Races most likely to be won in those curves
Published: June 13,2005
My nephew won the Amateur Class World Championship in Wave Runner Racing last year. He qualified for the Worlds by racing everywhere from Florida to Nashville in the Southeast.
As with most athletes in sports that are fueled more by passion than money, he couldn’t afford to make all the races in the Southeast. He did gain enough points to qualify for the World Championships in Arizona and he brought home the trophy.
There are a number of articles that could be written about his adventure, but most are reserved for the sports section. I could, no doubt, come up with a few that would fit this column.
Whether it was good sense to use money he inherited to finance a sport that will probably never pay him back, even if he becomes one of the best? That would make for good personal finance fodder.
Making it through the season with little or no money, no pit crew and, at times, the appearance of insurmountable odds would make for a good column on overcoming the odds. But I want to write about something else. I want to write about how he won the World Championship.
The really big race
In September of last year, I was having lunch with my nephew, Claude. I was very excited to hear that he had placed third in the Nationals in Nashville just two weeks before. Having not participated in a number of the races last season, he had to have a big race in the Nationals to get an invitation to the World Championships.
I asked him about the Worlds and he said he didn’t think he would go. I was shocked. He had worked so hard to get a shot and now he was thinking about not going.
I dug further to find out what was going on and this is what he said. “Uncle Scott, I can’t win the Worlds without doing a lot of work to my wave runner. I am almost 10 miles an hour slower than the rest of the field right now. I have to be faster than that to win the World Championship.”
I was taken back a bit by this revelation and asked what any normal person would ask at this point. “If you are slower than everyone else, how did you do so well in the Nationals?”
“I beat them on the curves,” he said matter-of-factly.
“How much faster do you have to be to win the Worlds?” I asked.
“I can get about six or eight miles an hour more from my jet ski and that should give me a chance,” he said.
I explained that he would still be slower than the rest of the field but he wasn’t worried about that. He knew he could beat them in the curves — and he did.
What’s the lesson?
What does this have to do with investing? It’s how you act through the investing curves that decide whether you make your goals or fall short.
The straight-a-ways are just for show, but the real race is won in the curves. In the 1990s, any company with a pulse could gain 10% or 15% a year; the good companies grew their share price much faster.
By the end of the century investors and money managers alike started to believe that they were making money through some genius of their own. As we turned the corner to a new century, that genius faded quickly into the second-worst bear market ever.
We seem to have settled into a sideways market for the time being as the country tries to find its post-bear market legs and many investors are wondering what to do. It hasn’t been easy since the spring of 2000, although we did have a nice breather in 2003 before hitting the doldrums again last year.
But this is just the kind of market that can separate the guys who just have a fast boat from the guys who actually know how to drive them.
This kind of market tends to illuminate the real talent in our business. It’s called a stock pickers market because you don’t get to ride the wave of the market to make money, you have to invest wisely or you won’t go anywhere.
When you are in the curves of the market cycle, you have to know when to accelerate and when to slow down. There are a lot more decisions to be made in the curves and some of them don’t feel right, and you have to trust your knowledge of the sport.
You have to accelerate into the apex of the curve even though the overriding emotion is to slow down. You have to know when it is safe to move and when to stay in the pack.
The curves are where experience, knowledge and expertise combine with raw power to win the day. If it were not so, if we only had to run the straight-a-ways, then I would say let the fastest man win. There would be little use for financial advisors who knew what they were doing and this would truly be a do-it-yourself industry. But we know you can’t go straight forever. Sooner or later, you will run into the shore.
The fact is that the market spends more time in the curves than anywhere else. It has rarely been a straight line, and even though that is where the big boats show out, the race is won in the curves.
Contact MBJ contributing columnist Scott Reed, CIMA, CWA, AIF, of Hilliard Lyons, member NYSE & SIPC, in Tupelo at email@example.com.
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