Who’s In Control? You Are.
Almost everyone I talk to says the same thing: “These are crazy times” (or something similar). It seems that many of us have a hard time wrapping our heads around this global pandemic. We don’t know quite how we should feel about the constant stream of COVID-19 news. It’s an eerie feeling. We feel out of control, helpless.
Investors are feeling the same way, as we watch the plunging U.S. stock market trigger a circuit-breaker, which temporarily halts stock trading, for the third time. We have not seen this kind of volatility since the Global Financial Crisis of 2007-2009 (GFC). I suspect that much of the volatility we are seeing now are disconnected from any rational assessment of the fundamentals of the economy or of particular companies or industries. In other words, fear is now driving stock valuations.
In the depths of the GFC in 2009, when U.S. stocks were down 50%, Charlie Munger, Warren Buffet’s long-time business partner at Berkshire Hathaway, said “I think it is in the nature of long term shareholding of the normal vicissitudes, of worldly outcomes, of markets that the long-term holder has his quoted value of his stocks go down by say 50%.” He said investors need to “react with equanimity” to such price declines, and must have the right temperament and “be more philosophical about these market fluctuations.”
But how, exactly, do we achieve “the right temperament” or become “more philosophical” when things seem to be so completely out of control? Maybe we should pause for a minute and think about that little word “control”. Are you and I in any position to control anything related to the COVID-19 pandemic? Sure, each of us can and should “Do the Five” in terms of personal hygiene, but can we control anything about how governments, health agencies or businesses are acting and reacting?
One of the most significant and important books I have ever read was Man’s Search for Meaning, by Viktor E. Frankl. Frankl was a Holocaust survivor, who later became an influential Austrian neurologist and psychiatrist. The first half of the book describes his experiences as a prisoner in several Nazi concentration camps. Frankl writes that even in those horrible conditions, when everything is taken from a prisoner, they still had one thing left: “the last of the human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s own way. And there were always choices to make. Every day, every hour, offered the opportunity to make a decision, a decision which determined whether you would or would not submit to those powers which threaten to rob you of your very self, your inner freedom.”
In other words, while we can’t control everything related to the COVID-19, much less the daily stock market gyrations, we have it in our power to control how we react to it all. We can choose to be more thoughtful and calm about the events as they unfold. We can intentionally suppress that feeling of panic that would seek to assert itself, and, sometimes, we need to talk back to ourselves by questioning the logic and likelihood of doomsday scenarios we might be entertaining. We can also be more selective in terms of where our information comes from, avoiding sources that tend to pander to our fears and anxieties.
As a nation, we have been through many crisis situations before: the Great Depression, two world wars, the Cold War and the Cuban Missile Crisis, political assassinations, 9/11 Terrorist attacks, just to name a few. The capital markets reacted in a similar manner to what we are experiencing today. In spite of it all, in every case, we have prevailed as a nation and the markets eventually recovered. These are important things to keep in mind as we choose moment by moment how each of us reacts to today’s events outside our control.
In the darkest days of World War II, as the British people awaited what they thought was the imminent invasion of their island nation by Nazi Germany, the government distributed notices that said “Keep Calm and Carry On”. That’s good advice in times like these.
John serves as Chief Investment Officer for Coyle Financial Counsel and is responsible for overseeing the investment process. John’s prior experience includes managing institutional fixed-income portfolios for corporations, pension funds, non-profit organizations and foundations at several large, global asset managers. With more than 20 years of institutional investment experience, he is energized by helping individuals understand the role investing plays in meeting their long-term financial goals.
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 Man’s Search for Meaning, by Viktor E. Frankl (1959, Bacon Press, Boston)