A New Investing PerspectiveSubmitted by Latitudes Financial Strategies on June 4th, 2021
What are you reading? Summer is a great time to dive into some great books, what do you recommend that I dive into?
I’ve been on a bit of a reading jag lately, remembering to turn off the TV and take pleasure in the simple act of reading books again. I’d almost forgotten the gratification that comes from finishing a book and placing it on my bookshelf. Audiobooks and electronic books don’t quite give me that same feeling of triumph like the simple act of putting a dust jacket back on a book I’ve just finished and displaying my trophy for all to see.
My favorite new book is The Code Breaker by the renowned author, Walter Isaacson, it’s the story of Noble Prize-winning scientist Jennifer Doudna and her collaboration with other scientists from around the world to discover the gene editing technology known as CRISPR. From the Covid vaccines we are all hearing about to cures for Sickle Cell Anemia, her science has driven our world to new levels of health technology, and this is a wonderful and historic thing. I came away from Isaacson with a feeling of hope about our future as a species.
To balance my reading (and the hopefulness), I’ve also been re-visiting some Kurt Vonnegut novels: books I hadn’t read since my college days in the seventies. Vonnegut has a way of looking at our world from the outside, as if visiting from space, and his subversive and stinging satire is as relevant today as it was 40 years ago when his novels were popular with us radical types (well, I wasn’t too radical, I spent a college summer in US Marine Corps officer candidate school- no SDS radical here, but I understood the division in our world over social issues and was more sympathetic to them than the average office candidate that I met that sweltering summer in Quantico). I believe that a good investment guy needs to have a similar contrarian view of the world as Vonnegut: one needs to stay away from popular delusions and the madness of crowds to be a successful investor. In 1973, in Breakfast of Champions, Vonnegut said:
"Ideas on Earth were badges of friendship or enmity. Their content did not matter. Friends agreed with friends, in order to express friendliness. Enemies disagreed with enemies, in order to express enmity."
As investors, we have to be skeptical of popular ideas and, instead, seek to invest with unbiased attitude based on truth and a remembrance that investing is not a popularity contest. Today we are watching many speculators use the internet to spread some crazy investment strategies that may well end very badly, markets don’t care what is popular with the cool kids, in the long run valuation wins out.
Why am I telling you this? Because I know it’s boring to read (and to write) the same old Buy Low- Sell High message about investing every month. The fact is, investing is about having a world view, about having an insatiable curiosity about life, about having hope for the future, and having the ability to recognize BS when it inevitably happens.
My teenage grandson has me playing a new computer strategy game in which you participate in World War 2 as any country, re-writing history as you go. I’m currently playing as Italy, trying to eschew the Axis powers and join the Allies instead. It’s a losing battle as I’m fighting propaganda, an angry populace, and the inevitability of this particular war. In short, the artificial intelligence of the game is working against me: such is the lot of a contrarian, you are usually swimming against the current. I’m comfortable with seeing things differently than other people, even if my Grandson thinks I’m tilting at windmills and setting myself up to be conquered. I’m trying to teach him those certain principals which are worth dying over (even if you lose a computer game in the process).
As investors, we need to first seek truth about a prospective investment and then to view it through the lenses of history, future expectations, and valuation. It’s our job to recognize irrationality and emotion and to mitigate their effects on our portfolio. Stocks can get over (and under)-valued quickly, expectations can get ahead of reality, and greed and fear can become more influential than a rational, disinterested view of the markets. Currently, there are pockets of excess in our markets (there always are) and we are doing our best here at Latitudes to recognize them for what they are and doing our best to steer clear of hidden icebergs and emotional excess. In other words, I’m keeping my eye on the ball when I’m watching your money.
Over-time, we’ve been more right than wrong, markets tend to move higher over meaningful periods of time, so we are able to live in a world of hope instead of one based in fear. As investors, we are able to ignore situations that don’t make perfect sense to us (we pass on a lot more ideas than we buy), keeping an informed and dispassionate view as our primary weapon. Truth, science, and hope are the arrows in our quiver as we try to discern good opportunity from bad. Please contact me at Latitudes Financial if you’d like to discuss your investment plans.
The opinions voiced in this material are for general information purposes and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
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