Time is a sort of river of passing events, and strong is its current; no sooner is a thing brought to sight than it is swept by and another takes its place and this too will be swept away. – Marcus Aurelius, Meditations
As we reflect back on the first quarter, it appears that some events of significant magnitude have occurred. Some are continuing to unfold. Particularly unsettling is the stealth takeover of Ukraine by Russia. While this is certainly disheartening and tragic, in all likelihood, it will have little impact on capital markets in the medium to long term. The Ukraine’s political system is as corrupt as Russia’s. Its economy is smaller and in materially worse condition. Any deterioration, while having possibly catastrophic human consequences, will exert little influence on the world economy. The lone exception being Russia’s supply of gas to Europe. Even there, energy disruptions historically have been fleeting.
The quote at the head of the newsletter is from Meditations that was probably written between 170 and 180. A collection of thoughts never really intended to be published, they reflect his personal interpretations of the stoic philosophy. Among the many thoughts contained in Meditations are the beliefs that we should reflect on a much greater spectrum of events over a much greater time frame. This is a very useful lesson for retirement planning and investing. There have been many significant events in the past few years alone that have challenged many investors’ resolve to remain exposed to capital markets and in particular, equity markets.
Some things are in our control and others not. Things in our control are [opinion, pursuit, desire, aversion, and], in a word, whatever are our own actions. Things not in our control are [body, property, reputation, command, and, in one word, whatever are] not our own actions. – Epictetus, Enchiridion
Epictetus proceeded Marcus Aurelius in the stoic philosophy timeline and greatly influenced the latter’s own thinking. In his writings, Epictetus espoused the idea that things that are not within one’s control should not control one’s emotions and actions. It is better to focus on what is controllable and channel one’s actions towards decisions that will achieve apatheia or objectivity in the face of life’s challenges and successes.
Again, this is very useful in planning and maintaining asset allocation. In recent newsletters, we have documented investor behavior. In particular, we have highlighted the fact that individual investors were net sellers of stocks in the five years ended in 2012 despite the attractiveness of valuations. These investors became net buyers only one year ago. These investors were making decisions based on events and outcomes that they could not control. As always, we believe that through the planning and implementation process, one should establish an allocation that they can stick with in the face of adverse conditions in markets.
Look back over the past, [with its changing empires that rose and fell,] and you can foresee the future too. – Marcus Aurelius, Meditations
In a final quote from Meditations, we can draw further parallels to planning and investing. Particularly, major, market moving events will occur on a fairly regular basis. These are out of our control. The outcomes or implications, when viewed over longer time frames, are reasonably predictable. They will be the same outcomes that have occurred in the past. Firstly, economies will normalize. Markets will recover. Further, investors will be rewarded for abstaining from rash judgments in the midst of an emotional peak.