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The Cody Blog: CW on RM: The Wisdom Found in 'What if'

Friday, August 25, 2006

CW on RM: The Wisdom Found in 'What if'

The Wisdom Found in 'What if'
08/25/2006 1:19 PM

What if I go fly fishing and camping in the mountains of southern Colorado next week and never come back to New York City? What if I could just let go of all the stress and pressures that come with running a fund in public to boot?

I'd have thought going to cash and subsequently being pleasantly surprised by a market collapse would alleviate some of the constant stress that comes with running other people's money. I'd have thought catching a big move in my Microsoft calls and further distancing myself from the market would help that omnipresent stomach knot that I whine about sometimes in these pages. I'd have thought that taking a break from being mostly aggressive in the market for the last 3 1/2 years of running this fund would have made this summer less stressful than last summer was.

And you know, I suppose that's all true to some extent. As I've outlined before, the pain that comes with persevering through the drawdowns -- especially big ones like I had last summer -- is brutal and horrifying. And I'm not brutalized (well, by some of my readers I am, but what's new there?) or horrified this summer.

But it's still stressful, isn't it? What if the market takes off while I'm still mostly in cash and Mister Softee? What if Mister Softee blows up? What if I start putting some money to work and immediately get crushed?

It reminds me of that ol' Marvel Comics series that I loved as a kid, What If, although it explored past events for characters, such as Captain America winning the 1980 presidential election.

I often think of that series when I write my "What's on My Mind" pieces on Friday afternoons, such as when I recently wondered what the setup would look like if Greenspan were still Fed chairman instead of Ben Bernanke.

We as investors always need to ask ourselves "what if." That analysis helps us determine our own risk/reward and can give perspective, such as the differences between Greenie and Ben.

It's an important tool, and while I wish that asking "what if" didn't stress me out like it does, I will, unfortunately, be asking myself that question constantly next week. I hope to have some new answers when I get back.

See you Sept 5.

4 Comments:

Anonymous maximo zeledon said...

Cody,

Don't be so damn hard on yourself. You were right on Microsoft and the fact that you called it on the Larry Kudlow Show tells me you have strong convictions. But then again I'm not running a hedge fun like you are. I think a lot of people followed your lead and opted to cash out this summer. Me and my 75K did exactly that for the exception of MSFT, so I thank you for that. I can't afford to lose money as an MBA student! Have fun in Colorado.

8/25/2006 10:10:00 PM  
Blogger dvv7 said...

It is a part of your strategy, and useful tool for directing our thinking (that otherwise wonders)
what will you do, if only you could?
what you are not thinking about?

Also, making scenarios helps us to notice the difference, between what we wish to happen and what is likely to follow.

The stomach knot feeling is also a part of your strategy (just as it is a part of mine on every trade decision).

Mister Softee will be around and will get aquired if runs into trouble and won't disappear. Just as IBM transformed. And things would be less volatile with Grenspan, but Ben seem to learn the language.

But these are not just big fears generated by our mind, it is productive to start with big caution in stock market (just as it is useful to remember crash statistics if you are airplane pilot), but that should not render indecisiveness and what to do with those awful feelings when you are indecisive, I'm still figuring it out for myself. Good luck and thanks for reminding that we need periods of deep concentration.

8/26/2006 11:35:00 AM  
Blogger Wes said...

I have a hard enough time managing my own portfolio. That said, guys like you keep my interest in the game while also keeping it fresh. For that, thanks man... I think... lol

8/27/2006 08:42:00 PM  
Anonymous claudia said...

Where do you live again Wes? Anyway don't we all have these feelings? it dosn't matter what way we think it really matters what we feel when we think these things? Sometimes my guts hurt so bad, other times I am just throw them up, no big deal and at times I am really trying to say what I mean and it really dosn't come out the way I expect it to so go figure. It is really hard but it is great to have Cody here to help us, thanks Cody rock on. 6 sheets to the wind. Hey wasn't that a song?
Claudia

8/28/2006 10:00:00 PM  

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