It’s only chaos if we treat it like chaos

2018-03-07T08:37:12+00:00 June 24th, 2016|Behavioral Finance|

The UK voters passed a referendum last night to leave the European Union (EU). Whether Parliament actually notifies the EU of its intent to leave is another issue, and not something we are going to discuss here. We also aren’t going to discuss any short or long term potential economic impacts. Smart people have good ideas on what may happen, but they are only ideas, not certainties. We will have to see how things play out and see who was right.

What I do want to talk about is chaos. As of this morning when I woke up, the DJIA was expected to open down around 600 points, all other markets were going down also, US 10 yr T-bill rates are expected to plummet as investors move cash into a safer investment (and I will be exploring a mortgage re-fi once this post happens), and currency values were approaching record levels (specifically, the price of the British Pound in US Dollars was the lowest its been in 30 years). In the financial world, this could be considered chaos.

Here are few headlines I see when perusing common news sites; “World Markets Upended”, “Nightmare Coming True for Stock Bulls”, “Global Markets are Getting Destroyed”, “Here’s the Real Reason Markets are Freaking Out This Morning”, etc. It sort of adds to the chaos, doesn’t it.

But what I really want to talk about (which I promise is related to the topic at hand) is a book I have been devouring the last two nights, The Art of Learning by Josh Waitzkin. If the name Josh Waitzkin sounds familiar to you, it’s because he originally became famous as a child chess prodigy, winning many national titles. The movie Searching For Bobby Fischer is based on Josh’s early life. I was surprised to learn that Josh stepped back from competitive chess and has devoted many of his recent years to the martial arts, specifically Push Hands sparring, which is a form of Tai Chi. He actually has won a number of world titles in this endeavor as well; but his martial arts accomplishments are beside the point.

In The Art of Learning, Josh spends some time describing his chess philosophy, explaining to the reader how an intuitive style differs from a structured, classical style. Josh, unlike many of his contemporaries, did not rely on set openings or structured attacks. Josh was an intuitive player, allowing his subconscious mind and knowledge, through his intuition, to guide his movements. In time, Josh learned that he could obtain an advantage over his opponents by creating chaos on the board, creating situations rarely seen or practiced by his opponent. He created chaos, but it was only chaos to his opponent. But Josh was at home in that environment, this is where he found his opportunities.

So back to the chaos we are seeing now. There really are two principal ways to deal with the chaos; focus on the fear or focus on the opportunity. Some people have a vested interest in wanting you to focus on the fear. “Gold is the safe place to be” or “markets are collapsing, take your cash” they may say. But what if we treat what is happening now the way Josh would. Live within other people’s chaos, but don’t make it your own. Search for opportunities, focus on your plan, control yourself in the moment. Don’t let fear of what may happen control you; this is in direct conflict with the whole point of developing and following a plan. Try to find a comfortable place within what other people see as chaos. Because not only will this help you now, in this chaotic moment, but it will help you during the next chaotic moment, and one thing I can assure you of is that there will be another chaotic moment.

Written by:

Robert Lack, JD

Wealth Transfer Advisor

Timonier, Wealth Beyond Financialâ„¢

Robert@timonier.com