Wash the Car

These are anxiety inducing times in the markets. Both the glass half-empty and glass half-full camps have plenty of data to support their respective narratives, and when a path forward is uncertain, anxiety naturally develops. A psychiatrist friend advised anxiety ridden patients to wash the car, clean the house, do laundry, re-arrange the furniture, anything that might be positive and wouldn’t be permanent when they were feeling out of control. Brené Brown is something of a self-help guru who advises folks to embrace the vulnerability and fragility of life. She points out that our lives can be forever changed the next time the phone rings and in profoundly unexpected ways. I think it’s great advice but not practical every day. I can’t go through every errand in my car trying to focus on my vulnerability and fragility. In fact, I get through a lot of life by ignoring those fragile things and focusing on my goals. I’m very familiar with the need to do something or anything at times of crisis.

My doctor friend explains the need to do something emerges at about age two when the toddler becomes aware that he or she isn’t in control of the world. One begins to observe the child arranging stuffed animals in chairs around a little table and giving some treats or toys while sternly saying no to others and taking away toys or treats from the other animals. Some of this is mimicking parental behavior, but some is exercising control and dominating a pretend world that the child can control.

When markets or the economy or world doesn’t make sense and when troubles befall us, there is a reflex to do something. Take control. Reestablish dominance over the world by taking action. The big problem is that actions taken in haste to stem temporary discomfort to make us feel more secure, often have long-lasting, sometimes negative consequences. The classic example is selling all one’s stocks at the market bottom.

If one invests for the long-term, then short-term occurrences should not change long-term, well-thought, disciplined strategies.

My long-time friend and hedge fund manager Doug Kass from Seabreeze partners told me that this year’s market is one of the most difficult of his career. The NASDAQ 100 have rallied 50% off its December 2022 lows. Inflation was over 9% a year ago and is only 5% now. Japan’s Nikkei stock index just made a 33 year high. Shares of Apple just made a new high. Unemployment is about 3.5%, so there are a lot of things that are going pretty well with the world. Glass half full. On the other hand, we have a debt ceiling crisis, bank failures, rising interest rates and half of all working Americans report living paycheck to paycheck with few if any cash reserves. Credit card balances are soaring, and middle- and lower-income Americans are hurting despite earning more. Glass half empty.

My wonderful partner and friend John Washington would have been 103 this week. He died at age 99 just a couple of months before his 100^th birthday. He was a brilliant person and brilliant investor. John advised buying excellent companies and never selling them. Masterful inactivity and benign neglect were John’s only-somewhat tongue-in-cheek prescription for successful investing. A portfolio of strong well-capitalized, well-managed companies should increase in size and profitability as the economy expands. John said that a lot of buying and selling of stocks interrupted the process of participating in a steady economic increase over time. On top of that, he warned, you’ll just end up paying a lot of capital gains taxes and transaction fees.

The debt ceiling crisis, rate of inflation, war in Ukraine and other troublesome issues fill the headlines and disrupt too many of our otherwise quiet, peaceful moments. A line from a poem I like says, “And whether or not it is clear to you, no doubt the universe is unfolding as it should.” Don’t you love that? I’ll add a paraphrase: whether or not it is evident, America is moving forward in spite of stumbles and wrong turns as it always has, and corporate America is continuing along its slow steady, long-term trajectory higher.

This is not an easy time and headlines are troubling. We will get through it, and all of us at Farr, Miller & Washington are here to help. We will carry on steadily, doggedly, and dispassionately in pursuit of our clients’ interests. Don’t hesitate to call anytime. If I don’t answer immediately, I’m probably out washing the car.