Relax … then work on a rational plan for investments

  • By Mike Benbow
  • Friday, October 24, 2008 8:19pm
  • Business

I’ve been thinking a lot about panic these days.

Not entirely because of the wild gyrations of the stock market — although that’s a big part of it — but mostly because I got a look at the real thing while on a recent vacation in Florida.

What’s happening in the market as people are selling frantically some days is child’s play. If you want to see raw panic, take a fishing trip to the Everglades.

Then look at the fish.

The usual drill during our trip involved having a guide push our boat through the estuaries with a graphite pole, waiting for the water to explode as schools of small fish threw themselves into the air with complete abandon to avoid being eaten alive by a bigger fish.

What happened often was that they were instead eaten alive by the flocks of egrets, herons and other birds standing in the swamp or hanging around in the mangroves.

The survivors would fall back into the water, darting along for their lives and getting ready to fling themselves into the air again.

That panic was our clue that there were some bigger fish worth catching nearby. It was our signal to throw in a fly that looked like a baitfish and move it around erratically. Unlike a real fish, we hoped that a tarpon, a snook or a redfish would think of our fly as a tasty snack.

I hadn’t thought of fishing in quite that way — exploitation of panic — before. But maybe it was because I’d end each afternoon by watching CNBC to see what the market was doing.

The televised reports seemed familiar. One day there was panic. The next day, people would rush in to buy what they perceived as great deals, exploiting that panic. After that, more panic.

It’s taken me some time to make my point, but here it is.

Whether you’re a fish or an investor, panic is really a tough way to live your life.

Actually, it’s no way to live your life.

President Bush noted last week that some of the panic in the market appeared to be subsiding. I hope he’s right.

We’re in a cycle now where we’re feeding on each other, and that only benefits the biggest fish. Warren Buffett expressed what’s happening well in a recent opinion piece in the New York Times. “A simple rule dictates my buying,” he wrote. “Be fearful when others are greedy, and be greedy when others are fearful.”

I’m not suggesting you should run out and get all the money you can and put it in the stock market. Nor am I suggesting you should run out and sell all your investments and put your money under the mattress.

But if you think you might do something drastic, it’s time to take a chill pill.

Relax.

Take a break from worrying about the market and do something you enjoy. If all your friends do is to talk about the swings in the market, take a vacation from those friends. Maybe you should go for a walk.

Next, begin making a plan.

You need to develop a rational plan of action. To take control rather than let panic make you do something you’ll regret.

Grab a cup of coffee, sit down at the kitchen table and take a look at your investments. Are there some aspects of your investments that keep you from sleeping at night? You might considering selling them and letting other things lie.

Talk to your investment advisers and come up with a game plan to get you through the crazy times.

Just don’t panic. The bigger fish will eat you up.

Mike Benbow: 425-339-3459 or benbow@heraldnet.com.

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