Wisdom of the Elders

I’ve always been a remote kind of guy. Ever since I read the book “My side of the mountain” when I was a kid, I’ve longed for the wilderness. Many years ago. I penned this poem about solitude…

What is calling way out there?

Beyond the desk we sit and stare.
What is calling way out there?

A freedom search, quite possibly.
In wilderness we long to be.

Where all around the boundaries gone.
In solitude from dusk ‘til dawn.

In quiet search for self-reliance.
To continue on – no small defiance.

Our choice to make, should we turn back?
Not from fear nor courage lack.

But search we must, inside the lines.
For freedom lies within our minds.

What is calling way out there?
An echo from a calling near.

Today, I can’t help but be concerned about the undeniable trend toward a permanent remote workforce. Many companies, particularly in the tech industry, are moving in this direction, taking advantage of this trend to reduce salaries for employees who move from high-cost areas like Silicon Valley to lower cost cities and towns. Corporations also see great opportunity to reduce expenses for office space. What’s not to like?

When I started in the business, in the dark ages of the early 1980s, I went to lunch every day with my colleagues. Since I was the rookie, I took advantage of this time to ask as many questions as I could without being annoying. Over time, these and many other face-to-face, informal conversations, provided valuable insight into how these seasoned portfolio managers and analysts approached their profession. This hanging-around-apprenticeship taught me the nuances of stock picking. If the chatter around the coffee pot centered around a stock that had been doing particularly well, I learned that most of the news was already discounted in the stock price. Conversely, if the buzz around the office was decidedly negative, that might be a name to dig into as a potential buying opportunity. I also learned to read the body language of my peers which gave me instant feedback as to the persuasiveness of my arguments during our daily debates on the economy, markets, and individual stocks.

In a nutshell, there is no effective substitute for face-to-face communication, especially when it comes to transferring the wisdom of the elders to the next generation. While reduced overall expenses for payroll and office space may enhance the bottom line in the short run, the loss of this informal training and mentoring will be an issue companies will have to deal with well into the future. Companies that can right-size cost structures, while preserving all-important, face-to-face mentoring, will have a leg up on their competition.

With only a couple weeks to go before the election, the stock market is very close to an all-time high, baffling pundits and market strategists of both political persuasions. As I have previously written, both sides fear disaster for the markets and for our country if the other side wins. I suspect reality will land somewhere in the middle. What does this mean from an investment perspective? It means the election is likely to create winners and losers across our economy and markets. Some will be short term, driven by fear and over-reactions, and some will be more substantive and long term. It will be important to distinguish the latter from the former. Maintaining valuation discipline will be critically important to take advantage of opportunities that may result from political or legislative change. As has become our motto, internally – we will do our best to control what we can control.

While many of us would like to control the election outcome on the state and national level, none of us can. We can all vote and should. We can all support whoever wins, and that perhaps is our civic duty. And when science solves the pandemic, which it will, we should hang around with our neighbors and loved ones, and marvel at the wisdom of the elders among us.

Michael Kayes, CFA