Posted on January 22, 2009 - by Jeflin

It Feels Great To Be A Sloth Investor

Warren Buffett once remarked that successful investing consists of long periods of inactivity, bordering on sloth. That pretty much describes my attitude towards investing coming into the new year. If we are going to have more of the October massacre, then we should at least seek cover and conserve cash.

The losses from Citigroup and Bank of America were staggering and confirmed that the worst of the financial mess is far from over. Analysing when the good days will arrive seem to be a futile exercise now. In any case, I am less worried about the economic recovery which will definitely happen with so much money being dumped into the system.

My concern is whether we can have effective supervision and regulation to prevent a recurring bust, once euphoria and greed return? If not, we are only delaying the inevitable financial Armageddon which even the printing press of the US government may be powerless to handle.

Of course, returning to the gold system will impose strict discipline on all nations and individuals but in terms of trade and development, it is not ideal. The gold reserves held by the US has declined over the years; in fact, the ever bulging US current account deficit could even wipe it out in one fell stroke. Exporting nations will suffer if US has no gold to pay for imports nor credit to fall back on… I can just see the global economy growing at a snail’s pace.

In another day or so, the Bush era will be over and the Obama administration is poised to hit the ground running. Will they be able to instill discipline while not stifling the global economy? Obama has promised to spend trillions to create jobs. That is good, there is much to be done, in terms of infrastructure and development of clean technology.

As for bailouts, common sense dictates that Obama should let irresponsible and ailing financial institutions fail but the Law of Unintended Consequence may give him an unpleasant domino effect with mass bank runs and businesses to fold in unison.

Tough decision indeed, and to be fair, being an armchair critic is easy, sitting on the hot seat is another matter altogether. If decisions can be made so easily, just let all the laggards fail and you are guaranteed sky-high approval ratings, then why isn’t anybody doing it earlier?

With all the uncertainties, I have decided to be a sloth investor in the next few months. Laziness in investment can be a virtue but not in your workplace. If you don’t step up on productivity during this economic recession and rather be a sloth, it is a quick one way ticket to unemployment.

One of the first step to be a strategic sloth investor is to pick businesses that required very little attention on our part, and if it can beat the market, all the better. The idea is to concentrate on solid, reliable business leaders which don’t require daily monitoring of their stock prices.

If the stock market closes for the next five years, they will be the businesses which will still turn in superior performance and not give us sleepless nights. Here are 3 more tips for the sloth investor: Read more…

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