I am neck-deep in the modern translation of Marcus Aurelius’ Meditations (sorry, I couldn’t handle the “thy”s and “thou”s of the old translation, and my Koine Greek is pretty rusty since undergrad. Yes, I’m serious). Admittedly I have fallen in love with it, probably more than I loved Seneca’s Letters from a Stoic which is really saying something for me. We don’t have to get into the finer philosophical debates of Stoicism or Aurelius’ concept of nature and determinism but there is a lot here for long-term investors to consider. I’ll give a few of his points my own modern translation.
- You aren’t in control of much. Aurelius loves to point out that you can’t control what happens in the world. You can’t control other people, how they act, how they treat others and how they treat you. You can’t control their selfishness. You can’t control what happens to you, your body, your health. All you get to control is how you respond. As an investor, you aren’t in control of much. You don’t decide when and how the Fed raises rates. You don’t decide global economic output, productivity gains, profit margins, international tax law, currency exchange rates, or inflation. You don’t get to control how other investors around the world feel about the future or what they think next year’s earnings will be for any single company. You are, by and large, at the whim of the markets. Sorry. You do get to control how you respond to each and every one of these events. You are in control of making rational or panicked decisions. You are in control of worrying about the next global health scare or political storm or economic malaise. So count the short list of things you are actually in control of and let go of the rest.
- Nothing ever really changes. “…anyone with forty years behind him and eyes in his head has seen both past and future – both alike. (Book 11)” Markets are made up of people, and despite our best efforts to understand ourselves, we haven’t ever changed. We are given to manias and panics, to speculation and greed. We love rumors. We want to believe that we have the inside track, that we know the guy, that our stock is the one everyone else is wrong about. We also think that what just happened is going to be what happens forever, despite decades of history that shows us otherwise. Markets go up, and they go down. Companies go public, stocks go on incredible streaks, other companies go bankrupt. Sometimes the same company does all three in a short bit. Markets cycle and economies cycle and that isn’t going to change.
- You can endure this (or you won’t). Aurelius’s version of “this too, shall pass.” Whatever is going on in the markets, the economy, the world. Either we’ll come out the other side of it, or we won’t and it’s all over anyway. I remember people telling me that it was all over in 2008, that Lehman signaled the end of days. So I suggested that rather than having conversations about selling stocks or really anything to do with financial markets, they ought to be stocking up on Spam and bottled water and ammo. These are your two outcomes: the economy and markets recover from the next crisis, or they don’t.
- “Be indifferent to what makes no difference.” This is the best advice any investor could receive. It is simply too easy to get information. Corporate earnings, revenue projections, economic data, inflation, Fed minutes, election polls, consumer sentiment, vehicle miles traveled, pick your poison. There is enough data to assemble any conceivable narrative. Bearish? You can support it. Valuations, earnings declines, margins are too high, the cycle is long in the tooth. Bullish? Sure! Wages are going up, inflation is subdued, rates still very accomodative, housing picking up, consumers feeling good, job quits are high, unemployment low, etc, etc. Whatever you want, you can find it. Of course, ultimately, none of these things make any difference to you as an investor. This information might be interesting, but it’s not actionable. This goes for your neighbor’s thoughts on his new Tesla and that article your father-in-law sent you about his favorite political conspiracy theory. It makes no difference. Be indifferent.
Bason Asset Management 