a pill, I recommend In Defense of Food for guidance. You might even be inspired to keep butylated hydroxyanisole out of your lunch today.

By Jeannette Jones, CPA, CFP®

Time for Drastic Changes?

As discussed in the last post, dealing with all the emotions involved with the recent market rollercoaster can be incredibly difficult. As volatility calms somewhat and talk of whether the market has turned the corner takes focus, our stomachs settle a little and reflection begins on how to avoid this the “next time”.

There are many so called experts suggesting that everyone revise their asset allocation, revamp how you look at potential returns over the long term, and distrust any kind of planning technique that did not 100% forecast the recent downturn.

While I would never suggest that thoughtful reflection on your finances is a bad thing and that thinking through what really is a need versus a want and how that relates to your tolerance for risk is certainly a worthwhile exercise, I would caution against sweeping changes to your investment philosophy based solely on the events of the last several months.

If you’re a long term investor, your recent investment experience has no doubt been as painful as most. That said, as prices have been driven down, long term expected returns have increased substantially. In other words, you are seeing an increase in expected reward for your perceived increase in risk. Taking the view that market gains will never return or that we are bound to head into historic downturns more frequently in the future is not so much a flight to conservative thinking as it is unnecessary fear due to recency bias. It is this same bias that helped precipitate the downturn in the first place as, back in 2007, the popular opinion was that the good times would never end.

Allowing your emotions to swing the risk pendulum back too far in the direction of safety will serve only to compound the issues you already face. In fact, it is the decisions you make now that will effect your long term success as an investor, not the decisions you’ve made over the last several months. Paying attention to your spending and staying true to your goals, investment strategy, risk tolerance and retirement needs is what will really pay off in the long run.


By Chip Workman