tjbresearch.com
Thursday, January 27th, 2011
road conditions

There’s nothing quite like a drive across the prairie alone to get you thinking.  It’s that sky and the endlessness of the possibilities, I suppose.  With some tunes blaring, it’s a sure way to end up with a bunch of good ideas.  I always look forward to it.

Two such drives this winter weren’t typical ones, but they got me thinking about risk.  They were different from many of my journeys, in that I had passengers along with me.  Like an investment advisor working with a client, my ideas and actions were governed not just by my own predilections, but by theirs.

The first drive occurred during a heavy snowfall.  Heading home after a funeral, we weren’t likely to be in a risk-taking mood anyway, but immediately encountering dangerous roads put us on high alert.  The snow was so heavy that in a few hours the roads might be impassable, and we decided to press on.  At times it was hard to find the road and there was no question that proceeding with extreme caution was the order of the day.  As with a market where the risks are obvious and worsening, going slow and taking few chances can be the prudent approach.

The other trek was completely different.  We started out from a metropolitan area with little concern about the weather.  The light snow that started the night before had ended.  But once we hit the wide open spaces, we knew that we were in for an interesting ride.  The wind was up and despite the baby-blue skies above, we could hardly see.  The dusting of snow had become what is referred to as a “ground blizzard.”

As with the other trip (and with investing), along the way we had to assess the environment and determine how much risk we were going to take.  We decided to continue, even though we were essentially blinded by the blowing snow at times, considering our options and the probabilities of bad outcomes as we went.

Someone inexperienced in such driving would have been at even greater risk — once again the parallel to investing was evident.  I knew the roads and the land and the fickle nature of such storms, so I had an advantage.  And I adapted to the challenge, following a semi at a safe distance for many miles (OK, with some urging by my passenger to do so), the top of its trailer providing a visual point of reference.  Further on, a new transmission line and the fields of wind turbines that generate electricity for it provided fixed rather than moving markers.  As with investing rules of thumb, I had helpful but not infallible guidance for the drive.

Of course, there were those who ignored the risks and proceeded apace, including a pickup truck pulling a trailer buffeted by the wind, barreling along as if it was a normal day.  I’m sure they traveled without incident, but the behavior was as unwise as reckless risk-taking in a dangerous market.  Apparently they were unaware that directly ahead there was a spot which always presents trouble in such conditions; no matter that it looks the same as other areas, it was likely to have a drift growing into the highway.  It did — and the only way that I knew it would be there was that I had seen it so many times before.

Once we got into the little town that was our destination (and after my passenger admitted to having said a few Hail Marys to help me along), it was as if we were in a different world.  A modest buffer against the wind changed everything.  It was calm and beautiful.

Had we had conditions that were a combination of the two days, heavy snow and high winds, we would not have gone anywhere.  As it was, we managed to complete both journeys, with some skill and some luck (and some prayers).

The market excursion we are all on has not encountered storms of any note for quite awhile, and there are speedsters out on the roads despite the icy patches.  Yet, it still feels like winter and a little blast of wind could make driving difficult, to say nothing of the calamities that would be caused by a real blizzard.  I think I’ll take my time.