I Agree With George Soros

Well…  on one thing at least.

You may have noticed that I haven’t blogged yet this summer.  Hopefully this blog will shine a little light on the reason.

Last week my partner Mike posted some quotes from the Mad Hungarian.  One in particular caught my eye.

“The trouble with you is that you go to work every day (and think) you should do something.  I only go to work on the days that it makes sense to go to work.  And I really do something on that day.  But you go to work and you do something every day and you don’t realize when it’s a special day.”

Now I’ll concede that it’s generally only billionaires that have the luxury of only going to work on days they think are “special.”  But I understand, and agree with, the gist of what he’s saying.

In the money management business, we’re preconditioned to be in constant motion.  24-hour business news, up-to-the-second Fed releases, breaking earnings news, real-time charts, the quest for low latency, nearly free trading commissions…  all commiserate to make us think we need to do something.  Place a trade.  Re-allocate a portfolio.  Develop a new product to catch the latest trend.

And, with no intended malice, clients who share the same preconditioning often clamor for action if only for the sake of action.  “You haven’t traded my account for a month.”  “Why are you sitting on so much cash?”

What George and I have in common is the lack of desire to take action when there is no identifiable reason to take such action.  Asymmetries in risk and reward don’t show up every day.  Or week or month.

Fresh thoughts for a new blog post are sometimes equally hard to find unless one wants to regurgitate “The market makes another all-time high, ” or conjure up some reason why the all-time high is an illogical set-up destined to crush those who dare participate.  The former is boring and the latter is foolish speculation.

When there is a lack of asymmetry (or a missing muse for that matter), inaction is likely the best course of action.

Inaction provides benefits unique to its emptiness.  It clears the mind from stress and bias.  Better to spend the day analyzing objective data and coming to your own conclusions than to be emotionally driven to action by business news, opinion-filled business websites, or left or right wing blogs.

Inaction affords insight as you sit on the porch with a friend or family member discussing the matters of Main Street.  These insights may be more valuable than those you might get being forever mired in the matters of Wall Street.

It’s the pause that refreshes.  It allows room for gathering perspective.

Inaction offers the time to get all the tools laid out on the workbench, so when a real asymmetry (or a “special day”) arrives, action can be taken decisively.

Admittedly, there is a fine line between conscious inaction, paralysis, and laziness.  In this regard inaction can be a gateway drug.  But used judiciously it can mean the difference between being a successful long-term investor and a flash in the pan.  – LL