The Consolation of Markets

Where do we find financial value?

Global Market Update - Fortune Wheel
Lady Fortune with the Wheel of Fortune.
Source: Wikipedia

In sixth century Rome, the philosopher Boethius was awaiting trial—and eventual execution—on a trumped up charge of conspiracy. While in prison, he wrote The Consolation of Philosophy, an immensely influential work that outlines how to be content in a world beset by treachery and evil. The key, he explains, is to look beyond our outward circumstances to the “one true good” we find within. Current conditions are always in flux—moving up and down on a “Wheel of Fortune.” The only thing we can control is our own virtue. True happiness comes from inside.

I thought about this recently while looking at the stock and bond markets. The market is an ever-changing mix of economic, financial, and demographic variables. Prices are never static. They reflect current and future conditions and expectations about a company, industry, and the entire global economy. Market values are always in transition.

But a share of stock represents an underlying reality—a corporation that provides goods and services to customers in exchange for payment. The market value may be volatile, but the economic value doesn’t change all that much. It’s primarily based on internal fundamentals: what kind of business is it; how efficient are they; what the capital structure is; who are the competitors. The key to finding financial value—as Boethius would counsel—is to look past a company’s outward situation to its “one true good” within. No firm can be truly secure until it has been tested by a significant downturn in its fortunes—until it has had to look inside.

The “wheel of the market”—like Boethius’ Wheel of Fortune–is always turning, lifting us up or taking us back down. Bad things can and do happen to good companies. By looking inside we find what our investments are really worth.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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