Soon, once again, the growing but distant drum beat of economic sluggishness is about to captivate the airwaves. The intensity of the nattering class, tasked with forecasting the combined value of a diverse group of the largest companies in the world, will only intensify. The shrill indignation that investors continue to be more positive (too positive!) on some companies than others is… getting boring.
In other words, all is normal in the world. I would suggest enjoying the rest of the summer, nothing to report, carry on!
It is a well-known trick of letter writers, reporters, and strategists (whom I call bingo barkers), when prophesizing on all things economic– to be negative; to focus on the problems, to project what could go wrong makes one look smart.
We have a simpler job. We must only decide which companies are the most likely to succeed over a reasonable timeframe of many years based on the attractiveness of the things they produce and sell to millions, if not billions of customers. We find companies especially attractive if their customers keep coming back to buy more stuff on a recurring or regular basis because 1.) Once it’s bought it’s consumed, and 2.) The goods and services these companies produce keep getting better.
It all sounds simple and logical, and it is! It’s simple to invest in great companies, it’s just not easy. It’s not easy because so many times there are so many compelling reasons to change strategy. It’s especially easy to change strategy when you are ‘up good money’. It becomes really compelling to change strategy when everyone is saying bad times are around the corner.
We all know how lousy it feels to see our portfolios drop, as they tend to do when enough people change their strategies.
Presently, investors are cheering (and ignoring the bears) that inflation is falling and that soon interest rates will fall too. Goldilocks is falling inflation, falling interest rates, rising wages and rising sales. In most parts that is what we have today. This is why investors are enthusiastic.
Some of the most respected strategists (bingo barkers) on Wall Street have recently quit, been fired, or given up trying to persuade the world of their pessimistic visions. In Darwinian terms, the bears are approaching extinction.
When I was a young boy, I sang in the school choir and one of the hymns I recall is All Things Bright and Beautiful. The first verse comes to mind today as I write this.
All things bright and beautiful,
All creatures great and small,
All things wise and wonderful,
The Lord God made them all.
The world needs bears. We should not rejoice in the fall of the bear. Bears play an important part in our ecosystem. They spread the seeds and nitrogen in the forest and streams where they hunt salmon, they spread the deer far and wide stopping overindulgence in any one area.
Stock market bears spread the seeds and nutrients that have blessed us with these results we enjoy today. Bears likewise stop overindulging bulls, something we should be mindful of today.
I poke the bear in jest, not out of a lack of respect. I poke the bear because frankly there are too many bulls and from what I know of bulls, they like to do things that are not always pleasant. Too many bulls in the ring can be dangerous too.
John O'Connell
