The Zen Fund Manager

From Hussman

The Buddha said “with our thoughts we create our world.” Our self-talk – the phrases we quietly and often unconsciously say to ourselves, and the questions we ask – contain the concepts, filters, blinders, and occasionally, the crystal clear windows through which we observe and interpret reality. If we approach the world with expectations to be met, rather than an openness to accept (or at least begin with) what is there already, those expectations become the source of our own misery. If we form tight, detailed concepts of what we need to be happy, those concepts become the root of our unhappiness, because they shut out all of the opportunities to find happiness already around us.

There are two main questions I constantly ask myself as I manage the Funds from day-to-day. They're from chess: “what is the opportunity?” and “what is threatened?” Those bits of self-talk are my way of constantly getting back to the present moment, rather than getting caught up in hope about the future or distress about the past.

Another bit of self-talk comes from a sign that a veteran trader once had on his wall. It said, simply, “It ain't gonna happen that way.” It's a constant reminder to allow for uncertainty, and not to form detailed “scenarios” about future market movements.

That one takes a while to learn. There's a constant tendency to want to plan out the market's future course, draw trendlines, plan on a strong second-half, etc. Just like our detailed concepts about what we need to be happy can often make us miserable when something seems missing, our scenarios about the specific future path of the market can drive us absolutely out of our minds if the market moves the “wrong” way.