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Serenity Now

In the recent blog post, “A Bear on the Prowl,” I wrote of the importance of remaining calm when facing market volatility, rather than succumbing to the temptation to “do something.” However, it can be difficult to stay calm and rational when faced with the daily bombardment of opinions from so many directions: television, the internet, social media, email, conversations, etc. Dealing with all the noise, not to mention daily swings in stock prices, is enough to overwhelm anyone. Recently thinking about this issue, an article in The Wall Street Journal grabbed my attention. Entitled Fund Chief Survives Oil’s Swings, it profiles Pierre Andurand, an oil trader who profited from oil’s collapse in 2015 and its rally in 2016.  I am no oil trader and am not familiar with Mr. Andurand, but what stood out to me was how he has structured his environment in order to create calmness and insulate himself from distractions. The article states:

Mr. Andurand prefers to form such trading views in the silence of his own office - fitted with an ivory leather couch and floor-to-ceiling windows that look out onto luxury department store Harrods - by reading reams of analysis, rather than amid the chatter of peers. Guests enter the trading floor between two large fish tanks, designed to add a calming influence.

"I need to be really quiet," he said. “In order to be an independent thinker, you should not speak to too many people.”

He also is the final decision maker on the fund. “I don’t need other people agreeing with the view,” he said, adding that the fund’s risk limits help protect against losses. “Sometimes it will be too late before everybody agrees.”

Mr. Andurand’s attempts to manage his environment are both instructional and refreshing. Likely his approach of reading on his couch next to his aquarium in a quiet office is a vastly different picture most have when imagining investment managers. His surroundings sound more like a library or living room than a hedge fund manager’s office. The stereotypical image of an investment manager might include a guy in a suit anxiously watching prices on one of multiple computer screens while yelling orders to a broker on the phone with CNBC blaring in the background. While this type of fast-paced environment might be exciting, it is likely not conducive to clear thinking and unemotional decision making. A quiet, calm, and distraction-free office environment is what we here at PYA Waltman try to foster to help us make the best decisions possible.

I also think Mr. Andurand’s remarks about speaking with others are interesting. At first glance it might seem odd that an investor would purposefully avoid talking with many people since the more knowledge gained, the better the decision about a particular investment. However, what Mr. Andurand seems to be guarding against is not necessarily information but rather opinions. He places a high importance on independent thought, which becomes more difficult to develop and maintain when receiving input from others. There is a big difference between opinion and information, and in order to promote independent thinking, the former must be minimized. While we do not advocate operating in a bubble, we do attempt to form our own views based on an objective assessment prior to hearing what others have to say. This approach is especially valuable when the market is volatile. Conviction is necessary in order to stick to your investments because it can only come from independent thinking. A lot more could be said about this subject, but I’ll leave it here for now. We here at PYA Waltman, like Mr. Andurand, believe that a calm, distraction-free environment and independent thinking are critical for success, and we do our best to nurture this type of setting.