Wednesday, December 5, 2018

Agonizing Investor - You are not alone!

It seems like investing is such a black & white thing. We show such a façade of confidence to the world. But what is really going on behind that façade?  Below is some of my current 'back-and-forth' thinking.

We don’t know the future. On TV and in the news paper you meet a never-ending stream of experts who know exactly how the future unfolds. Then there are those that trade large volumes based on mathematical algorithms, after all they calculate the future or at least the probabilities of various futures. The math is beyond me. 

In the meantime, during corrections and bear markets like we experience today, I and many others look at the depressing prices our assets are valued at. Is the value real and were we wrong?  How come the others seem to know so much more? When you live on top of all this fake-prognostication in Calgary, apparently the epicentre of Canada’s disastrous liberal politics, it is hard to stay optimistic and believe in the future. Alberta is pissed!  Yes that is certain!

Look at the bright side!  Stocks are on sale and they are dirt cheap!  Then why is nobody buying?  Is this a rational and efficient market?  I doubt it very much. I may be a believer of selling high quality services for a fair price, but many clients put work out for bid and in the end, it goes for the cheapest and most worthless. Who needs clients like that? They never will be successful. So, you win the bid this week and you don’t enjoy working for a cheap skate who doesn’t have pride in its own performance but who only cares as long as it is cheap!

But then, don’t I do the same when building my new house?  I look for a fridge and no, I don’t buy the cheapest one on the market. Instead I buy the one I want for the lowest price and then the final decision still depends on the pricing of the entire appliance package.  So, I save a few thousand; do I get the service from the seller that I crave? And… is the price difference meaningful? 

Should I go for an IKEA kitchen or a custom-made one at double the price?  I may not even get value, but do I upset the builder’s relationship with his suppliers?   Is it worth to worry about $5000 if the total project is $600,000? Is it even worth the grieve? Yet, I have to show the builder that pricing matters to me. That my pockets are not bottomless so going through these moments of penny-pinching are worth it after all?

The same with investing in stocks. Does it matter if you buy at the cheapest possible price? Should you embrace the blackness of the market? Yet, over time your performance will even out as long as you buy a good company that lasts for decades with ever growing earnings?  But commodities are not like that!  Nor are most companies around for ever. Buy and hold works only for Warren Buffett stocks, but now even Warren has invested in high tech - a business he claimed he didn’t understand.

What is right and what is the wrong investment decision?  Even if you are right; the market can be longer wrong than your pockets are deep!  Who says investing is easy? Maybe investing in long term market index ETFs and not trying to outsmart the market is the best thing to do.  But then, I like to know what I invest in and I am kind of a market groupie and… it is so difficult to let active management go!   I don’t think driverless cars are for me… but then again…

The good news is that my house will be finished in a few months. Thank the Lord at least I can enjoy living there. Spending every month tens of thousands makes me nervous. Can I afford all that?  Maybe I should sell everything but the market is so depressed....

I hope reading this makes you feel better :)

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