This blog post originally appeared on RealMoney Silver on May 14 at 7:36 a.m. EDT.
One day a hare saw a tortoise walking slowly along and began to laugh and mock him. The hare challenged the tortoise to a race, and the tortoise accepted. They agreed on a route and started off the race. The hare shot ahead and ran briskly for some time. Then seeing that he was far ahead of the tortoise, he thought he'd sit under a tree for some time and relax before continuing the race. He sat under the tree and soon fell asleep. The tortoise, plodding on, overtook him and finished the race. The hare woke up and realized that he had lost the race. The moral, stated at the end of the fable, is, "Slow and steady wins the race."-- Aesop, "The Tortoise and the Hare" ( Wikipedia summation)
In my professional investment career, since graduating The Wharton School in 1972, I have seen multiple bull- and bear-market cycles. And, almost without fail, I have observed that far too many investors worship, trade and invest at the altar of price momentum, though their investment strategy is framed (publicly and sometimes disingenuously) on fundamental grounds.
While momentum trading has its benefits and can produce superior investment returns, it is not for me.
I am by no means an investment purist -- "I don't want to make friends; I just want to make money!" -- but buying high and selling higher is not in my investment bag. Unlike, Jim "El Capitan" Cramer, I am no good at it.
Rather, I prefer to stick to the discipline of interpreting fundamentals, valuation and sentiment through a logically reasoned, objective and analytical process. This means that I maintain the self-control of sitting on my hands, selling and/or shorting when values are rich and buying (even recklessly sometimes) when values emerge as they did two months ago.
This is, however, easier said (or written) than done. It requires patience and, at times, a variant or contrarian view and strength of analytical conviction. It often also requires one to ignore the business media's staccato repeated sound bytes of bullish breathlessness. Their intentions might be honorable, but quite frankly, the media, with few exceptions, have no or little skin in the game. And it often requires market participants to ignore the delivery of the talking heads whose platform is the media and whom are too frequently theatrical and shallow in their "advice" rather than substantive in their analysis.
Today's investment mosaic remains unusually complex, and arguably, it's
, given the proliferation (and competition in delivering superior investment returns) of hedge funds, the instantaneous of news and the unique economic circumstances (the great buildup and the consequential unwind of credit) -- among other unprecedented conditions.
Regardless of one's style, I have long opined on The Edge that the above factors will contribute to a secular increase in market volatility and, accordingly, that expected heightened market turbulence should lead traders/investors to maintain smaller-than-typical positions and attempt to supplement a buy/hold strategy with an opportunistic trading strategy.
For both for individuals and institutional investors, erring on the side of conservatism should continue to be the dominant investment mantra.
My Grandma Koufax's words still resonate (as she paraphrased a New York City OTB slogan back several decades ago): "Dougie, invest with your kepela (head), not over it."
Chase value, not price. Be the tortoise and not the hare, given the unusual economic times we face.
Doug Kass writes daily for
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Know what you own: The most active stocks in Thursday's midday trading include Bank of America (BAC) - Get Report, Citigroup (C) - Get Report, Direxion Daily Financial Bear 3X Shares (FAZ) - Get Report, Direxion Daily Financial Bull 3X Shares (FAS) - Get Report, Ford (F) - Get Report, SPDRs (SPY) - Get Report and MGM Mirage (MGM) - Get Report.
At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.
Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Long/Short LP.