The Better Letter: Always Winter But Never Christmas

In the C.S. Lewis classic children’s story that’s much more than a children’s story, The Lion, the Witch, and the Wardrobe, the land of Narnia is cursed by the White Witch. “‘It is winter in Narnia,’ said Mr. Tumnus, ‘and has been for ever so long…. always winter, but never Christmas.’” As in Narnia, seemingly every son of Adam and daughter of Eve feels enveloped by winter in this year’s wounded, weary world. Every daughter of Eve and son of Adam longs for Christmas blessings to “flow far as the curse is found.”

We will get to Christmas this year, but the metaphor is still apt. I will see my children and grandchildren only on Zoom. I will not share their expectations as they go to bed on Christmas Eve and their delight as they open presents Christmas morning in the ways I usually do. That is a resounding joy I wish to repeat but won’t until next year. 

It’s as though we have all developed benign paroxysmal positional vertigo – when we try to stand up and get off the couch, the world goes off-kilter. Always winter. Never Christmas.

New Yorkers are debating the relative merits of two ongoing rat lawsuits to decide which is less bad: (a) falling into a sidewalk sinkhole filled with rats, afraid to scream, lest the rats scamper into your mouth, and being stuck there for 30 minutes; or (b) having a rat-filled ceiling collapse on you, covering you with rodents and feces. I think the right answer is clearly (b) but, either way, it’s always winter and never Christmas.

Isaiah 41:10 has been the most searched, read, and bookmarked Bible verse during the ongoing pandemic. “So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you; I will uphold you with my righteous right hand.”

We cling to Isaiah’s Advent prophecy: “The people walking in darkness have seen a great light; on those living in the land of deep darkness a light has dawned.”

Advent is the period of waiting for Christmas, hoping for the world to be made right and light, for victory to blossom out of loss, for the kilter to be put back on.

O come, o come, Emmanuel, and ransom captive Israel. May it be so, especially this year.

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It isn’t Warren Buffett. It isn’t Bill Gross. It isn’t George Soros, or Michael Steinhardt, or Sir John Templeton, or Stanley Druckenmiller, or Jim Simons, or Seth Klarman, or even Benjamin Graham.

The best investor of all-time is David Swensen, head of the Yale Endowment since 1985, who took an 80 percent pay cut to leave Wall Street for the university where he earned his Ph.D. Since then, his “labor of love” has grown Yale’s portfolio from about $1 billion to well over $31 billion while paying about 35 percent of Yale’s annual expenses along the way, currently about $1.5 billion per year

More than just the investment performance, Swensen created an entirely new approach to investing, taking advantage of the risk premia for equities and illiquidity on account of the endowment’s exceedingly long time horizon – essentially forever. Returns are smoothed via broad global and asset class diversification. Alumni of the Yale Investments Office lead some of the other top performing university endowments.

And, if that isn’t enough, Swensen imagined and created the first Wall Street swaps trade ever before going to work for Yale.

Thousands of endowments, pensions, money managers, advisors, and individuals have seen Swensen’s success and decided they want to “have what he’s having.”

Imitation may be the sincerest form of flattery but, in this instance, it only rarely, if ever, works out. That’s because of higher fees, greater risk, lack of access to the very best managers, more needed resources and discipline, illiquidity, a misalignment of interests, and more uncertainty.

In the investment world, as an investment becomes more popular, it suffers from both falling expected returns and rising correlations. In other words, good trades get crowded and their advantages tend to disappear. This crowding happens because success begets copycats as investors chase returns. Mean reversion only tends to make matters worse. In effect, it results in “investing while looking in the rearview mirror.”

Most fundamentally, nobody is as good as David Swensen.

We know that because we can benchmark Yale’s performance rigorously. We can look at how Yale’s specific investments performed as compared to similar investments. We can review Yale’s performance on a risk-adjusted basis. We can examine how Yale’s portfolio performed compared to similarly structured portfolios or some “standard” portfolio construction (e.g., the classic 60:40 portfolio). We can consider Yale’s performance as compared to that of other endowments, investment managers, and/or various indexes. We can determine how well the Yale Endowment met its stated goals and contributed to the university as a whole. We can ask how well Yale’s Endowment did with respect to various societal goals, such as environmental or diversity concerns.

Personal portfolios demand benchmarks, too. These may include investment return targets but are usually better directed toward clear personal financial needs and goals.

We all need accountability and thus benchmarks for our portfolios. We need them in our lives, too. We especially need them in our lives.

As I argued in How I Invest My Money (order it here), “[a]s investments need to be benchmarked, our lives need it too. No matter what we say, we show what we love by how we invest our time, our talents, and our treasure. We reveal our whys with our love. Our purposes provide benchmarks.”

Benchmark your life with your purposes. Start with love. It’s the biggest Christmas miracle of all.

Totally Worth It

In our house, it’s about time for the annual viewing of the best Christmas movie ever.

This is the best thing I saw this week, unless it was this. The most remarkable. The sweetest. The grinchiest. The craziest (which is a very high bar) in the U.S., and in England. The scariest. The funniest. The most terrifying. There is only one baseball glove maker left in the U.S.

Christmas is coming. I’m willing to wait for it.


This week’s benediction is a lovely advent song from Caroline Cobb: “O Righteous Branch.” Simple. Honest. True.

Like Christmas. Even in 2020.

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Issue 41 (December 4, 2020)