Market Volatility

The market seems to go up and down these days depending on who said what, or what the latest development in Europe is.  No confidence vote?  Referendum?

It is really silly.  Someone said to me the other day that it must be hard to deal with markets like this.  I said, "What are you talking about?  The market is flat on the year".

These days when the market is up or down 200 or 300 points, I really don't care because I assume someone in Europe will say something tommorow that will reverse it. 

With all this gloom and doom and fear, the market is flat.  Think about that for a moment.  We had a U.S. government debt downgrade that everybody feared.  We had Fukushima, the biggest nuclear disaster since Chernobyl.  We had, or are having a Greece default (or technical non-default).  We have occupiers on Wall Street.

If you told someone at the beginning of the year that these events would happen but the market would be flat by November, no sane person would have agreed with you.

As Seth Klarman (and most other good investors) says, you have to look at what a company may be worth in five years and try to buy it at substantially below that price and not worry about what happens in the near term. 

There was a great Shelby Davis quote that went like this:

"To sail across the ocean, you must balance making progress in fair weather with the ability to withstand the inevitable storms. Those who think only of the storms will never leave the shore. Those who think only of fair weather will never reach the other side."

There was another one that I can't seem to find.  I don't remember where I read it, but it was something to the effect that we must be guided by the light of the lighthouse (or stars) rather than the waves crashing against our boat.   In other words, don't let the short term noise distract you from your medium to longer term goals.

In investing, the light is the intrinsic value of something you own.  If you understand the business and know it can get through some adversity and it is trading at less than instrinsic value at an attractive level, who cares what is going on in Europe?

I know, I know.  Easier said than done.

(Of course, if one thinks that the goings on in Europe is the beginning of the end of capitalism, then they may have other ideas.)