Stand Up Paddling (SUP) has become the latest craze along with frozen yogurt here in Central Oregon. It is an ancient sport of Hawaiian heritage that was reintroduced to the modern water sports world by surfing icons Laird Hamilton and David Kalama. Today it is an emerging global sport that has experienced an enormous rise in popularity here in Central Oregon with the help of fellow Bendite and surfing legend Gerry Lopez. I believe one of the reasons for this is that unlike surfing, paddleboarding is very easy to learn. Within one hour you can become comfortable in the water and on your board. It is also offers great fun as well as a work out.
I have had the good fortune of learning proper technique over the past few years from my friend and former big wave surfer Alistair Paterson. As we were paddling early one morning this week before work, I could not help but correlate the similarities between navigating the Deschutes and the stock market.
As a long-term observer of the securities markets, it never ceases to amaze me how violent market moves can be and how quickly severe market movements can occur in both directions. Since 1946, there have been ten bear markets where the market decline has exceeded 20 percent. The average decline has been 35 percent.
One of the best ways to describe this volatility of U.S. Equity markets is to compare it to the rapids we encountered as we approached the largest falls on the Deschutes River. The picturesque waters of Benham Falls stair steps over a series of small ledges as it cascades through a gorge. We started off on the placid waters above Dillon Falls but before long we had to paddle with great intensity to power our way up river against the rapids as we approached the falls. What I have discovered over time about rapids is that while you think you can prepare for them, you don’t really know when they’re going to show up. Sometimes you hear different noises from the river, but it ends up being nothing. Sometimes you hear very little, and all of a sudden you are in a tumultuous portion of the river. While you are always on the lookout and think you are prepared, it is virtually impossible to be fully prepared; and there is no way to avoid the rapids if you want to reach your destination. You can anticipate the rapids and prepare as best as possible; but when they come, you are still concerned and you brace yourself.
The one thing you cannot do is BAIL OFF OF THE PADDLEBOARD as this would guarantee you not reaching your destination.
Preparing for the rapids in the investment process is designing the appropriate plan, asset and product allocation which will help get you to your investment destination. It cannot, by definition, be a totally smooth journey.
Rapids will be encountered, and rapids will be conquered. The investment climate in the U.S. is often exacerbated by our 24/7 financial commentators whose primary objective often may be to increase their Nielsen ratings. While we look at the current situation and observe many challenges, we ask ourselves – haven’t we had some of these situations in one form or another for the past 50 years? Is the debt crisis worthy of a live countdown 24 hours a day, even though it passed again like it has each and every time before? Was the debt crisis caused by the event itself, or the media coverage of it?
I observe that there are significant challenges in Washington. Government spending has been at an arguably unsustainable pace for many years and we experience stresses from Europe and turmoil in the Middle East. However, I also observe that U.S. corporate after tax profits are at their highest point in history, that most worldwide stocks are at price levels representing as much as a 40 percent discount to historic valuation averages, and that relatively new markets such as those found in Asia and Latin America are growing at an incredible pace.
Do you remember sitting in gas lines in 1973 when the oil boycott occurred? Do you remember when inflation was above 13 percent in 1980? Do you remember Black Monday in October 1987 when the U.S. stock market dropped 20 percent in one day? Do you remember the dot com crash shortly after 9-11? These, and many other “financial rapids,” have been encountered by the American people on an irregular basis for half a century; and I suspect we will continue to encounter such rapids in the future.
Remember, the worst move in the middle of rapids is to bail off the paddleboard. Benjamin Graham, a significant figure in finance, had the following to say when observing the irrationality that seized the market in the Great Depression, “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Graham recognized that solo investing requires a certain mentality, “Individuals who cannot master their emotions,” he said, “are ill-suited to profit from the investment process.”
Much like changing your putting stroke right before the biggest putt of your life, or slamming on the brake when you hit a patch of ice on the way to Mt Bachelor; individuals often abandon process and technique in the very moments when they are most important. Relying on a proven investment process can help to carry one through, as this too will pass.
As Alistair and I exuded much effort to reach Benham Falls we carefully turned our paddleboard around in the direction of the flow. Our hard work and persistence of staying the course paid off. The rest of the journey was rather easy as we flowed with the river, took in the amazing scenery and effortlessly made slight adjustments along the way to ensure we stayed safely on course and reached our final destination.
David Rosell is President of the Rosell Wealth Management in Bend. He is the President of the City Club of Central Oregon and the Past Chairman of the Bend Chamber of Commerce. David can be reached at (541)385-8831 or www.RosellWealthManagement.com.
Investment advisory services offered through Rosell Wealth Management, a State Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Ste 300 Akron, Ohio 44333-2431. 800 765-5201. Rosell Wealth Management is a separate entity from ValMark Securities, Inc.
