Fool's mission
We keep reminding clients that volatility is a two-edged sword. It would be wrong to define that word only by
its pejorative “downside” connotation.
Volatility also applies to manic upside spikes which, while profitable
for your portfolio, might also have unintended consequences such as additional
risk or unnecessary imbalances, later on.
We prefer to look beyond bottom line benchmarks and track records to
uncover new ideas that will have positive impact not only for portfolios but
for the economy-at-large.
One year in, and it is becoming
clearer how the effects of the pandemic wreaked both health and economic havoc
upon consumers, governments, and corporations.
Even more obvious is how these imbalances disproportionately spread...by
sector, demographic, and geography.
Those cyclical businesses that were hardest hit could be shuttered
forever. For those purveyors there was
no “Plan B”. The asymmetries of the
devastation was shocking. The wealthy
maintained while the poor fell further behind.
The magnitude and breadth of the
crisis was greater than any in the last century. While the S&P might currently be trading
at or near all-time highs, many are in the midst of the greatest economic
crisis they will ever know.
In an era of globalization and
expanding opportunity, making capital available to consumers is about more than
keeping interest rates (borrowing costs) low.
It is about demonstrating compassion by helping the public tackle the
real, everyday problems they face and providing services and solutions which exhibit
personalization and customization to their needs. As with most things, it is all about
perception. Unfortunately, we witnessed too much of mass production, marketing,
and self-indulgence in a game of survival of the fittest. Such is the nature of business when
everything is on the line.
Big
picture
The market and the economy are recovering.
It might take time fully to re-imagine a post-viral world, however. Measuring one's progress versus a
pre-pandemic paradigm will prove to be problematic. The data is not conclusive about who, or how,
the spoils of a new normal will be allocated.
But there is a disturbing undercurrent that what happens next for some may not be what happens for all. For
those most disadvantaged by the past year, those most vulnerable now, the
ravages of the economic and health crisis is punishment enough.
The pandemic has shown us that
businesses and institutions that rely upon impersonal algorithms, in which it
is acceptable for some to fall through the cracks in the system, can't be trusted to do what is right for their
broader community. Trying always to
squeeze the last dime of profit out of every situation is oftentimes
un-empathetic, and should be uncharacteristic, we believe, in a post-Covid
business plan. We favor earnings
potential from corporations that specialize their approach to their
clients. These networks of responsible
citizens will raise staggering amounts of new capital in the coming years, with
expectations high that they will succeed for their, and our, benefit.
Boardroom competency will be most
acute in industries where human need trumps unashamed greed ...industries such as
housing, medicine, agriculture, energy, and education. In many instances, the dilemma lies not in
the supply side of the equation, but in the delivery network of those
supplies. New initiatives must take on a
beginning-to-end outline so that their consumers are serviced comprehensively.
As the economy rebuilds, we will be
looking for signs of breakthrough and capital expenditure in alternative
energy, agronomics, technology, and other areas with staying power for the
future. Fixation only upon the current
cycle or mainstream performance barometers is a fool's mission, and destined to
lose sight of the real opportunity that presents itself upon our horizon.
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