Synopsis: Investors can sometimes be lured into the kind of behavior that makes historical figures famous…for all the wrong reasons.
Fall was coming to the Hudson Valley and an early morning chill hung on the breeze. The General sat brooding over a fire in the hearth, flames leaping and smoke twisting. It reminded him of a retreating army burning their stores, and though he had won some victories in this war, too often it was his troops who were withdrawing. So much fire, destruction and death, he thought, so much blood spilled on both sides. And yet we are no closer to defeating the British than we were when we declared independence.
He barely heard the door open and his aide-de-camp saunter in. “Good morning General, there is news already from down near Tarrytown.”
The General arched an eyebrow, then flinched as a wet log popped on the fire. “Oh? What news?” Born in Norwich Connecticut, the General’s father was a respectable businessman who watched three children die in infancy and turned to alcohol to dull the pain. Perhaps because of his father's preoccupation with spirits, distilled and family alike, the General went through life with a chip on his shoulder, trying desperately to be noticed.
“Some troops under Colonel Jameson caught themselves a spy, sir. A chatty British Major who had incriminating documents and was dressed as a civilian. We’ll be stretching his neck in a noose by the end of the week.”
“Indeed?” The General struggled to his feet, old wounds grown stiff in the cold. As a young militia captain in the French and Indian War he distinguished himself enough to earn a commission in the Colonial army. He had helped to capture Fort Ticonderoga in 1775 and was severely wounded at Saratoga in 1777.
“Sir, where are you off to?” He was used to the highs and lows of his commander’s moods. He felt for the man. His success never came with the recognition he deserved. Indeed, back in ‘77, five men of lesser seniority were promoted ahead of the Brigadier General and his staff had nearly revolted. The aide noted he became more and more bitter as his chances for promotion and glory seemed to pass him by.
“For a walk. I find myself in need of some air.” Sweat was suddenly running in rivulets down the neck of his uniform.
“Very well sir, but remember you are to have lunch with General Washington.” But he was gone, closing the door behind him. Ay, he seems a bit off today.
And off he was. General Benedict Arnold had met with the captured Major John Andre the day prior and offered to turn over his command, the American fortifications at West Point to the British. Frustrated by his lack of success in the American army, married to a British loyalist and often deeply in debt, On September 21st, 1780, Arnold attempted to give up his command, his country and his honor but only succeeded in the latter. On hearing of Andre’s capture, he fled across British lines, returned to the war on the other side and moved to England after the war. He never received the major military honors he craved with the British either and engaged in several controversial business dealings before dying at the age of 60. Today, in the country he partially helped create, his name is synonymous with traitorous behavior. Nevertheless, he got off easy. Andre was hanged as a spy.
Many sectors of investment markets entered the third and fourth quarters of 2018 also striving for recognition. Areas such as foreign stocks and fixed income have been unloved and underperforming the major US stock indexes. This is a problem for some investors who try to associate US indexes with their own accounts, feeling good or bad based on this arbitrary index in green or red on the nightly news. Unless you own the thirty stocks that comprise the Dow Jones Index, determine the proportion of them in your portfolio by owning more shares of the most expensive (the Dow is price weighted) your portfolio is not a mirror reflection of the domestic indexes.
Yet markets sometimes entice investors to shift their allegiances. In the worst-case scenario, this perceived underperformance may have led some investors to declare their independence from their long-term strategy and overweight stocks just as we were headed for what is, so far, a moderate mini-correction. Lesson learned? Generally speaking, you may want to be more loyal to some of your holdings. Changing sides isn’t always what it is cracked up to be.
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