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This year has been an exercise in patience in many ways. The market fell to near catastrophic lows in March and many were questioning the very financial underpinnings of our society, and now less than nine months later we’ve been climbing a wall of worry in the great bull market bounce in history.
As I enter my 2nd decade in the asset management business, this year has been a test of lessons learned. As many of my friends and readers know, I was part of a tech-only fund during the greatest bull market in history, and the subsequent bursting of that bubble. It was, quite literally, the best and worst industry segment to specialize in at the time.
Back then, I told myself that the most important thing to take away from the Great Bull and subsequent burst was that you have to avoid making the same mistakes twice. My partners and I got a lot of things right back then, but we certainly weren’t perfect. In retrospect, we should’ve sold almost everything much sooner than we did (a mistake we shared with seemingly everyone else in the market) and then we should’ve been more aggressive buying off the lows (again a common mistake, but not as broadly felt).
Fast forward to the last 2+ years. In addition to being a lot more mature and seasoned, I’m also no longer solely focused on one sector. While my background was information technology, and that remains a passion for me, I’ve been a generalist for almost six years. It’s been incredibly rewarding and, frankly, kept my partners and I sane. There are times (like this year) when tech is the place to be, but there are also plenty of times when you want to be exposed to and overweight other sectors.
The last nine months have been a study in discipline. I’m, by nature, a long-term thinker. My partners and I prefer to take long-term views of secular trends, and then find great companies with solid fundamentals that will serve us well over years — not months, days, minutes or seconds as many of my investor brethren seem to prefer. But having an eye for secular trends is not always the easiest road to travel.
On a SECULAR basis, I’m as bearish as I was a year ago. I share many of the same concerns that friends like Gregor and Roger do. Ballooning sovereign debt levels, runaway printing presses for most currencies, maturing populations, scarce resources and an impossibly difficult push/pull between deflation and hyper inflation are but a few issues looming. But investing strictly on the concerns I have longer term would’ve been disastrous this year.
You HAVE to keep perspective and understand that cyclical forces can drive powerful returns, even in the midst of a clear-as-day secular crisis. It’s never easy, and at some point we’ll all have to decide if it’s again time to batten down the hatches. But 2009 will be a time when focusing on shorter duration inputs made you money, whereas longer term secular views would’ve likely crushed you.
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