Falling Knives and Speeding Trains

I was lucky to start my career at a small firm in Cedar Rapids, Iowa, Securities Corporation of Iowa (SCI). Lucky, in that SCI put an emphasis on teaching its brokers how to be portfolio managers and the CEO, John Knapp, took a particular interest in instructing the youngest members of the firm.

In the summer of 1985 that was myself and fellow trainee Julie Snyder so John made a habit of stopping by most Friday afternoon’s for a chat. To say that we were impressed by John was an understatement. A PhD in economics, degrees from Amherst College, the Harvard Business School and subject of a recent favorable profile in the Wall Street Journal denoted John as everything we were not… someone to be taken seriously. More important John was a born teacher and we were happy for his attention.

Recent market behavior has me remembering two of John’s more useful instructions; “don’t try and catch falling knives” and “don’t jump onto moving trains”. To John, following the crowd in or out of fast moving issues was behavior to be avoided. Often the best course of action…. is to be still.

The market sell-offs of December and May have been followed by surges in January and June. Fast moving markets or; falling knives followed by speeding trains. Markets that don’t call for action as much as a prudent application of patience. Wall Street pundits instructing trading action in such a whipsaw fashion do little to create enduring wealth and do much that erodes longterm returns of investors.

Cancer took John, and then later Julie. Both too young. Thankfully memories and the lessons they contain live on. Iowa Wealth Management doesn’t try and catch falling knives and we don’t attempt to jump on moving trains. Just a couple of the lessons learned the summer of 1985.

 Past performance is no assurance of future results. Iowa Wealth Management is a registered investment adviser with its principal place of business in the State of Iowa. Opinions expressed are those of Iowa Wealth Management and are subject to change, not guaranteed and should not be considered recommendations to buy or sell any security.