Last week I spent time on our family farm in the Karoo. They have had good rains after a back-breaking drought. It was lush and green, with grass hip-high in places and abundant birdlife around dams and stretches of water. It was just how I wanted to experience the Karoo.
But with it came locusts. On our way, we drove through long stretches of small reddish-brown locust armies marching on the road, so thick that vehicles skidded off the road in places. These locusts are part of the ecological cycle in the Karoo and specifically appear after the first good rains following a long drought. Where they go, they turn tall grass into stalks, like chaff. Although their dung is a rich fertiliser to the soil for the coming season, it is of little consolation to the farmers in their present season. They cause complete devastation and there is very little that farmers can do. Spraying seems pointless when new armies emerge somewhere else the next morning. It feels hopeless, especially for those farmers who are barely making ends meet after the drought.
At the same time, the Russian army invaded Ukraine. I stay clear of the news when I choose to recharge my headspace, but eventually, the news reached me even there. A friend remarked that my clients must be worried especially as I was not in the office to manage the crises.
But I don’t believe that is a healthy way to look at financial markets or your own financial planning. We shouldn’t panic when there is geopolitical drama or some other setback for financial markets. Because it’s all part of investing in financial markets. We must anticipate that it will happen, not because we have foresight into the future, but because the past has taught us that it will happen. It’s not unusual, it’s the norm.
Every few years there is a conflict that threatens to be the cause of the Third World War or a financial market setback that may be the start of the next bear market. I’m not making light of the potential consequences of the Ukrainian crisis. It is just that we do not really know how it will turn out, and even if we did, we cannot predict how it will impact financial markets. Our portfolios and financial plans should be built to withstand the impact with the knowledge that these kinds of crises happen. Just like Karoo farmers must know that droughts will come and locusts will follow after good rains, we must realise that turmoil is part of investing. What if we accepted that it is all a part of it? The turmoil, the ups and downs, the fear, and the eventual growth – it’s all just a part of it.
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//04 March 2022.