Aloha Mr. Hand. This market is fascinating, what a run. Each month, and quarter, it seems we enter uncharted territory. It's nice to look back and feel some sort of accomplishment. But just what have we accomplished? Monetary policy has pushed interest rates to lows not seen by this generation, as a result, equities have soared since the Great Recession bottom. A recent article by H. Bradlee Perry reminds us to reflect with caution and revisit the investor's classroom.
Always be a Student
Researcher and Analyst
- Don't guess on the future. Get, and use, the facts.
- Be disciplined in your approach.
- Study the economy, review financial markets daily and know company positioning.
- Do the math ("discipline the rhetoric") - what is the valuation.
Historian
- Study and understand financial and economic history.
- Look for the patterns and recurring themes in past decades.
- Bubbles, bulls, bears, exuberance & exhaustion.
- Case study: tech bubble run and burst in February 2000 - 80% to 100%+ losses.
- Case study: housing - 2006 easy money, easy terms, gigantic loans, stunning defaults.
- 1968 - small unproven companies -75% declines in 1969.
- 1980 - oil prices increase - Middle East events, stocks double, burst, fall 45%.
Top of the Class or Steady Performer
- Self-awareness and humility can be better than the best investment tool.
- Simplify your thinking - concentration - basic facts and fundamentals.
- 10% optimism - 90% facts, data & common sense.
- Focus on quality and share valuation.
- Quality: strong companies in favorably situated businesses.
- Leaders in the field, good growth, competitive positioning, solid financing.
- Seek above-average returns, take below-average risks.
Be a Valuation Major
You know, it's not timing the market, it's time in the market.
- Be knowledgable of the best and worst values.
- Never pay more than you should - even the best things in life can be overpriced.
- Seek good investments that are temporarily undervalued.
- Valuation is the discipline that will ground your emotions.
- Think long term, focus on key fundamentals.
- Be patient. Be logical. Execute at a favorable time.
You know, it's not timing the market, it's time in the market.
Never Graduate
Stay in school forever. You hear it all the time, on the sports field, at work, in life, the key - happiness. Enjoy the experience. Buy the ticket, take the ride. Be fascinated by the economy, the markets, the psychology, the history, the humor, the technology, be a sponge, enjoy the spoils. Show up for class. Aloha Spicoli.
Stay in school forever. You hear it all the time, on the sports field, at work, in life, the key - happiness. Enjoy the experience. Buy the ticket, take the ride. Be fascinated by the economy, the markets, the psychology, the history, the humor, the technology, be a sponge, enjoy the spoils. Show up for class. Aloha Spicoli.
