One of the tougher things around is learning the art of surfing. I can recall the phrase, “Getting Up,” as being the hardest part for surfers, that of pushing yourself to stand up on the board while the wave is forming in order to find “the tube.” I never was able to get up, but I tried, and really made a big effort one year in Mexico, but alas, it was never meant to be. Still, having participated a bit in trying to catch a wave, in many ways, today’s investing is very much like surfing. Why you may ask?
Both institutional and individual investors are trying to find areas in the business world which are undergoing a huge growth opportunity, and combine this with owning those companies which will participate in the massive expansion ‘wave’. These crests might last decades and reward owners with many multiples of their capital, think 10X or plenty more.
Many of these rapidly ‘forming’ industries, call them waves if you want, peter out and only reward owners with disappointment. Perhaps you can recall Palm Pilot, or rare earth minerals, the joy that was Crocs, Krispy Kreme, the silver craze, the gold craze, the internet bubble, the housing boom and bust? It is rare to find something which actually has a long sustainable move over many years, like say, the Windows-Intel monopoly, or now with smartphones and Apple. Instead, what you find is these temporary spurts in industries where investors catch on, get very excited about the potential, and then reality leads the stocks and their investors back to earth.
If one looks at the current environment, with Amazon, Facebook, Netflix, and those cryptocurrencies in never-never land, it is not hard to be a bit skeptical of the sustainability of 100X earnings company or a ‘currency’ that goes up 200% in a few months or years. Riding waves as a surfer is quite difficult, at least it was for me, and investing over the long term typically involves patience and perseverance, which are not necessarily easy characteristics for most people either, especially in today’s digital dream.
