In the spirit of roadmaps, forecasts and cherry picking

In the northern Hermisphere we are going towards autumn and the markets are – as so often – on the down. In fact, just this morning on various online news they were fearing a “Black Monday”, as the stock exchanges around the globe are pointing in one direction: down.

And – who knows – maybe it is or it isn’t a ‘so-called black Monday’. I don’t want to go into the ins and outs of the “why, how and who is to blame”-mechanism that invariably starts when something untoward happens in the world.

Road maps

Instead, I would like to focus a little bit on the mechanics of road maps. Me, I have a really bad sense of direction, which means that I have had to learn how to read a map. And for me, the invention of TomTom and any other navigation software rank amongst the highest IT inventions in terms of life-saving usefulness.

Anyway, just imagine, for a moment, that you are sitting in the driving seat of your car and you are cruising along on the motorway. Everything is easy, traffic is light, weather is good and you are concentrated and basically relaxed.

Weather Forecast

All of a sudden some dark clouds form and out of the blue it starts swilling down. – Weather forecast? – Zilch. Hm. What is your reaction? – Normally, every person with only half a brain would automatically take the foot off the accelerator and reduce the speed to match the outer circumstance – right? – Of course you are bound to agree if you are not suicidal. Maybe, upon noticing the dark clouds some would actually hit the accelerator a little harder in the hope of being able to escape the ensuing downpour. – On the motorway? – Where the next exit is likely to be miles away? Hm.

Markets, maps and forecasts

Isn’t it then, quite similar in the markets? I mean, there have been black clouds hanging over our heads for the last few weeks or months even (for those that take a closer look at a map) with news of China’s stock exchange taking a hit day after day. And yes, of course you can find forecasts left, right and centre – if you look for them and read them.

Strangely enough, though, a crash is a clear sign that neither forecast nor maps have been taken seriously. In fact, for some very strange reason, there were actually main-stream-media endeavours to disconnect any relationship between the Chinese market and all the other markets. Sure, there were those that were slightly worried. But for some reason, the human being has a very resilient built-in code that tells him “ignore the black clouds hanging over the Chinese market (or any other market for that matter), everything is cloudless and wonderful here”.

Strange, isn’t it? Today, after the fact, you have banking analysts explaining the reasons for the negative news coming from the so-called emerging markets. They are explaining what has actually always been known – i.e. prevalent corruption issues, nepotism, etc. etc. Surprised? – Well, not really.

Now, I do not know about you. But when you study a map, don’t you try and avoid swampy areas to drive through and sand bunkers to land in? That is, if you are not out for an adventure of the more annoying kind. And if you do have to go through a swamp, wouldn’t you then ensure that you have an excellent guide to march you through on the narrow dry lane?

The art of ignoring the map

Isn’t it interesting, then, that when it comes to money, investment and trading, the maps are not studied carefully? – Everybody knows about the issues of nepotism, fraudulent behaviour here and there, etc. and yet even government officials from so-called highly developed countries (e.g. Switzerland) go on trade-mission tours hailing the great opportunities to be had in such countries. Somehow, the knowledge of wrong behaviour seems to be put into a separate box and is thereby totally ignored. Basically, it is as if you are trying to will away that you are going to hit a sand bunker.

NO Cherry picking!

A former boss of mine had a clear guideline, when it came to in-house partners wanting only a fraction of the services of our department. And this guideline, which she never broke, was very clear: “There is no cherry-picking in my department”!

What she meant was obvious: it is either all services or nothing. Whilst I did not always see the wisdom at the time in her – what was sometimes perceived as being a very stubborn – attitude I have to say today that she is perfectly right!

In other words, if you think you can simply go for the opportunities – i.e. the cherries – by totally ignoring the roadmap and more often than not the weather forecast on top of it, don’t be surprised when you hit a sand bunker here and there. OM.