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“So. Tell me. What do you think? Which is better? To take action and perhaps make a fatal mistake – or to take no action and die slowly anyway?”
― Ahdaf Soueif, The Map of Love
Prisons are full of people all over the country and the world. Many of these individuals made decisions at a time when their minds were unsettled in some way. I would surmise, in many of these instances, for some reason, they were angry. You could also imagine that in some percentage of the prison population, individuals sought some form of revenge for some kind of perceived slight. Clearly, these are examples of decision making which was not of the highest quality. Over the course of a lifetime, people make many decisions in all kinds of different areas. Many of the sub optimal decisions will not have a major difference in one’s life. If you chose pistachio ice cream and didn’t like it, well, you will probably be OK. As the consequence of the decision becomes more important, the thought process and time spent considering the implications should probably increase in an exponential way. Unfortunately, people don’t always think things through when matters matter, if you get my drift. Now, how does this all relate to the important subject of finance?
Decision making when allocating capital involves analyzing some situation and considering what the chances of a positive outcome relative to the negative one. Doing nothing is making a choice as well. With investing, however, the right choice can be consequential for decades to come, as can the wrong one. Just as importantly, the best investors in the stock market are correct maybe six out of ten times. I’m talking legends, Lynch, Buffet, Robertson, Gabelli, etc. Very few are as good as those people just mentioned. The great thing with investing is you really don’t have to be correct on every investment. If you get one right in a big way, it can make up for plenty of wrong ones, especially if you just continue to own it, or even add to the position as things get better. It is for this reason that if you can find a way to make decisions in a more thoughtful way, with more diligence applied to thinking about potential outcomes, and attain a dramatic improvement in the quality of your approach, the effect on your investment results could be meaningful.
In the market this week, Fed Chairman Powell kind of took the air out of the balloon when he did not give any indication he was considering a rate cut during the press conference after the Federal Open Market Committee meeting. Investors hated that, but the decision was vindicated when the April jobs report came in at a much stronger than expected 263 thousand jobs, which jolted the equity market higher. With specific companies, Google missed badly with costs much higher than expected, although one would rightly note that Amazon’s emergence in on line advertising is probably having an impact. Apple gave a shot to their investors with a better than expected results with services showing dramatic improvement and scale which is impressive. McDonald’s showed their business model just keeps putting up strong results as does Merck. Hamburgers and drugs, hard to beat. In that eating space, Beyond Meat, the noted plant based food company, had a rocket of an IPO. I very much understand why people are looking for foods made from plants versus animals, though that does not mean the investment will be a winner. Elsewhere, the Berkshire Hathaway conglomerate continues to roll along with billions of dollars of profits and record setting crowds at the meeting this weekend. Buffet and Munger put on their typical show with wit and wisdom that enchanted the forty thousand plus crowds. The Buffett empire has been built on recognizing value through making high quality decisions, one step at a time, for fifty years plus. Something to consider as the Kentucky Derby gets run today as well, where over 150 thousand will attend the run for the roses. Bettors will be making decisions about what horse they like and why, with an outcome about two minutes after the gates open. Buffett and betting, seems like a bit of a contradiction, but both topics involve making decisions, which is what investing is all about.
Thank you for reading the blog this week, and if you have any questions about investing, please email me at email@example.com.
Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one’s overall financial situation. The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantee performance better than market indexes.