Rational Advisor

“For tomorrow belongs to the people who prepare for it today” - African Proverb

People act based on internal models and also look to confirm their preexisting internal axioms.

Please consider a few points…

1. Confusion results when there is too much information as compared to knowledge, a trend that will continue exponentially. A good investor can control this by mapping the information back to fundamental principles, knowledge and wisdom. This will greatly simplify what needs to have a process, and Simplify!

2. Investors must continue to think fundamentally and resist adopting trends simply because momentum has been gathered behind them. Think objectively and collaborate with other objective thinkers.

3. While there are multiple perspectives behind any decision: financial, short term, long term, approach, etcetera, there is only one end. Make sure that your fundamental analysis considers all the camps appropriately and is not steam-rolled by a single perspective.

I do not agree that managing by short term intervals is a robust answer. Companies are highly coupled dynamic feedback systems. Our state today is a result of actions years ago. There is a time when short term controls are needed, mostly reactive, but long term principles are what will govern company success and investor successes. One can not cost-cut to success. One might even argue that if you found yourself in need to cut costs, then a mistake was made earlier. Most investors tend to mistakenly think that the cheapest cost is a better product - this is a mistake as was seen by the cheapest cost vehicle last year equity market ETF’s having some of the greatest drops TSX index -35%

“Decision is a sharp knife that cuts clean and straight. Indecision is a dull one that hacks and tears and leaves ragged edges behind it” - Gordon Graham

Too many times in ouor investment management we over-analyze and become indecisive about investment processes and choices. We do this all for the right reasons, so that we don’t make mistakes. But, invariably this indecision is another cause of problems.

Investment managment is best handled by having a philosophy, understanding that volatile times will always be around. Sticking to your sound intellectual framework And lots of patience.

Staying the Course
By BJ Gallagher

Our journey of life is about progress,
not perfection.
It’s not about doing one thing
100% better -
it’s a matter of doing 100 things,
1% better each day.

Progress is evolutionary
not revolutionary,
and most days we measure our progress
in inches,
not miles.

What matters most
is showing up for your life
whether you feel like it
or not.

Ask yourself,
“What two or three little things
can I do today
that would move me forward?”

You’ll be amazed
at how much distance
you can cover
by taking it in increments.

The little things add up;
the inches turn to miles;
and we string together our efforts
like so many pearls.
Before long,
look what you have -
a whole strand!

Ah… beautiful.

The Organization for Economic Co-operation’s and Developments head said at a conference ‘Canada will be one of the first countries to come out of the recession”

THE OECD said that signs of the end of the recession are evident.

They said that “stronger signals of a possibel trough” are in Canada, France, italy and Britain.

You can go on all day about things that can spoil investments. Ultimately, what I have is faith in the profitability of well managed companies. For over 100 years we’ve had a tonne of stuff thrown at us, and yet the markets carried on trudging upwards. Years ago, we had the Tsunami, yet it had no impact on the markets.

We’ve recently had GM and Citigroup removed from the Dow, they were replaced by Travellers and Cisco. See, bankrupt companies and poorly run companies are removed from the markets and replaced with stronger entities, such is the survival of the fittest – this is why the market keeps on moving upwards.

35 years ago the first UPC code was scanned at a grocery store, it was on a Wrigley’s gum, and it was scanned in Toledo, Ohio – hard to think how much this productivity has changed the businesses of retailers.

Mark Carney Governor of the Bank of Canada
Henry Paulson Former treasurer for the US
The head the New York Stock Exchange,
The head of the World Bank,

lots of members of the U.S. Treasury Department, and members of the White House staff

Which is the only investment bank which received the US Federal Reserve’s approval to transition to a bank holding company, Goldman Sachs? All others went into near bankruptcy.

Interesting!!

Canadian financial markets are poised to benefit disproportionately in the coming global economic recovery according to a Scotia Economics research report suggesting the global economy is on the cusp of “transitioning from recession to recovery”

What troubles me most is that people lost faith in things they should really believe in. This was an unprecedented financial crisis, but it has pretty much calmed down.

What disturbs me is the phrase, “it’s different this time”. You hear it on the upside, you hear it on the downside. So many individual investors believed that the economy would never come back. For whatever number of reasons, this disturbs me because first of all, it isn’t logical based on history. There are over 300 million people in North America spending and working, all this tends to drive the economy, particularly over the long term. So, it isn’t logical, but it also causes people to move into safer perceived investments such as Treasuries, and they tend to do it too late. It worries me when an individual investor tries to time the markets.

There should be no coulda-woulda-shoulda’s in investing. The first thing is to figure out your tolerance for volatility, and where you sit right now.

The things you should know about investing for the long term is to invest early, invest regularly and to stay invested. How, why and what you invest in, is important and will determine if your decision is a good one.

Consider the current market as one that has its products on sale. Purchasing items on sale provides great opportunity for future gains.

Good investors should never get distracted by what is exciting, be away from the noise – be in your fortress of solitude.

Be aware of the distractions, and every so often take a spiritual cleansing day – what ever it is, golfing, bike riding, seeing your kids play soccer – take a day off and clean your head.

You have to keep a sensible approach to money and life