Worth noting here that within both these documents, the word "freedom" only shows up once, in the First Amendment: "Congress shall make no law ... abridging the freedom of speech, or of the press."
These two documents, built on compromise and sacrifice, shape and form our country's intangible assets of "life, liberty and pursuit of happiness" and the tangible assets of a democratically elected government with built in tensions on account of "balance" between three independent branches. They formed our country as a new experiment and provided a road map for other people's pursuit of self governance.
I've served on a few boards (coop, PTA, sports leagues) and just those small cases reveal how hard is self-governance but also how tension and conflict can lead to better decision making.
How each generation resolves those tensions is how we measure up or fall short from any guidepost of american exceptionalism. I see no better example of how far we are falling short than the hilarious / hideous video of wealthy white people screaming at and screaming past each other in a neighborhood aptly named "The Villages". It sums up what seems to be a zeitgeist of national schizophrenia.
I've learned a bit about that disease reading my friend Bob Kolker's book "Hidden Valley Road" (highly recommended). He writes early on: "Schizophrenia is not about multiple personalities. It is about walling oneself off from consciousness, first slowly and then all at once, until you are no longer accessing anything that others accept as real." It is a sad and debilitating disease.
I understand the Constitutional Convention of 1787 had quite a great deal of conflict itself, comprised of the same white and wealthy demographic as "The Villages" (sans women), but at least our forefathers had a loftier goal in mind. The goal now seems solely "politics as circus."
The modern day Village is a dark and dysfunctional place, lacking respect and full of contempt, egged on by those whose sole incentive is to fan their followers' emotions with little regard for long term resolution. All of this is a luxury we can ill afford at present and is certainly not a sustainable foundation for healthy governance.
***
Oh but those emails ...
I was never much favorable to Madame Secretary until a friend of ours and fan of hers asked in 2016 to have a conversation to re-assess my views. I will always welcome a conversation of self reflection, (especially about stocks), and I came away with a reformed view on how much gender bias shaped my perception.
Here was a woman from a fairly conservative family, raised in the 50's and early 60's, smart, precocious and ambitious at an early age, likely aware and reinforced that for a woman to get ahead, she simply can't show emotion. And so she didn't, not through all of the shit thrown at her, deservedly or not, over the last 30-years.
Rather, she was steely and tough. She hid from view or suppressed as best she could any vulnerability. I came to view her as a modern day Marlboro Man, the strong, silent mythological male (in modern times, that silence hides the dysfunction of someone who can't access their feelings). In her case, I think it created an incongruency in what we normally expect from a woman.
I don't know if she would have won if she were a man - her campaign had issues on its own - but I'm confident she would have been more accessible in conforming with people's expectations. Coincidentally, we ended up with male president who almost comically doesn't show vulnerability and has the dysfunction of someone unable to access their feelings. But hey, he puts on a good show, a recurring victory of style over substance.
***
I didn't intend to go off on this tangent so let me return to the matter at hand, the small adventure that is the market since March. I wrote early into this crisis in a letter to clients ...
The sun will set tonight and rise tomorrow and eventually calm will prevail again in the markets. For this reason I have been putting cash to work adding to existing holdings or buying other well positioned companies that fit our investment profile. In three years time, I think there will still be consumers and entrepreneurs; franchises seeking to recycle and compost waste; hospitals in need of outsourced IT services; there will still be credit card transactions; and airports and weather; etc.
The old saying “you know who’s swimming naked when the tide goes out” comes to mind, as this decline may reveal which businesses and what funds are over leveraged, over margined and unsustainable. But skinny dipping is fun and I don't want to pick on it.
As we think about the beach, I'd rather remind bathers - beclothed and bare - how to survive a ripcurrent. I imagine getting pulled past the break might be terrifying but the worst thing to do is panic. Either swim parallel to shore, or tread water and float since the circular nature of the current may shortly return you to shore.
... and lo, for those who did nothing, the market brought us back close to where we started.
