COVID-19 has been called by some as the virus of truth. It has certainly exposed those whose arrogance has led them to claim that they are somehow smarter than the pathogen. I can still remember the hubris of the Chinese leadership who laughably proclaimed that their handling the virus once again proved the superiority of the socialist system with Chinese characteristics.
Um…. Someone will have to explain to me why the political affinity of a microbe should matter in the way that it can rip through large swathes of a community? And with the benefit of hindsight, we can now see that there is nothing at all superior when two of China’s largest cities are in lockdown whilst the rest of the world is opening up.
Hubris is not the sole preserve of political leaders. Money managers can be guilty of a false sense of self-importance, too. A renowned US tech-fund manager has claimed that its investments could grow at a compound rate of 50% a year over the next five years. Sounds more like a sales pitch than serious analysis. According to Bloomberg, only one of the holdings within the fund is not in the red.
It is not for me to say that China won’t somehow emerge from the pandemic. And far be it for me to criticise someone else’s stock picks. But it never hurts to be a bit humbler. Warren Buffett once said that there is nothing wrong with a ‘know nothing’ investor who realises it. The problem is when you are a ‘know nothing’ investor but you think you know everything.
If the pandemic has taught us anything, it is that there are lots of things out there that we know very little about. The market correction that we are witnessing, which could easily turn into a full-blown bear market, is a painful reminder that we should always be prepared for the unexpected. And as far as how far or how long the correction could take, nobody really knows.
Here’s a parting thought from Warren Buffett: “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” And if we are humble income investors, we can at least look forward to receiving our dividends, whether the market is open or closed, or whether share prices are higher or lower.
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