The Economic Rodeo

If you happened to be sitting on a horse that started to buck, the natural reaction would be to suddenly stiffen up all over. This is the worst possible reaction, and it is likely to result in you eating dirt after just a couple of good bucks. On the other hand, if you knew he was going to buck, what you would be advised to do is to get a good grip with your hand, stretch out your legs, then supple your back so that your upper body moved as much as possible with the sudden jerks from the horse. If you did it well enough, you might make it to the buzzer and win.

I have had the dubious pleasure of having experienced both of the above (though not as a rodeo participant). Not much to learn here, except that, if you prepare yourself; if you hold tight where you should hold tight, and be flexible where you should be flexible, you have a better chance of avoiding eating dirt. Sounds simple enough on the surface, but it is quite difficult to adjust your brain to accept the idea that one part of you must remain firm while another part stays flexible.

And so it is with economic investment. Economics is as inexact a topic as I can imagine – full of twists, turns and surprises. In order to make good investment decisions, it is necessary to be firm and resolute when you believe you have already made the right move. As tempting as it is to reverse your decision, based on minor daily fluctuations or distractions from the news media, it usually proves better to ride it out, and stick with your decision. At the same time, however, a part of your brain must be open to considering all new information, and not get stuck in stale reasoning. Somehow we need to find a balance between the two concepts, practice it, and (hopefully) get good at it.

A Perverse Rodeo

Lately, the economic and political scene has begun to seem more and more like some perverse rodeo, and, like it or not, we are all contestants. Instead of the smooth, steady trail ride that we would have preferred, with the occasional gallop for fun, our steed is showing an increasing propensity for wanting to toss us off. Worse than that, unlike in a rodeo, there is no buzzer after seven seconds. In fact, this wild ride could take years before we can enjoy a nice smooth ride again.

Of course, we like to reflect on the fact that money is to be made in troubled times, but sometimes, it might seem more pleasant to stop off at the pay booth, collect our winnings, and go home and open a beer. Sorry, folks. Not this time.
However the reader chooses to invest his wealth at this time, it would be a mistake to just hand it over to a broker and ask him to invest it wisely. This is a time when study will be necessary to understand what investments are likely to survive future economic events. Additionally, time must be spent monitoring the unfolding of events, to be ready to make difficult decisions quickly, but calmly, not as knee-jerk reactions to events.

It appears likely that the rodeo ride will be increasing in dramatic twists for the near future, and is unlikely to level off for several years. Then, for many, the long slog uphill will begin. Hopefully, you, dear reader, will not be in that group. If you have stuck to your guns, hung onto your real money, and avoided the “money” that is made of the same stuff that hangs on a roll in your bathroom, it is likely that, a few years from now, you will, in fact, be in even better straits than you are at present.

Only then can you go to the pay booth and collect your winnings. At that time, more than ever before, the flexible part of the brain will be needed. All the sound investment thinking that has existed since the beginning of the new millennium will be subject to change, and those who still hold wealth will face a Brave New World, filled with a new set of possibilities.