Dear Clients and Friends,
In the 1994 classic, Forrest Gump, Forrest Gump and Lieutenant Dan survive a dreadful storm with their shrimp boat and remain in business after the devastation from Hurricane Carmen. The movie depicts their success post-hurricane with bountiful shrimp catches and an almost euphoric success; spawned from what seemed to be a tragic event for the community. This short scene from an outstanding movie serves as a great lesson for investors today – crises can bring opportunity. What follows is a short review of crises and aftermath for investors, which should serve as small lessons for how we as investors should view crises.
The story of history is crystal clear on crises and opportunity, every crisis has embedded within it a great opportunity. Whether it is war, economic failure or the outbreak of a contagious disease, when crises are met with a clear understanding of the failure and bold action, they can turn out to be very powerful forces for change. In most cases of crises, the initial reaction is panic and asset prices fall fast and hard. The US has a system that deals very well with crises, and as an investor we have to understand that there are very few challenges that pose a grave existential threat to a system that has the ability to adapt and change. Yet crises beget profound uncertainty, and this uncertainty creates both the panic and the opportunity. An investor wants to look at the crises as a point where they can get some great deals on great assets, because eventually the system will regain composure and assets will be priced more rationally.
Steve Jobs and Steve Wozniak started Apple Computer in 1976 with the idea that they would build a personal computer for the masses. Less than 10 years later Steve Jobs was forced out of the company he helped create. For Steve Jobs, this was a crisis, but a year later he took his love for graphic design and computers and funded a small shop called The Graphic Group – today we know them as Pixar. By 1996 Steve had an opportunity to return to the company he started when Apple bought NeXT computer (one of Steve’s companies he helped start after leaving Apple). Apple was in need of some serious leadership and Job’s turned out to be the answer. Steve Jobs summed up his crises this way, “I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me.” By losing the company he started, Steve was able to look into the crises and see opportunity and I believe the world is better off for this.
In late September in 1998 as small company in San Francisco started using a website to organize the internet through search. They had a single mission, “to organize the worlds information” and in 2000 the tech world imploded in what became known as the “Dot com Bust”. So, Google saw the crises in AOL and Yahoo as an opportunity to take advantage of the massive dislocation in technology by innovating faster and better than their larger competitors. By 2004 Google had survived the storm and went was successful enough to go public. Steve Jobs, Google and Forrest Gump all survived the storm and capitalized on the opportunity created by the crises.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All investing involves risks including loss of principal. No strategy assures success or protects against losses.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.