Simplicity is one of our 2013 key themes here at CLS. Simplicity, is easier said than done. But, every time I focus on this concept it seems to become a little better, as long as we focus on the correct areas.
My family has been enjoying a new show on the National Geographic channel called Brain Games. One of the first episodes was all about focus. There was a series of games that tested your ability to multi-task and focus on what was most important in the game. Then, they would throw a curve ball outside of the areas you were focusing on. For example, they asked the audience to count the footballs crossing the screen. However, while we were counting the balls they put the answer in the background. The key point of the exercises was to show how much you may miss if you are focusing on one thing. They also emphasized the importance of being aware of other factors around you.
This Monday my head was swimming from all the tasks I needed to do. We are quite busy at our house these days, with two children in both baseball and soccer. I am also balancing my responsibilities at work with a couple board positions as well as school fundraiser tasks. I did a brain dump on Monday, all in I had 25 tasks dumped on a list that needed to be accomplished between work and home. Not to mention the items that continued to scroll in as the workday ensued. Needless to say all of these items were mush inside my head. However, once I put them on paper and started to attack them one by one the tasks went much faster.
The investment market is a test in the Brain Games exercises every day. We have talked a lot the past several years about “tuning out the noise.” However, there are two pieces to this. One is the ability to identify what the news media is telling you, and recognize whether it is something you should be focused on or not. For example, we are bombarded daily by numerous weekly, monthly, and quarterly economic and corporate reporting numbers. The news media reports each one like it is going to make or break the market. All this data is like the footballs going across the screen. It is up to us to decide which ones are most important to grab onto and be able to be aware of, but tune out, the rest.
It is that ability to grab onto and focus on the most pertinent information for making investment decisions, but be aware of all of the other issues around us, and that is the second piece. The issues that are not directly in our focus may be very important to our decision making. They may be issues readily being discussed, or developing issues that no one has grabbed onto yet. The changing conditions of the market give way to the fact that what is most important today does not mean it will be the most important tomorrow. It is our job to identify those important issues that may be outside our direct line of sight. The answer to the question may be written in plain English in the background, while you are diligently focused on counting the footballs.
To be honest, I relish in all this, at home and in my career. That is why I enjoy doing what I do. I wouldn’t be enjoying life if I didn’t have multiple items to keep my mind busy and strategically identifying those items that must be attacked first. Oh, I mean focused on first. At CLS we identify five key investment areas to simplify, or help focus our investment efforts: economic, fundamentals, valuations, statistical, and technical. If we always assess each piece of information for its level of impact on each of these five factors it is much easier to identify those items that will have the strongest impact, focus on them, and determine how we should position portfolios to take advantage of the information. That is, until the next most important factor comes along.