A weekend morning, when markets are closed and the daily hysteria of Wall Street has faded away, when it’s still dark and quiet outside and covers are warm and snuggly, is good for thinking about the larger and more important things in life, like trout fishing and times spent on lakes or streams, casting to rising fish. Classically, trout fishing is dry-fly fishing in creeks and rivers, but for me it was small lakes, almost ponds. Late afternoons, as shadows lengthened toward early evening, we’d slap on enough bug juice to thwart mosquitoes and row to where the fish were working. We’d flip for bow or stern position and begin an hour or two of casting to fish feeding on the surfacing hatch. There's not much to do with investing in bonds about that picture, but consider another one. You’re a trout who lives in waters such as W. D. Wetherell describes in his collection of fishing essays, Vermont River. When you’re hungry, you don’t drive to the grocery store. You move from your resting station, that is sheltered and away from the current, to your feeding station, perhaps at the downside edge of a mid-stream boulder deposited there in the last ice age, and you begin to watch the conveyor belt of objects floating past you, selecting between the debris carried from land to water by wind and the truly tasty stuff also fallen there. If you’re an experienced trout, you know bugs from things that might look like bugs and ignore the #12 Gray Drake that guy in waders just drifted past you, sipping instead a true Siphlonurus from the surface, and ease back to your station.Such a picture describes late spring or early summer, when the raging, discolored, winter floods have receded and the river has resumed what we, as fishermen, think of as its normal pace and rhythm. But all stages of the river, from January’s floods to August’s low waters, are the cycle of the river, with each year’s cycle being a variation of previous ones, and Wetherell does a good job of capturing the misery of cold, wet days when wading was foolhardly and fishing an exercise in frustration, as well as the blistering, hot days of July when fishing was equally a waste of time. It occurred to me this morning, still snuggled in bed, that fishing for trout according to the rhythms of nature and the seasons of the river had a lot in common with buying bonds, which also have their seasons, driven not by rains but interest rates, and not annually, but in longer, waxing and waning, but recognizable and repeating cycles of 4 to 5 years. Trout don’t buy bonds. People do, but how would a trout buy bonds if he were to? My guess is that he’d accept the fact of rhythms and seasons and cycles and wouldn’t go charging into the full current of the river at just any time of year, madly chasing after every apparent opportunity that floated by. Instead, he’d look at the larger picture of things, see where in the cycle of interest rates he was, then choose a feeding station, out of the buffet and torrent of daily events but at its edge, and patiently watch the conveyor belt of market events bring the opportunities to him, selecting those he recognized as genuine, rejecting those that were merely fancy feathers and a hook. One could argue that bonds are as varied in their kinds as are fish, and the methods to pursue the individual kinds of each must be as individually chosen. But emphasizing the admittedly event-specific, equity-like nature of junk bonds, for example, over the fact they do relate to interest rates, however complexly, ignores the forest for the trees and loses the main value of the metaphor, namely investing is about the long haul, about history and patience. And right now isn’t the Spring of the year for bonds. Go fishing instead. Charlie (Feb, 2002)--------------------- First After Note: That essay was written three years ago, and its message still applies. Playing the “hot money" game is a fool’s errand that will put you into the frying pan. Investing is about the long haul, about making shrewd decisions in the here-and-now, one by one, with whatever modest resources you have. And, yes, now has become a time for bonds again. But allow me to offer this caution. You are going to be living with the consequences of your investing decisions for a long time, if not financially, then emotionally, which is why you want to avoid situations fraught with unneeded risk or grief wherever you can. The risks that can’t be avoided have to be managed, of course, but there’s no peace or profit to be gained from taking on troubles easily avoided. Charlie (Jan, 2006)-----------------------Second After Note: The original essay is now seven years old, and still its lesson applies. As was written long ago, To everything there is a season, and a time to every purpose under the heaven.... A time to get, and a time to lose. These aren't comfortable times to be an investor, but they, too, shall pass. Meanwhile, another season has begun, as Winter gives way to Spring. Enjoy the moment, enjoy the day for themselves. The time for making money will come again. Charlie (Mar, 2009)
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