Rational Advisor

In investing as in life, it’s important to understand that the one decision you make can be important. And that one decision should not be made on the current events or some hot topic.

Much of the mistakes being made now in the market, is to NOT make changes to appropriate investments, instead it’s to “ride” along with the markets. Well, the markets are in the habit of making the most number of people fools at the most inopprtune time.

The United States has had severe or secular bear markets, often linked with financial crises, averaging more than one per decade for the past 150 years. Even during the golden period of 1982 to early 2000, there were several crises, such as the combined real estate, savings and loans, and junk bond disaster of 1990, and the 1998 Long Term Credit debacle. And, while most such markets unfold slowly over time like a disease, the October 1987 crash was more like having a tooth pulled without anesthesia – painful, but mercifully quick.

We’ve recently experienced this decades financial crisis. But that does not mean that some other crisis does not lurk out there - maybe not financial but some other asset/sector.

The point of this history lesson is not to open old wounds but rather to explore Santyana’s dictum that those who do not learn from history are doomed to repeat it. The sad fact is that after the bear markets of recent years investors blithely carrying on making the same mistakes, apparently assuming that it would never happen again. The still investing with the same ol’ disregard to risk management. Assuming that this something that is running so hot will continue, orr that they’ll be better able to time it this time.

The problem is that there are still a lot of little worries and no major one. Remember that small amounts of carbon, oxygen, nitrogen or hydrogen are easily handled. When combined in a particular way, however, they turn into nitroglycerine.

Seemingly unrelated components can be combined to create dangerous economic effects also.

Every decision you make, every action you take matters
To not make a decision is also a decision
So, even the decision we do not make matters
- Any Andrews – The seven decisions

Every time you do something – things change

One guy made one move 140 years ago. a 34 year old teacher on July 3rd 1863 – said he wasn’t a teacher, he was a Colonel, not because of his experience, but because he was the first guy to volunteer. If he did not do what he did, the US would be part of the UK.

Chamberlain, (http://en.wikipedia.org/wiki/Joshua_L._Chamberlain) with no ammo, put the bayonets on the guns of his 80 soldiers and captured 400 at Gettysburg. If the South had one that battle, you would have had a state like Europe, a bunch of small countries put together and not the United States (All States United in one nation - one country – all because of one man, and his decision.

So, as you can see making a decision is very important