Own Your Fear.

August 27, 2012

And I am a weapon of massive consumption
And it's not my fault it's how I'm programmed to function
I'll look at the sun and I'll look in the mirror
I'm on the right track, yeah we're on to a winner
I don't know what's right and what's real anymore
And I don't know how I'm meant to feel anymore
And when do you think it will all become clear?
'Cuz I'm being taken over by the Fear
Forget about guns and forget ammunition
'Cuz I'm killing them all on my own little mission
Now I'm not a saint but I'm not a sinner
Now everything is cool as long as I'm getting thinner
-The Fear, by Lily Allen

. . .
Human beings are fearful animals. Like gazelle grazing upon the Serengeti, we go about our daily lives glancing wildly from side to side, trying to spot any signs of trouble. It only takes one herd member to begin running, and we all follow. Sprinting wildly in every direction. Often uncertain of what we're running from.
Who was... ?! What the... ?! Run for your lives!
We teach our kids to fear their own neighborhoods, though statistically they are in no greater danger than the days during which you would vanish for 13 consecutive hours, only to return like Pavlov's Dog at the sound of the dinner call.
Our government teaches us to fear foreigners. Nations. Strange ideologies. Even as these people represent no more an existential threat to us than Greenland.
Politicians teach us to fear those who think differently than we do. Who label themselves as something slightly different than you, and your team of label wearers. Even though the history of mankind shows us that there is no more dangerous a way of thinking than consistent, consensus thinking, as it begins to breed nationalism, and worse.
Religious leaders teach us to fear those that believe differently. Teaching us that our way is the only way. Even though the end goals often align so closely as to be different only in name and tradition.
Teachers teach us to fear failure. To believe that small failures can lead to larger failures, eventually leading to failure in the one test that matters, life. Even as every great story of achievement began as a lineage of failures.
Coaches teach us to fear losing. To think of losing any competition as we think of germs and bacteria -- to be avoided at all costs. And so we come to despise losing at all. And we internalize each loss as an affront to our self worth. We teach our children a similar approach to losing. "Don't do it!" We reward them with ribbons and trophies each time they simply don't miss the toilet bowl. Preparing them for failure in the greatest competition of all, life.
Our bosses to teach us to fear for our jobs. As life becomes more results oriented, more data driven, we are each held to closer scrutiny and better results. Unless one works in the public sector, in which case the union bosses teach us to fear the very individuals who employ us. Pay us. Provide opportunity. To hate them for holding the purse strings. To loathe them for not recognizing the value you provide. Even as the enterprise employing you is driven asunder by anachronistic policies and politics that prevent it from competing at all.
We insure ourselves against everything we fear, each catastrophe that may befall us. We cushion all of life's sharp edges so that loved ones will not spill their brains after grazing their heads upon them.
Politicians go so far as to tell us that we should fear our very futures, as they are lined with danger than can only be avoided by voting them and their five-point danger avoidance plans into office.
Politicians tell us to fear each other. To fear those ideas that may oppose our own. To fear those that look, act and talk differently. Who make more money. Or make less money. 25 percent of us pay the taxes. 75 percent of us provide the votes. And so politicians divide as like cattle, milking both groups for whatever value they provide. Sowing fear while preaching tolerance.
And so we leave our homes each day, fearful of what lay ahead. "Be careful out there," Detective Andy Sipowicz would caution the thin blue line before him at the start each episode of Hill Street Blues. Because that is how he and his colleagues needed to approach their dangerous jobs.
But we are not NYC cops. We are employees. Parents. Business owners. Friends. Colleagues. Teammates. Investors. Sons. Daughters. Humans.
As investors continue to exit the stock market, convinced that Pandora's Box is nearly open, the market has delivered a 14 percent return, only eight months into the year.
Frightful of the unknown, November's election, European contagion, Iranian aggression, computer trading algorithms, poor economies, so on and so forth, investors have removed their chips and are refusing to play.
ICI fund flow data shows that investors are fearful of stocks. We've seen outflows in May and June. And while world funds have seen inflows, U.S. stock funds have seen outflows - even while U.S. stock funds continue to kick the teeth out of all asset classes.
We are bred for fear. As citizens. As people. As investors. Instead of choosing to risk our time and capital to begin a business, we settle for the comforting embryonic warmth of a boring desk job with little upside. Why? Because we are taught to fear failure. And we are taught to fear that we may not be capable of succeeding. And if we fail, we'll never make it back to the cavernous maze of the rat race. In which case we'll never eat cheese again!
Similarly, we fear risking our capital in well-research opportunities preparing to leverage some technological and demographic nexus making its way up the S-Curve (Click Here). So we hold cash, which pays nothing. Or bonds, which pay little. Even as the stocks race higher.
There is a unique place in this world for those who have stared down their fear. Kicked fear off the cliff. Turned up the heat so high that the fear is burned off the surface of their existences. Sterilized clean. Having done so, you are free to feast upon the fear of others.
Don't mistake this for cynicism. Nor a clarion call for malice or fear mongering. The latter is immoral. The former is just ugly.
But, in fear resides opportunities for the fearless.
You can count on the herd to make one poor decision after the next. To respond to the most mundane fight or flight decisions with the most caustic reactions (Run!).
The fearless will be there to buy. Property. Stocks. Trips. Homes. Cars. A life. All at a discount to fair value, simply because the herd became too fearful to pull the trigger.
A little fear? That's a great thing! Keeps you sharp. Honed. Focused. Too much fear? It runs your life. Eats you alive. Engulfs you in the flames of passivity, inaction and self loathing. So, let it go.
Like the stock market, life was designed to appear more challenging than it is. Don't misread me, life is rife with obstacles. That's where the rewards lay. So it is with investing. Danger around every turn. Do the work. Hone a process. Reap the rewards. Life, boiled down to its purest essential, is the balancing act that transpires upon the tightrope linking risk and reward. Cross at your own peril. Or, don't cross at your own peril.
The sharp edges? They're everywhere. But that's where the lessons reside. The experiences are gleaned. Investing is not easy. Nor is a life lived well. It is educating, challenging, daunting and joyful. Run headlong into it as fast as you can, eyes wide open, ready for action. Put your time, energy and capital to work whenever your process says it's prudent to do so.
Stare down your fear. Laugh it out of the room. Kick it off of the cliff. Once purged, conduct an objective analysis of life around you. Learn to read into the sentiments of others. And act decisively.
In June, the Conference Board's consumer confidence survey showed that the number of fearful investors thinking that the market would fall had increased by a third. Simultaneously, the market surged upwards 10.2 percent for the month. The herd ran in one direction, opportunity went opposite.
Since 1987, there have only been seven occasions in which the stock market rose 10 percent or more in a month. On six of those occasions, the market was up six month later. The average additional six-month return was 10.2 percent. Remember, negative sentiment is just another reliable contrarian market signal.
The market will, without fail, disappoint the largest amount of investors as frequently as possible. When everyone believes it is set to fall? Probably time to put capital to work.
Short your fear. Go long the fear of others. Tune out the fear mongers. Liberate yourself. When you find yourself scared, unsure and unwilling, remember that you are only human. Fear will always be there. But, you can own it. Refuse to allow it to own you.
So go forward, resolute and cautiously bold, into the howling winds of chance and opportunity. Within those untraveled lands can investors discover the possibility of risk, wealth, learning and life.

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