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New: A Stake in the Game

Posted on Oct 14, 2008

Speculation. It makes the world go ’round. The financial world, in particular. It’s the bedrock of gambling, the essence of markets, and a human trait we just can’t seem to shake. If the possibility of multiple outcomes exists, for any given activity, there will be at least two people willing to stake odds. An industry unto itself, gambling is the life’s blood of many municipalities who rely on the ironically predictable nature of people to take a chance. ‘Win some, lose some’ is the fatalistic mantra of the veteran.

Recent weeks have seen more of the downside of this reality than most are comfortable with. Especially those who had become accustomed to winning. Receiving the latest Mutual Fund statement is a painful reminder that stocks are, in fact,  institutionalized gambling. When it’s your retirement, it really hurts. When it’s your home, well, that’s personal. In reality, it’s called ‘investing’ specifically because there’s ‘Risk’. If there wasn’t risk, it would be a sure thing, and everybody knows there’s no percentage in that. No percentage, no return.

We all have to develop a personal comfort level with risk; Some climb mountains, others daytrade, and still others buy homes. Some do all three. At the moment, mountain climbing is looking pretty tame. But it’s all relative. 2 years ago, no one was willing to admit, or reliably predict, that there was the level of risk built into the system that we have seen revealed in the past months. Surreal as it may seem, 2 years ago, we were riding a wave of unprecedented housing growth. There appeared to be no downside to purchasing a home, using other people’s freely provided money, with none of your own ‘skin’ in the game. And lenders were happy to do it- throwing money at borrowers with both fists. The apparent freedom from risk was a heady, toxic brew, frequently referred to by pundits as ‘hubris’.  As my fishing buddy is fond of saying, “Time wounds all heels”.

So, here we are. Look anywhere, under any rock, scan any headline- regardless of media- and you’ll find the answer to the deep down questions you’re all wanting to ask, “What happens next?” No, really, the answers are all there. Is today going to be a rally, or a rush day? Will the markets recover? What is going to happen to my house value? And, as realiably as the old ‘Magic 8-ball’, the answers float up off the pages and screens. Depending on your outlook, you will find the answers you seek. Sounds zen, but it’s true.

The reality is, we all know the answers, we just want someone else to validate them. We want to be sure we’re right, because uncertainty is intolerable in today’s environment. The ultimate answer, however, is yes, the world will right itself. How do I know? Because I believe. The answer may be different for you, unfortunately, because you may not believe. In fact if you’re like the average investor at the moment, you’re finding it hard to know what you believe.

So, here’s what I believe, in a nutshell. Are you prepared for some unbelievably insightful answers to life’s current questions? I believe that the markets will be whatever you believe they are. If it’s true for you, it’s true for your world. Because ultimately, the markets, the money, the game, the speculations; they’re all based on what you believe. Not the suits in far-off CorporateVille. You; You decide. The markets are responding right now to your uncertainty.  Fluidly as a mood ring, the markets are turning purple while you ponder your move.

Gambling requires confidence in the cards you’re dealt. Not the cards you wish for, or the ones your neighbor holds, or the ones you had last week; just the ones you have now, in your hands. What’s your Bet?


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