Complacency
“The best preparation for tomorrow is to do today’s work superbly well.” —William Osler
Equity markets had a mixed week, which included more volatility. For the week, the S&P 500 saw a 0.45% gain while the Nasdaq lost 0.18%. The Dow was the big winner as it rose 0.79%.
In a rare interview, Todd Combs, Investment Manager at Berkshire Hathaway and CEO of Geico, described some of the things he thought made him successful. He mentioned that he refused to get complacent, which is a state that many people eventually find themselves in during their careers, rightly or wrongly:
If you have a lot of curiosity and you're a hard worker and you have moderately decent judgment and intelligence and clarity of thought and those things, you'll go a long, long way because that's how you get the compounding over time. People usually rise to their level of complacency. And that's pretty generally true, and that doesn't matter whether it's investing or at a big company or whatever.
If your dream is to make it to manager and you're perfectly fine there, that's pretty much where you're going to stop. And that doesn't mean the opposite is true. That doesn't mean if you got 10,000 people who all want to be CEO or whatever that they're all going to achieve it, but people create their own limiting factors. You hear that in sports, you hear that in business and so forth. I think people don't appreciate that enough.
Complacency is common in one’s investment portfolio too. When things have been going well for a while, one tends to pay less attention, work less hard, and think all is well.
But markets can change in a hurry. Sometimes, it’s good to just let things role and compound. But, in some other times—some other rare times—markets go through a major shift in which complacency can cause one to be dramatically ill-positioned for that shift. Howard Marks thinks we may be in one of those key points in time worth paying attention to, as he highlighted in his latest memo:
The overarching theme of my sea-change thinking is that, largely thanks to highly accommodative monetary policy, we went through unusually easy times in a number of important regards over a prolonged period, but that time is over. There clearly isn’t much room for interest rate declines from today’s levels, and I don’t think short-term interest rates will be as low in the coming years as in the recent past. For these and other reasons, I believe the years ahead won’t be as easy. But while my expectations may prove correct, there’s no evidence yet on which I can hang my hat. Why not? My answer is that the economy and markets are in the early stages of a transition that’s far from complete.
Examine your portfolio. If we truly are in a sea-change, as Howard Marks has described it, are you ready for it?
Tweets of the Week
In Case You Missed it…
A 1500 Bagger Conversation with Ryan Pape CEO of XPEL (For more on XPEL, be sure to see our previous whitepaper on the company.)
Further Thoughts on Sea Change - by Howard Marks
The Worst Bond Bear Market in History
Art of Investing Podcast: Todd Combs - Investing, The Last Liberal Art
Value Investing with Legends Podcast: Ray Dalio - Risk, Return, and Asset Allocation
Value Hive Podcast: Keith Smith: Mining Services 101
The Business Brew Podcast: Peter Mantas - The Potential Opportunity in Life Sciences
Plain English Podcast: Inside the Trial of Sam Bankman-Fried
If you have not already upgraded your membership…
Avenel Financial Group, a merchant banking and advisory firm located in Charlotte, NC, launched a new business venture called the Co/Investor Club. The Co/Investor Club is a community of value-oriented investors that collaborate on investment opportunities and ideas. You are receiving this newsletter because you are a Free or Premium Member of the Co/Investor Club!
Chat with Mike
Whether you’re an executive with investment opportunities or a college student looking to network, we would love to chat with you! Email our Founder, Mike Pruitt, at mp@coinvestorclub.com with questions and ideas or schedule a meeting.
Don’t forget to follow us on social media too!
Twitter: @coinvestorclub1
LinkedIn: Co/Investor Club
For our disclaimer, please visit our website.
Have friends that want to join? The Co/Report is public, so feel free to share!
Thank you for reading. Co/Report grows through word of mouth. Please consider sharing this post with someone who might appreciate it.