”Bank on the trends and don’t worry about the tremors.”
– J. Paul Getty
It’s absolutely true that most developments in the market are totally irrelevant and most of the stuff people are writing and talking about is more interesting than it is actionable. That includes many of the links and stories you’ll find on this site and in my Twitter feed.
And what’s wrong with that?
Why did we allow Actionable to become a priority over Informational? What’s wrong with awareness for the sake of contextual understanding? Why can’t we agree that a chart is interesting or a statistic is fascinating even though it may not have a shred of immediate utility to us?
There is a balance.
Just because a piece of information is not “useful” for investors in a practical sense right away, that doesn’t mean it ought to be completely ignored. The buy-and-hold purists argue for a practiced ignorance of anything and everything that comes down the pike, from valuation metrics to trends to technicals to sentiment to news to opinion to economics to daily closing prices. They say that those who pay the least attention to everything will probably do the best – without making any decisions, how can you ever make a poor one?
But these purists have made a miscalculation in their understanding of basic human emotion. By forcing out all outside noise and influence, it is true that we may create an artificial temple of calm inside our minds. Unfortunately, in this state of manufactured tranquility, it takes very little to shatter the silence and stillness within. The smallest bit of news can reverberate through the chamber like the ringing of a thousand gongs when we force such mental fragility upon ourselves. By allowing the machinery to run down and rust, our coping mechanisms are rendered impotent from disuse just when they are needed most. The stricter one’s diet is, the more violent the inevitable backslide.
Thus, by trying to eliminate all commotion and clamor, we end up becoming even more susceptible than ever once the concerns of the real world find their way in (and they always will).
No, willful ignorance will not serve you for long, no matter whom you are or how you manage money. I would argue for the opposite approach for the long-term investor. I would encourage you to absorb everything, read voraciously, take in all that you can and learn to withstand it. It is only from prolonged contact that we can systematically weed out the detritus, training ourselves into a pragmatic stoicism.
The late, great George Carlin tells an anecdote from his childhood to explain why he never fears germs or illness:
Let me tell you a true story about immunization, okay? When I was a little boy in New York city in the nineteen-forties, we swam in the Hudson river. And it was filled with raw sewage! OK? We swam in raw sewage, you know, to cool off. And at that time the big fear was polio. Thousands of kids died from polio every year. But you know something? In my neighborhood no one ever got polio. No one! EVER! You know why? Cause WE SWAM IN RAW SEWAGE! It strengthened our immune system, the polio never had a prayer. We were tempered in raw shit!
Every day we are swimming in it, the nonsense and banality that is being packaged as though it’s of Code Red-level urgency. Everyone needs a viewing audience and everyone wants clickthroughs and pageviews. Otherwise, what are they going to wrap the ads around? How many commercials can you sell on a TV show about “Staying the course”? That would be a pretty short and uneventful show, each episode would feel like a rerun. How many banner ads can you place alongside an article that says “Buy stocks and bonds and rebalance, period.”? Not many.
But this is the machine we live inside of and it is up to us to develop our own defenses to it, our own way of taking or leaving what we want from it. And do you think the political media and the sports media and the entertainment media are doing anything different? Are they not spending the bulk of their time and energy on dramatizing the mundane, accentuating the titillating but ultimately trivial?
It’s fine. Learn to swim in it. Let it wash over you, let it temper you.
Early internet visionary Clay Shirky once said that “there is no information overload, there is only filter failure.” And he said that in 2008, before anyone you knew was even on Twitter.
Eventually, you’ll become inured to the superfluous facts and figures being thrown at you each day. You’ll learn where in your mind to file which piece of information and when to pull it back out again. You’ll stop chasing pennies in the street and start thinking more broadly about the mosaic you’ve constructed with all of the interesting input and evidence you’ve come across.
On this site and in my career, I try to find the balance between learning about things that are compelling while keeping it real about their likely lack of significance when all is said and done. I can’t afford to pay attention to none of it but I also can’t afford to take most of it seriously.
This has annoyed some people. They don’t like the idea that they can’t look at a chart or a historical ratio and predict the future with consistency. They hate the fact that there isn’t a rulebook or a recipe for this. And they don’t like me for reminding them of it. They cannot accept that it’s different this time because it is always different – while fear and greed may be constants, the conditions and variables in a complex, adaptive market environment are never precisely replicable from one era to the next. They also can’t rationalize the massive role of randomness and luck in investing, which can either augment or frustrate the results of even the most skilled players.
They’re not there yet, haven’t seen enough yet and, at the end of the day, they still want to believe. Or worse – they have arrived at something close to the truth but for professional reasons they cannot admit it. At least not out loud.
The more I run this blog, the more I realize I have much to learn. The more I see and read, the more my own ideas are challenged or even discredited. I’ve made peace with that. I’m going to keep talking about what I see happening in markets and I’m going to continue to try to make sense of it – for my own benefit and hopefully for the benefit of the readers. It is highly unlikely that everyone will like everything I say.
I can’t endear myself to everyone and have this blog actually mean something. So if I have to choose, I choose to continue on the path toward enlightenment, education and mirth. I hope that you will choose to come along with me.
But I’m not turning back.