Unmet Expectations

At my wedding speech in 2014, I caused a few surprised faces. When asked, “What’s the secret to a happy marriage?” I answered: “Low expectations!”

Some guests looked puzzled. Isn’t having low expectations a bad thing? Does he not believe in the happiness of his own marriage? Of course, I do. It’s just easier to meet a low expectation than a high one. Because that’s the formula for happiness:

Happiness = Reality minus Expectation

Last week, we sent out a client update, Gutmann UpToDate. Global stock markets had dropped by more than 10%, with the Magnificent 7 tech giants taking the hardest hit. If you’re invested, you can’t escape the market. Neither can we. But we focus on successful business models. We invest in quality and long-term resilience, staying broadly diversified and seaworthy - before the storm even hits.

Putting Things into Perspective

For years, I have been trying to keep our clients’ expectations realistic. When stock markets fall, the value of Gutmann’s portfolio management portfolios will not rise. Sorry, that’s harsh - but unavoidable.

Still, one client felt our Gutmann UpToDate update was inappropriate. He saw it as self-congratulatory, given that “money was lost.”

How we deal with challenges depends largely on how we frame the situation. If every market downturn is seen as “losing money,” one should never invest a significant amount in equities.

Even Warren Buffett - the most successful investor of all time - experienced multiple drawdowns of over 50%! Where would he be today if he hadn’t stuck to his strategy? By the way, the idea of low expectations also comes from him.

There’s No Bad Weather - Just Bad Gear

At Gutmann, our primary goal is to avoid permanent capital loss. Market declines are not a bug but a feature. Apologizing for that would be absurd. I don’t apologize for the weather either - it’s beyond my control.

However, there is room for discussion when one is poorly prepared and caught in the rain without an umbrella.

Our update struck an optimistic tone. Rightly so - because given the market conditions, we did a good job. Yes, it rained and stormed. But those who can endure such moments and avoid hasty decisions will be there when the sun shines again.

P.S. If you missed our latest update, you can read it here.