‘It’s never easy being so certain of something. Whenever your conviction is high, and if it comes with a lack of humility, the market will teach you a lesson about it.’
Greg Canavan, The Rum Rebellion (Wednesday 12 February)
My old mate, Greg Canavan, penned these words on these same pages less than a week ago. And believe me, ne’er a truer word was said.
Whatever copper coin my opinion is worth, this extract doesn’t just apply to the markets.
The same applies to any activity — predictions or otherwise. Whether that be which horse will win this year’s Melbourne Cup, or how much the Earth will heat up a century from now…or where the index will be a week, a month or decade away.
Best to leave those sort of predictions to others. I can’t even predict what I’m going to have for dinner.
Let others squabble. To be able to say they were right when everyone else is wrong. No matter how many times they have to ‘adjust’ their prediction or timeline.
That’s why the doomsayers blew the climate debate. For a decade and a half, so hopeless and hapless have been their predictions, they became laughable. And worse for them…ignorable.
If you’re going to tell everyone that the world is going to end next Tuesday, then you better be right. Come Wednesday, whatever you have to say, you can be sure no one will be listening.
I guess there ain’t no winning an argument when folks have stopped listening to you.
Only a season of tumultuous fire devastation has even remotely created a window of reasoned conversation about the climate.
But then, give it time. Come a year from now, there is every chance that bushfire has long gone from the public discussion.
Public debate might be back to where it was a year ago. Discussing the correct use of pronouns, or how we should label public toilets. But that too is just another prediction.
As Greg writes, it’s never easy being 100% sure about anything. For me, though, the overriding key word here is humility.
Humility makes you a better surgeon, barrister, truck driver or bricklayer.
Humility triggers a warning light in your head when you step outside the bounds.
Haven’t been a trader? Then don’t write about it…what could you possibly know?
Don’t know what it’s like having a cricket ball whizz past your nose at 150km/hr? No problems…you can join me with all the other clowns tooling about in the nets. Just don’t tell someone else how to bat.
Or the pressure of making a putt to win a golf masters. Did the guy/gal on TV choke? Would you choke? How would you know if you can’t even make the green in three shots or under on a par five?
Who knows, you might be able to read an annual report as well as Warren Buffett. Or read a chart better than the best technical analysts.
Maybe you think you can see what everyone else is missing.
You might survive for a while being cocky, complacent, arrogant, smug, condescending…even superior. But be sure of one thing, though, you will come unstuck.
Humility is key
It’s humility that ultimately keeps you alive as a trader.
Last week I wrote my regular piece about the markets. I wrote how for the moment, the way I see it, shares remain the only game in town.
With interest rates so low — still negative in many countries — and anaemic inflation, income is simply becoming harder and harder to come by.
If inflation is 1.8%, as it is in Australia, and a ‘special’ term deposit rate is 1.5%, an income investor is basically stuffed. What are they supposed to do?
And mind you, to get that 1.5% you have to lock your money up for eight months! It is just totally ridiculous things have come this far.
It’s a bugbear of mine that many investors just don’t seem to appreciate what really drives the market over the long run. I’m sure we miss that here sometimes at Port Phillip Publishing.
However, any long-term study I have come across tells me the primary catalyst is income. But at least I have the platform to write about it. My job is to convey that better.
However, a much bigger bugbear goes way beyond the markets. It goes to anything where some random talking head is prophesying about the future.
Again, whether that be the markets, the climate, or what fashions on the field will be like at the Spring Racing Carnival this November.
Mind you, out of those three, I’d bet the fashionista has the highest chance of success!
Our focus here, however, is the markets.
It is so easy to get bogged down in your own view. To only see what you want to see…to only read what you want to read. To seek out the person who best agrees with your own opinion.
But this morning, I did something different. I actively chose to read something that decidedly conflicts with my own views. And I openly encourage you to do the same as me.
Vern has stuck to his guns ever since I started at Port Phillip Publishing, more than five years ago. For all that time, he has been writing about what he believes will bring this market down.
And fair play, you certainly can’t doubt his belief. He’s as sure, if not more sure, than he was five years ago.
In my three decades in the markets, I have learned many things. I’m sure I’ve forgotten more than I have remembered.
But the overarching thing that has always stuck with me is that word…humility. For in the end, that is all the markets teach us.
If we do nothing else this year, then let’s aspire to humility.
All the best,