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Saltwater Gospel

Updated: Jul 24, 2023

I spent a lot of my life dodging Bali. I don’t like the place.

I was very close to being with my dear friend Steven Webster when he was blown up in the 2002 bombing in Kuta, a trip I tried very hard to talk him out of. He tried very hard to talk me into going; I tried very hard to talk him into Fiji. I lost.

Kuta Memorial. Love ya, #6!

So, I hated Bali for a long time. Still do. A bunch of overweight, eat-pray-love, pasty, baby-boom women riding around on the backs of their new, waifish, local boyfriends’ mopeds. (“I bet he already taught her downward dog!”) The only thing burned in greater quantity than incense in Bali is plastic. 300% tax on any imported alcohol. Traffic-- like, Bali loses more than 1% of its population every year to traffic accidents. Locals whistling at my wife and calling me “mate.” I once saw a woman bathing her infant in the gutter while a man thirty feet up the street urinated into the same gutter as a dead rat floated by-- in Seminyak, just a block away from the Oberoi, which is the "nice" part of town.

But I had to go to China for a business trip in 2012, so I decided to stop in Bali “on the way” home. It was March, just as Bali is going from its wet season to its dry season. In other words, I was there for the first week of surf season.

And that’s the thing about Bali-- it is surfing Disneyland-- and the Indian Ocean did not disappoint. The first time I surfed Impossibles at Uluwatu (which means “devil waters”), I was 41 years old on a surfboard that was way too small-- Surfline was calling the surf 15’-18’, and I’m pretty sure I was surfing on a potato chip.

It was a week after a diver got swept into the rocks south of the point and died, and nobody else was surfing at the time. At my current stage of life, paddling into triple-overhead surf at a spot notorious for wicked currents and razor-sharp reef, I would have been very nervous, but I paddled out all by my lonesome and locked into a few giant barrels. Without killing myself.


I excelled at surfing for most of my life, and that was important to me. I don’t think it was a matter of wanting to be the best surfer in the water—although I definitely wanted that every time I paddled out. But I do think it had to do with always wanting to get better, to be constantly improving, and when my aging body wouldn’t let me do that anymore, I got frustrated. Not long after that Bali trip, around the time I turned 45, surfing stopped being fun.

So, I went a few years there when my friends probably didn’t enjoy surfing with me all that much. The waves were never that good, or it was too cold, or it was too crowded, or I brought the wrong surfboard; I always had something to complain about. I missed waves that I should have caught, I ate it on waves when I shouldn’t have, and there were days where just paddling out was a royal pain. My spirit was revolting against my body.

At some point recently, I began to realize what I was doing to myself. I began to acknowledge a need to age more gracefully and that various stages of life have their own inherent challenges but also their own unique forms of joy. I ride a little bit bigger surfboards now, and I no longer get bothered when I get backpaddled by frothing 20-year-olds because I appreciate how many more waves I’ve already had than they. I feel a sense of awe from sitting in the channel and watching my daughters surf-- that’s a big one for me. I don’t have to get spit out of a five second barrel and launch straight into a giant rotating air in order to enjoy the ocean.

I’m ok with how things are instead of how I think they should be.


Accepting my station in life when it comes to surfing is akin to our conversations with clients about investing in 2023. We feel that we’re entering a new phase of life-- just as my days of surfing 15 foot Impossibles are over, so are the days of low inflation that have constituted the majority of my life.

We’re now living in an era of high inflation, and that certainly presents its own challenges. But it also presents its own opportunities. Some of that opportunity is difficult for us to discern at this moment in time, but investing is always a matter of operating with imperfect knowledge, and the empirical evidence for balanced portfolios is pretty compelling:

According to Blackrock, 60/40 portfolios—those with an asset allocation of 60% stocks and 40% bonds—suffered a 17% loss this year, making it the third worst on record, and as we see from the chart, 3- and 5- year returns after those kinds of years are historically very good.

The problem is that bear market performance for the S&P without a recession typically averages just under a 30% loss, but the S&P only declined 25% from its peak on January 3rd to its closing low on October 12th.

If we do not get a recession in 2023 or if it’s mild, we may have already seen the lows for this downturn. However, we have been saying for a month that the Fed’s action going forward is much more likely to key off of the labor market than the headline Consumer Price Index number. It still seems likely to us that the Fed will do as they have repeatedly promised, which is to hike rates until unemployment hits their 4.5% target. That equates to millions of households losing a breadwinner, and job losses of that magnitude have always coincided with recessions.

Therefore, we continue to believe that a recession is likely, and moreover, it’s likely to be severe given that there are so many “excess” job openings that will need to be destroyed in order to hit the Fed’s target.

A bear market that is accompanied by a recession typically results in an S&P decline of over 40%, indicating that we have not seen the lows for this downturn yet, and we expect the S&P to see 3200 before it sees 4200.

Yours truly— at age 42

Click here to invest with Chad.

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