Market Turmoil and Courage

MJG

Hi Guys,

Markets seem to be in a chaotic turmoil, although that seems to be the rule rather than the exception. But for some, the turmoil appears to be especially disquieting.

On a recent TV WeathTrack interview, posted by Ted, legendary money manger Jean-Marie Eveillard talks about an unprecedented equity market uncertainty level. Most investment opportunities seem ultra expensive with downside risk a real worry. January performance reinforced this uncertainty with daily high volatility, a very troublesome addition to the risk equation for some short-term investors.

All this roiling is part of the investment world. Some folks are very uneasy; I’m not. Downturns are frequent happenings. As Sir Winston Churchill said: “Courage is going from failure to failure without losing enthusiasm.” I still have large equity positions, and do not expect to change my asset allocation dramatically in the near term.

Behavioral studies show that investing is a challenging mind game. Here is a poem by Walter D. Wintle that describes the power of the mind.

Believe or The Man Who Thinks He Can

If you think you are beaten, you are;
If you think you dare not, you don't
If you'd like to win, but think you can't,
It's almost a cinch you won't.

If you think you'll lose, you're lost,
For out in the world we find
success begins with a fellows will;
It's all in the state of mind.

If you think you're outclassed, you are;
You've got to think high to rise.
You've got to be sure of yourself before
You can ever win a prize.

Life's battles don't always go
To the stronger or faster man;
But soon or late the man who wins
Is the one who thinks he can.

I hope you find this brief poem as inspirational as I do. It has served me well over many years and helped me through many tough circumstances.

Best Regards.

JohnChisum

Good post @MJG. It is interesting indeed how many of us spend a lot of time developing a plan only to throw it out the window when the winds change. By asking yourself how you will react to varying conditions, you can better prepare your plan and stick to it.

Thanks again.

hank

I agree with the sentiments expressed by MJG & John. But I'm afraid the cute poem vastly over-simplifies the investment process and, truthfully, most challenges in life. If Ma & Pa can't balance the budget ... all the positive thinking in the world won't solve the problem.

I'd change the focus a bit from positive thinking (even though I admire the work of Norman Vincent Peale) to the concept of developing a common-sense "process" applicable to the challenge faced. This process-based approach should combine your own independent thinking along with with knowledge of what has worked for others in the past. Walter Wintle's poem might than read something like this:

When faced with a challenge design a process.
Process-based thinking leads to success.
Abandon process and there is no redress.

Process-based approaches can be successfully applied to investing, retirement planning, family budgeting, career training and advancement, dieting and weight loss, health and physical conditioning, as well as to competitive sports. I've heard highly successful coaches during losing streaks speak to the importance of staying focused on the "process" the team has developed, perfected, and successfully employed in the past.

An advantage of process-based thinking is that it lessens the emphasis on immediate outcome. In investing, as in most endeavors, results will vary. Near-term they may appear erratic. Even the best investors experience lackluster years. Focusing only on results distracts attention from the process - leading not just to disappointment and dusallusionmet, but also to rash and unwise decisions.

Junkster

One of the traits of lucky people is "they nurture a basic core of pessimism so dense and tough and prickly that it startles you when you first come upon it.." From Max Gunther in The Luck Factor. What surprised Mr. Gunther when studying lucky and unlucky people was the fact that the lucky ones always expected the worst. He called it the Pessimism Paradox.

The better traders/investors I know sure have that trait in that they believe every trade or investment they put on is destined to fail. Or as Mr Gunther relates, they believe if something can go wrong, it will. Thus, they are ready to bail at a moment's notice if price runs against them. A losing position equates to wasted time and they are always ready to move on to a position that will work.

MJG

Hi Guys,

Thank you all for joining the discussion with your excellent submittals. It was uniformly great stuff.

My opening remarks were rather dry and one-dimensional. Your comments were multi-dimensional and expanded the discussion by an order of magnitude.. Many thanks for your diverse perspectives. I agree with all the observations although some may seem to conflict with others. The contradictory comments are.easily accommodated given the disparity in timeframes considered.

Who would have anticipated that we had an emerging poet among us? Hank, that is a fine and investing focused suggested addition to the quoted poem. I. really enjoyed it. And I really enjoyed all your varied investing wisdom and experiences. No size fits all.

Best Wishes.

Charles

I look around and honestly don't understand what the hand-wringing is all about lately.

Like Vonnegut's book, I think mostly our minds are too big given the daily tasks before us ... so, we tend to get ourselves into trouble.

But I'm having an off-night.

It will be better in the morning .

Thanks MJG!

c