Wednesday, July 16th, 2008
out of position

A well-designed and challenging golf course rewards players who can place their shots in optimal position and punishes those who cannot. Conversely, easy courses often allow a recovery shot to be made without much careful thought or precision, maybe even while preserving a low score. Here’s a map of a hole to help illustrate the point:

In analyzing a hole, there’s usually a Position A, from which the subsequent shot will provide the greatest chance of success on the hole, and perhaps a Position B that’s also pretty good but, as in this case, that doesn’t provide angles of approach that are as favorable. And then there are those places, like mine above, that are clearly out of position. I can try a heroic shot (out of a bunker, over another one, and onto a green with water immediately behind), and perhaps I can make it work, but the odds aren’t very good. The best shot for me to make is the one that fits my skill level and on average produces the best score.

Given the events of recent months and days, many investors and investment firms are similarly out of position, in some cases dramatically so. Faced with that dilemma, it’s easy to obsess about the past — and it is extremely important to analyze the roots of the mess at an appropriate time. Just not now.

The golfer that can’t get the bad shot out of his head is unlikely to be able to align wisdom, confidence, and ability in a productive fashion. It’s never too late for a good shot, whatever has transpired.

The same is true for those of us trying to navigate the markets. (Talk about a hard course!) There is a best shot from here. Figure out what it is and take it.