It’s Tough to Be a Bear

This year marks a personal anniversary: Thirty years attending California Golden Bears’ home football games—a stretch during which I’ve missed only two. And last weekend, I went to Southern California to watch my alma mater take on the USC Trojans. A pilgrimage I’ve made a handful of times to see the Bears play both USC and UCLA—though I’ve yet to see a win. In fact, my personal road record is rather dismal—of the probably dozen or so Cal road games I’ve attended (Big Games at Stanford aside), only two have been wins: one in the Palouse against the Washington State Cougars a couple years ago and the Insight Bowl in 2003. Other than that, I’m winless on the road.

And as I watched my Bears fall in thoroughly disheartening fashion yet again to the Trojans, whom we haven’t beaten either home or away since 2003, I was forced to be introspective. To contemplate what my dedication to Cal football says about me—whether I’m an eternal optimist or the definition of insane, personified. As Einstein is credited with saying, the definition of insanity is doing the same thing over and over again, expecting a different outcome. Plenty of Cal fans could easily fall into that category.

When I was a student at Cal, my freshman year, the team went 1 and 10. Our sole win was the season’s finale, which was a make-up game against Rutgers played in December—rescheduled in the wake of September 11’s attacks. The next year, though, we were 7 and 5—our first winning record since 1993. Then came an 8 and 6 season, and then, in one of the truly great seasons I’ve had the pleasure (or pain) of witnessing, we were 10 and 2 and by some accounts (my own, entirely objective one included), should’ve gone to the Rose Bowl—for Cal fans, the Holy Grail of collegiate athletic endeavors.

Why do I recount this history to you? Because in some ways, being an Old Blue (as Cal alums are affectionately called) isn’t so different from being a stock investor. First of all, that’s some hefty volatility in year-over-year results. And the same is true of many college football teams—with what seems to be the sole exception of USC, among a few others, rarely are teams year in, year out powerhouses.

Largely the same can be said of the stock market: Though its long-term average return is in the 10% range, individual years’ returns are all over the map. In fact, it’s more normal to see what might be considered an “extreme” year than an average year: Since 1926, 37.2% of years have seen big returns (over 20%), while 34.9% have been average (between 0% and 20%) and 27.9% have been negative (less than 0%).* Ups and downs are to be expected, but in the long run, stock markets generate quite solid returns—provided, of course, investors can stay disciplined and patient, remaining in the market far more often than they’re out. That’s much easier said than done.

But there’s another, more philosophical sense in which us Old Blues share some commonalities with stock market investors. On my flight home from Los Angeles, I was re-reading some of Ken Fisher’s old Forbes columns in Aaron Anderson’s The Making of a Market Guru, and I came across a few quotes:

In the long term, America and the stock market have a wonderful future. As history is my guide, things clearly get better over the generations. Always have. Always will.
- “A Sitting Bull,” February 19, 1990

In your bones believe in capitalism and its basic ability, despite recessions and scandals, to better the human condition. From that belief you can conclude that, over the long term, the stock market works. It is better to come to this conclusion from faith than from studying a column of statistics.
- “Philip A. Fisher, 1907–2004,” April 26, 2004

And Aaron Anderson says in summing up Ken’s years writing for Forbes the following:

Stock market investing is inherently for optimists. Things won’t always be rosy. The economy and stock market will flourish at times and languish at others. During dark times, there are those with little faith things will get better and those who are long-term optimistic.

The stock market is for optimists—those who believe in their bones capitalism is the worst system of economic organization ... except for all the others that have been tried (sincerest apologies to Winston Churchill). Because in the long run, capitalism provides the most people with the evenest odds at achieving success, however they individually define it—whether it’s investing success, entrepreneurial success or yes, even football success. Without capitalism, none of those are especially attainable because there’s no guarantee of a level playing field. The big guys can take the ball and go home without notice. But with capitalism, even the little guy has a shot. That’s why we play the game—regardless of the odds. Because you never know—Appalachian State could beat Michigan (apologies to the Wolverine fans).

And so even in years that challenge investors’ discipline and leave them questioning whether they’re inherent, unflinching optimists or insane, they’re far more likely the former than the latter.

Now me, on the other hand—I might be another story. Thirty years of Cal football with relatively little to show for it has challenged my dedication, my sanity and, at times, my very soul. But I’m stronger for it, and I still believe in the long run, anything’s possible. Investors should maintain a similar attitude—it’s far more likely to lead to long-term success than being ... Bearish.

*Source: Global Financial Data, Inc., as of 12/31/2011.