"I must not fear. Fear is the mind killer. Fear is the little death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain." ~ Frank Herbert
Fear, life and investing
Now that the Dow has rallied almost 1500 points from its lows, the experts are snapping out of their panic induced stupor, the masses are wondering what in the hell possessed them to dump everything at or very close to the bottom and the few that resisted the urge to surrender and give into panic are finally feeling somewhat vindicated. So what is the right response? In truth the entire lot is wrong; for a true investor (very few such investors exist) should be watching and not reacting; to him or her it's nothing but one big show and when the situation hits an extreme (as in extremely oversold or extremely overbought) he or she starts to either buy or sell. We would like to state that this is not an easy state to achieve, the majority will never ever have the pleasure of experiencing such a phase, and the only way to experience this, is to first acknowledge and understand the power of fear. Acknowledging that fear is far stronger than any other emotion you posses is not an easy task, the next step is to understand that it takes effort, at times super human effort to knock fear out, and prevent it from spiralling into its ugly sister panic. Once you are able to do this, you will have the ability to deal with extreme amounts of fear without reacting like animal; in other words, you will have finally acquired the ability to stop and think instead of just reacting.
Individuals are only exposed to such high degrees of fear once in a life time; very few bother to examine how they felt during such periods; hence very few records exist for others to learn and profit from. The biggest mistake any trader can ever make is to call himself a master; once a person does that, it's just a matter of time before some event shows up that will not only knock them of their feet, but bury them 6 feet deep just to illustrate how daft they were ever to think of themselves as masters.
A market is nothing but a pit filled with mad investors (take time to see what most investors are doing, and you will agree with this statement), plagued with some of the worst negative emotions out there (lust, greed, hate, fear, etc). So how can one be a master of something as uncontrollable as this, when most investors have little to no control of their own unstable emotional nature, how then can they control the nature of millions and millions of unstable investors?
The only way to be in control of the situation, is not to lose control of oneself, the only way not to give up control is not to fear losing it in the 1st place and the only way not fear losing control, is not think about control. Essentially what we are saying is that if you do not think about control then there is nothing to fear and nothing to lose. How could you think about losing something if you do not identify with it? Sounds too simple to be of any use right; useful knowledge is just there for the taking and that's why it's so hard to spot because it always appears to be too simple to be true, but garbage usually sounds complex and individuals love to embrace complex concepts and as history quite aptly illustrates, complex formulas are usually not even worth the paper they are printed on, especially when it comes to the markets and on the study of human behaviour.
To give you an idea of how one could apply the above principle, let's go back to the February- March Period. Why did everyone panic, why did everyone feel the world was going to end, why did no one bother to turn the TV off or turn the computer of, or read a good book and why did almost everyone seek the doomsayers out there that stated the world was going to end? If you can answer these questions correctly and honestly then you are on the right path; you already know the answer and now all you have do is implement it.
For those who feel that they cannot answer the above questions accurately or honestly or correctly, or maybe it's a combo of all the above, we will provide some guidelines. Do not just jump and read what we have to say, stop and ponder over these questions, even if it takes you 2 hours before reading the answers.
First of all, one must understand that the thought and the thinker are two different concepts. When one thinks and forms a thought, the thought now exists independent of the thinker; the thinker is no longer required; he or she has done their work. To be useful one has to continually produce new thoughts. This is something you need to understand on your own; it's one of those principles you either see, or you don't or a third option is that you just assume it's a boat load of rubbish.
Fear, in essence, is nothing but a negative thought and just with any thought the thinker should not fight with it and let it exist on its own. One can acknowledge that fear exits but one should never identify with it; this is the real battle. In other words, one should say the following "I know fear exists, but I also know that I do not have to become one with fear; I do not need to think I am fear or fear is me. By acknowledging it exits you are dealing with reality but by not identifying with it, you are acknowledging the reality of your inner and outer world; when fear takes over, reality ceases to exist and illusory forces start to dominate. For those who took our advice and maintained a trading journal, go back and read the notes you jotted in your journals during the months of October 08, February and early March 09. If you were honest, you will be able to feel and read the blackness of the thought, the weight of the negativity, the signs of pain and fear, etc., There is no point in keeping a beautiful journal and pretending you are tough chap, for if you do this you will learn nothing. One also needs to understand the following concept; thoughts have weight and negative thoughts weigh more than positive or neutral thoughts. One also needs to understand that negative thoughts consume energy, neutral thoughts consume no energy and positive thoughts increase ones energy. Notice how negative people have nothing good to say about anything, look like crap and probably feel even worse; their health is usually shot to pieces and one usually gets a very bad vibe when one spends time with them. If one pays attention one will notice that one feels like one has lost some energy after spending some time with these individuals. Remember this, negative individuals suck energy and that is why we have always stated negative individuals should be cut off like filthy pieces of cancer.
As we stated negative thoughts weight more and if one pays attention one usually feel this pain on ones shoulders, shoulder blades and one has some tension in ones back during such phases. On the other hand, when one is in a good mood and has good thoughts one usually feels light and energetic. This simple factor alone should drive anyone to want to knock fear out the moment it raises its ugly head. Now if fear spirals into panic, it robs one of even more energy and vitality.
