As we are in the midst of a major correction in several asset classes (emerging markets) and one entire sector (energy), we thought it appropriate to revisit the principles of how we invest and in a manner, remind ourselves of what we should be paying attention to.
For those that have grown up in the Pacific Northwest, the story of the most famous suspension bridge to be built, and subsequently destroyed, in our own backyard is well known. For the rest of the world the Tacoma Narrows Bridge, more commonly known as Galloping Gertie, is no more than a footnote on a study of failure analysis for a university level structural engineering class.
Along with the sinking of the Titanic, the Tacoma Narrows bridge collapse was a sobering reminder of the devastating cost of hubris.
If you have been following the financial headlines of late you may have noticed a consistent theme around the ills of over stimulated markets. Every day we go deeper into this historic market run up the warnings become more pronounced. Even to the seasoned investor, the current state defies conventional logic.
Leveraging a theme discussed by Nick a few months ago in his article titled, “Heads We Win, Tails We Don’t Lose Much,” there is a correlation in the view of risk Nick illustrated and how we can look at risk in our businesses, and more importantly, what we can do to skew the curve in our favor.
If you recall the childhood game of Rock, Paper & Scissors, then you likely know as much about investing as many in the markets. To come out ahead however, it requires developing a strategy rather than leaving it to chance as those that are disciplined will undoubtedly be better off in the long run. Listen to this latest installment of the Chart of the Week and hear Nick and Rick's take on how applying a strategy to either activity will benefit you in the long run.