It’s funny being someone who isn’t always bearish. When I am a bear I seem to garner a lot more attention, website traffic is better, etc. And when I turn bullish I seem to make a lot more enemies, website traffic declines, etc. I don’t know what it is about being negative, but people seem to embrace it in the investment world. The strange thing here is that it’s the perseverance and optimism in people’s ideas and production that generally drives wealth creation so there’s an odd sort of contradiction in this form of permabearish thinking coming from supposed capitalists.
Obviously, I am not the most optimistic guy in the world (my macro outlook over the last 5 years hasn’t been exactly rosy), but I would characterize my thinking as “risk managed optimism”. I’ve previously used the investment analogy of climbing a mountain with the understanding that we’re all trying to get to the top. So you have to be optimistic during this climb. You have to always persevere and always make progress. But if you just sprint up the mountain you’re bound to slip up if you’re not careful. You can’t always focus on the beautiful parts of the climb because it’s not the pretty flowers that slip you up. It’s the loose rocks. So your approach should be optimistic, but measured. You have to manage the risks on your way up because the mistakes can potentially kill you (literally if you’re mountain climbing). But a permanently pessimistic perspective will guarantee failure.
Anyhow, I won’t bore you with my philosophy on investing, but I really liked this portion of a Yahoo Finance article:
And…the top reason for being bullish:
- 1. “The end of the world only happens once – Monday probably isn’t the day.” Through recessions and depressions, flashes and crashes, we seem to persevere. “For all the well-publicized challenges facing markets and investors, financial Armageddon is still an unlikely occurrence,” Colas writes. “And even if it does happen, what are the chances you really have enough gold coins, freeze-dried food and double-aught buckshot anyway?
“It is OK to prepare for disasters; just make sure you plan for success as well.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.