The long and Short of it

Even before the end of the  construction for the Eiffel Tower, it was already at the heart of much debate. Enveloped in criticism from the biggest names in the world of Art and Literature.

The “Protest against the Tower of Monsieur Eiffel”, published in the newspaper Le Temps, addressed to the World’s Fair’s director of works, Monsieur Alphand was signed by several big names from the world of literature and the arts 

Insults were hurled at it like : “this truly tragic street lamp” (Léon Bloy), “this belfry skeleton” (Paul Verlaine), “this mast of iron gymnasium apparatus, incomplete, confused and deformed” (François Coppée) etc.,  etc.

Build in preparation for the 1889 world’s fair, the tower once completed was not only appreciated for its granduer but also received over 2 Million visitors during the fair.

Every year 7 Mn visitors visit the tower and produces tickets sales in excess of 60 Mn Euros.

If the short-termish view of the tower’s construction and lopsided outlook on how it would fit into the architechtural beauty of Paris had prevailed, the world would have missed out on a monument of such scale and engineering excellence.

Long-term Expectations/Short-Term Thinking

Human tendency to let short-term events impact long term thinking gets amplified during big events and tests human behaviour and discipline. 

  • Events disrupt, they don’t end the life.
  • They create a crisis, impact individuals negatively, 
  • Small businesses can even get wiped out
  • Individuals lose out their livelihood
  • Govt.’s have to react and create easier monetary and fiscal policies to support.
  • However the “ONE THING” it doesn’t do is “END THE WORLD”.

One things we have been hearing regularly during the “covid-19” crisis is how several businesses, even if temporarily, have gone to “ZERO” earnings and would take very long to recover.

Those of us who saw 2008 will remember same discussions during that period when the market was in a free fall everyday.

However that didn’t exactly happen. The Earnings Per Share of Nifty 50 that peaked in July 2008 at 234 went back to the same levels within 2 years in June 2010 and then moved to 391 in June 2014 and over 450 recently in 2019.

Life and businesses didn’t come to an end.

Human spirit survived the crisis and came back strongly.

This is not the first “PANDEMIC” that the world has faced and would not be the last.

Each time there have been valulable lessons and hopefully next time we will be better prepared as a community to face this.

As an investors all you want to remember is to stick to your risk-profile and your asset allocation.

  • Such times don’t raise the questions of who is smart and who is not-but who has the guts to stick to their asset allocation.
  • Yes-your equity portfolio has gone down.
  • However valuations have now created the space where you can not only re-build the equity portion of the portfolio but do so at a far better risk-reward.

Here are a couple of Warren Buffet Quotes that could help you chart your path:

“Predicting rain doesn’t count, building the ark does.” 

When every one is depressed, businesses are not being able to open and no one is able to see when things will normalize, worrying over whether your stock will be impacted or not will not make things better. Instead, try to analyse the financial of the business to understand if the company can survive a short-term financial hit.

“Only when the tide goes out do you discover who’s been swimming naked.”

Weak businesses get exposed during times of financial stress. This is not the time to be fearful but actually the opportunity to find out and better understand the companies that are able to hold up better than others. 

Lastly follow what Peter Lynch the legendary fund Manager said:

  • Identify a good business-business doing well and managed by a good management;
  • Figure out a fair price for the business
  • Wait for the opportunity when you get that price, if its not already available in the market

This is that time

So stop fretting and get going

2 thoughts on “The long and Short of it

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s