Thoughts from 30,000 Feet

Hello friends, my name is Jack Raines. I will be writing on Alpha’s platform once a week.  I also write a newsletter, Young Money, where I cover all things investing, finance, and careers. Hope you guys enjoy today’s piece!

But before we get into the newsletter, first a word from today’s sponsor…

Stocks are so last year

Let me guess: Your portfolio has been getting hammered lately?

Yeah, us too. The S&P is down. The NASDAQ is down. And crypto is down.

But did you know that farmland is completely unaffected? Or that comic books are way up? Or that tickets are mooning?

That's why we've been reading Alts. These guys analyze the heck out of alternative investment markets, and you reap the rewards.

Stefan and Wyatt provide original research and insights to help you become a better investor.

Oh, and and get this: They don't just track these markets, they are actually crushing them. While everything else in the world was down last week, their own recommendations were up 1.4%. 

Join 30,000 others and find out what you've been missing.

Subscribe to Alts for free

Thoughts from 30,000 feet

I went on a ski trip in Breckenridge, CO with several of my college friends a few weeks ago. Man, it was awesome. Three days of great powder in the Rockies with good friends. You can't ask for anything better.

Unfortunately for me, I live on the east coast while the best skiing in the US is out west. To access the best powder in the states, I needed to fly to Colorado. And I have always hated flying.

While I have grown more comfortable with flying in the last few months (this sort of had to happen considering I've been on 25 flights since August), something about being trapped in a metal tube 34,000 feet above the ground for 2.5 hours still doesn't sit well with me.

There are a lot of things that suck about flying.

• Long security lines

• Minimal leg room

• Overpriced refreshments

But one thing stands out to me: Turbulence.

When you are seven miles above the earth's surface, it's a long way down. When the plane lurches up and down, side to side in the middle of the troposphere, you pray to God that physics don't stop working. But turbulence isn't bad or dangerous. It's just uncomfortable.

Turbulent flights have a lot in common with stock market declines. Let's dive in.

Expand Your View

I fly with Delta whenever possible.

One reason that I prefer flying with Delta is the built-in entertainment system. Hundreds of movies, shows, and games are at your disposal for the duration of the flight. However, my favorite feature isn't any of these: It is the flight tracker.

I love seeing where my plane is on the map, moving the cursor around the globe, and exploring different time zones. The flight tracker also has an "information" tab that shows altitude, speed, time to destination, etc.

Back to turbulence. On my way to Colorado, we experienced a wave of stomach-dropping turbulence an hour in. My heart rate jumped as my fight-or-flight response kicked in. We must have dropped hundreds, maybe thousands of feet... right?

Wrong.

I checked the altitude tracker on my screen. We had dropped a massive 18 feet. from a cruising altitude of 34,000 feet. That's a 0.05% decline in altitude. Literally nothing.

But it didn't feel like nothing. In my state of heightened anxiety, it felt like we were moments from a death spiral. Because I was hyperaware of every bump and dip.

Investing works the same way. When we are checking stock prices everyday, constantly plugged in to the market, every minuscule decline feels pronounced. The S&P 500 is down 1.5% one day? That's thousands of dollars down the drain. Your positions have been red for a week? You wish you had sold.

When you live in this state of market hyperawareness, you feel like you need to safeguard against every little decline.

Zoom out. That 1.5% decline is nothing over the long-term. The fear, anxiety, and doubt that you feel isn't a sign of risk or danger. It's a sign that you are paying too much attention to short-term volatility, and not enough attention to long-term trajectory.

When you are overly focused on your flight's movements, those 10 foot drops feel like a death sentence. When you look at those small bumps in comparison to your altitude, you realize they are irrelevant.

When you are tracking stock prices day in and day out, those small drops feel like the world is crashing. When you look at the long-term trajectory of the stock market, you realize declines are entirely normal. A feature, not a bug.

Zoom out. 

The Cost of Comfort

Turbulence sucks because it is uncomfortable. I know for a fact that I would be more comfortable taking a full day to drive out west. I would be in control. I wouldn't be at the mercy of high-altitude winds.

But this comfort comes with a cost.

It would take 20 hours to drive from Atlanta to Colorado. It only takes 2.5 hours to fly the same distance.

The cost of comfort is efficiency. For all of the discomfort involved in flying, it is a remarkably quick way to travel from point A to point B. Is "comfort" really worth wasting a full day?

Maybe, if comfort were correlated with safety. But that isn't true. In fact, the opposite is.

What are the odds of dying in a motor vehicle crash? 1 in 103. What are the odds of dying in a plane crash? 1 in 9,821. For those keeping score back home, you are 95x more likely to die in a car crash than a plane crash.

Comfort =/= safety. And discomfort =/= risk. 

Driving feels safer. It certainly feels more comfortable. But driving takes 10x longer to get from point A to point B, and it increases your risk of a fatal accident by almost 100x when compared to flying.

In this case, the more comfortable option is both more dangerous and less efficient. Hardly worth the tradeoff for comfort.

The same is true with markets. 

Stock market declines suck. If you had $100,000 invested in the S&P 500 in January 2020, you lost more than $30,000 in just two months. However, by January 2022 you would be up more than $70,000 from the lows. 

Staying in cash "feels" safer. It is more comfortable. But it is also more dangerous. As your time horizon increases, your odds of positive returns from the stock market approach 100%.

Meanwhile, staying in cash all but guarantees that your savings will depreciate over time thanks to inflation. Market declines suck. Losing money sucks. But declines shouldn't scare you off. In fact, you should welcome declines. Because they offer you cheaper prices to purchase stocks.

Turbulence is the cost of efficient transportation. Market declines are the cost of outsized returns.

Comfort =/= safety. And discomfort =/= risk. 

Closing Thoughts

Turbulence sucks. But it isn't dangerous. It isn't risky. It is just uncomfortable.

Stock market declines suck. But they aren't dangerous. They aren't risky. They are just uncomfortable. 

The market provides the best opportunity for average investors to create wealth over time. The journey isn't always comfortable, but volatility isn't risk. It isn't danger. It is the cost of wealth creation over time.

Cash might be comfortable, but like driving long distances, it is guaranteed to set you back over time. Ignore the turbulence and focus on the long game.

- Jack

Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.

Alpha Letter is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.

alphaletter.co (“Alpha”) is a website owned and operated by Substack. Alpha is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Alpha in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Alpha is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Alpha does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Alpha does not verify the adequacy, accuracy or completeness of any information. Neither Alpha nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Alpha nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis