Expectation is the root of all heartache – 4th quarter, 2017
Jan 10, 2018
By Andrew Pastor, portfolio manager
In the 1930s, Winston Churchill had left politics and was teaching a class at Cambridge University. He started a lecture with the following question, “What part of the human body expands to 12 times its normal size when subjected to external stimulation?” The class gasped, it was the 30s after all!
Churchill pointed to a young woman in the class, “What’s the answer?”
Blushing, the woman replied, “Obviously it’s the male sex organ.”
“Wrong! Who knows the correct answer?” asked Churchill.
Another student answered, “It’s the pupil of the human eye which expands 12 times when exposed to darkness.”
“Of course!” replied Churchill. He then turned to the first student and said, “Young lady, I have three things to say to you. First, you didn’t do your homework. Second, you have a dirty mind. And third, you are doomed to a life of excessive expectationsi.”
In this commentary I want to discuss investor expectations. If you’re reading this there’s a good chance you believe the future will be similar to the recent past. If that’s the case you’re setting yourself up for disappointment.
We believe that over the next decade equity returns will likely be lower, and the ride not as smooth.