Painfully, this hasn't been the case to date for the small companies in our portfolio. "Ours" means mine and my clients, my wife's, our friends, my sister's retirement savings, the institutions and individuals who entrusted me with stewardship of their assets, all totalling roughly $5M in AUM at the beginning of the year that has diminished on paper by roughly 20% as of this writing. It's a hard feeling to underperform. Navigating the analytical vs emotional process is part of the parcel.
Our portfolio is skewed towards services companies, which are asset lite and have operating leverage. They solve important problems for their customers such as cyber-security planning, nurse staffing or managing waste streams. "Man hour labor" businesses tend to lead cycles; first in / first out. They have the capital to survive and while patience is trying at times, I am a long term investor in sound businesses at reasonable valuations. I expect they will endure and grow in time.
Through this adventure I've been thinking about one of my favorite stories of survival, that of John Aldridge, the local Long Island lobsterman swept off his boat in the middle of the night and 40 miles at sea.
As I re-read that, it got me thinking about stories of people getting lost, which is akin to the feeling I get trying to make sense of this market that is supported by QE^n and the never ending stimulus. I feel lost trying to reconcile market valuations with municipal budgets, declining GDP and missed mortgage payments, etc. (Here is a funny blogpost by Frank Martin who also trying to make sense of it all).
I read about Geraldine Largay who got lost and died in her tent not far from the trail and less than 200 miles from the end of the Appalachian Trail. I remembered reading about two teenagers who got lost and died when they were overcome by a fogbank while kayaking off the coast of Nantucket. It eventually inspired a book about navigation by Harvard physicist John Huth who was coincidentally lost in the same fogbank but survived. And the story of four tourists travelling in the US in 1996 that got lost in Death Valley National Monument and how their remains were eventually found.
There is a recurring tendency for people who are lost to panic, to seek action, to move. And then, either b/c one leg is shorter than the other or there they are not paying attention, they end up walking in circles.
The key is that when you're lost, you don't panic. The Boy Scouts teach "STOP" (Stay calm, Think, Observe, Plan). Why would someone need to be reminded to think? B/c gripped by panic, it's usually the first thing to go, and if you can't think, you won’t be able to find a reference point to re-orient or work your way out of the problem.
One way I've found to work my way out of the problem of the market adventure is to find new ideas. I'll spare the trouble of re-writing what others have done so well and suggest reading about $SMIT by @Deep Value Observer on twitter (I thought I was one of only people in the world watching that stock) or the MicroCapClub forum on $LSYN (I agree mgmt stinks but the podcast business continues to grow and activists are still engaged; what could this look like with a competent CEO?).
I also go on my own adventures and take day hikes up in and around nature. It is as accessible as the outdoors and with summer foliage even city parks offer lush vantages that hide the presence of man.
The Patient Investor's family recently took a day hike up in the Adirondacks. Walking through a wooded trail, climbing a summit, focused only on the surround sound of nature and the placement of the next footstep, it was easy to access a sense that we are all working for something bigger and grander than ourselves.
It's a universal feeling I think, but one too often tethered to a cause or belief. As comforting as certainty may feel, once we cling to it, we are anchored to an idea that can crowd out reason and create new biases. Uncertainty in contrast, a base principle of science and investing, is a bit harder to pin down. But learning to live with it and the knowledge that maybe we are all a little lost at times is itself a victory of substance over style.
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ALL RIGHTS RESERVED. PAST HISTORY IS NO GUARANTEE OF PRIOR RETURNS. THIS IS NOT A SOLICITATION FOR BUSINESS NOR A RECOMMENDATION TO BUY OR SELL SECURITIES. I HAVE NO ASSURANCES THAT INFORMATION IS CORRECT NOR DO I HAVE ANY OBLIGATION TO UPDATE READERS ON ANY CHANGES TO AN INVESTMENT THESIS IN THE COMPANIES MENTIONED HERE, WHICH I MAY OWN.
