Noise

Noise
One of the biggest challenges for investors is determining what’s valuable to your investment process and what’s noise. I would guess that at least 95% of what I read and a huge chunk of the research I do is worthless to mine. Making that determination, however, is not nearly as easy as it seems.

Getting caught in the quicksand of macroeconomic theses, debatable technical formations, and both touts and short-sellers with unspoken agendas can happen in a split second. The hardest part is some of this stuff can be very valuable, too, but it can also very quickly lead you astray – to focus on a few trees and miss the forest, as they say.

I think this is why Warren Buffett has said that there were times in his career where he wished he had just gone to the movies instead of to the office. It’s so hard to tune some of this stuff out. You feel like you’re going to miss something when the bigger risk may, in fact, be that it sucks you in. You become too risk averse at the wrong time or take too big a risk in the wrong opportunity.

When in doubt just turn the volume down or off completely and refocus. Sometimes it helps to just stare at forest for a while without even noticing the individual trees.

Jesse has been managing money for over 20 years. He began his professional career at Bear, Stearns & Co. and later co-founded a multi-billion-dollar hedge fund firm headquartered in Santa Monica, California. Today he works with a select group of clients at Felder & Company, LLC in Bend, Oregon.