Losing = Winning?
It’s a wonder that in any serious pursuit, someone could be happy that they were behind. It’s even more perplexing when the pursuit is the alpha-dominated investment industry. But I think Jonathon Clements is on to something.
In an article written today, I’m a Loser and I Couldn’t Be Happier, Clements discloses that he has lost a “boatload” in recent weeks he “couldn’t be happier.” First, I have to “B.S.” — you would be happier with more money. Even the most passionate value investor can feel sick to his stomach after the recent turmoil. That being said, Clements is right.
As I wrote in a recent article, the time to buy is when you feel a sickness in your stomach, when all of the news reflects a depressed outlook, when people start asking you whether they should stop investing in stock market altogether. In short, the time to buy is when your stomach tells you run and your brain is starting to agree.
The reason it is such a good time to buy right now is that all of the rampant pessimism decreases the price of assets, especially in sectors connected to the bad news. As Clements states, “This sort of market turmoil scrambles valuations and creates opportunities.”
When the market is ruled by emotion and short-term thinking, as it is currently, opportunities are created to buy great businesses at low multiples. While it is true that in the short-run, many of these opportunities will continue to be volatile, money can be made by taking advantage of other investors short term thinking.
I can see how Clements has convinced himself he is happy. Intellectually, we should all be happy if we are able to purchase more with less. But, it’s hard to imagine that he is actually smiling underneath.
