Writing roughly 45 blogs a year for the last 8.5 years sometimes leaves me a little empty on the idea front, and yesterday I was struggling mightily for a topic or theme that would be at least semi-interesting to write about this morning.
I wrestled with this most of the day and by the time I turned in last night had come up with absolutely nothing. A bit panic-stricken and distracted, I turned off the lights and completely forgot to set my alarm for this morning.
The Lord provides.
Like clockwork, I became restless around 5:00 this morning and my eyes shot open at 5:12 – the precise time I typically get rolling in the morning. After over 20 years of getting up at this time every weekday (except Thursdays), my mind’s internal alarm replaced my external alarm.
I then realized this isn’t the only internal alarm on my mind at this point.
Having studied the financial markets on a daily basis for over 25 years, I have several active internal market alarms that are going off right now.
I have seen tech bubbles pop. I have witnessed stock markets driven by very few stocks stumble. I have watched parabolic updrafts reverse course. I understand that investing at low(er) prices is mathematically better than buying at high(er) prices. If I listened to all of these internal alarms, I would be quite alarmed right now.
Unlike my internal clock which I greatly appreciated this morning, I am actively suppressing my market alarms. My daily routine for going to work is fairly predictable, but the ebb and flow of logical and illogical behavior in the financial markets is beyond unpredictable. It is absolutely incomprehensible at times.
This used to rattle me in my youth. I would spend hours working to uncover precisely why the markets did what they did today. This thankless task would be much easier if traders were required to submit their written rationale for selling or buying with every trade, but most days we are simply left to rumor-based conjecture.
I have come to serenely accept that on a daily, weekly, monthly, or sometimes multi-year basis traders will go to extremes that defy my own comfortable personal logic. Instead of being alarmed during these increasingly frequent illogical times, our focus turns to maintaining our clients’ logical long-term investment risk budgets.
When the stock market is illogically high resulting in too much investment risk in our clients’ portfolios, we logically trim back their stock allocation to maintain their logic-built personal investment risk budget.
When the stock market is illogically low resulting in too little investment risk in their portfolios, we logically add to their stock allocation to maintain their logic-built personal investment risk budget.
Focusing on the pre-built logic we can control instead of traders’ unstable daily “logic” creates confidence in times of uncertainty. And my alarms are telling me there is uncertainty ahead.
Sometimes internal alarms are a blessing that can start your day on time. Sometimes internal alarms require logical suppression. We exist to help our clients work toward their goals by identifying which of their alarms merit action and which require logical suppression.
If someone you care about would like some help in managing their alarms, please share us with them.
Quote of the week: H.L. Mencken: “The whole aim of practical politics is to keep the populace alarmed – and hence clamorous to be led to safety – by menacing it with an endless series of hobgoblins, all of them imaginary.”
Graphic Credit: iStock 1385385548 credit: mialapi