Believing
the earth is still flat...
The emotional turmoil
that is the financial markets has caused many investors to abandon common sense
and fact-based analysis in place of a kind of 15th century-style town square
deference that still believes it is
possible to sail off the end of the world, or that witchcraft
causes evil in the municipality. These
are usually the type of investors who are focused upon wringing just a few more
points of yield out of their portfolio each monthly statement, or who chase
return based upon the "latest" product, strategy, sector, or guru
offered up before them.
They are people whom
you know (you are not one of them!) who manage.... or who ask their advisor to
manage.... their account with the explicit message "not to miss out" on
the market's latest fad or current hyper-profits.
This paradigm mostly
exists because people are greedy, they believe in mythology, or they
don't/can't discern between investing for the long-term versus speculation on
short-term, get-rich-quick schemes.
When someone is
pounding the table in front of you, very seldom do cooler heads prevail, even
when facts trump mythology.
Despite the market's
current bull expansion...and traffic congestion here "at the
top"....we have seen this form play out in other times. A bear market (when it occurs) is usually a
matter of sequencing in market cycles and has its most deleterious impact by
the stark contrast from the euphoria which preceded it and the perspective by
which its danger is perceived. Not so
coincidentally, its ominous offing happens to be one of the factors causing
current investors to try to maximize as much as they can as fast as they
can.....
....not to mention the
powerful attraction of making a lot of money while the getting is good.
Who's
steering the boat?
But this bull market in
particular is quite unusual, not just because of its duration (9years), but
because (at least from this writer's perspective) it doesn't "feel"
like a bull market expansion to many of those not as fortunate to have cashed
in on the last decade.
Typically, an expanding
economy and an intensifying market go hand in hand. Why is it, then, that teachers are on strike in
cities across America fighting against low salaries and lack of supplies;
storefront businesses are vacant in several small communities; large
multinational industries are at death's door; paychecks seem not to go as far;
indigent populations worldwide are migrating en masse; some children in war torn nations are hungry and orphaned;
and a significant majority of us just sometimes feel more fearful about the
future? Are those characteristics of an
unbridled financial boom?
The difference this
time might partly be attributable to 3 factors: (1) technological innovation (2) low global interest rates (3)a decline
in empathy worldwide. While not the
exclusive causes of our discomfort, all three are fueling a vortex which
spirals attitudes downwards, not up,
making it become just a little more difficult to be neighborly and
empathic.
Economic booms are not
just financial events, they are social compacts as well.
When one does well so, too, should the rest of us....or so it is
anticipated. And we should be proud of
the accomplishments of others because they enrich the human experience for all
of us. The history of man is still being
written, so we can't give up on the story just yet. But we should try to avoid any timeline
comparisons between this decade, or that one, and focus instead upon the remarkable
progress populations have made in medical research, ecology, food and water
research, replenishing energy resources, and building a functional
infrastructure.
A well diversified
portfolio should not be expected to respond minute to minute, quarter by
quarter, year over year to peripheral or exogenous events. Investing is not exclusively the art of
chasing profitability, but rather directing one's resources towards innovation
in people-saving motifs, and trying to avoid hyperbole that stifles markets
just when we need entrepreneurship and capital to help us the most.
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