It’s late-January. We’ve rung in the New Year. Christmas decorations are put away. We’re settling into the late winter slog of cold & snow.
In my reading on this morning (a cold & snowy one in Milwaukee), I came across the following passage:
“You see, Rodya, to make a career in the world , it’s enough, in my opinion, if you always observe the season; don’t ask for asparagus in January, and you’ll have a few more bills in your purse; the same goes for this purchase. The season now is summer, so I made a summer purchase. . .”
It’s from “Crime and Punishment” by Dostoevsky. Since it’s a Russian novel, explaining exactly who is talking, who is being spoken to, and the overall context would take too much time. But I’m quite sure that we can look at what is being said on its own and glean some wisdom.
Like I said, it’s January and it’s cold and snowy in Milwaukee. We make accommodations for that. We dress warmly in extra layers – a trip outside usually includes a hat and gloves. If not exactly warm, we are comfortable. Fast forward six months and such a wardrobe would leave us exceedingly uncomfortable. Likewise, heading out the door in a tee shirt, shorts and flip-flops in the middle of a polar vortex would be seen as the height of folly. We don’t look at the average temperature over the course of the year and settle on one outfit that we will wear in both January and July. We “observe the the season” and act accordingly.
When it comes to investing there is push to ignore the season – to sit passively with the same mix of stocks & bonds, sizes, sector and geographies regardless of the trends we see and the market developments that occur. This isn’t about making forecasts and playing endless games of “what if”. It’s about realizing that neither market risk nor investor risk tolerances are evenly distributed. There are periods when it makes sense to focus on opportunities, and periods to take shelter or seek safe harbor. Right now, with Central Banks providing liquidity and stocks making new highs in the US and around the world, the weight of the evidence favors seeking those opportunities. Like the weather, that will change at some point. When we see that, we can listen to the market and make the necessary adjustments. This is important – our behavior & our preferences will be different in bull market than in a bear market. That is not a theoretical proposition – it’s a reality whether we embrace it or not.
We can see the season for what it is and lean into it. We don’t sit passively, dressed in the same outfit in January that we would wear in July. While that might be the easiest approach for whoever is selling the clothes, it’s probably not in our best interests. If portfolios look the same in bull markets as they do in bear markets, investor interests are not being served.
We are trying to make a career in the world: In the summer, we make summer purchases and in the winter, we make winter purchases.
We enjoy it when it’s available, but we don’t ask for asparagus in January.
That’s what I’m reading & thinking about right now.