If you act anxiously to hasten your results, you delay their arrival. Calm poise reveals the shortest route home. Alan Cohen
We live in a world where everyone has an opinion. The opinion may have no credibility because of lack of training, experience, background, or certification. With social media, anyone has the ability to inform us on the merit of subjects which they have previously thought about for less than one tenth of one second. For example, if you go to certain web sites, you too can give your opinion about the tastiness of a restaurant’s food. You don’t like your lasagna or taco, you can decide to write a scathing opinion which will cause plenty of grief for the operator. Probably more significant, the review can influence other potential customers, which means far more to a business owner. Hotels, any kind of restaurant, anything related to kids, and airlines are all prime examples, but there are hundreds of other kinds of businesses in the same situation. Unfortunately, some of this is related to the personal characteristic of poise.
When I refer to poise, I am referring to the ability to maintain one’s composure during a trying moment. Over and over again during one’s life, people are put in situations which are uncomfortable. It may be a difference in opinion, it might take place over a financial dispute, a relationship, and of course, opposite points of view on politics. As one gets older, you learn patience and poise, or hopefully you have. You discover what appears to be life ending doesn’t, that the waiter who didn’t serve you quickly isn’t going to change your life at all, and the extra fifty bucks you paid needlessly isn’t going to alter your financial circumstance. Let’s take this idea and see how it applies to investing.
First, with respect to returns, many investors focus on achieving certain returns, or having performance which is better than the market (or indexes). If you have poise, or an understanding of yourself, whether or not you beat the S&P 500 by three tenths of a percent this year does not matter. As time passes, when you are building wealth, you are able to fund your life the way you want to, does your performance relative to the market matter? If you are a hedge fund trying to attract pension fund allocations worth hundreds of millions of dollars or more, it might. For the vast majority of investors, beating the market means absolutely nothing, and personally, it has no affect on how I invest. In combination with this idea, having poise means you have the ability to ride out owning stocks which don’t perform. The reason why it is important is because evidence shows that most big moves in stocks only occur after you have owned them for a long period of time, usually between year seven and ten. If you cannot handle a period where a stock does nothing, or even worse, loses value for a few months, you are going to have a hard time owning equities. Poise gives you the patience to handle these periods, which is the vast majority of your ownership. Another crucial area where poise matters from the behavioral (psychological) area of investing. By maintaining your poise, your not going to have huge emotional swings based on stock prices or portfolio value. Probably just as important, you can use difficult market periods to your advantage so you can upgrade position quality or add to existing positions of excellent companies. In addition, having poise will allow you to evaluate your positions objectively and make the difficult but necessary decision to eliminate those holdings which might benefit you for some other reason, often tax or liquidity related. In sum, understanding ones self and having poise might be as important as anything in the investment world.
The last week was heavy on earnings reports as thousands of companies released their financial results. Let’s start with Under Armour, which reported a good number but announced the SEC has been investigating the company for two years regarding revenue recognition policies. Sprint and T-Mobile got the final approval for their merger from the FCC, but now must wait on lawsuits from ten state attorney generals. Poise will be needed by shareholders of both companies. Xerox made a bid for HP, which decided they would make a bid for Xerox in return. Uber hit their number, but investors skipped the ride as ongoing losses don’t seem quite as appealing as a few years ago. Disney reported a big number as confidence grows that the Newscorp acquisition is being integrated nicely and Disney plus will be a, well, plus. Earnings will continue hot and heavy next week as well, so maintain your, sorry.
In an area where self control and poise is seemingly non existent, the current political environment revolves around conflict, or another name, warfare. On the Democratic side, liberals (progressives) like Senators Elizabeth Warren and Bernie Sanders are at odds with moderates Joe Biden, the South Bend Mayor Pete Buttigieg, and Minnesota Senator Amy Klobucher. On the Republican side, traditional conservative journalists like George Will and Bill Kristol have sworn off a party led by the Donald. Many other conservatives politicians are in the same boat as they fear what could happen in the 2020 election. Policy wise, the Trump Administration has positions which have benefited specific segments of the country, especially regarding energy and lowering tax rates for businesses. On the issue of the demeanor of any of the candidates, somewhat related to poise, well, I’ll leave that for your personal perspective.
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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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.