We like national parks and outdoor vacations. We'll sprinkle in the beach here and there but most of the time, if I'm not in the office, you can find me out exploring. I should probably qualify that...we're glampers...we still like a nice place to come home to at the end of the day that has running water, AC, and a place to charge our ipads but we like to think we're tough during the day. This year we went to Maine and spent some time in Acadia National Park. I was reminded of a few things about the investment world with things that I learned. Here are four of them:
Lobsters regrow after a loss
Lobsters are an interesting animal. They can regrow any body part that they lose in a scuffle. If they lose their tail, they will grow a new tail over a 5-year period. If they lose a claw, they will regrow a new claw over a 5-year period. It doesn’t matter what body part is lost; it will regrow. The only constant and the only constraint…it takes 5 years.
Time.
Time is also the constant mandate in your investment portfolio. Suffering a loss is not fun. It’s not fun for a lobster and it’s not fun for us to watch our investments suffer a loss. Here’s the bad news. If you invest long enough, you’ll probably find yourself in a ‘scuffle’ of some sort at some point. You’ll probably experience a loss. The good news for lobsters is they just wait for it to grow back. The same could probably be true for your investments, too, but you must wait.
Fun Fact: The only part of the lobster that doesn’t grow back with the same body part that was lost is its eye. If a lobster loses an eye, it gets a random body part in its place. Lose an antennae, grow an antennae. Lose an eye, spin the wheel of random body parts, and maybe end up with three claws or two tails.
Fog can roll in at any moment
We hiked to the top of Mount Acadia. On the 887-foot ascent the weather was good. We got to the top and couldn’t see 30 feet in front of us. Sometimes you get to the top of a mountain and it’s not what you expected. You better enjoy the journey because the destination is just a point in time.
Back in the rental vehicle after the hike the fog was so dense the crash detection alarm kept going off on the drive back to the house. A reminder that even technology can get confused in a fog. Be careful what you’re listening to when the markets produce a fog. A plan is a good idea at the outset. Reviewing that plan when there is fog is an even better idea.
Lighthouses also need a bell tower
Because of the proclivity of the fog, humans who were tired of rescuing ships that ran into the rocky coast built lighthouses. Powerful lights that could cut through the fog. They added bell towers to those light houses so even when you couldn’t see the lighthouse you could still hear the sound of the coastline. The lighthouse that you build around your investments should have multiple ways to guide you to your destination. Do you have an advisor that is helping you navigate? Is that advisor a single voice or are they part of a larger team? Do you see them or talk to them on a regular basis? What does the firm behind them look like? Are there multiple people with vast experience across many disciplines?
Inflation has and will probably always be part of the headwind
Technology has and will probably always be part of the tailwind
We’ve been in an environment where we’ve had massive inflation and massive technological advance. We’ve seen both up close and personal. The Bass Harbor light station was a good reminder that those two things are a constant if you’re interested in progress. Take the $80 that it cost to buy the land in 1858 and the way we provided light back then as exhibit A. 165 years after some poor soul had to trim and light an oil wick by hand every three hours, we have an electric, automated, occulting red lantern that no one has to man. Look at the bell as exhibit B. That poor soul that had to ring the bell by hand in 1876 (in any weather) got a steam operated bell 20 years later that was run by electricity 50 years after that. 25 more years of progress and someone decided to just let the ocean and her waves do the work of ringing the bell.
Take any problem we face right now and I think we’ll solve it the same way. Technological advance will probably take us to a solution but on the way to that solution we’ll run into cost increases. Life probably gets better over time but it will cost more. Save money. Equity ownership has been one of the best historical hedges against inflation over time. A hike to a view is not always a straight climb. Sometimes you feel like you’re headed back down the mountain only to ascend further. Sometimes you must walk through mud. Keep on walking!