Thursday, March 10, 2016

Doldrums



My dad was a sailor. When I was young I had to take sailing lessons first thing in the morning every summer, then on weekends sit with the family, bored out of my mind, on his tiny sloop as we tacked back and forth across Boston Harbor. A typical boy, I wanted speed: speedboat, ski boat, jet-ski, really anything that made a wake. But he was never more content than he was in that open little boat, mainsheet in one hand and steering with the other, sun on his face, a Heineken between his fingers on the tiller.

The worst for me, however, was when the wind died completely. He called it the doldrums, which was technically inaccurate (the doldrums are an actual location near the equator, sitting between trade winds) but he nailed the spirit. As does the word itself: it sounds tired, slow, dreary, which of course it is. When you hit the doldrums, there's nothing much to do. It's a sailboat, after all, and-- ever the purist-- Dad didn't have a motor. So we sat.

After a few dull minutes, Dad would start getting busy with all the nothing. He'd put one of us on Scout duty, scanning the distant surface for any sign of an incoming breeze. He'd have someone else coiling lines and sheets, putting away winch handles and empty soda cans and hats left around the cockpit. Eventually he'd pull out nautical charts of the area and ask Mom to fix a snack or something. It could be a while, he'd tell us. He'd teach us again about the sails and the wind indicators, called telltales. He'd quiz us on terminology. It was all just filler, trying to keep us engaged and interested until the wind returned.

But really he was preparing us, himself, the boat. Because on the water, weather can change suddenly and violently, and then things often happen fast. A sudden a squall, a rogue wave, even just an unexpected gust, and your little boat is rolled and you're in the water.

Welcome to the US stock market doldrums. A real banner year, with all major indices down so far in 2016 after a flat 2015. If you're one of those who finally pulled the trigger and started investing in the last couple of years, take heart.

Technically, of course, we're in year 7 of a bull (rising) market. This is true because, while 2016 to date has seen a correction (short drop), it's not enough to knock the market out of bull status. But that's pointless advisor-driven wordplay. Here on the ground in real time, nothing seems to really be moving much. We got whipped at the start of the year, and now it's up a little on Tuesday, down on Wednesday and Thursday, up again Friday through Wednesday, then down again. No celebration, no panic, no excitement at all.

Sadly, this is the stuff of successful modern investing. It's tremendously tedious, punctuated by tiny moments of action when you buy or sell something. Nearly all of the rest of the time, it's this. Just nothing.

From all that sailing training I know to use the time. And I am. I've been on Scout duty. Of course I'm not just looking for signs of a market wind, but for specific opportunities: businesses that have been repriced by the market correction in January and early February which haven't recovered yet and so represent good values going forward. I'm also inspecting my holdings for signs of weakness: businesses which-- if ultimately a sudden gust comes over my gunwale-- I'll need to sell because they don't necessarily have the products or the distribution or the branding or the management experience to weather a real storm. I've been moving money around, selling some older investments which I believe have had their run, and socking away cash with which to buy when I identify new targets. I've been doing a lot of reading about business, economics, investing practices, media, and the hot mess we're calling a political campaign season. I'm coiling my lines, bagging my empties, readying my winch handles.

Dad would be proud.




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