As I was recently thinking about the crocus of spring, the world outside me is again blanketed by a storm of snow. And while I’m not trying to wax poetical on you (certainly not about investing), this irony does strike me as somewhat indicative of what most have come to expect from today’s market and economy.
Just a few weeks ago, when it seemed like all news was bad news, the market suddenly turned at a right angle and headed up. The last couple days, it has turned back down. And, not surprisingly, the myriad of pundits and prognosticators are now arguing if this is simply a bear market rally, or if this is the start of a new bull market. I suppose they have to find something to talk about. The real answer, though, in my opinion, is that for long-term investors, it simply doesn’t matter.
The strange thing about what you hear in the world today, is that it seems that the great majority of people seem to be more concerned with “calling” the exact market bottom, or even worse, predicting the daily path of securities prices, rather than focusing on making good long-term investments. The truth of the matter is that if someone could actually call a market bottom, or know how stock prices will gyrate daily, why on earth would they tell anyone?
What most people can do, on the other hand, is search for good businesses--those that earn good long-term returns on capital—they understand, wait for them to be at reasonable prices, and then slowly add them to their portfolio. This isn’t that difficult. But what it does require, though, is the emotional temperament and stability to resist the temptation to try to “call the bottom”, and to also have the patience and ability to wait for markets to recover. This, actually, is much more difficult, especially in today’s world, where investors are hit with sensational headlines and media commentary twenty four hours a day, seven days a week.
There is so much noise, in fact, that I’d argue that most investors today can’t seem to see the forest through the trees. What is more, many seem to react violently to the headline of the day, even when much of this information has already been disseminated (think many of the events surrounding General Motors) to the public and may—or may not--even have an impact on some other businesses.
While I may rail against this mass-market behavior as somewhat irrational, the bright side is that it continues to create opportunity for the long-term investor to opportunistically add good businesses to their portfolio at reasonable (or in some cases great) prices. This seemingly simple insight seems to be lost on the majority of investors.
I’d like to end this post with one final thought. A couple of years ago at the Berkshire Hathaway Annual Meeting, Berkshire Vice-Chairman Charlie Munger was asked to give his opinion on the investment climate. Back then, he said, as I recall (and I’m likely paraphrasing here) that it was not a time to be swinging for the fences. With the value placed on businesses down, in aggregate, substantially from when he was asked this question two years ago, I wonder what his response this year would be?
In the spirit of the baseball season soon to begin this spring, here’s to hoping he’ll be asked the same question again this May.
You might also be interested to know that buffettologist.com was recently mentioned in a Marketwatch article, which I’ve linked here.
Justin
The content contained in this blog represents the opinions of Mr. Fuller. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business. This content is intended solely for the entertainment of the reader, and the author.
