Not a Confused Capitalist at all
Some terrific advice from Jay Walker, the Confused Capitalist in today's post. Jay portrays himself as being confused, but seems to come up with a great deal of sage advice.
Appropriate to the Omaha weekend celebration of value investing is today's post where Jay highlights the wisdom of Tom Stanley.
Most of us realize that we have to be different in order to achieve different results, but the behavioral weakness that many of us have, or a vigilent supervisor or manager, compels us to try to fit in. It's just a hell of a lot easier to be a lemming than a "misfit."
I can recall one investment strategist telling me post 1987 crash how he still had faith in the consumer and was weighting the retail sector at 5% rather than the S&P's 3.5%. When I admitted that I had 25% of the portfolio in retail, he went ashen. He told me that I was reckless.
The need to think differently just for the sake of being different is just as foolhardy. Have a rationale for your thinking, not just a bravado. The notion of long term horizons is also important. Almost every contrarian looks like an idiot for the near term. Wealth is built over the long term, not by settlement day. Almost every really good idea I have had in 25 years of portfolio management and unfortunately I think there were perhaps five, resulted in immediate loss of capital, clients, or the threat of a loss of my job. The stupid ideas tend to blow by quickly...always sell them when you recognize your fallacy. The great ones take time and some of them are still ripening as we speak.
Long term profitability can be much easier to forecast than what next quarter will be. Yet Wall Street, Bay Street, and every other den of capital iniquity (or un-equity) focuses on what that next quarter and maybe year will look like. Project a return on invested capital for businesses that truly have a competitive advantage...don't bother getting out your calculator for those that don't.
Have a great weekend and if you're in Omaha, maybe we'll run into each other.