A Matter of When, Not If

When it comes to the long term, most of us would instead prefer to think of the here and now. To add more than a little color on that front, I once again turn to the well that is Louis C.K.:

“Or you’ll meet the perfect person, who you love infinitely, and you even argue well, and you grow together, and you have children, and then you get old together…and then she’s gonna die. That’s the best case scenario, is you’re gonna lose your best friend, and then walk home from D’Agostino’s with heavy bags every day and wait for your turn to be nothing also. Nothing good ends well.”

A couple of things immediately jump out as true: 1) you don’t want Louis C.K. as your best man, and 2) not thinking everything you do completely through to its logical conclusion is part of what allows us to function. We are the only animal on the planet that learns early on that our time is finite, and yet we still manage to walk around and waste amazing portions of our lives to things that are truly meaningless (ladies and gentlemen, Candy Crush). You would think chickens would figure out their all-too brief role based solely on the ample anecdotal evidence at their disposal, but then that’s part of the flawed beauty of being a chicken.

There are indeed mundane things I do that I clearly know are going to end badly but do anyway. A prime example would be any effort I take at straightening up our garage. I know not-even-that-far-deep-down that all of this work will be quickly undone at the hands of our children. String will be glued, or taped, to various items less than five feet tall, and every tool not secured behind a lock will be strewn on the floor for tests involving procedures for which they were never designed.

There are other things I know will be undone so soon that I no longer even make the effort. A prime example of this is the act of returning sheets, covers and pillows to the “made” position. I have the utmost confidence that the impact of this effort is fleeting in large part because I’m the one who destroys it about 15 hours later.

This takes us to the realm of the important things we do that we know will end, perhaps badly, but choose to do anyway and hope deep down that it will somehow all work out. No, I’m not talking about marriage. Rather I am turning to the person who many hired to help take care of their money through both their working and retirement years. That’s right. I’m talking about Bill Gross. There may still be a few of you out there who have not yet heard the news — Bill Gross left PIMCO.

This news shouldn’t be shocking on any number of fronts. Going back to the Louis C.K. methodology, hiring a mutual fund with a star manager typically only has a few possible endings:

  • The star manager’s approach fails at some point, and he or she is fired because of underperformance.
  • The star manager leaves the firm for another opportunity, such as a hedge fund.
  • The star manager retires.
  • The star manager dies.

There are many, many well-documented cases of all of these outcomes. Most of these endings are bad ones. I’m purposefully avoiding naming examples to avoid hurt feelings and angry lawyers, but you need only look to your own holdings over time to find them.

There are also outlier situations where a fund has successfully transitioned from one star manager to another and continues to enjoy success, at least for a time. In many of these cases, the star manager was actually replaced by a team of individuals rather than a single manager. Even in star manager settings, there is an entire team of people supporting that individual, and it’s often difficult for the outside world to discern the impact of that support team.

Regardless of the future manager/team’s success rate, the longevity of a star manager is finite – a matter of when, not if. It appears that Bill Gross will be taking his considerable talents, as well as a fair amount of baggage, to Janus. I hope he continues to put forth his monthly articles. He has a unique ability to convey complex ideas in ways that just about everyone can understand (and which usually overcome his increasingly curious reference points).

There are too few stars left in the investing world and, like marriage, we should appreciate them while we have them.

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