When asked what the greatest risk to investors is, I usually answer, “Themselves.” Whether it be greed, fear or impatience, humans are very creative at finding ways of sabotaging a good financial plan. Let me begin this discussion in my youth when I decided to join a high school debate team.
My first assignment was to debate in favor of a position that I was personally opposed to. I initially protested but my new coach insisted it would be a great learning opportunity. After a week of diligent preparation, not only was I able to skillfully debate the position, but I gained a greater appreciation for the other side. I also gained respect for the people who I initially disagreed with, recognizing that they had good reasoning on their side as well. It was a basic lesson in life, but one that is sorely lacking in today’s society.
We were once a nation that thrived on the free and open exchange of thought, but in recent years the polarization has become so severe that it’s almost impossible to have a cordial conversation on difficult topics. Viewpoints have become so narrow that decisions are often based on what groups we identify with rather than what makes the most sense. It’s like our lives have become a continual contest of “us” versus “them,” with a dozen different iterations of who us and them are.
I mention this here because this unhealthy attitude has found its way into investing. When people ask me about the economy or current investment options, the questions are often tangled up in the same “us and them” conversation. From the outset their language makes clear that they view the issues through the lens of whatever group they belong to. As a single example, I get many questions about the backlog of cargo ships in California, and the accompanying effect on our supply chains. These questions are usually couched in polarized language which blames politicians, unions, and others for the problem. There seems to be more focus on assigning blame, than on looking for solutions, or in an investors’ case, finding opportunity.
I have done some research on the topic and found, to the surprise of many, that during the recently completed fiscal year the Port of Los Angeles recorded a 112-year record for the amount of cargo unloaded. That sounds much more like an overload than a slowdown and is amazing considering the pandemic. For investors, one might say that is actually good news. The supply problem investors see as a huge political mess (because that’s what they are looking for) is largely because America is on a buying spree. Investors, caught up in polarizing blame games may be missing an opportunity to invest in the companies Americans are so anxiously trying to buy from.
And this is just one example of how polarizing thought is hampering investors. My debate teacher was right. You can learn a lot more (and potentially profit more) if you take the time to understand all sides.