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I am in the habit of looking outside of the world of investing for examples of how to work through the events of the day.
There is no escaping the fact that these last few weeks have shown us the extreme ends of both market activity and peoples’ reactions to them. We cannot control the markets, but we can control our reactions. It is for this reason that I share with you an approach to defeating an extraordinary foe from examples beyond Wall Street.
The Matador
(The following is an excerpt from the book "Maybe, Maybe Not" by Robert Fulghum. I am not a fan of bullfighting, only of useful metaphors.)
I am at the top of my form as a matador.
I'm confident in the presence of the bull.
This confidence is called ver llegar in the ring. It means 'to watch them come.' It is the ability to plant your feet exactly so - to hold your ground and see calmly, as in slow motion, the charge of the bull, knowing that you have what it takes to maneuver the bull safely by. This is dynamic stability. Standing still is one of the steps in dancing, as moments of silence are part of the music. Confidence lies in the stillness. It is the confidence that comes from many passes and many fights - you can control the bull and defeat it because you have done it before.
What can we learn from the matador about surviving the charge of a terrifying foe?
1. Do not panic. Things are not moving as quickly as it might first appear and It is ok to hold still for a moment and take a breath. Panicking now would undoubtedly get you hurt.
2. Know that you have what it takes to maneuver the threat safely by. The best defense is to not stand stubbornly in the direct path of the threat.
3. Understand that you do not have to defeat this threat at this moment. You need only to ensure that you will survive this charge. Your ability to attack later depends on your ability to still be upright and breathing.
How does this translate to recent markets? At the moment, this threat can easily seem larger and scarier than it actually is. The media is certainly no help. Do not panic. Block out the noise, take a breath, and don’t be afraid to hold still for a moment. Any suitable investment strategy should not have placed your short-term assets in a position where they would have sustained any serious damage from the recent market volatility. With the immediate threat now past you, you can consider the most prudent next steps with a clear mind. Some people are already trying to “call a bottom” and encouraging others to jump full force into buying stocks at their current low valuations. While I appreciate the instinct to look for opportunities in nervous times, remember that you are not required to launch your offensive right away. In the short term, it is enough to stay engaged and take a moment to appreciate our current position. Even if today does represent an opportunity, it is not likely to be the last and your survival ensures that you will be able to benefit from others in the future.
I understand that these paragraphs do not give a clear “color by numbers” instruction manual for how to successfully be an “investing matador”. The fact is that there are no hard and fast rules and every event is different in its own way. The good news is that there are options for those who are not cut out for this particular activity. You can choose to stay out of the ring. Investing does involve inherent risk and not everyone is constructed to tolerate the inevitable ups and downs of long-term investing. Your second option is to hire an experienced matador to stand in the ring on your behalf.