Pessimism and Your Portfolio

The Dividend Cafe

The Dividend Cafe - The Bahnsen Group

Retirement Planning, Dividend Growth Investing, Monetary Policy, Investing, Business, Wealth Management, Estate Planning, Macro Economics

4.9 • 572 Ratings

🗓️ 20 November 2020

⏱️ 13 minutes

🔗️ Recording | Apple Podcasts | RSS

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Summary

I have to say there's nothing more important than the basic conversation of optimism vs. pessimism. Not only is the topic of extreme importance to me personally, existentially, emotionally, and spiritually, but I was convinced then, as I am now, that there is lasting investment significance to the topic – one that matters to the financial results of real people with real goals and real objectives.

If you fast forward from the levels of uncertainty that existed in markets (and in the society) 6-8 months ago, some may conclude, “okay, well now I am an optimist, because we see a couple vaccines coming and a lower mortality rate than we feared then, but then we saw no such thing, and pessimism was in order.” And if pessimism vs. optimism is to be determined by circumstantial conditions at a moment in time, it is fair enough. If optimism is to be recovered as a hindsight tool for use after conditions have improved, I can understand that assessment (i.e. pessimism when one doesn’t know what is going on; optimism once they see things having gotten better).

But of course, that is not what it means to be an optimist or a pessimist – to form a viewpoint or personality impulse (dare I say, a character impulse) as a backward looking response to then-known conditions. In today’s Dividend Cafe, we are going to unpack this more, and seek to understand why this topic is not just relevant to investors, but perhaps at the very heart of what it will mean to be a successful investor. I am optimistic that you will find it rewarding.

Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Transcript

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0:00.0	Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life.
0:12.5	Hello and welcome to this week's Dividend Cafe podcast, video, all the good things coming to you with my thoughts on the week and and kind of current
0:25.2	reflections on the topic of the week. I wrote at dividentcafe.com this week about a subject
0:32.2	that I actually made a video on earlier in the year. I was kind of quarantined up in my house
0:37.1	as most of us were back in
0:38.8	April. And one of the videos in a little series, a mini series of kind of ad hoc videos we did in
0:47.2	the COVID moment was on the subject of optimism versus pessimism.
0:57.5	And I want to make a few comments on that topic here today.
1:03.9	Not so much in the exact same vein as what that video was on, what, seven or eight months ago,
1:11.8	but kind of more evergreen approach to the topic, something that I happen to think is really, really important to the long-term investment success that a particular investor may have that comes out of their
1:21.4	general disposition favoring a more optimistic viewpoint on things, a more pessimistic view.
1:29.8	And one of the things that I will suggest to you is that an optimist does not mean,
1:37.3	and the success that an optimist might achieve as an investor, let alone, by the way, as a human being, does not mean the ability to look back
1:50.0	on things that ended up turning out okay and saying, okay, well, now I'm an optimist.
1:56.5	In other words, optimism is not, by definition, a rear view mirror, a backward-looking condition or viewpoint or framework.
2:07.4	Optimism requires a forward-looking expectation to be considered optimistic.
2:15.9	If you're looking backward and saying, oh, yeah, look, that all worked out, that's merely
2:20.1	descriptive.
2:22.4	And yet, what I would suggest is the hang up for a lot of people who struggle with becoming
2:30.3	optimistic is, in fact, the inability to look backwards on things that empirically
2:38.0	suggest a reason to have an optimistic framework into the future, and yet are unable to
2:43.9	translate that.
	...

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