Beyond The Headlines
Is it always crisis investing?
I grew up in Poland and saw the last decade of a failed economic experiment where everything was owned and operated by the government. Hardly anything ever worked, and nothing was ever on time. I thought the whole world worked this way; fortunately, it doesn’t! The Iron Curtain fell, and an unbelievable economic miracle followed. This young mind was already shaped, and I grew to appreciate having a backup plan and never trusting that any rescue was coming.
Those early days might be a fading memory now, but when I see myself make investment decisions or even small life choices, I look through the prism of those early years. It gives me a silent edge in a world where most think nothing can ever go wrong. We have same-day deliveries; you don’t even need a spare toothbrush at home anymore. A knight in shiny armor will always come around, even if your bank spectacularly goes bust. I get it, but I still love having a contingency plan, even if there is no crisis in sight. Let me explain.
Once I arrived in Brussels as an exchange student almost a quarter of a century ago, I immediately noticed how ATMs regularly ran out of cash by Friday evening. You could count on it! No pun intended. I learned that not everything works all the time, even in the charming capital of Europe. My fellow students who lived nearby would always know that I had the cash they could borrow interest-free. Maybe I set a bad example that later gave us zero-rate interest policies? I don’t know. Some of them are European bankers themselves now. Cash bars and restaurants are rare now, so they don’t need weekend bailouts from a good friend.
I learned another lesson. My first commuter train into New York City got delayed by a few hours, making me miss lunch with my soon-to-be boss Francois Sicart. Patsy Jaganath, our partner now at Sicart, took my call that day and kindly rescheduled the lunch to another day. It wasn’t a fluke; it happened two dozen more times in my years of commuting.
You could safely assume that pretty much nothing worked in my early childhood in Poland, but I realized as I continued my education that many things aren’t perfect, even in Brussels or New York City.
A few friends that sailed with me know well that I always have a contingency plan, Plan B, C, D. I’ll have the whole alphabet if I have to! The goal is to make it safely from a harbor to a harbor. You have to be ready to pivot and adapt. The forces of nature are to be respected. Investing is very similar in that way. The folly of the crowds does not differ from an ocean with a sudden squall that gives us chills and rips the sail apart.
If you invest long enough, pitfalls will happen. It’s not a question of “if” but how many times over. I always have spare cash at home; I take earlier trains. I follow my wife’s motto: “On time means you are late.” I always have lots of what Ben Graham (the father of value investing) called “a margin of safety” in my life. Yes, in the aggregate, I probably have waited too long at the airports, and I could have cut some arrivals shorter, but I have never missed a flight in my life.
It starts with throwing an umbrella into your backpack. If it doesn’t rain, that’s alright; it’s a minimal cost and effort. Having cash and extra credit cards traveling that’s another step.
In investing, it helps to avoid the most obvious dangers. These are all the investments that no contingency plan can even save. If you invest over a lifetime and avoid all recent fads, you’ll be already ahead. If you avoid leverage, derivatives, and companies with no real business or profits, that’s another leap forward. You’ll be even further ahead if you have idle cash to take advantage of opportunities after the bull market crashes.
Those decisions start to add up and compound very quickly, and most of all, they give our clients and us peace of mind, and that’s absolutely priceless.
My grandma likes to say that the odds of rain dramatically fall if you have an umbrella with you. I don’t know if she has research to back it; maybe a lifetime of experience instead. If nothing ever goes wrong, and the contingency plan is that umbrella on the bottom of the backpack, so be it.
Either way, I continue to love a good contingency plan when it comes to cash in the pocket and a well-designed thought-through portfolio of stocks.
The last three years have felt like a test in many ways, not just in markets but daily life. Extra home supplies came in handy; acting cautiously while investing helped too. It was a global pandemic-era crisis living and investing.
In 2017, Janet Yellen, as the Chair of the Federal Reserve, told us that there wouldn’t be a financial crisis in our lifetime. I remember vividly the day she said it. My grandma would share an old Polish saying: “Don’t call the wolf out of the woods.” Only three years later, the markets and the economy stalled and fell as COVID gripped the world. Six years later, Ms. Yellen is presiding as the Secretary of Treasury over the era of the biggest bank collapses in recent history.
Crises are part of life and part of investing.
Is all investing crisis investing? No, of course not, but it’s good to be prepared rather than surprised. Sometimes it saves me from a minor inconvenience, other times from a bigger pain to the wallet. I have to thank that first decade of my life for imprinting this mindset into my investor DNA that I can’t make a single decision without knowing what I would do if things didn’t go exactly as planned.
Let’s not call the wolf out of the woods, and let’s have a good contingency plan if the wolf comes, anyway.
The information provided in this article represents the opinions of Sicart Associates, LLC (”Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.
This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.