March 22, 2014

Do Introverts Make Better Investors?

The 1980's were a decade that left in its wake the memories of interest rates as high at 15% and a stock market rally capturing investors in a frenzy not seen in decades. But it also includes one day in 1987 when the S&P 500 stock index declined 508 points, or just shy of 23%. That's it, one day, in which the world got its first taste of investor panic since the stock market crash of 1929. And in the days that followed a well known editorialist for the financial magazine called Barron's named Alan Abelson, cautioned that you should reconsider, if your stock broker wasn't climbing the walls for answers. His final word on the subject was to never trust a broker who wears a cardigan sweater.

But Mr. Abelson's goal, one of many frequent reminders to the uninitiated and over enthusiastic, was grounded in the simple observation that there is no reason to get anxious over a situation that can't be controlled, except for one that can be. And while the stock market is a grand mechanism that rumbles on in spite of the near maniacal belief that it can be controlled, the outcome is that just as we jump at an unanticipated sound out of our sights, so too the markets have shown great sway over its participants, including its army of brokers, at little more than the quiet thunder of financial chaos.

The markets have been little unruly the past couple of weeks. As most of you know I hold to the notion that a disproportionate amount of market activity is incumbent upon human behavior. And when it seems that the demons of conventional wisdom are stacked against our collective expectations the outcome is to think that although the markets can't be controlled, they can, however, control us. Don't believe it.  I've found that after all the volumes I've written over the years regarding the outgoing attitudes of "some people" who, as Robert Rubin so eloquently referred, seem to be more certain about everything than I am about anything, the lesson in all this is simple. For some of us the mass of people may seem too chaotic to recognize the value of information, so it's human behavior that nurtures us to seek out the more common opinions. And I'm not going to diminish the importance of free access to information, because in a connected world it's a distraction that's here to stay. And the aggregated stories of aggression in the Ukraine, Turkey's war on Twitter and the ongoing mystery in Malaysia might have more answers in them than the masses might be considering.


Does a collective assumption make us better investors? Maybe by coincidence, but I find when I am alone with my screens and my thoughts it's a lot easier to recognize the familiar traps that are being set every day to distract us. Do introverts make better money managers? Not necessarily, whatever strategy we use to serve as our filter, I believe success will always favor the prepared