This is a Good Season
“Stocks are far more volatile than companies. And investor emotions are the most volatile of all.”
So says our friend, Nick Murray, in a recent post available to our clients.
We look for some of the great companies in the USA and the world. Our researchers each use a different strategy to find them—which provides us diversity—and we invest with conviction and consistency. These are the hallmarks of long-term success.
The opposite of success is what we read, watch, listen to daily. Think about the way the markets behaved in the aftermath of the President’s tweets about the China tariffs. One day, markets are ecstatic about the possibility of reconciliation with China and, almost literally the next day, markets are sure that the end is near, recession is imminent.
Let’s put it into perspective. Let’s pay attention to the season and talk a little about the weather.
This time of year, sunsets in Montana are approximately four hours long. We recently visited the “crown jewel of the continent,” and the “magical hour” never seemed to end. They are amazing! At my Colorado bed-time we sat outside to watch the sun set and I, at least, fell asleep before the sky grew dark. It is the season of seventeen-hour-plus-days and very short nights. People living along the 49th parallel are full of energy and optimism in July.
In January, Montana changes. Daylight may hit the opposite extreme, giving Montanans four hours of daylight—or something like that—and a lot of time indoors. I imagine optimism is harder to find amongst our Northern friends during the long, dark days of winter.
Think about your investments as companies, not stocks, and you may feel a similar sense of calm as you might watching a long, glorious sunset in Montana. Our current economic cycle is a warm, summer season—and it’s lasted longer than ever—and the optimism among the women and men running the companies into which we’ve placed some of our nest eggs is tremendous. Invest in companies, not stocks. Enjoy the season, not the weather.
Paying attention to “stocks” is like predicting the weather—don’t bother. Instead, think of your investments as companies, run by logical people, who are optimistically enjoying long, summer days. It may rain, it may not, but today’s environment is healthy. An alternative to investing in companies, fixed investments with low interest rates are in a long, dark winter. They don’t bounce as much—providing ballast—but you may feel this is small comfort, especially in comparison to a beautifully diverse allocation to some of the best run companies in the USA and the world.
We live in a world where exaggerations are common. We cannot change the world with a word, but we can change our own reactions. We can each eliminate one word—stocks—and replace it with another—companies—and perhaps together we might enjoy the season, even if we do have a few complaints about the weather along the way.