Tuesday, August 30, 2011

On Forecasting Economies, Markets and Hurricanes and the Democratization of Blather

I am seeing many critics now stepping out with their perennial second guessing (at best) and ridiculing (at worst) Irene's denouement landfall.  Though only a schadenfreudically disappointing CAT 1 hurricane, I'm here to tell you that being in the purple wind bands for a sustained period of time is no fun.  Having your entire county's power grid knocked out is even less fun.  A 150 year old red oak or beech tree is a powerful force when it comes crashing down on your home, car, or body.

Waiting until there was certitude about the storm's intensity and the when/where it would make landfall means that you are too late if you've underestimated. When dealing with catastrophic losses of life/property, the error that should be made is on the side of overestimating, not underestimating, the magnitude of the event.  With time comes certainty, but time also erodes options (such as evacuations) in the event that you underestimate the outcomes of a particularly event. 

What you want to avoid is being on the other side of an event of some consequence (weather, economy, market, or some trick you've decided to try with your car/boat/motorcycle/skateboard/mountain bike) and hanging your head, kicking the dirt and dazedly muttering, "coulda, woulda, shoulda" in some refrain.  Katrina, 'subprime' (which was so much more than that), lead paint, asbestos, DDT among many other events, bear witness to the costs of underestimating (or ignoring) consequences. 

Weather events, like economic and market events, (and our personal stunts that end badly) can only be evaluated with full clarity in hindsight.  These critics suffer from the need to second guess decisions that needed days of consideration and many hours of execution on limited information from the vantage point of hindsight.   I surely do not want my health and welfare in their hands.  From where I sit still recovering from being in the purple wind bands in a county whose electrical grid was entirely (not partially) decimated by many hundreds of fallen trees (of the 150-200 year old age), the din of the sideline carpers at least is drowned out a bit by the hum of the generator and buzz of the chainsaws.

Such writings also make me question if the internet's democratization of opinions is such a good thing.  Freedom of speech and having something worthwhile to say do not go hand in hand--and sometimes the internet and the many forums of 'expression' feel like the democratization of blather.  I'm sure that I've made my own deposits to the blather bank, but I try not to.

All the better to overestimate Irene and have her disappoint, than to have her juiced up and/or wobbling outside the bell curve of underestimation.  I can point to several hundred old oak trees more than 150 years old that have weathered many a hurricane...but not this one.  And many a person decided to ride out Katrina because 'in their experience' such storms, despite warnings, could be endured.  Right.

The art of assessing risks and making considered judgments based on a possible range of consequences is just that...an art.  When we have to act is not always at the time that we have full information.  And having full information generally makes it too late to act.  Too many last breaths are preceded by "If only..."


Monday, August 29, 2011

Return from Hiatus

I am returning from a much needed vacation away from the markets.  I found myself zigging when the market was zagging and then zagging when it was zigging.  Guess what got zinged?

I have a page on this blogged tagged "wisdom".  It serves as a place for me to write down things that I find important and want to both reference and share.  I would like to highlight a couple that are very meaningful to me.

The first is from Musashi:

Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

And the second is from Munenori (a nice corollary to the one above):
When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new."

Sun Tzu reminds that choosing not to fight can be a successful strategy.  So with the zig and the zag and the zing, I elected to put my pencil down and rest my head a bit.  I am feeling more clear eyed and refreshed from the break.