There are no permanent trends, only permanent preparations - Lazy Investing Way

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Tuesday, April 04, 2017

There are no permanent trends, only permanent preparations


There is no shortage of pundits, experts, gurus and self-proclaimed prophets ready and willing to bombard us with dire forecasts of the future. There is really no specific good or bad news, it is our perspective of it that matters.

Right now, I’ll be a doom-gloom prophet and tell you that right now there is a trend of dissent by the people towards their governments. People are choosing the “devil” they don’t know rather than the “devil” they do know. We can see this from Brexit and the election results in the US. Perhaps people have become tired of the status quo politics with the corresponding graft and corruption.

Perhaps we can even trace the tipping point during the global economic meltdown which began in 2007; wherein government was supposed to fix the problem, and yet even now we are still seeing it’s effects as some countries are still reeling from it like Italy, Germany, Spain which will also have upcoming elections which may cause some shockwaves around the world!

Humans by nature are pessimistic, expecting negative trends to continue based on the past and the present. Neither good times nor bad times last forever (Walang Forever!), but we always seem to ignore that fact.


As an investor, we have to constantly remind ourselves of this fact. Governments do not “Fully-control” the economy although they do have the ability to provide directions with regards to support and regulation. We also have to repeatedly tell ourselves that our current “Free Market Economy” is driven by economic forces of supply and demand. What matters most therefore is the attitude of businesses, and consumers.

In the Berkshire Hathaway 1994 annual report, Warren Buffett wrote something that has contributed to my general thinking about investing to this day.

“We will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. But surprise: None of these blockbuster events made even the slightest dent in Ben Graham's investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist."

I believe investors obsess about things that although scary, do not have a direct long-term impact on their specific portfolios, but only their short-term attitudes about them. Of course there is still opportunity in the short term for traders for positioning.

To be invested in the long term, do not look at the chaos of politics but rather look at the state of health of the company stocks you own.

With Warren’s statement, this truly reinforces my belief that there are no permanent trends, only permanent preparations.


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The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
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Originally Published in Philstar - The Freeman Newspaper last March 21, 2017.

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