I appreciate Seeking Alpha’s new “Insta-Blogging” platform because it is a forum where we can discuss ideas without inciting immediate action. Most published articles at SA (beyond the Insta-Blogging site) need an action hook: “Should I buy or sell today? WHAT should I buy or sell today?”
But equally important is to create the background, the context, the milieu in which each individual decides what their comfort level is in various market environments. Without doing the Big Picture thinking first, we are no more than billiard balls being acted upon by cue sticks (the markets, the economy, government actions) and cue balls (various commentators’ and gurus’ spin from the cue sticks.)
In that spirit I provide the following, lifted directly from the pages of our current (April 2009) Investor’s Edge® providing a little context for how we like to make decisions…
We live in a fast-paced world. Efficiency is lauded, multi-tasking is expected, and faster is universally prescribed as better. We have ready-made cakes, cookies and indeed entire meals, (“just add water for homemade taste!”) express mail, instant oatmeal, fast-acting drugs, overnight delivery, fast food, live chat, tweets and instant messaging: “r u still e-mailng not txtng dude u r so 10 min ago.”
Yet the skills required to be a rational and successful investor are so -- well, so yesterday. Effectiveness counts for more than efficiency. Single-tasking is rewarded; depth, not breadth, is what allows you to tear into a balance sheet and find the cockroaches, silverfish, and other assorted nasties hiding therein. And a slow hand means we aren’t so quick on the trigger that we shoot first and ask questions later. (Questions that usually lead off with “Why?” “Why did I buy that dog based on a blogger’s tip?” “Why did I never learn to analyze an income statement?” Etc.)
I was reading an article on-line this morning. The article itself was thoughtful and well-written. But here is the “Live Chat” that accompanied the article. It’s as if they never even read the article. That would take too much time. Why not just ask a bunch of strangers with no demonstrated deliberative capability or depth in the issue -- but never short on opinion, even if it does change every 5 minutes:
Live Chatter #1: “i need srs to pop before tuesday” [JS -- What? You got a hot date on Tuesday and need dough for dinner?]
Live Chatter #2: “I am feeling very comfirtable for next week...CNBC...are recommending to...buy short ETF”
LC1: “what etf did they talk bout tbt?”
LC2: “Treasury short”
LC1: “karen [JS -- another chatter] also said to buy srs for fridy”
LC2: “so nothing to worry about… I advise you to sell SRS @ 52 and then rebuy @ 40…”
LC1: “ok cool thanks for the advise”
That is so cool, dude. Except that SRS was down 17% today, from 46 to 38. Do we now buy more (even though it didn’t come near LC2’s sales price of 52) since it’s now below 40? Stay tuned! In another 20 seconds we’ll have a new opinion from LC2 or LC3 or LC 74.
Investing is work. Hard work. It gives me pleasure so I keep doing it. But then, I like “work.” I like to clear shrub and move rock and chop firewood. Investing can be even harder, more exhausting, sometimes way more frustrating, but it has its rewards, as well, both intellectual and financial. Unlike the chatters and IM-ers, I simply cannot spew forth advice on any and every topic. And I expect from others, and myself, follow-on to any advice I do present. That’s why we provide Model Portfolios in which we show what we bought, on what date, and at what price. We keep a running total of our buys and sells. Nothing is just thrown into the wind and then forgotten. Sometimes it’s painful to see our mistakes in black and white but that’s the only responsible way to do business. It’s time-consuming. It requires great focus. And it certainly induces humility in all-too-regular doses!
(2008 was a prime example. We began our two equity model portfolios January 1, 1999 with $400,000. We increased their value every year, up year or down in the market, through 2007. Then came 2008: we plummeted from our 2007 year-end value of $1,474,527, up more than 300% in those 9 years, to just $1,198,813 at year-end 2008.)
We ratcheted up 9 years, then down one. I don’t like it but I recognize that into each life -- or portfolio -- a little rain must fall. I am ever-mindful that, if we are to ratchet up again in 2009, it will take solid research and a critical eye on the economy, the markets and the madness of crowds. It will be slow going. And it will require focus, not multi-tasking. Thinking, not tweeting.
DISCLOSURE: No position disclosures. That's not what this article is about!