Losing Perspective Because 'This Time is Different'

CEO Mo Lidsky discusses the current situation surrounding COVID-19 and its impact on the firm, the market, and investors. Vlog #2 - March 17th, 2020

Transcript:

As we spent the last week testing our business continuity plan, gradually migrating our office staff to remote locations for the social distancing, it was nearly impossible to have a conversation with anyone about their annual goals. Everyone was focused on the anxieties of today. Obviously, we can’t think about our long-term future without focusing on the short-term, right? Wrong! Our long-term future is paramount, and our short-term issues (with all the chaos) will sort itself out. Though, it doesn’t feel that way.

For investors, this crisis feels different. Unlike any previous corrections – which were largely caused by financiers, bankers, and policy makers, this one was catalyzed by a virus. Unlike previous corrections, which didn’t immediately affect the average Joe or Jane in the street, this crisis disturbs us on a physical, emotional, economic and social level. As a result, the level of collective anxiety or stress levels are now through the roof, and since anxiety always shrinks our field of vision it is incredibly difficult to maintain healthy perspective and make any thoughtful decisions.

I am getting questions from people who have no need for liquidity if they should sell everything. People who are generally thoughtful planners questioning whether they should abandon their long-term plans. These are perfectly normal sentiments, as we are currently sitting in the eye of the storm – especially one that we’re experiencing on so many dimensions. All our media channels have become one homogenous and dramatic echo chamber; entire companies or even economies are temporarily shutting down; our social and recreational worlds are being reduced to WhatsApp and Netflix. On top of that, we’re paranoid about having COVID-19 and not knowing about it, and the markets seem to be butchering our investments. The feedback loop in this situation is overwhelming – to some, even apocalyptic - and so many are fearing that, “this time is truly different”.

And it’s true. This hasn’t happened before. Outside of regional wars, entire economies don’t typically shut down, people aren’t typically restricted to their homes, and all asset classes don’t typically go down together. Though, every correction, almost by definition, has something that makes it different. Otherwise, we would have been prepared for it and it wouldn’t have triggered the correction. What stays the same, however, is our behavioural biases – our natural impulses to overreact to short-term events, our strong sense of loss aversion, and our instinctive fight-or-flight response. What also stays the same is the fact that we will, ultimately, get through this.

The coronavirus will eventually be dealt with. Entire economies will not shut down forever, as no one stops feeding their children out fear of a virus. And when business reopens, markets will bounce back with extraordinary vigor. One day we’ll likely reflect on this time as opportunistic – perhaps even wondering what all the fuss was about. Naturally, it’s hard to see and feel that when we’re in the eye of the storm.

So, for the time being, please avoid any rash decisions. Just stay healthy. Stay calm. Stay thoughtful. We will see better days ahead!