When Did You Become a Benchwarmer?
Despite his trillions of cells and intricate network of tissues and neurons, it’s a mystery how man at times exhibits all the complexity of a gnat.
We are particularly troubled when we hear him proudly boasting of his exceptionalism. Yet he needn’t play up the cult of individuality, for there are but two kinds of people in this world.
At one extreme is he who expects the worst around every corner.
For him, society has lined the streets with security cameras. It has bred a new era of policeman — the nuclear-arms-wielding gendarmerie. And it has erected a social paradigm that polices itself.
Together, they guarantee that any slight against him will be caught on tape, punished, and shamed in front of the world.
He is emboldened by his crutches. But, cruelly, his worry isn’t with the outside world. For his biggest fear is himself.
At the other extreme stands he who understands that there is no observable difference between good and bad…up and down…failure and success.
He looks at the world today and sees cause for concern. Yet he sees great opportunity too.
He prepares for a tomorrow in which all his possessions are stolen. All the while scheming to take from the world what he desires to be rightfully his.
He is an entrepreneur in the sense that he wants more. Of what? Of everything. And he is not ashamed of admitting as much. Not to himself. And not to anyone else.
Grey hairs and lost opportunities
Three months into the new year, we struggle to remember a time of more upheaval.
But we are reminded that in our library is a backlog of essays cataloguing the state of affairs of yesteryear.
In reflecting on years past, we find that not much has changed. We still live in a state of permanent anxiety about the future. And we continue to speak with relish of an economic collapse that would wipe the smirk from the biggest optimist.
And what do we have to show for our worry? Grey hairs and lost opportunities.
In searching for analogies to describe our plight, we find one on the football field.
We empathise with the dreamers that hug the sidelines every weekend.
At first, they are not happy playing a bit part. They are eager to prove their worth and claim their swag.
Some get their chance. Yet most remain seasoned benchwarmers.
In time, many, through years of self-consolation, come to enjoy the safety of the sidelines. Behind the white line, nothing can hurt you.
Occasionally, a lucky few, long lulled into stupor, receive a jolt from the blue. Trading dreams for comfort, they realise, has its consequences.
It’s just a ride
In sitting on the sidelines, many investors have watched one of the greatest market booms in history slowly pass them by.
Fortunes have been made by those with enough foresight to see road bumps where others saw cliffs.
The benchwarmers, meanwhile, have been hypnotised into inaction. But they face a conundrum:
The longer the boom plays out, the more they convince themselves they’ve missed the boat… And yet, tragically, the longer the boom plays out, the greater the fortune they miss out on…
‘Ah… But don’t you remember what happened during the last crash?’ the benchwarmers snide.
We remember it well. The ASX lost a third of its value. From a peak of 6,873 points, it plunged below 4,000 points.
It has since climbed above 6,000 points again, despite not reaching the heights of the mid-noughties.
Does this prove the benchwarmers right?
The biggest gains were made by those that had the courage to invest while the benchwarmers watched on. Those that lost out were the ones that waited too long.
In realising their mistake, some bought in high and were forced to sell out low as the collapse swept away their fortune.
The benchwarmers of today face much the same dilemma. Which is why they prefer to cling to the belief that the market is approaching another high.
In truth, they may be right. And though we believe they’re wrong, we can’t say for certain. But history is on our side.
Consider that the ASX has never undergone a crash when its value was lower to the previous high prior to a market collapse. The wool crash fell from a higher level than the Second World War crash. Which was lower than the high prior to the Vietnam War crash.
This pattern repeats for the oil crash. And the 1987 crash. And the tech crash. And the subprime-led crash.
Every crash was preceded by a new high.
Promisingly, to date, no crash has yet to halt the upward surge of the ASX. The harder it falls, the stronger it rallies.
With the ASX sitting at 5,900 points today, it suggests that we’re still some ways off the new high that could give way to the next crash.
Importantly for the benchwarmers, it suggests their opportunity hasn’t passed them by. For them, there’s still time to step over the white line.
But there is a caveat to this:
While the next high may well be years away, we’ve already witnessed a decade of growth in the market. Which means the benchwarmers can’t rely on blue-chips to make their riches.
Instead, to realise their fortunes, the benchwarmers may need to think small to go big.
After all, the smallest man on the field needs to be agile and quick-thinking to best his larger opponents.
The market, as you’ll learn here, is no different.
For The Daily Reckoning Australia