The song, “One of These Things Is Not Like the Others,” is played during an educational segment on Sesame Street, a popular and long-running American children’s television series. The song was written by Joe Raposo. Source: Wikipedia
In the investment world, differences are where value is created. We are not talking about that dangerous phrase “This time it is different.” No, we are talking about finding those little disconnects that others have not quite picked up on or perhaps don’t fully believe quite yet. Identifying those opportunities is what creates differences in our returns versus market comparisons.
Differences come in many types. There may be a difference in trend from one period to the next. For example, the Fed has clearly demonstrated that they are ramping down support in contrast to the past five years. There may be a difference in how two parties act in the same period. For example, other global central banks have been talking up more support in contrast to the Fed.
In this world, change is the only constant, which means that differences are always coming and going. We must keep a vigilant eye and an open mind to understand the ramifications of what we see.
Be willing to be different as an investor, but only if the facts support it. Be willing to pick your spots; you do not have to own all types of assets at one time or one type of asset all the time.