A few things today to close out the weekend.
The first is from Morgan Housel who posted about an idea that definitely resonates with me which is the importance of not caring. He focused on investing but I think it has broader implications too. At a high level this could be the ability to not care about appearing to be wrong occasionally in the name of portfolio discipline. Value investing has struggled for quite awhile when compared to growth. Value investing is clearly a valid concept but no investment concept can always be the best. Value is not permanently broken, at some point it will outperform for a time and then swing back to lagging for a time. It is no more or less valid when it is doing well or doing poorly. Here not caring really is not worrying that value might be permanently broken, this is a difficult run for those folks but abandoning a valid strategy because it is lagging will often lead to performance chasing and that usually ends badly.
I've written a lot of posts since last May of my belief that a bear market had started. Since then I've joked many times about when my belief appeared to be right and when it appeared to be wrong. Wrong again for now I guess and I don't care. I forgot to post that last Monday I sold our position in Pro Shares Short S&P 500 (SH) as it had been a few days that the index took back its 200 day moving average. A couple of days prior, our position in Pacer Trend Pilot Large Cap (PTLC) re-equitized. Both events increased the extent to which we are net long but still have TAIL (a fund that owns puts) and BTAL (a long short fund that can go up when the market goes up). My call I guess is wrong but I am sticking to my investment process which is more important than caring about being right.
Another form of not caring where investing is concerned relates to choosing individual stocks for the long term. Many clients have owned Northrup Grumman (NOC), this holding goes back to when I first hung my shingle as an RIA in 2004. If you compare NOC to other defense stocks over varying periods of time you'll see periods where it outperformed and others where it lagged. Since I first bought it back then, Yahoo Finance shows it up over 500% on a price basis which is a little behind Lockheed Martin (LMT). I don't care about the slight lag to LMT, the more important thing is that both are up 500+% versus 144% for the S&P 500 on a price basis.
There are also lifestyle implications to not caring. Trying to keep up with neighbors, friends or relatives is a behavior that ruins many financial plans. Keeping up with other people is the exact opposite of living below your means and living below your means will make every other aspect of your life easier. Additionally, you have no idea what your neighbor with the huge house and two new cars is going through to maintain all that. We have all known people who appeared to be living the high life to only see it implode in ruin. I've said this before, if someone appears to be obviously more successful than me I assume they work harder than me, are smarter than me, are luckier than me (yes, luck matters) or some combination of the three. If you are able to pay the bills and set some aside for the future with a little left over for some fun then you're doing very well, who cares about the others (in an envy context, obviously I care about peoples' well-being).
Someone (maybe Nassim Taleb?) Tweeted something out about the stoic, Seneca. I was curious so I found this primer on who he was and a couple of the things he was known for. One quote from him was*“*Believe me it is better to understand the balance-sheet of one’s own life than of the corn trade.” To me this is about priorities. When you can figure out who you are and what is important to you it then becomes possible to live, work and save toward the right outcome, more bluntly you won't waste time pursuit of the wrong (for you) outcome. I gave up wanting to "be rich" in my mid-20's which allowed me to live what I think is an unique and interesting life up to this point versus toiling away in an office tower in a big city for 65 hours a week.
The way I interpreted that first one has a lot of overlap with “We are not given a short life but we make it short, and we are not Ill-supplied but wasteful of it.” There is a balance between paying your dues in your 20's to gain experience and build a financial base and finding yourself at 60 and having wished away much of your life to get to the weekend and then to retirement. Dues paid notwithstanding, this makes for a rough existence.
Finally, a little personal news. On Sunday I passed my 17th pack test. This is the fitness requirement to be able to fight wildland fires, pretty much my hobby as a volunteer firefighter. The pack test calls for going three miles in 45 minutes or less while wearing a 45 pound pack (we use weight vests). My time in this is always ordinary but in keeping with this post, I don't care. The test is pass/fail, it doesn't help to do it in 38 minutes, 44:48 is just as good. The way I brief on this every year to the group is to say that more than your time, what is important is how you recover. If you're laying on the couch three days later unable to move because you're so sore, how much fun will you be able to have fighting a fire? My recovery is strong and quick and I do care about that. Caring about your time is a function of ego similar to caring about your neighbor pulling into his driveway with a sweet new G-Wagon (or whatever vehicle moves the needle for you).