Investing is not a sport.
In Laurence Fink's (CEO of Black Rock, the worlds largest asset management company) letter to the CEO's of the S&P 500 companies (earlier this week) he suggested that :
“Investors need to focus on long-term strategies and long-term outcomes,” Mr. Fink said, suggesting we’re currently living in a “gambling society.”
It irks me to hear the media pandering to this gambling mentality.
Investing is not about the stock markets performance over 1 day, 1 week or even 1 year. Anybody who purchases stock in a company and expects immediate gratification is gambling.
Gambling is not investing.
“The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” Mr. Fink writes in the letter. He says that such moves were being done at the expense of investing in “innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth.”
US companies spent nearly $1 trillion on stock buy-backs and dividends last year under shareholder pressure for price appreciation and short-term gains.
More buying of shares drives prices higher in the short-term but has the ability to push valuations to unrealistic levels.
Share prices reached unrealistic levels in 2000 and 2008.
We certainly know what followed.
Sadly and unfortunately, our thirst for "at the moment" information leaves us tuned in to those who make their living by selling that information. It can be addicting. They want it to be. Increased readership / listenership brings advertising revenue. Churning short-term news keeps folks "tuned in".
When I tune in to 680 (Toronto's "all news" radio station) for "traffic and weather together" (useful and practical information) and get the "business report" that suggests that a financial market had a "winning" or "losing" day (useless information) ...
I turn it off.
Investing and the management of wealth are about setting and achieving long-term goals. The daily fluctuations (volatility) can and may be unnerving. That is why a good wealth manager is there to help you focus on those goals.
The day to day, week to week, month to month, quarter to quarter stuff is just noise.
The idea of "rockstar" portfolio management (how did they perform this quarter?) is short-term noise.
Turn it off.
Focus on your long-term goals.
Let me know.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist