Day to day the cacophony of noise and nonsense can be deafening. Day traders seek to buy and sell fleeting price swings. Extremely few do it with lasting success over time. Some people strike huge gains on fortuitous timing which they then mistake as superior intelligence and skill and spend the rest of their lives and fortunes striving to replicate. Life is long and day to day fortunes can turn on a dime. Living is full of every kind of risk.
The best way I know to survive longer term is to control risk in every way that we can. This means spending less than we earn no matter how much or little our earnings may be. It means avoiding debt no matter how much our bankers assure us we can carry. It means investing in our health, skills and relationships every day. It means always hoping for the best while still weighing the probabilities of the worst.
When it comes to the global economy and asset markets, effective risk management starts in my view, with discerning the season. If we get the season right, we are more likely to be properly equipped to navigate our needs and fortunes through it.
Today I believe we are working our way through a long and tedious winter. We will no doubt have periods of milder days, some interim opportunities, but overall the world’s debt abuse over the past 15 years has left us waist deep in snow banks. It is slow slogging to move forward. But it does not have to be fatal or impossible. I am reminded of stories of my grandfather who was a Canadian pioneer and a trapper in the far north. He said it was amazing what humans could survive and navigate so long as they were prepared and didn’t lose their head.
This interview with economist and asset manager Lacy Hunt gives some excellent top down insight (and fabulous charts) on the world’s present season (via John Mauldin). Read it here: Face the Music: the road back to prosperity is through shared sacrifice