Military Maxims; Investing Axioms

Military Maxims, Investment Axioms© 2019 by Robert P. Fennell

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First Edition July, 2019

Contents

Acknowledgments

Section One: Intention

Section Two: Premise

Section Three: The Military Maxims of Napoleon and Investing Axioms

Chapter One: (V) Principles, (1) Principled Foundation

Chapter Two: (XII) Simplicity, (2) Plan

Chapter Three: ( LXVI) Judgment, (3) Reason

Chapter Four: (LXV) Courage, (4) Courage

Chapter Five: (XXVI) Risk, (5) Risk

Chapter Six: (IX) Audacity, (6) Modus Operandi

Chapter Seven: (XVI) Genius, (7) Selection

Chapter Eight: (IV) Concentration, (8) Deliberation

Chapter Nine: (XI) Unity, (9) Unison

Chapter Ten: (XV) Pres/Pers, (10) Perspective

Chapter Eleven: (XVIII) Determination, (11) Discipline

Chapter Twelve: (XXIX) Force, (12) Commitment

Chapter Thirteen: (LXXVII) Experience, (13) Adaptation

Chapter Fourteen: (LXXIII) Confidence, (14) Hubris

Chapter Fifteen: (VII) Vigilance, (15) Awareness

Chapter Sixteen: (X) Perspicacity, (16) Maturity

Section Four: Summary

Postface

Notes

Bibliography

About the Author

Acknowledgments

~~~~~~*~~~~~~

To my wife Patricia of these many years, for her energetic encouragement of an idea.

To my friend and colleague Dave Fritts, a trusted and gifted market consigliore.

To my university grandson Thomas for his classics erudition.

And

To Jennifer Nicole Fennell for her courage.

"There is a tide in the affairs of men which,

taken at the flood, leads on to fortune."

Julius Caesar

William Shakespeare

Act IV, Scene III

Section One

~~~~~~*~~~~~~

INTENTION

Asked by a longtime friend and colleague, Why did you decide to write a book I replied that, in my view, most writers wrote because they had a passion or an anger. In my case, it is a little of both.

The Maxims idea started from a television commercial in early 2014. The advertiser, standing in front of a large line chart—on which he blocked the most recent (downward) price action was encouraging the public to invest in silver because of its attractive historical performance. Later in 2015, the advertisement encouraged investing in silver because the price was now so advantageous (way down in value). What the hell is this? I thought.

In my years of experience as an investor and as a professional advisor investing in the stock market and related financial market endeavors, including venture capital work, I became aware that my friends and most other people possessed a very muddled view of financial markets. But most were active investors and in the game. So when I spoke of this in casual conversations, they were often reluctant to discuss what they were invested in or why; many generalized comments were offered like healthcare, technology, and the Internet.

Are you in growth or defensive/income stocks? I’d ask.

The replies were varied: No, I don’t invest in defense stocks; I’m mostly in mutual funds or stocks such as AT&T, Verizon, Ford, maybe a little McDonalds.

Sounds diversified, I’d say., So how have you done over the last couple of years?

Well, you know, I think I’m doing okay.

You know, I’m not really sure, but my investment guy takes care of everything.

Or, You know , the company’s mutual fund company takes care of my 401(K) retirement stuff. I get a lot of financial reports and annual reports ad infinitum in the mail, but I really don’t get in to it.

I realized the pervasive nature of this attitude because it was prevalent among all kinds of people: young and old, newly-rich, and not-so-rich investors. Everybody is generally busy with their occupations, their business, their family commitments, and matters of finance are viewed as a chore, a distraction, and boring, to boot. As an financial advisor, I prepared an annual analysis and report of a client’s investment situation—with attendant findings and recommendations for improvement—I was rocked by the fact that it was never read. Never read!

Most clients are, no doubt, either focused on non-challenged, comfortable socially-enjoyable endeavors such as golf, sailing, skiing, lawn management, sports, cocktail parties, etc. or they leave it up to tomorrow. Or sometimes a client, a very busy financial management consultant, encouraged me to do what I thought was best because he really didn’t have the time to keep up and trusted me. I was floored; I’m an advisor and not a fiduciary (one possessing discretionally authority) and not a fool! I certainly acknowledge that, yes, it is indeed hard to keep up with the normal complexities of a made by professionals investment portfolio. In reality, it has been my experience that most investors have but a careless non-interest in a comparative review of a monthly or annual investment portfolio. It’s even more of a challenge to figure out what, if anything, needs to be changed. Most times, things that should be changed now do not get changed, and the investor suffers accordingly. Some investors rely on an investment advisor to take a personal interest, but in the real world professional workloads prevent personalized portfolio optimization.

