Will you follow through on promises?

By DAVID MOON, Moon Capital Management
January 20, 2008

A friend of mine recently proved that he is incredibly confident in both himself and his marriage. He gave his wife a gym membership for Christmas.

She didn't hit him, at least as far as I could tell. The neighbors didn't complain about late night beatings or police calls.

What happened? She went to the gym.

She reported that the gym seemed crowded the week immediately following Christmas, but since she was a newbie, maybe that was a normal cardio congregation.


You can predict what happened. On January 2, the place was bursting at the seams. She had to wait in line to get on one of those machines that make you feel you're walking up stairs that don't go anywhere. Who pays to work out on a machine that replicates a fire escape?

By January 12, she had almost the entire gym to herself. She finally saw the gym in its normal state. The New Year's resolutions had finally worn off.

It took less than two weeks.

The Shoney's sitting in the same parking lot as her gym looked as full as ever. Breakfast buffet trumps weight-loss resolutions.

People say they care about long-term performance, but how many follow through on those words?

A new client this week was concerned that the few days that it would take to transfer his assets from his old manager to us would cause him significant losses. He explained that he had lost ten percent in just the last two weeks. If it takes another two weeks to get his assets moved he'll have lost 20 percent.

Maybe. But only if the past is guaranteed to equal the future. Using that logic, my weight would have continued to double every six months, just like it did that first-half year after I was born. And I would weigh 1.8 octillion pounds today. That's 928.5 trillion trillion tons, or enough to scare the people at Shoney's and the Rush.

Someone else was skittish about the stock market and his entire economic future. 'Aren't we heading into a recession or already in one? I'm just not sure if I'll ever be able to retire.'

This guy graduated from college in the middle of a recession in 1969. He has worked, saved and invested through six recessions, two stock-market collapses, an oil embargo, a presidential resignation, Monica Lewinski, and Peyton Manning being denied the Heisman. Yet the Dow Jones Industrial Average managed to climb from 800 to 12,500 and this guy managed to accumulate $2 million while working a fairly normal job.

All he did was keep focused on the long term.

Emotional states change. It sometimes becomes difficult to keep the same rational understanding about things at all times. Right after two or three weeks of gorging on fruitcake and eggnog it is easy to make promises. It's like seeing an old classmate at a high school reunion. 'We had such a great time. I just know we're going to stay in touch.'

Yeah, right. Pass the eggnog, please. And no, I'm not about to use that treadmill. Go ahead; you can have it.

Oh yeah'and I promise I'm going to focus on long-term performance, not the daily or weekly or even monthly returns of my portfolio.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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