Survive and Advance
I've found myself referencing a famous NCAA basketball tournament slogan for what has been a year to forget for investors. I believe it's appropriate and relevant.
"In 1983, the NC State Wolfpack, coached by Jim Valvano, stayed alive in the postseason by winning nine do-or-die games in a row — seven of which they were losing in the final minute — beating the likes of Michael Jordan and three-time National Player of the Year Ralph Sampson. The unlikely squad made it to the national championship game against No. 1 Houston, aka Phi Slama Jama, a team featuring future NBA Top 50 all-time players Hakeem Olajuwon and Clyde Drexler."
'Survive and advance' was coined in 1983 by Coach Valvano during this miraculous run. Thirty-five years later, 'survive and advance' has become part of the March Madness fabric. For nearly every champion since that beloved 1983 NC State team, there has been a scare or two during a championship run. My beloved Syracuse Orange were nearly knocked out of the 2003 tournament in the Sweet 16 by 10 seed Auburn on their way to a national title. It wasn't a pretty stretch of basketball for the Orange, but it was never realistic to believe that they would always be at their peak. They endured, moved forward and went onto achieve a much bigger outcome. Survive and advance.
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For many portfolios, 2018 has been a year to forget.
"Stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street."
"All told, 90% of the 70 asset classes tracked by Deutsche Bank are posting negative total returns in dollar terms for the year through mid-November. The previous high was in 1920, when 84% of 37 asset classes were negative. Last year, just 1% of asset classes delivered negative returns."
Diversification cannot be declared dead after a ten month stretch of time. It's just a simple reminder that no strategy works 100% of the time. This, in itself, does not warrant a reaction for the sake of doing something.
Coach Boeheim did not bench Carmelo after a scoreless first half against Auburn (he went on to score 18 second half points.) The Orange did not abandon the trademark 2-3 zone as Auburn came roaring back in the second half. Either of these reactions would have probably resulted in Auburn prevailing. As an investor, reacting to short-term feedback loops (politics, the current news cycle, market forecasts, etc.) and leaving behind an effective long-term portfolio is always a recipe for disaster.
Build your portfolio durable enough to get through a difficult period, and then move forward. Patient capital typically wins out.
You have larger outcomes to achieve. 2018 will end up being forgettable in the grand scheme of things. Survive and advance.
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Sources:
Wall Street Journal "No Refuge for Investors as 2018 Rout Sends Stocks, Bonds, Oil Lower"
MSG Networks "Survive and Advance"