One has to understand and acknowledge one's weaknesses primarily that fear is something that can knock anyone out if it is allowed to take over. Once you acknowledge this, your body and mind will now understand the importance of not giving into this useless emotion. Most deny the existence of this emotion and always claim to be in control; it's the control freak that's usually end up panicking the most once he or she is really tested. Remember identifying the problem is over 70% of the solution. Next understand the concept that thought exists independent of the thinker and hence even if one has fearful thoughts one need not identify with them; one can acknowledge their existence but one does not need to become one with fear.
Next understand the concept of weight and finally make sure you maintain a journal so that you can go back in time and feel the weight of your thoughts. History is actually a window into the future, for it illustrates what fools have done in the past and fools are remarkably set in their ways, they simply love to repeat this foolish behaviour over and over again. Examine any disaster in the past and the themes are always the same, the world is going to end, everything is terrible, it's different this time because the situation is worse now then it was say 50 years ago and so on. It's always the same; there is a phase of pain, then there is a phase of neutrality (sideways movements) and finally there is an explosive phase, which most miss for they were locked in the misery phase. By the way, just because you think a thought is good, does not necessarily make it a positive and an energy producing thought. Remember the phrase "the road to hell is paved with good intentions" to which we like to add and "the way to heaven (freedom) is paved with thorns".
An example of a bad thought disguised as a good thought. Seeking to help someone else while not acknowledging that you need more help than the one you are trying to help. Hence one of the reasons you might be helping another is to hide your own weakness. There is no way one can help another if one does not first identify and deal with ones own weakness. How could you possibly know what another needs if you have no idea what your own needs are? Another one of our favourite saying is "deal with reality, if not, it has a cruel and effective way of dealing with you."
Another concept to examine as it relates to this subject is the fact that individuals spend so much time thinking about their retirement. Now we have what many would call a shocking concept to ponder. How many individuals spend time dealing with the concept of their death; how many actually acknowledge the fact that they could die any moment, that life is finite and the irony of saving for ones golden years; should not one be thinking of it more in terms of "oh hell, I just gave up my golden years to save for my bronze years". How could there be anything golden about it when everything is working less than half as well as it once used to work? We are not trying to make fun of older individuals, what we are trying to illustrate is that most live in an illusory world, everything is upside down and the only way to reverse things is in most cases to turn everything upside down again. For example, the ideal time to have sold, for those who were trying to time the markets, was to have sold at the top; ironically, the majority sold a lot closer to the bottom than the top and vice versa.
We are also not advocating that one should throw caution to the wind and start to live like a fool, for those who decide to take this path, may we remind you of the very wise and time tested phase "a fool and his money are soon parted".
Sounds like a complex answer, well that's because you are over analysing it; the answer is very simple, stop analysing and do; most worry about living, very few actually live.
Note if someone tries to belittle you or state that you are fool who knows nothing; we have a very interesting response.
I am no one who knows something, but you are someone who knows nothing".
One last useful thought; when fear takes over, you are distorting reality and stepping into an unreal world. To explain this one has to understand that one only has control of the present moment and as such one should try to live in the present and enjoy that moment for when it's gone, it's gone forever; more importantly though, living in the present enables one to spot the opportunities that are presenting themselves during a disaster, while everyone else is jumping on the bandwagon of fear.
Usually when individuals are in a fear induced state; they start to think about the future (usually in terms of how bad things might or will get) and or the past (in terms of how good things once were), but they do not focus on the present, the only part of the equation they have any control of. Fear drives individuals from the real into the illusory world, for it pushes one to focus on time frames that one has absolutely no control over and this is why very few have the ability to spot opportunities during times of disaster for they are locked out of reality. When one tries to live in the present, one will notice that one cannot really live in the present in the true sense of the word; for as soon as the moment is experienced it becomes part of the past, and the moment waiting to be experienced is still in the future but in trying to experience the present you inadvertently shape not only your past but your immediate future. Investing really boils down to spotting opportunity and the only way to spot opportunity is to focus on the here and now and not fixate on the past or the future.
Finally note that you are under no obligation to take any of this to heart (in fact, fact even if you agree with us, you should never take anything to heart, never identify with anything); you can agree, disagree, take a neutral stance or just state that it's a pure load of nonsense. We are not looking to impress anyone or create impressions, we are not claiming to be masters or experts, the most we would settle for is to be called advanced students; masters and experts think they know it all, students are forever open and willing to learn new concepts. The only reason we bring up such concepts are to provide food for thought, what you do with it, well that's your business.
How can one put some of this information to work especially in these trying times that most investors find themselves today? There are many techniques out there, but we will list the simplest and easiest one's to implement today, the more complex ones are for subscribers as those positions need to constant monitoring and when necessary changes need to be implemented rapidly. It goes without saying that the US dollar is going to take a beating sooner than later; the nail on the coffin was the fed's announcement to monetize our debt by buying treasuries. Hence a simple way to benefit from this would be to spread your money in various foreign currencies via ETF's; a partial list of foreign currency ETF's is provided below.
As the dollar tanks, commodities will start rising in price and thus it would make sense to have some sort of exposure to this sector.
|Sector||ETF/ Large cap stock|
|General commodity play||DBC. A good way to play the entire commodities sector.|
Finally one could also short the dollar via UDN.
"Fear does not have any special power unless you empower it by submitting to it." ~ Les Brown 1945-, American Speaker, Author, Trainer, Motivator Lecturer