Getting Back on Course

On a camping trip with the kids this past weekend, my daughter stayed in the woods to cut down a tree branch… my friend and his kids continued hiking back to our campsite.  When she had finished, we picked up our gear and began our trek to catch up with everyone else.  But unaware, I took a wrong turn and led us deeper into the woods.  After about ten minutes of hiking, it was apparent to her that we were lost.  A few minutes later she started to tear up and become afraid.

Having hunted in these same woods over fifteen years I knew we were safe.  My frustration was that I had led us in the wrong direction… and I knew it would take much longer now to get back to camp.  Her shoes were wet, her spirit beginning to break, and all she wanted was to be back with her friends (and to eat lunch).  Can’t say I blame her… as an eight year old (like her) I remember getting lost in my Mamaw’s neighborhood one time.  The word “fun” has never been used to describe that experience. 

Now, in the woods with my daughter, I began to experience a different fear… “what if” my six year old son had turned back for us and not continued on with my friend and his kids?  JB could easily assume that my son had stayed with me and would likewise be unaware anything was amiss.  That meant my son could be lost in the woods by himself… perhaps even feeling like I did as a lost child?  And to make matters worse, I left my cell phone in the tent, so there was not any quick phone call back to make sure all was okay (or to get a simple four-wheeler ride back to camp).

The mind began to run… and in a short while I was starting to feel a little panic like my daughter.  I had no control over my son’s situation and that is difficult for a parent.  But that’s when a simple thought landed.  I had a choice… to feed my daughter’s fear, or to turn our current situation into a learning experience.  We stopped, I said a quick prayer for my boy (and for us) and then began to point out signs to her.  Observing what was around us, we rather quickly found our way out of the woods and onto a familiar trail.  Then I let her take over and she eventually led us out to the road.  From there, we were back at camp within a few more minutes only to find her brother roasting s’mores over the campfire.

Thinking back on this experience I am reminded how easy it is to get caught up in hype, fear, or chasing trends with our investments that the “noise” around us soon causes us to lose focus.  We become distracted, and before long realize we aren’t following our plan.  We have taken a wrong turn and are no longer on course… or we simply become afraid, which can lead to emotional decisions that aren’t good for us.  There is much value in learning to stop and observe before we take action.  Through this practice we can make better decisions to get us back on track, and it’s how my daughter learned to get out of the woods!

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Market Update March 17th

We hope things are starting off well for you in the beginning of Spring. Due to all the recent events I thought it best to update you on what we are hearing.

The markets have given back a portion of the growth we have seen since the market bottom March 9th of 2009. According to the Wall Street Journal, remember the S&P 500 index has increased 85.8% from this low through last night (March 16). Keep in mind it’s typical for markets to consolidate and lose some ground when they gain so much in this type of time frame. Now with the recent Mid-east tensions and the Japan earthquake some market volatility has reappeared and uncertainty has risen.

On a conference call yesterday with Fidelity Investments we learned the following regarding Japan. First, the next couple days are critical as Japan struggles to get control of their nuclear reactors. Assuming the outcome improves and avoids a horrific outcome we could see the market rally fairly quickly.

Next, with Japan considered a Tier 1 supplier to global manufacturers in the auto, tech, and electronic businesses, supply interruptions are still unknown. As global manufacturers scramble to offset Japanese components we could see time delays to product production. It appears there are alternative suppliers stepping-up and offering supplies to offset most Japan delays.

As time goes by and Japan begins to rebuild this could prove stimulative to Japan’s economy as well as globally as they buy steel, wood, concrete, industrial equipment, etc. Keep in mind this can create more inflation as well as higher interest rates.

In terms of the oil situation, as of late, we have seen the oil markets calm down and give back some of their gains. It appears other OPEC countries are stepping up and offsetting the Libyan supply interruptions. The real question is can Saudi Arabia avoid the political unrest experienced in Egypt and Libya. We sure hope so. All of this heightens the need for an effective energy policy here in the U.S. Who knows, these recent events could force Congress and our Administration to deal with our long-term energy problems.

In the terms of the U.S. economy we have seen some improvement since the latter part of 2010. Unemployment has declined and both the consumer and businesses are beginning to spend money. And other than higher gas prices, consumer’s attitudes appear to be more positive. Also, we are hearing that small investors are slowly re-entering the equity markets.

In summary, it almost never benefits an investor to react to these types of events and short-term trade in this financial environment. Keep in mind, for mutual fund investors, money managers and their analysts have a plan and make the necessary changes as they “objectively” see the need. They have much more information than we can imagine. As of recent we have heard mutual fund managers use this type of short-term fear to buy good stocks and bonds that become very attractive due to the market volatility.

We hope this helps and we pray for our Japanese friends. The effect on Japan’s people is so much more important than any of our financial concerns.