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2022 Q1 Newsletter

“Stay calm and serene, regardless of what life throws at you.”
Marcus Aurelius (April 26, 121 – March 17, 180)

Over the holidays, longtime Spartan and close family friend Douglas Malie presented me with a remarkable little book titled “The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living.” Each daily reading includes a quote from one of the great Stoic philosophers of ancient Greece and Rome (Marcus Aurelius, Seneca, Epictetus, Cato, etc.), along with a brief reflection, followed by an invitation to meditate on how to apply it during the course of the day.

Having never studied philosophy, my understanding of stoicism was limited to what the word stoic has commonly come to mean as an adjective: emotionless. But three months into this book, I realize that this definition is deceptively simplified. More importantly, I have been pleasantly surprised to learn how closely my personal beliefs align with those of the Stoics who lived centuries ago.

One of stoicism’s core tenets is best summarized as “Focus on the things you can control and simply accept those which you cannot.” The Stoics believed this to be the secret not only to success but to happiness itself.

Which types of things can we control in our daily lives? Things such as practicing gratitude, choosing optimism, seeking knowledge, working hard, showing kindness, and loving those we care most about come to mind. Which types of things can we not control? Inclement weather, traffic congestion, flight delays, long checkout lines, and how others treat us. Even though we all know this, many people waste much of their precious time and energy complaining, fretting, and worrying about things completely out of their control. This is not only counterproductive but inevitably results in frustration and unhappiness. As the Stoics say, it defies logic.

The exact same principles apply to investing. I founded DEM on the basic premise that the only way to deliver a successful investment experience is to focus solely on the things we can directly control: engineering comprehensive Lifetime Financial Plans; using reasonable assumptions; diversifying our portfolios broadly; minimizing taxes, fees, and turnover; rebalancing regularly; making systematic contributions and withdrawals; and maintaining discipline through thick and thin.

What can’t we, you, or anyone else control? The economy, pandemics, elections, recessions, inflation, wars, market volatility, or the relative performance of one fund versus another. Yet most advisors and investors spend their entire investing careers focused solely on these things. In contrast, last quarter, we wrote the following:

“So, although favorable conditions appear likely, I am 100% certain that currently unknowable political decisions, global conflicts, economic shocks, and/or natural disasters will emerge in 2022, disrupting the economy’s trajectory and triggering volatility in our equity portfolios. Fortunately, when (not if) these occur, our recommendations will remain unaffected.”

At the time, we had no idea the Russians would invade Ukraine, oil prices would surge, and inflation would reach 40-year highs. But we did know:

  • Shortly after I founded DEM in the summer of 1998, Long Term Capital Management collapsed with the S&P at around 957.
  • On the night before the terrorist attack of September 11, 2001, the S&P 500 closed at 1,093.
  • The Friday before Lehman Brothers filed for bankruptcy in September 2008, triggering the Global Financial Crisis, the S&P 500 closed at 1,252.
  • The S&P 500 hovered around 3,300 just before the world shut down due to the COVID-19 pandemic in March of 2020.

With the S&P 500 now resting comfortably above 4,500, it is obvious that none of these prior uncontrollable “crises” were capable of derailing our Plans. So rather than react in panic to the uncontrollable this quarter, we continued to calmly and serenely act within the context of the Plans under our direct control. This makes me believe even the Roman Emporer Marcus Aurelius would feel right at home amongst us Spartans.

Don Davey
Senior Portfolio Manager
Disciplined Equity Management
Plan Appropriately, Invest Intelligently, Diversify Broadly, Ignore the Noise



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