I do understand and empathize with investor’s state of affairs, nevertheless, stock market dynamics necessitates active stewardship. With today’s intense globally competitive economy, dissolute concern and awareness can be an expensive enemy over a very short time. Napoleon addressing his military campaigns was said to say, I can always gain space, but never time.

My view is that the individual investors’ investment management problem is due primarily to the complex paradigm of the investing space, and not to the individual investor’s attitude. The space is very complicated and difficult to keep up with. Its very dynamic nature and volatility breeds confusion and uncertainty. Financial advertising doesn’t particularly help. In 2012, investing in silver was attractive at $30 per ounce; in 2018 at $15.44 per ounce since the price has depreciated greatly, people should invest because it’s really cheap: invest now and catch the coming recovery! All of the spatial issues and greed-inducing promotions essentially converge to advance an investor’s laissez-faire attitude in contrast to their natural intelligence, education, and earnest nature. Of course, most of my experience involves investors who had an advisor or a stockbroker or a Company or a day-trader buddy who provided a lot of narrative or volunteered advice along with positive recommendations. But enlightened self-interest and personal time constraints can only serve to help an investor from making a really dumb investment mistake. Which is why I’ve written this book.

At times, high volatility events surge through the stock market, such as the high volatility of the Dow Jones Industrial Average (DJIA) during the fourth quarter 2018 of 500-plus points or more; that is a perfect example of a bear trap (which I define as a spasmodic, undefined contraction of investor emotional sentiment, a.k.a., fear). I realize that that many investors often join in the emotional sell bandwagon. However, powered by rising corporate earnings with a relatively stable political/economic stability the DJIA recovers. Reactive impulse selling breeds failure.

In my view, many investors can avoid this type of common setback because it is easily avoidable. Anyone can attain a level of investing acumen that generates not only creditable success, but also attains a refined composure. This is what you can achieve when you are confident in the soundness of your own personal investing campaign, one based upon on a foundation of personalized maxims constructed on sound investing principles and sustained by a confident courage of your own convictions. The purpose of this book is to help you accomplish this.

Section Two

~~~~~~*~~~~~~

PREMISE

I am confident that men and woman of reasonable intelligence can create a productive stock market portfolio and have a successful long-term investment campaign, both money-wise and mental-wise, by doing three simple things:

Realize that the next best thing (i.e., conspicuous consumption) is a fraud, so contain yourself, thereby generating excess money then slavishly save it.

Educate yourself on current business matters, (i.e., add cellular phone business web sites).

Study the Napoleon’s Military Maxims and Investing Axioms set forth in these chapters.

These things will take you through all the phases of your life, and in so doing, during retirement you will posses wealth when most of your peers will basically have leavings (well, there might still be some social security allotment or perhaps a free lifetime membership in the soon-to-be advocated American Rations Plan [ARP]. I have a troubled view of Social Security for my grandchildren because there is no actual accumulated money only recurring—and subjective—Congressional budget appropriations. I have the same dim view of pensions because I’m not certain they exist fully-funded today. Inheritances and lottery winnings are scam fantasy. We must be real in our expectations about life, health, happiness, and wealth—in that order. We must be real in our hope and aspirations for the future. We have to take charge; we have to command. So, instead of wishful thinking, our chances of membership in with the ARP, we should give our immediate attention to this formula.

To absorb this formula for financial success, the self empowered investor must adopt the following Imperative Willpower Actions:

ACT #1: I MUST SAVE

Today’s Cell Phone will rapidly but redundantly morph into some form of extra-terrestrial personal manager. It is a great tool for saving, as in direct deposit of a portion of income to a savings account to an investment account. Unseen is unspent. If you can’t save money for investing in your future, you may be broke in your sixties. Many guys I know, after living conspicuous consumption lifestyles, don’t have a dime saved for retirement (no money for old men)—a take from Coen Bros. 2007 film No Country for Old Men).

ACT #2: I MUST LEARN

A campaign of stock investing is where you have a fair chance for wealth and get close to your future financial security. To do this, it is imperative that you, the lay investor, acquire and maintain a degree of currency in general stock market news, overall economic conditions, and be able to confidently identify a few good companies for investment. Become responsible and informed. Many online financial news services enable you to easily become relatively well-informed. There are also a variety of free apps for help. It has been suggested that three percent of our brain power and two percent of our computer/handheld online time is all it takes. You don’t have to be expert; you just have to be informed.

ACT #3: I MUST ADOPT

Napoleon Bonaparte was one of the most outrageously successful military commanders of all time. Why? Because, like Alexander The Great and Julius Caesar, Napoleon achieved his victories by defeating enemy armies in their own country, even when their numbers exceeded Napoleon’s limited resources. Indeed, Napoleon’s success was empowered by his own extensive study of these and other famous generals’ campaigns, including Alexander, Caesar, Hannibal, Marlborough and Frederick. He attributed his military prowess to these studies and even wrote a lengthy critique of Caesar’s campaigns. Like Alexander, he was perspicacious in identifying and audaciously attacking the enemy’s weak point. Although Napoleon did suffer defeats—like at Moscow (Napoleon disastrously miscalculated the onset of the Russian winter, a surprise early blizzard), and also at Waterloo against Generals Wellington [English] and von Blücher [Prussian] where his trusted Marshals of France inexplicably failed to execute his direct orders. In the end, his military career has been included for study by most military academies, including our own West Point, from Civil War days to present.

I am convinced by my own experience that an application of Napoleon’s Military Maxims (dict.: a general truth drawn from science or experience, principle, rule of conduct), along with using sound investment principles as promulgated by leading investment practitioners, such as Benjamin Graham and Peter Lynch among others, and generally accepted by the financial intelligentsia, can provide the lay investor with universally relevant and essential guidance for conducting a successful investment campaign. According to Graham, a credible result can be achieved with minimum effort and capability just by buying and selling a representative list (of investments). Lynch, as well, believes that the lay investor can select investments as well as market professionals can. In fact, Lynch believes that the lay investor actually has an advantage; if not confused by listening to professionals and talking heads on TV. The truth is that most market professionals and their instruments fail to give us superior results.

So, if you think you can handle the three Must Do-s above, then there is a fair chance for you to be amazing and that’s a good thing, don’t you agree?

Section Three

