Market Crashes and Being Antifragile

For people my age (or older): We are the children of the Great Financial Crisis of 2007 to 2008. For instance those people in the late 30s, 40s, 50s, etc…

Well, in retrospect, at that time, I didn’t have much savings, and of course, in comparison to now, the amount I invested then is but a pittance when compared to the amount I invested nowadays.

However, still, the rain will pass and the sun will come out. Sub-consciously, it may have changed the way I view investing in the stock market.

Look basically, I do not believe in timing the market. However, given the limited time (and resources) I have, I seem to be unable to find suitably price equities.

Yes, there are many dividend-paying stocks that are offering juicy yields, but I looking at their historical P/E and base on the intrinsic values I have calculated, it is just not within my own margin of safety level.

So I wait for Fear, while sitting on a “higher than normal” percentage of cash. And having a wish list of stocks, while trying to read some quarterly or annual reports per week.

Yes, I know when Market Crashes, there are many who are freaking out (and losing lots of money), and it does not really appear appropriate to be jumping for joy in front of them.

Heck, in the recent Dec 2018, there are already people who had suicidal thoughts due to the huge unrealised losses in their stock portfolio.

 

Well, I can relate the video by Phil Town below.

And in his Video, Phil Town mentioned about this term “Antifragile”. You can fast forward to 4.15 min.

In his book, Antifragile, Nassim Taleb defines it as below:

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure , risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance … even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler on your desk.

The antifragile loves randomness and uncertainty, which also means— crucially—a love of errors, a certain class of errors. Antifragility has a singular property of allowing us to deal with the unknown, to do things without understanding them— and do them well. Let me be more aggressive: we are largely better at doing than we are at thinking, thanks to antifragility. I’d rather be dumb and antifragile than extremely smart and fragile, any time.

It is easy to see things around us that like a measure of stressors and volatility: economic systems , your body, your nutrition (diabetes and many similar modern ailments seem to be associated with a lack of randomness in feeding and the absence of the stressor of occasional starvation), your psyche. There are even financial contracts that are antifragile: they are explicitly designed to benefit from market volatility.

Antifragility makes us understand fragility better. Just as we cannot improve health without reducing disease, or increase wealth without first decreasing losses, antifragility and fragility are degrees on a spectrum.

 

 

For me personally, I kind of accepted the fact that a huge crash is heading my way (probably sooner than I expect). Like I said, I am a child of the Great Financial Crisis of 2007 to 2008.

Yes, I will still freak out, but in an odd (or shall I say perverse) sort of way, I am kind of looking forward to it. By the way, I am still invested in stocks (and still have losses in my portfolio). But I also have a higher than normal percentage of cash (from my own historical standpoint).

Not sure, I can be like Hulk or Iron Fist eg. become stronger under stress (or chaos)…

Perhaps I can steal a line from Steve Jobs. Maybe, I guess every event in our life is like a dot… you may not know why this particular event happens to you now. But later in life, if you join all the dots together, it sort of all make sense.

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future.” Steve Jobs

For people who have suffered huge losses in their portfolios due to the recent stock market volatility… some will give up, some will remain the same, while others will thrive in the next huge crash or correction. So which will you be?