Friday, June 21, 2013
What's Interesting About This?
I'm going to write about money again. I don't want to bore you, though.
Also, I don't want you to think that I'm posing as a financial genius or expert, because we all know that's not true. But, obviously, I think I have something of value to say.
So let me just get it right out there. CAVEAT:
I'm going talk about what I have learned, and I am not going to talk about what I don't know--which is a lot. (For example, I don't know much at all about bonds, except that they're low-risk and low-returns. I don't have a great understanding of dividends, but I think they don't contribute as significantly to my bottom line as returns on stocks; and I've read that dividends aren't necessarily great indicators of how well a company is doing, but I could be wrong about that. Now you know as much as I do about dividends, and probably a lot more.)
That was boring. What's interesting?
A fantastic read for non-business types like ourselves is The Biography of Steve Jobs, which is also a history of Silicon Valley and of computers, of Hewlett Packard and IBM, of Microsoft and Apple, of Pixar and Disney...etc.
Despite that, it's fantastically interesting.
By the end, when Bill Gates visits a dying Steve Jobs for the last time, it's like France and England meeting in a field at the end of the War of the Roses. (What? You hate history, too?)
They're all like, "Well, cousin, we've had a good run of it, haven't we? How's my sister?" "Fine, fine. How's my mother?" "Feeling her age, these days. She just turned twenty-seven the other day." "Oh, yeah. We're none of us getting any younger."
It dawns on you: they're not just the Titans of Capitalism that they are. In some archetypal sense, they are brothers. Cut from the same cloth. Different, rivals, but more alike than almost anyone else on the planet.
What else is interesting?
The stock market--The Dow, Nasdaq, whatever--it's kind of like society's collective mood. I wanted to say subconscious, but it's kind of conscious. Maybe not. It's collective, at least.
One report says one thing and we all start worrying and speculating and selling off shares. Or, it's Friday and Steve Bernanke is wearing a green tie, so everyone rejoices and the market goes up.
It's a big giant mood ring. Apparently, we're all cyclothymic, and sometimes much further up on the bipolar spectrum.
During last fall's fiscal cliff brouhaha, the market went up or down depending on whether John Boehner was implying that the Republicans might be close to some kind of compromise. Usually, he would offer a thin slice of hope on Thursday.
They do not want us going into the weekend feeling downcast about our investments. I suspect they pull a rabbit out of their hats on Friday so we can go into the weekend feeling solvent, ready to rejuvenate the economy.
If the market is down on a Friday, something real could be happening. It could be an Act of God, beyond the scope of human manipulation.
On Monday, the market typically slouches or slumps, as we do.
What else is interesting?
There is a Taoist aspect to investment management. (Remember, we're not talking about LOTS of money, we're talking about 401ks and IRA's and that sort of thing.)
What is Taoist about it?
As in the martial arts, you have to assume a posture in which your knees are slightly bent for greater agility. Agility serves you well as an investor.
You have to be in the moment.
You have to know when to make your move.
You can buy a lot of a stock when it's down, believing that the company, like Best Buy in 2012, will rise, phoenix-like from the ashes. Do you have faith in that company? Do you have faith in your own judgment? Do you have faith in your crystal ball?
Best Buy did rise in 2013. Its obit was published prematurely. (I sold too soon!)
What about J.C. Penney, huh? Hmm? Similar situation.
Interesting story. Best Buy was tanking. French CEO was brought in. Stock value did not reflect enormous confidence in his ability to turn things around. But apparently, he did. Stocks are up now and forming a wedge of positive regard.
J.C. Penney was circling the drain. They brought in the fellow behind the Apple stores to bring the look of J.C. Penney up to date, make it hip and cool, etc. Stocks rose on confidence in his ability to turn things around. He failed. Apple never did any market research, so neither did he. And that, as they say, is Greek tragedy.
In addition to your politics and your ethics and your values, your portfolio should reflect your personality. That's interesting!
Before you create a portfolio, consider: How much anxiety can you stand? How much time do you want to spend waiting for that big wave to come in? How much risk are you willing and able to assume, financially?
You can choose to surf the waves, picking stocks that go up and down, paying attention and buying and selling accordingly.
Or, you can fill your larder with those lovely big wedge stocks, like JNJ and PG. Over the years, the value of those shares steadily increases, such that a graph chart of a three-year period looks like a big wedge, with the high end on the right.
You can just walk away and leave those stocks alone for a good long time. They'll be fine.
So, to recap: Sometimes you have to wait a long time. But you have to know when to make your move. Unless you prefer to set yourself up with those big, reliable tortoises who will run the race without your constant supervision.
That's Taoism. Know thyself. (Is that Confucius? Nope. Wikipedia calls it a "Delphic maxim". Oh, well.)
Before I sign off, remember two things: It's just my opinion. And, no, I really don't want to manage your money. That's not where I'm going with this. I'm advocating that you can manage your own money. You can do it! Booyah!