~~~~~~*~~~~~~

THE MILITARY MAXIMS OF NAPOLEON AND INVESTING AXIOMS

Napoleon compiled a book of seventy-eight military maxims, his military philosophy about the strategic conduct of war, taken from his works, correspondence, and conversations during his exile in St. Helena in 1821. Versions appeared in various military colleges in England thereafter. A useful edition appears in 1831, translated from the French by Lieutenant-General Sir George C. D’Aguilar, C.B. Later additions appear in 1861, published first in the Confederate capital of Richmond, Virginia. Perhaps the erudite CSA President Jeff Davis issued copies to his cavaliers. Editions were later published in 1901, eighty-six years after Napoleon’s last battle and defeat at Waterloo. The provenance of the original work has some mystery, however, it represents military expertise of the highest order. As the stated object of the earlier versions was to educate young military officers, perhaps the work posses utility for educating the confounded investing public.

Napoleon in brief: He emigrated from Corsica, perhaps a militarist peasant millennial, native tongue Italian, and eventually became Emperor of France the old-fashioned way-he was a successful warrior superman and inscrutable statesman for France. We Americans were very fortunate that he sold President Jefferson (shrewd vision, thank you) the Louisiana Purchase. He did not need the money, but he saw that the Americans would eventually overcome the land anyway (perhaps our Manifest Destiny). Indeed he possessed shrewd strategic vision as well; perhaps there is a Maxim for expertise? See Chandler in Bibliography.

Between 1796 and 1815 Bonaparte was engaged in two Campaigns of Warfare that involved Italy, Egypt, Spain, Austria, Prussia, Poland, Russia (a defeat at Moscow 1812) with his second military campaign finally concluding in 1815, in Belgium at…. Waterloo. He was successful beyond comprehension, but was defeated in Moscow by his own studied logistical and climate miscalculations; and at Waterloo by his oversight negligence of his Marshall’s failure to execute his direct orders. At Waterloo Napoleon made an additional error by leaving behind in Paris some of his intelligence apparatus—his observation balloons—or he would have been alerted to observe the Prussians (von Blücher) descending to attack his right flank. At Moscow he was destroyed, at Waterloo it was a very close thing. Sometimes he ignored his own maxims.

In general, Napoleon changed the art of war by engaging cavalry, artillery, and infantry organizations more effectively. Firepower must be concentrated on a single point (my italics) (think power play in ice hockey); as soon as a breach is made in the enemy’s line, the equilibrium is broken and the rest is nothing. Napoleon would pick the point—nothing new here as, Caesar and Alexander did the same. Calvary was used as a focused battering ram against entrenched enemy positions—nothing new, Alexander did the same. Artillery Napoleon’s Daughters was amassed so that the concentrated firepower would envelope specific enemy defensive formations. Infantry became highly mobile, with reserves applied to effect a turning point at the decisive moment. He used his combined forces to penetrate specific defensive positions, thereby facilitating the destruction of enemy forces in detail. All of this may seem simple in today’s air/mechanized ground warfare tactics, however, Napoleon made the essential difference by assessing where and when to attack, and how to employ his combined forces. His motto was, "Attack, attack, always attack."

There are a total of seventy-eight military maxims, some of which deal with the tactics of the battlefield and others relating to the conduct of a campaign. The former are of little value for our purpose; the latter contain relevant instruction of common sense rules to guide the self directed investor in making