Don’t Look Down

– by Murray Sawyer, JD, Founder and CEO

Last May, Randy and I went to western North Carolina to celebrate our grandson’s graduation from college at Appalachian State in Boone. While there, we took a trip to Grandfather Mountain. At 5,946 feet, it is the tallest peak on the eastern side of the Blue Ridge Mountains, renowned for its breath-taking cliffs, hidden caves, and some of the highest surface wind speeds ever recorded, with unverified but reported speeds of more than 200 mph.

Its most famous attraction is the Mile High Swinging Bridge. This 288-foot span is the highest suspension footbridge in America. Sitting almost at the apex of Grandfather Mountain, it traverses an 80-foot chasm more than one mile above sea level. As you can imagine, the views are spectacular. Randy and I gingerly walked across the bridge on a windy spring day. Before I could get to the far side, I glanced down. Immediately, I felt queasy and seasick.

Once we got to the other side and had explored that part of Grandfather Mountain, we reversed our course and returned to the bridge. This time I did not look down. Walked straight across, head held high. No queasiness, no pit in the stomach. Same span, same stimuli. The geologic formations below and the engineering marvels permitting its suspension hadn’t changed. My reaction to them did. It’s not the event, but our response to the event, which informs our thinking about it.

In about a week, you will receive your portfolio statements for March from your custodians. If you look down, i.e., open them, I can promise you you will think you’re on that bridge staring at the ground below. With apologies to Robbie Robertson, Levon Helm and the rest of The Band, my advice is Don’t Do It.

It’s not the event, but our response to the event, which informs our thinking about it.

Here’s the reality we all know. Things will get worse before they get better as COVID-19 continues its virulent attack on our health, welfare, and productivity. Statements will be horrifying for March, April, possibly into May, maybe even June. But here is something else we all know — COVID-19 will end. You will outlive COVID-19, and so will your portfolio. It will repair itself as surely as our economy and the health of our citizens become healed. And the markets will go up, as will your portfolio statements, before COVID-19 is eradicated.

Of Golf Holes, Ponds, and Sand Traps

Earlier this week, I received an email from a delightful, long-time client who had just looked at her February statement. Being single and in her 70s, she was concerned about how much her portfolio had “lost.” I pointed out to her that it had not “lost” anything. True, the values of her holdings had diminished when compared with the previous month, but she was not cashing in her chips, calling it a day, and walking away. I pointed out to her that her investment horizon is still a good ten or more years. Her portfolio will recover.

The 4th hole of the South Course at Wilmington Country Club is a par three. It is bordered on the left-hand side by a pond and protected on the right-hand side by several sand traps. The green is narrow and double-tiered. Back when I used to play this game, if I hit the ball left of the green into the pond, that ball was lost. However, if I hit the ball to the right into one of those traps, I could continue to play with that ball. Your portfolio is that golf ball.

Recently all of our portfolios have landed in that trap. Plugged. Under the lip. Sure, it will take us a stroke or two to hack our way out of that challenging predicament, but ultimately we will blast our ball on to the green and knock it into the hole.

In mid-February, all three U.S. equity indexes reached all-time highs. Not just highs for 2020, but historical highs! That’s the equivalent for me of hitting my very best all-time shot on #4. That didn’t happen every time I played. It’s beyond unrealistic for me to have expected that all of my tee shots on #4 would be that good. (Come to think of it, I remember my all-time best shot. It ended up eighteen inches above the hole, on a slick green that curled menacingly to the right. Missed the sucker).

Similarly, we shouldn’t expect that every time we play # 4 hereafter, that our ball will land in that trap, plugged and under the lip. The point is we need to continue to keep playing the game. So long as we do that, the chances are more than likely that, as we quaff a beer on the 19th hole, we will have enjoyed a decent round despite that ugly triple-bogey we took on # 4.

So let’s hunker down in our homes for the time being. For me, when I’m not in the office, I’m binge-watching Ozark on Netflix. Pretty dark. Forget about looking at our portfolio statements for the next several months.

Remember . . . Deep breaths. And don’t look down!