Values.
Despite an efficient velocity in market direction during this past January, and an expected capitulation this month, there remains an inefficiency in our emotional response to whether we're "doing well" or "doing poorly."
Don't get me wrong. Steadily, we've seen a recovery in many facets of economic measurements. Earnings are broadening, housing prices are increasing, portfolio and 401-k valuations are rising, unemployment is creeping back down. But while we may herald a new enthusiasm for all things financial, we are suspiciously left scratching our heads about why it is that we feel as if it's all happening to someone else, not necessarily for us, but to us.
The single biggest predictor of financial growth is not how much money we have stashed away in secret savings accounts, but how much confidence we feel about a fair return for the deployment of those dollars. In that sense, corporations and individuals alike uniformly adhere to a quid pro quo matrix. Investing must be fair; it must be reasonable; and, win or lose, it must be swathed in aspiration that makes us feel worth making the investment in the first place.
Right now, the chasm that exists between our perception of value and its real impact upon our "bottom line" is still quite wide.
Science.
Many are quick to inform us that markets are inherently unfair, that the playing field is not nor should be really "fair," in the sense that there should never be a guarantee of quid pro quo. After all, they argue, it is entrepreneurship and risk-taking that makes economies function efficiently. In all endeavors, money too, they believe that there should be winners and losers. Such is life. No equivocation.
My proprietary science does not disagree objectively. However, if the purpose of investing is not only to generate profit but also to provide capital for meaningful social contribution, then there is an additional burden at work when evaluating risk versus reward.
Anyone can scam the public with a "get rich now/get rich quick" scheme. Fewer, though, can subpoena capital for a "purpose." In that regard, values-based investing provides meaning as well as the chance to get rich. Who wouldn't want to hit that jackpot of success?
In this dichotomy between being rich and feeling rich, what one stands for is as much a confidence boost as the quantification of how large the profit.
Decline versus advance.
One factor that seems compelling in understanding consumers' mood is an ability to separate time and anxiety from the process of investing. Getting impatient about portfolio returns, even when executing a well-structured methodology, is the worst thing one can do. Either we feel that we're not making money fast enough, or we lose patience when caught in a short term decline. But in either case the answer to building wealth is not in a staccato-like goal orientation, but rather to be patient and diligent in effecting one's science.
Time after time, confidence (and success) comes from maintaining a steady hand on the rudder. January's sudden burst out of the gate is analogous to a long-distance runner beginning the race as a sprinter. There has to be a perception of time and value, duration, calmness, and trust in order to succeed at investing.
Are we "doing well" or "doing poorly?" In life, a sense of equilibrium emanates from an inner peace and a longer term purpose. Losses and gains are ethereal. Discipline is not.
Scotty C. George
(212) 624-1147
© du Pasquier Asset Management
The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and it accuracy cannot be guaranteed. It is intended for private informational purposes only. Any opinions expressed are subject to change without notice. Du Pasquier Asset Management and its affiliated companies and/or individuals may from time to time own or have positions in the securities or contrary to the recommendation discussed herein.
