Articles

I Changed My Mind

When I was a kid, I was not an adventurous eater. I was fascinated with Ancient Greece and Rome, though. My parents took me on an unforgettable trip to Turkey. That’s where many of the ancient seaports used to be, including Homer’s Troy. I learned that the Mediterranean Region has more to offer than history. Its cuisine wouldn’t be complete without olives. As much as I loved walking around the old ruins, I didn’t like the taste of this peculiar fruit. I changed my mind since. In the same way, my investment choices have evolved over time.

I think it’s fair to say that we all appreciate consistency, but we admire a nimble mind. One of the biggest powers of a human being and an investor is the ability and the courage to change one’s opinion. We value highly people with character, whose principles we know, and whose actions we trust, but within that framework, we know well that they still can change their mind. We actually hope they will if they need to.

I know that there are principles in life and investing that I hold dearly, and they will never change. The individual decisions have changed more than once, and I believe they’ll change again.

You have seen me say that I love what I do, and I’d do it even if I had all the money in the world. My take on the investor’s work evolved over time, though. I used to think that one needs at least two computer screens, a well-fitted suit, an office, power lunches, a commuter train ticket, and more to be an investor. I changed my mind about that a while ago. In my 2018 TEDx talk, I jokingly said that all an investor needs are flip-flops, a hammock, a book, and good Wi-Fi. My audience laughed. I was serious, though!

The 2020 remote work revolution proved that I wasn’t that far off after all. Peace, quiet, and lack of distractions, in other words, the right environment to think took precedence over a more  traditional investor’s work setup.

The last 12 months showed us something else, too. We realized that we need to be ready to be surprised both in life and investing. To me, it means that we hold on to our principles, but we let our minds stay nimble. It implied quick, decisive actions last year. It means a cautious but open mind this year and beyond.

Reading the news, keeping up with earnings reports, I see an array of uncertain variables pulling the narrative in many directions: from the trends in interest rates, consumer price changes, tax rate hikes, unemployment levels, economic activity to demand recovery, supply constraints, borrowing, spending, deficits, and more.

As tempting as it may seem, it could prove dangerous to build a portfolio around one single set of assumptions, rising interest rates, accelerating inflation, and sustainable demand recovery, for example. I’d call it a set in a stone portfolio or an auto-pilot portfolio.

As humanity seems to be gearing up for regular trips to Mars, I’m often reminded of the observation shared about the earlier flights to the Moon. The Apollo rocket was on the correct course only 7% of the time, while it required constant correction the rest of the time. It’s no different than an investment portfolio’s path.

I think this new accelerated investment reality will demand an ability to change our minds and change them quickly while following our investment principles. We are used to managing investment challenges. There are many stocks we sold and walked away from over the years when the business reality changed. There will be many investment choices that will run their course and need to be corrected.

We do our research, stay in tune, focused, but accept that we don’t know the future, and our investment choices may need to adapt to an ever-evolving business and economic backdrop.

Some investors don’t share their views or discuss specific holdings. This allows them to change their mind without anyone noticing. We prefer to share our current take on world affairs, and in client meetings, we are happy to discuss individual investments and asset allocation choices in greater detail. However, we always reserve the right to pivot in a different direction if we have to.

Between my culinary adventures and investing experience, I learned that it pays to be consistent all the time but be nimble where needed. A quarter of a century later, my tastes evolved, and I really like olives. As a matter of fact, last year, a few cans of olives made it to our pandemic stash next to pasta, rice, and some other essential goods. They traveled with us to the two cabins in the woods last spring and summer, but they are long gone since.

The asset allocation and the particular holdings may change over time; even how and where we work from has evolved, but the principles we abide by will remain the same. We treat the capital we manage as money our clients can’t afford to lose, we make investments based on value, we pay the least to get the most, and we remain contrarians at heart.

We changed our minds before, and we think the odds are we will again. We remain committed to our investment principles, but we intend to stay as nimble as the situation may require.

Happy Investing!

Bogumil Baranowski

Published: 5/13/2021

Disclosure:

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.