Trust the PROCESS: Here’s a way to avoid being distracted by the market “noise”! [Wednesday: The Independent Investor]
Miles Everson’s The Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Happy midweek!
We’re excited to share with you our topic for today’s “The Independent Investor.”
Every Wednesday, we talk about basic investing tips, insights, and useful coaching comments from Professor Joel Litman. Our desire is to help you get a better idea of how you can protect your investments.
Ready to know more about today’s topic?
Continue reading to learn why building a smart and reliable process is key for investors. We’ve also prepared a special announcement that you wouldn’t want to miss at the end of this article.
Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
The Independent Investor
Are you familiar with Julian Robertson?
For those of you who aren’t, allow us to give you a brief background about him…
Robertson was a MASSIVELY successful investor and the founder of Tiger Management, one of the first hedge funds in 1980. From its establishment up to the next 18 years, the fund returned nearly 32% annually after fees.
Here’s the thing: Tiger Management’s ending wasn’t nearly as happy. Robertson made some costly mistakes during the dot-com bubble and that led to the fund’s closure in March 2000.
[Dot-com Bubble: Also known as the “Internet Bubble,” this refers to the period between 1995 and 2000 when investors pumped money into Internet-based startups in the hopes that these fledgling companies would soon make a profit.]
In other words, Robertson let macro trends get in the way of his usual playbook.
[Macro Trends: These refer to major shifts in consumer behavior that will influence the business landscape in the long term.]
You see, one surefire way to tank your portfolio is by holding on to your beliefs until they aren’t applicable anymore… especially as new information comes to light.
That’s why today, we’ll explain how you can avoid these pitfalls and continue to invest with confidence.
How to Avoid Macro Pitfalls
According to Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment strategist of Altimetry Financial Research, macro factors often become investors’ biggest worry.
This makes sense, though. After all, these factors affect almost all aspects of people’s lives.
For instance: Economic growth directly impacts cost of living, jobs, vacation plans, etc… and for the workforce at Valens, Professor Litman says these stressors can be about everything and anything—the Turkish election, U.S. debt headwalls and a potential recession, Philippine gross domestic product (GDP) growth sustainability, and others.
However, the main issue is many investors try to bet on macro, only to crash on the rocks of a poorly mapped shoreline.
Professor Litman states when folks start betting on macro, they’re betting on uncharted territory. Take for example the case of Robertson who wasn’t really a tech investor. When he invested in tech, he was doing so as a reaction to the macro environment that was sending tech stocks higher during the dot-com bubble.
The result?
Tiger Management started to underperform the market and lose over 50% of its value in 2000. Eventually, Robertson was forced to close up shop.
So, what can you learn from this story?
Building a smart and reliable process is key for investors.
Professor Litman and his team love the mantra, “strong opinions, weakly held.” This means using the data you have available at any given time, you should hold your opinions or predictions with conviction. However, you should also be willing to change as data changes, especially since there’s a high degree of uncertainty in the market.
The issue is many macro-focused people do the opposite. They have weak views but hold on to these beliefs longer than necessary. This often leads to a crack at the last possible moment.
Sure, it’s easy to talk yourself in circles with “maybes.” This is why having a smart framework is important.
A structurally sound, repeatable process gives you confidence in your long-term decisions even when the market disagrees for a few months. This also gives you the confidence to change your mind when needed.
Never switch your strategy just because the initial results of your actions don’t look like what you expected. By sticking to a clear-cut process, you can check and recheck how your broader outlook is holding up.
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One of Professor Litman and his team’s favorite tools is the Timetable Investor, Altimetry’s monthly market “checkup.” It helps them keep track of the market outlook so they can navigate short-term moves with an eye on the long term.
Right now, the Timetable Investor shows credit signals are still tightening—a hallmark of a bear market environment. This will make it harder to access funding and liquidity, putting a damper on market growth.
However, using the repeatable Timetable Investor framework, Professor Litman and his team will continue to watch until the trend reverses. There’s no need to get distracted by the market “noise.”
By trusting the PROCESS and not just the result, Professor Litman says he and his team can have confidence in their decision to switch investment styles if needed.
We hope you find today’s topic insightful and helpful!
Always remember: Stay cautious and vigilant. Keep your framework at the forefront of your investing decisions.
The 2024 market is a TRAP.
Last year, bankruptcies soared to 30%. Subsequently, 600,000 job openings disappeared. An unprecedented number of Americans are defaulting on their auto loans. Meanwhile, home sales continue to crash. The situation is dire… and it’s about to get worse in the next few years.
There are only two choices to navigate this crisis: Survive or thrive.
My friend and colleague, and Chief Investment Strategist of Altimetry Financial Research, Prof. Joel Litman, has a recommendation we also want to share with you, and it’s not just a lifeline. In fact, if you miss out on this ONE investment opportunity, you could miss out on MASSIVE earnings!
We’re not referring to stocks, gold, crypto, or real estate. This is an investment option that is specific, safe, and easy-to-use. As you’re about to see, this year’s market is the perfect setup to employ this strategy.
The details are all here. Are you ready to just survive or THRIVE?
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
LITERALLY.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
Our goal?
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com
