Business, Value Investing

A Buffett Disciple On What To Do About Market Turmoil

A Buffett Disciple On What To Do About Market Turmoil by Guy Spier, Observer

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“Back in the day” is an expression I had not heard until I came to Wall Street. To me, it denotes the speaker’s harking back to prior time. A golden age. A time when things were getting better, and what we lacked in experience was made up for by a generally benign and improving environment.

But that it is emphatically not where we find ourselves today. Today life in the markets is hard. Stocks are volatile, and mainly in a downward direction. For the last five years, the world’s Central banks have sloshed vast sums of money into the system, but seemingly to no avail. Because we are most certainly “not out of the woods.” China’s growth seems stalled, commodities are in the tank and uncertainty and loss lurk on every corner, waiting to mug us unsuspecting “babes in the wood.” That is, unless you were smart enough to have bought your own piece of Silicon Valley nirvana in the form of Apple, Amazon, Google and Facebook.

For my part, I wasn’t.

And so we are left with a rush of commentary and analysis that seems to jump out from everywhere. Sometimes I think that more than half the emails in my inbox come from one pundit or another, each one ready with his explanation and what to do about it.

And so what then must we do about our gyrating portfolio values?

A couple of decades ago, the compulsion to do something in my portfolio to “fix things” would have been irresistible: Depending on which combination of commentary and analysis I was most exposed to, I would have wanted to do something like buy portfolio insurance, rotate out of commodities, or find some way to scale into some over-valued and over-hyped sector. Most likely, the panacea would have been a combination of all of these and more.

But that was before I read the Intelligent Investor, invested in Berkshire Hathaway and met Warren Buffett.

Now I know that the best thing to do would be to put the screaming headlines and the rewarmed market commentary aside and simply go for a long walk. Preferably with a dog, or some other good friend, leaving the portfolio entirely alone.

But while I know that this is the right course of action for me, I still find it hard to do. Harder than I ought to find it, given how I have immersed myself in the Graham-Buffett-Munger-Pabrai philosophy of investing and life.

Why is that?

The simple reason is that I have not constructed the best possible environment for myself. Because my repeated experience has been that, no matter how smart I am (or think I am), environment trumps intellect.

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A Buffett Disciple On What To Do About Market Turmoil