What a World!

Topic: Human Interest

Geoffrey J. Gouinlock CFA

July 29, 2020

Image used with permission: iStock/nito100


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What a World!

You don’t need to read a blog from your most trusted investment advisor to realize that 2020 might go down as one of the most notable and difficult years that the world has faced since WWII. Almost without exception each of us has had to confront significant challenges and upheaval in both our personal and business lives. This is not London during the Blitz. But it’s quite enough of a challenge, thank you very much.

The pandemic introduces immense uncertainty into every corner of our lives, and individuals respond with varying reactions and emotion. Some are frightened and see health risks in every corner of their lives. Others behave brazenly, falsely confident that they and their loved ones will rise to the challenge that the virus presents. Managing our emotions and behaviours might be easier if the scientists, public health experts and epidemiologists agreed on what was best to do. Alas, almost from the outset, there have been experts with very different recommendations for what needs to be done. As circumstances change and the calendar rolls forward, there seems to be little willingness to acknowledge that no expert fully understands how to best confront COVID-19.

Now, I don’t want people to think I am being too hard on those who have the tremendous burden of leading the public health response. In the regular briefings that are so commonplace these days, they seem intelligent, experienced, hard working and well meaning. While some have clearly enjoyed their time in the spotlight, most experts have done their best to explain complicated science to people and politicians, so those in charge can make decisions that best balance all the complexities that confront us.  Who doesn’t admire the energy and dedication of 79-year-old Dr. Fauci? He’s writing articles in the New England Journal of Medicine. (See Devin’s blog Medical Progress: How Far We’ve Come, But Still a Long Road Ahead) He’s giving press conferences on the science of the coronavirus. He even threw out the first pitch at the Washington Nationals home opener.(1) But it has been a mistake to think that he or any other “expert” can “see around corners” or knows how the pandemic will eventually be beaten.

In this way, they are a bit like investing pundits who appear in the business press with their predictions and models that chart the future course of markets. In times of uncertainty they answer a human need to believe that the future is knowable and that an ability to predict the future is key to investment success. But we know they are often wrong, sometimes seriously, and that we should not place too much confidence in what they say. Making investments always involves dealing with risk and uncertainty. In fact, at Nexus, accepting that you can’t predict the future is a key part of what we think is needed to construct portfolios that will deliver financial success in the long-term. Of course, we do our best to spot trends that will advantage or disadvantage our holdings. But we know that well-managed businesses, with sound financials, are often more adaptable and cope with change better than we expect. We disclaim an ability to time markets because predicting the future is not needed to select good companies.  Thoughtfully selected good companies will, with time, provide dividend and capital growth in real terms that delivers financial success for our clients.

________

If there is a silver lining in any of this, it is that the quarantine has accelerated the use of technology to connect people at a distance with one another. If you’re worried about your investments, please don’t hesitate to let us know. Sometimes a short Zoom call is a powerful antidote for investment unease. As for your personal health, please do what almost all the experts now agree on. Wear a mask and wash your hands!

(1) Sports announcers reported that Fauci threw a “flat curve” that was just a little outside 😉

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