"In the real world, things fluctuate between 'pretty good' and 'not so hot,' but in investing, perception often swings from 'flawless' to 'hopeless.'" - Howard Marks
Howard Marks is an American investor and writer. His periodic memos are a must read within this industry. I have learned much from his content over the years.
Recently, when asked about the sudden market collapse experienced during the first week of August, followed by an almost equally dramatic advance back to market highs, he reflected on the above observation from a memo he wrote in 2016.
The values of markets and their underlying securities are highly volatile because they are subject to the mood swings of investors. As such, short term values tend to irrationally oscillate between “flawless” and “hopeless”.
As investors we must be prepared to endure these mood swings, as they are inevitable and frequent. Those that have remained steadfast within the guardrails of “pretty good” and “not so hot” as it relates to their investing sensibilities, tend to have the fortitude to ride out the mood swings – With history as our guide, such pragmatism has been greatly rewarded by the long term advance of the equity markets.
At the risk of this quote commentary morphing into an essay, I feel compelled to expand the realm of this observation by Mr. Marks beyond just that of investing. Almost every aspect of life today seems to be over sensationalized. With so much demand on our attention spans, “flawless” and “hopeless” gets clicks.
Hence, more and more of everyday life decisions are being contemplated under chronic duress. This threatens to keep us in an almost constant state of fight or flight. While grace under pressure is a necessary and useful skillset, it should be reserved for the occasional crisis, not the everyday decision.
We don’t have to look too hard to find societal examples of this. Just about every news topic, including sports, is rarely presented devoid of conflict, outrage, or scandal – yet another dire crisis to be feared. Clearly, the forthcoming election is the most hyperbolic topic du jour. Come November 6th, we will move on, adapt and prosper as we always have. Although it may not seem like it in the moment, reality almost always resides somewhere between sunshine and rainbows, and the end of the world as we know it.
So, what is one to do? I don’t claim to have a universal answer, but it seems to me that a starting point is where we began this commentary. Life, like investing, will have its ups and downs. In the same vein, if most of the time we can filter out the extremes and keep our psyches within the realm of “pretty good” to “not so hot”, it would almost certainly assure a more balanced and enjoyable journey. As surmised above in the context of investing, I suspect such pragmatism will also be rewarded over the long term – by allowing each of us to define and live our own best life.