"All human errors are impatience, a premature breaking off of methodical procedure, an apparent fencing-in of what is apparently at issue." -- Franz Kafka
Most professional investors recognize that investment management requires discipline and the ability to tame emotion. In theory (and in practice), it is best to
wait for a fat pitch
and not to rush headlong into investments and trades -- for patience can be bitter, but its fruit is sweet.
As Jesse Livermore once said, "Throughout all my years of investing, I've found that the big money was never made in the buying or the selling. The big money was made in the waiting."
A large body of investors (individuals, fund of funds, universities, endowments and pension plans), however, are sometimes more immediately influenced by the current environment and, not surprisingly, might become increasingly impatient with the economic headlines, a trendless market and the worrisome volatility in share prices. We know already that many individual investors are fleeing domestic mutual funds and that a number of hedge funds are facing redemptions or closures.
As most subscribers recognize, I don't expect a quick resolution to the credit problems or to the depressing state of residential real estate. And with the levered consumer burdened with an uncertain job outlook, inflationary pressures and a record level of mortgage, installment and consumer loan principal and interest payments, the outlook for retail spending seems destined to serve as an albatross around the economy's neck.
Under this backdrop and within the context of anticipated disappointing 2008-2009 corporate profits, it is hard to see the environment for stocks improving dramatically over the balance of this year.
With markets unable to maintain any upside action and with poor first-quarter investment returns in the mail, market confidence is evaporating even as the negativity bubble expands. Why, even the "Sunshine Boys," Treasury Secretary
are now finally concerned about things economic and regulatory.
While a contrarian view of poor sentiment has emboldened some (particularly after an apparent breakout day nearly two weeks ago), investors' discontent could become even more palpable during a summer market malaise -- especially if the current negative bias continues or even if a range-bound stock market becomes the mainstay.
So let's add investor disinterest/apathy (and a continued reduction in mutual fund inflows and a moderation in hedge fund inflows) to the expanding list of market headwinds.
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 Short Offshore Fund, Ltd.