Do You Believe? Really?

My grandfather (and hero) Michael Keogh used to say that if faced with a complex problem, do the right thing. He assured me that whatever the circumstances I would always be able to discern the morally correct answer. He advised that the right thing to do would seldom be the easiest thing to do, but I would be well served in life by making that right, if perhaps harder, choice.

The inner intuitive compass of right or wrong, true or false, savior or sham is often buffaloed into silence by the noise of the day, the blatherers and charlatans who would prefer to mislead us in their self-serving direction.

Investing is as much art as science, and a large part of the art is sifting through the noise and applying the quieter, simpler wisdom that tells if something is or is not credible.

Naturally optimistic, I’m uncharacteristically struggling to embrace the reports of rosy economic recovery and smooth sailing hereafter. Corporate earnings are greatly improving, manufacturing activity has surged, employment seems to be gaining traction, inflation is reportedly not a problem, and the stock market only goes up. All of this truly good news is not finding any traction with my inner compass.

Malcolm Gladwell wrote a book called Blink. In it he lauds and advocates the veracity and importance of our non-verbal judgment that is a compilation of our intelligence and life experience. Gladwell says that people are inclined to mistrust things that are difficult to articulate. If one is faced with a conflict between one’s misgivings and data, one is more likely to trust data. Gladwell says that this is a mistake.

Bill Dunkelburg heads the National Federation of Independent Business and is a very smart man. This week’s NFIB survey of small business trends concludes: “Optimism faded, and is still at recession levels. Maybe it’s a “new normal”, maybe we won’t see the surges we used to see at the start of a recovery. Times are different, government is a larger drag all the time. It wants more taxes and imposes more restrictions. New York has a new bureaucracy to help new restaurant owners get through the bureaucracy. How insane. Uncertainty is huge and it clouds the future. Leadership doesn’t do things that make sense to those who create jobs and wealth, only to those who take it. Inflation is coming back, too soon with so much slack in the economy.”

As I sort through overwhelming amounts of data and research on a daily basis, I read a paragraph like Bill’s and think, “Damn, that really makes sense! That’s the way I feel.”

Your doubting-Thomas portfolio manager will continue to stick to my guns in reliance on what very simply makes sense to very simple me. While we are making money, it could certainly be more if I could persuade myself that the necessary risk might be worth it. In the end, I can’t. My caution is growing long in the tooth, but I expect it will be rewarded. Grand Dad hasn’t failed me yet.

Hang in there,

Peace,

Michael