“Time is the longest distance between two places” - Tennessee Williams

 

 

 

“How have you been Mrs. G? It’s been a while.”, I asked.

 

“I’ve been good, really good. Markets have been all over the place, that can’t be easy on you? Funny thing, I was thinking about you and markets last week playing tennis with my neighbor.”

 

“Mrs. G., why were you thinking about markets when you were playing tennis?”

 

“Well, it wasn’t exactly when I was playing but afterward. My neighbor was complaining that she had lost and how I make some shots look easy, but it’s just not like that. Tennis is a simple game but it’s not easy, just like success in investing is simple, but not easy. Some people think it’s as simple as buy low, sell high, but there’s so much more to it”

 

I asked her to explain more, knowing there would be yet another nugget of wisdom in her analogy.

 

“I’ve been playing tennis since I was a child, probably picked up my first racquet when I was ten years old, and my first opponent was my dad. He taught me the value of being patient and taking a step back once in a while to look at the progress. What he taught applies in many aspects of life. Whether you are trying to bet better at tennis, golf, baking bread, investing in the market; getting proficient is a process, not an event. I didn’t wake up one morning and proclaim to have mastered tennis, it came over time. During that time, occasionally stepping back and reviewing how to improve my short game or my serve to get a better understanding then tackling another aspect of the game has been a fun journey, having the humility to know there was much to learn and the consistency to keep learning and trying has made it even more rewarding.”

 

“But how does that apply to markets and investing, Mr. G.?” I never knew where her stories would take us but there was always a lesson.

 

“Markets are the same in a different sort of way,” she started. “Take the markets now for instance, it’s been really volatile with all that’s going on and when I do watch the forecasters on television, they all want to know when it will bottom and I think that’s the wrong way to look at it. Just like learning something, the learning is a process, not a one-day event. I didn’t take up tennis and think there will be a single defining day that I can declare ‘I got this’. The market is the same; finding the bottom, in a market cycle is a process, not a single day event. Yes, with respect to the market it can come down to a single day that is the lowest but coming to that day is a process that we need to be aware of and respect.”

 

“That makes a lot of sense, Mrs. G., what is your best piece of advice because I know you’ve thought even more about it.”

 

 From a big picture perspective, the markets returns are positive most of the time, there are shorter periods of discomfort. That means while conditions are good and markets reflect that, there really isn’t much you need to do, the market does the heavy lifting for you. When times are challenging, like they are now I revert back to keeping it simple. Rather than getting caught up whether IBM is cheap at $100 versus $112, as an example, I just look at prices as being rich, fair or cheap relative to where they have been. I like to buy when prices are fair, by categorizing like that, I don’t get too caught up in the small tidbits of data. I know this is oversimplifying but it filters out the noise and helps me to make decisions more clearly. I do have some other advice about this idea and that is that conditions can last much longer than you think and just because something is overvalued or undervalued doesn’t mean prices will adjust immediately. Patience is rewarded.”

 

“Back to tennis, Mrs. G., do you use this strategy in a match?”

 

“Absolutely! Tennis is a simple game when it comes right down to it. Patiently volley and not get out of position (manage your risk) until there is an opportunity to put the ball where your opponent cannot return it to you, then call upon all the years of practice to put the shot there. Sometimes that comes early in a match and sometimes it’s later but waiting for and finding those opportunities is a process, just like finding a market bottom.