Founder & Chairman
Who needs soap operas when you have the political affairs of the U.S. government? This stuff makes the breakup of Jennifer Lopez and Marc Anthony look a little boring. As I write this, we are less than 48 hours from the deadline for increasing the national debt ceiling, and while a purported framework for a deal looks to be in place, nothing is certain just yet. Certainty…an illusory concept if you ask me, for what in life is actually certain? Are you certain that the lasagna you order the next time you’re out for dinner will taste good? Are you certain that the weather for you next vacation will be awesome, even though you’re planning it 3 months in advance? Do you think Marc Anthony was certain when he asked Jennifer Lopez to marry him that she would never leave? Yet, in spite of all the uncertainty, things moved forward, decisions were made and life moved on. Seems to me the word uncertainty could easily be replaced with the word risk. I find it fascinating, that in today’s world, the concept of risk has been completely rewritten. It’s now a trendy-cool or macho proclamation to assert that you are a “risk-taker” or an “aggressive investor”, as if in making such a statement, Marilyn Monroe would suddenly find you irresistibly attractive. I wonder if James Dean, if given a chance to reconsider his risk profile, would still consider being a “risk-taker” the coolest way to be. Therein lies the rub, for some strange reason investors today have the misguided illusion that if they take more risk they must be entitled to a glorious return and simultaneously immune from any potential disastrous outcome. I certainly hope my next airplane pilot takes a more pragmatic approach to flying his or her plane.
Let’s get back to the debt ceiling. I think a ride on a rollercoaster is a perfect analogy here. While the ride itself can be quite exhilarating, even downright scary, the end result is never really in question is it? If you really thought there was true danger on the coaster, would you get on it in the first place? Maybe that’s why people have lost the concept of risk, roller coasters have given us all a false sense of security. Perhaps we should recommend a new approach, where let’s say three out of every ten roller coaster rides endure some kind of malfunction, could be just a couple of loose bolts, or it could be an entire section of track just disappears. I wonder what society would think or label anyone who would be “brave” enough to ride that kind of coaster? Maybe I’m getting a little “off-track” here, so back to the original point. The debt ceiling issue has always been about political posturing, was never in serious jeopardy and was very much like a roller coaster that purposely scares the daylights out of you but never really puts you in danger. I think this underscores the difficulty investors face today, it’s nearly impossible to sift through all of the emotional stimulus and filter out the noise to get to the information that really matters. The takeaway here, you need to make sure that you truly understand the risk that you are taking, that you can live with the results no matter what the outcome, and stay away from roller coasters.
On a separate note, we recently added two new sources of investment research, and frankly, they have really made a difference in the way we see the world. From the onset of the financial crisis back in the latter part of 2008, the markets have simply behaved differently than they had previously. Neither fundamental, nor technical analysis has been nearly as effective as they had prior to the crisis. The political influence on these markets cannot be underestimated It’s safe to say that the current politically charged environment won’t last forever, and eventually the technicals and fundamentals will be important again.
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