risk taking - need more?

I ended yesterday with the idea that once one can acknowledge and let go of defensiveness, not only is there obvious potential for growth, but also room for risk taking. Risk taking is often linked with growth of many kinds, including personal, professional, and financial. You can stay in your box and be perfectly content, but our lexicon is filled with phrases like "No risk, no reward" and "No guts, no glory" which emphasize the need for taking chances in order to excel. (One could naturally discuss a great deal about bailouts and whatever moral hazard that has/can result when the risk-takers not being the consequence-bearers. However, one merely need to google moral hazard to see plenty o' discussion on the subject.)

Financial risk, at least as far as investing goes, is generally straightforward. More risk should offer the potential for greater gain, but also greater loss. Less risk should mean less potential gain, but fewer potential losses. Many moons ago, I had a CD account that yielded 6.25%, a figure that is nigh impossible to imagine being available now. It was fantastic, but also not going to be available any time soon. If one wants that sort of yield or better, especially in today's financial climate, it almost certainly means more risk. Cash positions and dividend-paying utilities are relatively safe with low risk, but they will also never grow aggressively. More aggressive stocks, small-cap growth, and even trading on volatility all carry much more potential upside to go with their obvious risks. It's not that my money should be doing more, but that I should be doing more with my money. I am young enough to make back losses over time and some risk of losing capital should be acceptable, even welcome if it means greater returns.

In a professional sense, working here is hard to quantify in a risk sense. I suppose being where I am right now carries various risks and many of them are similar as to those that existed when I was in West Africa. However, most of these are risks to personal safety, not really inherent career risks. And as much as it will pain my mother to see me type this, I am not really concerned about my personal safety. There is good reason for this and not mere recklessness and I want to get back around to this idea at the end of the week. In terms of risk to career, staying here is the safe and easy choice. Not here physically, though I did just transfer in, but here as in my employer. I can turn what has so far been a series of similar, but always different jobs, into a coherent career that might even have a bit of direction to it. This is safe and relatively easy (but by no means absolutely easy) and of relatively low risk. It is also fraught with something that will always bother me if I go down that path. The reward of something else and what it could bring (in a purely professional sense) carries the risk of also failing to succeed in that other path. Staying put does not have that risk, but it also never means other rewards.

Personal risk taking could be all of the above, though I mean it in a relationship sense. With one exception, I have entered into every romantic relationship in my life and already known or at least believed, that it was doomed to failure for whatever the reason(s) might be. (It should be noted that this was not necessarily consciously known to me , but I am quite certain that at least some of me knew this each time sans the exception.) Perhaps it was the cynicism of youth, (though I still feel that way about everyone I meet), or I was never properly afflicted with whatever biochemical mix equates to love, or I was simply an immature jerk. Or, more likely, if I could envision an end at the beginning, then it also meant not actually investing real emotion and not being hurt. Regardless of why, that lack of emotional plunge is safe and boring. The single box is comfortable enough, but it is also very small. Finding how deep a box for two can be means the risk of falling through its depths.

paper losses

In the face of an unusually bad week in the stock market, perhaps it is finally time to put together my thoughts on this. I was noodling around with a similar post a month ago after a few straight weeks of poor stock market performance back in August. While I have easy access to news and information, the distance of being overseas, especially so far away makes this seem like such a insignificant issue. I think the 12 hour time difference from back home (or whatever it is), and thus the 9 hour difference with Wall Street makes it even more detached. By the time the markets open, it's dinner time here and checking on early morning market action is hardly at the top of my to-do list at that point in the day. What lessens the seeming impact of the news is undoubtedly the lack of video information and talking (screaming?) heads expounding on the market's performance. Everything seems less urgent when the delivery isn't from an armchair analyst yelling into the camera.

As for significance, it is quite significant despite the dampening of the delivery. On paper, market losses are quite noticeable as I do track these things. However, my investment style, like aspects of my personality, is quite conservative. Yes, stocks are down, but I don't care. Well, I don't worry. Undoubtedly, a big portion of my non-worry is from my non-need for currently held investments to be providing a meaningful source of income. I'm young, work a lot, and spend very little. This means I have time to reap the benefits of compounding interest, have little time to spend money, and will continue to accrue capital. Work has also meant that I have little time to actively manage any investments. This has resulted in two manifestations of my conservatism.

First, a meaningful fraction of what I have is effectively uninvested. I spend so much time with work that I have not taken the time to actually research and weight a lot of potential investment choices. In a practical sense, this really means I should be in mutual funds and diverse portfolios. In times like these, having available cash means available opportunities. If you believe in whatever your underlying investment theses are and that stocks (at least some of them) are under-valued, then this is a great time to use available cash and increase investments.

Second, I like dividends. There is something rather nice about a boring utility that wants to just give you 5% back every year. I'm perfectly fine with Exelon unsexily producing electricity or Waste Management taking out the garbage. Big-time growth? No, not really, but that's not the point. They are dramatically boring and that is a very good thing.

There is something that is arguably a third manifestation of my conservative nature and that is the fact that I track all of this. I have mentioned this before, but I used to track all aspects of my finances with Quicken starting after college up until the time I moved to Hungary. What happened then is that for a personal laptop, I traded in my old Dell Inspiron for a black MacBook. One of the downsides of that switch was that Intuit did not have a good Quicken product for Mac at the time and one could say that they still don't, so I stopped tracking, well, everything. (Yes, I tried Quicken Essentials for Mac and I think it is terrible.) I went from a certain level of compulsion with my finances to not keeping tabs on it anymore. Now, this isn't to say that anything untoward happened to my financial situation during this time. In fact, it was quite the opposite. I was making more, and spending substantially less since working overseas meant certain benefits I did not have Stateside. However, this lack of Quicken bothered me to no end and that along with other factors led me to eventually abandon the MacBook and go back to a Windows laptop earlier this year. I have resumed my obsessive Quicken ways and was able to resume my old data file and even fill in the biggest missing chunks of financial history. There are some kinks to work out, but I'm back on track for my tracking.

The only issue that has kept me from both caring more and being more pro-active is time. However, that is also changing (somewhat) with work rotation so I can get back to research and back to small, risky investments as well. Hey, as much fun as dividends are, some small amount of aggressive investing helps keep my attention and keeps the interest up. Soon, it will be time for some paper gains.

commodities crushed today

In a bit of a departure from my usual topics, commodities have been absolutely crushed this week. Gold, silver, crude, copper, coffee, etc almost all down across the board this week and some of them fell sharply today. Crude has been arguably over-valued, even with production shut down in Libya. Now, it looks like some demand is being eaten away at due to the high oil prices. Also, silver has tumbled badly this week but looking at its chart indicates this was probably bound to happen.

While we are in realm of commodities, my old friend natural gas storage is also worth a look at. We entered the winter at record high storage levels (again) and saw an unusually cold winter help draw down inventory. Now that it's May, we're back onto the usual storage upswing and activity in the field is very high. I fully expect storage levels to gain relative to the 5-year average and enter this coming winter at near-record levels once again.