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A View From Here March 2016

March 14, 2016 • Print This Article

"If I were to live my life over and could omit one thing, it would be worry. I spent so much time worrying about the next bad thing to happen and in the end, things always worked out all right' - Albert Wortsman

War of the Worlds Market

In the original War of The Worlds radio show recorded live on October 30, 1938, Orson Welles attempted to terrorize listeners into believing aliens were invading the planet. It became infamous for causing mass panic as a series of simulated news bulletins asserted that an invasion by Martians was currently in progress. Interestingly there wasn't a lot of mass hysteria at all, but rather a media push to suggest there was and the rest is history.* Things appear to be similar in the financial media these days with a steady stream of dire warnings despite economic data that hasn't been all that bad. The sheer amount of doom and gloom predictions I have witnessed in recent months has gone up tremendously and has successfully frightened the investing public. But how do any of these 'experts' know what is going to happen? Has anyone viewed their track record so that we know they are worthy commentators?

Throughout the previous decade there was a pundit who would regularly show up in the financial media (he still does from time to time) named Peter Schiff who forecasted economic terror. This video is one of the many highlights of his predictions that brought him out for a celebrity bow in 2009 only to be shuffled quickly off the field as things began to improve: https://www.youtube.com/watch?v=Z0YTY5TWtmU). While observing his proclamations, pay special attention to the stock market index at the top of the screen. With the benefit of hindsight we are aware that 10 years later despite a massive sell-off that followed, the markets are at much higher valuations. My point is - we should try not to take these people too seriously because fear appears to be a wasted emotion in business. The quote I use at the top of this month's View From Here is from a family member who I used to spend a time with. One of the things he used to say to me was, "Ask me anything - because I'm in the home stretch of my life." So I asked him, if you were to live your life over, what is the one thing you would omit? His answer was instantaneous: Worry.

The supporting cast of this radio show is concerned about oil, interest rates, China, Donald Trump and the constant standby, terrorism. In the case of oil, it stands to reason that lower is actually better. Common sense suggests that gasoline prices below $1.00/litre is a good thing for the economy, yet it has somehow viewed as a disaster. Low interest rates are seen as a source of cheaper capital with the purpose of spurring an economy. I recall a short time ago that there was genuine fear that rising interest rates would stymie an already fragile economy but now the concern is negative rates. The lack of growth in China omits the probability that nobody has ever been able to believe the data in the first place. While there might be a message in there somewhere, I am well aware that nobody knows what it is. My guess would have something to do with a pendulum that has swung from complacency to fear. What we do know is that the most important thing is that our investments continue to produce developments that meet or exceeded our expectations. This information calls for our sustained commitment and we have been buyers as markets weakened.

Cues from the Market

There's a belief that the stock market is an indicator of future economic activity, but I've never witnessed that occurrence from the crash of 1987 to the collapse in 2008. I do believe that the 'market' doesn't know any more than the average of the people who participate in it, nor does it have some swami-like intelligence that supersedes that of its participants. If the market reflects the wisdom of the average investor then those of us who are trying to be above average should not take our cues from it. The average investor doesn't do very well just as the average mutual fund does not beat the market. We have a track record of being superior and while it is hard to be superior, it is not impossible. One thing that I am certain of is that our success hasn't come from calling markets, but rather owning good businesses and remaining committed to them as their corporate developments suggest. Success is achieved over the long-term, which in my opinion is the only intelligent way to think. Those who want faster returns can take solace in the reality that time moves quickly. It has been so well established that nobody knows what's going to happen in the markets tomorrow or next year, so why should anybody act is if they do? If the market is going to turn down, there's no reason to run to the door because if you have made a fundamentally good investment decision, it will have little to do with the market in the long run.

Time Moves Quickly: Goodbye Synchronized Skating

As a side note, February saw the end of my daughters' synchronized skating journey that lasted almost 10 years. It has been an amazing ride that saw 6 a.m. practices turn into competitions throughout North America and Europe and ended with bronze medal in February. It was emotional for us to experience the last event with some of the families who will also end their journey as the girls move on to university. Below is a picture from 2009 of the last three standing from the early era that says it all. Time really does move quickly.

Thanks for taking a look and as always,

All Good Things,

Adam Hennick

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des ├ępargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

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