Dis and Dat - July 2010
The Gulf Coast and America face another challenge with the BP oil rig explosion in the Gulf of Mexico
If you're not making mistakes, then you're not doing anything. I'm positive, that a doer makes mistakes. ~John Wooden
Since our last newsletter unfortunately, John Wooden has passed. We are thankful that he took the time to share his philosophy, so we have the opportunity to get another human's view of the world. In continuing the review of his pyramid of success we find him describing what he refers to as the supporting characteristics to the heart of his pyramid. They are self-control, alertness, initiative, and intentness.
Wooden described self control as the ability to maintain control of one’s emotions. The markets are inconsistent in it’s valuations. As Ben Graham described, “Mr. Market” is always trying to talk you into doing something in the short term, and concluded it would be wiser to establish and stick to your own value of your positions. In addition to losing money, an emotional reaction can destroy the time and energy used in researching, analyzing and establishing your long-term objectives.
Alertness can be described as being aware. Due to life and investing being ever changing, they may offer an opportunity, which at times require adjustment. That is why we encourage everyone to review their overall situation with us and keep us updated of any changes.
Regarding Initiative, Wooden suggests that the failure to act is often the greatest failure of all. This seems at odds with some other suggestions on striving for patience. Therefore, we will give an example that we see. The first is holding on to too much cash or money market because one thinks the market will go down. None of us know where the market will be at any point in the future. Most investors will admit that earning zero will not meet their long-term objectives. We believe instead, you should analyze, value and match long-term funds with long-term investments, while preparing for short term cash needs with short term investments. Another example is holding too much of a single company stock because you do not know of any other investments that can “out perform” it. This is a convenient excuse to forget about the downside implications, because we all know concentration risk can lead to devastating results. We believe that investing is not a race to outperform everyone; instead it is an exhibition to align your portfolio to have a better chance at reaching your long term objectives.
Wooden described intentness as your determination to stay on your course no matter how fearsome the course may become. This is similar to the “never give in” that you hear from many others. You should expect to face challenges in your investment strategy.
These characteristics combined remind us that markets and the comments regarding them seem to act as though it were a bucking bull trying to knock the cowboy/investor off course. Trying as hard as they can to convince the investor that the purchase or the transaction they just made is a big mistake.
We know that solutions to the oil explosion in the Gulf will require many of the characteristics that Wooden promotes. Our thoughts and prayers go out to everyone affected by the situation, and we are hopeful for as speedy of a recovery as possible.
See you next time.
James Pope
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