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Value Investors: Muster Discipline and Courage to Avoid Charlie Brown’s Fate

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“The definition of insanity is doing the same thing over and over again but expecting different results.”

–Albert Einstein

Most attribute this quote to Einstein, but if not Einstein, the meaning of insanity is still doing the same thing again and again and expecting a different result. Charles Schulz’s Peanuts comic strip offered its version of insanity illustrated in the infamous football gag. The characters involved in the gag are Charlie Brown and Lucy van Pelt. Lucy tells Charlie Brown that she will hold a football while he runs up and kicks it. Charlie Brown usually refuses to kick the football because he (rightly) doesn’t trust Lucy. Lucy then offers a reason to persuade Charlie Brown to trust her. A coerced Charlie Brown runs up to kick the ball, but at the very last second Lucy removes the ball and Charlie Brown flies into the air, falling and hurting himself. The gag typically ends with Lucy pointing out to Charlie Brown that he should not have trusted her.

The first appearance of the football gag was in the strip from November 14, 1951. In that strip Violet, not Lucy, is holding the ball and she only pulls it away because she is afraid Charlie Brown will kick her hand. Lucy was first shown playing the prank on Charlie Brown on November 16, 1952; the concluding part of the comic strip shows Charlie Brown running towards the ball and then tripping over it. Every year afterwards for the remainder of the strip’s run, in the early autumn Lucy would continue to fool Charlie Brown. In the 1983 strip, when she tries to dare him, he wisely walks away only to see Sally, Peppermint Patty, Marcie, Snoopy and Woodstock all holding footballs and daring Charlie Brown to take his best shot.

Charlie Brown comes close to kicking the football in a 1979 storyline that begins when he is ill in the hospital. Lucy promises that she will never pull the football away again if Charlie Brown recovers. When Charlie Brown finds out about her promise, Lucy realizes she has no other choice but to let him kick the football. Lucy keeps her promise not to pull the ball away that year, but Charlie Brown misses the ball and accidentally kicks her hand. Later, when he apologizes for the accident, the following frame shows her bandaged hand and her angrily telling him that next time he goes to the hospital he should stay there.

Value investors can empathize with Charlie Brown. Just when valuations appear attractive on an absolute basis, Lucy, otherwise known as the U.S. Federal Reserve Bank (or any other central bank for that matter), repeatedly yanks away the opportunity to truly invest with a margin of safety. The S&P 500 Index now sits at five-month highs, putting the benchmark index on track for its strongest first quarter performance since 1998. The stock market continues to move straight up following the December lows and have been risk free since Federal Reserve Chairman Jay Powell (aka “Lucy”) caved on January 4th and signaled flexibility on the reduction of the central bank’s balance sheet. Bulls continue to buy every dip in the stock market and bears increasingly look like Charlie Brown yelling “AAUGH!” in Schulz’s football gag.

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