Last Fall I was standing in my living room just after getting back from a bike ride when I noticed a doe and her fawn out in the back yard. It was September 16th. We stared at one another for a while and I was struck by how small the fawn was for mid-September. The doe was young, probably her first fawn and if I guessed it dropped in July. Two months after the typical May fawning season. As I often do, I began to ponder why. I’m not a biologist but I do know that late fawns could be the result of an imbalance in the local deer herd. I know that a lot of things can cause an imbalance in a deer herd and one of those things could be poor (or complete lack of) management.
Most of nature’s cycles run with nearly perfect balance. So much so that most humans are totally unaware of the complexity of the cycles that surround them every day. When left alone nature does a fairly good job of taking care of itself and staying in balance. But these days it’s rarely left alone. Sure, from time to time there appears to be “natural imbalances,” like wildfires or floods. But even they are part of a longer-term cycle that doesn’t align with our relative short-term view of most things in our world. The natural world does not experience time like we do. Humans don’t seem to like these natural imbalances so we seek to manage them, often with questionable results.
There is a difference between naturally occurring events that cause an imbalance for a period of time and man-made imbalances that now require more “management.” Like a forest fire we think it’s a shame and we what the forest to look the way they did before the burn. We want things to adjust based on our perception of time not nature’s clock. As a result, people feel they need to get involved and do something right away. Unfortunately, these issues are often very complex due to the interconnected “nature” of the environment and the increasing intolerance for science and fact. Just a hint, Nature doesn’t care about how you feel but it does respond to what you do. The inconvenient true in Nature’s fundamental law is that the strong adapt and survive. It’s for a greater good even if we chose not to see (or even look) it. Nature is always trying to find balance. But for some reason, and I feel I can venture more than a guess, there is a growing segment of the population that wants every plant and animal to live in total peace in perpetuity. Which would be great. It would simply require that all of us leave the planet. We, humans, have caused permanent imbalances in the environment and are now tasked with the responsibility to understand those imbalances and manage them to the best of our ability.
All of this makes me think of Financial Markets. A stretch you say? Maybe, but remember, it’s just an analogy.
There is a difference between naturally occurring events that cause an imbalance for a period of time and man-made imbalances that now require more “management.” When the market experiences a correction some think it’s a shame there are companies or segments of the economy that are doing poorly. Many may wish them to look the way they did before the down turn. We want things to adjust based on our perception of time not the market’s. So much so that governments now feel they need to get involved, even seemingly jumping at the chance to get involved, and do something right away. Unfortunately, these issues are often very complex due to the interconnected “nature” of the economy and the increasing intolerance for science and fact. Just a hint, Markets don't care how you feel but they will respond to what you do. Strong companies and sectors adapt and survive. It’s for a greater good. Markets are always trying to find balance. But for some reason, and I feel I can venture more than a guess, there is a growing segment of the population that wants every person and company to live in total peace in perpetuity. Which would be great. It would simply require that all of us are actual productive participants in the effort…. and governments get out of the way. We have caused permanent imbalances in the system and now we are tasked with the burden to acknowledge those imbalances and manage them to the best of our ability.
Both Nature and financial markets have fundamental “laws” that are callously unaware of how we feel about what is happening. At a fundamental level they both still operate as they have since their beginnings. However, times change. With the passage of time, environments change. The forces of these environmental changes influence that which exists within them, encouraging evolution. The climatic environment and global demographics have changed, and nature will respond. The economic environment and global demographics have changed, and markets will respond. As good stewards of our environment we need to continually evolve our think and strategies. Much the same can be said for your money.