I once watched a small horde of surfers who found themselves at the perfect spot to soar the swelling waves on a beautiful summer day. Great excitement, I could see, as they surged towards the beach in control of the roaring beast below their commanding boards.

Then I saw something else as well. There were three surfers who did not share in the frantic rides towards the beach and the rush back into the heaving waters. They were hanging back in quiet solitude, no talking, no movement. I watched them for quite a while and then I came to see what was happening to these solitary surfers.

The waves came with a regular rhythm but they ignored them. Suddenly I could see that their body language change. They were positioning their boards towards the beach while watching something intently over their shoulders. Then I saw it too. A fierce specimen of the ocean's display of waves was coming towards them.

That wave they took, and when they avalanched past the other surfers it seemed like the coronation event of kings. And kings they were. They got the crests they sought - and with perfect timing.. There was no applause - just the respectful bowing of the soul towards the essence of things that will outlast all mediocre tethering.

And the financial lesson of this?, asks the frustrated naked capitalist who has already wasted three and a half minutes struggling through the apparent metaphysics of a wannabee financial commentator...

Okay then, let me try to turn lyrics into reality...

The financial cycle is an amazing thing. During the upswing of the economy people become more and more involved with the various instruments that they believe will bring great personal wealth. Be it property, the stock market, or a business venture, we participate with increasing pleasure in good faith that we will make a killing.

Oh boy how we humans can surf! As momentum increases, so does the perception that if we only participate, the unchallenged result will be that money will be made. As it normally goes, up to the last quarter in the upswing most participants do make a good bit of money. People then still continue to ride the wave, not realizing that the wave does not have momentum anymore.

That is when they start to make the big mistakes that wipe out their previous gains. It is relatively easy to make money when the tide is in full swing, but the downside is that one can so easily forget to turn your surfboard to safer waters. There is a time when the risk becomes too big and one should then rather stay put and assess the situation to wait for the surety of a new build up in momentum.

The basic tenet to this wave metaphor then is not even to participate in the surfing of a financial wave because so many other people are doing it with apparent success. The irrationality of greed can take a lot of people down the tube when they take it just a little bit too far. One should rather do one's homework thoroughly, even if it means that some opportunities could be missed. When you have reason to go with the tide, only then should it be done.

We are now in the middle of 2007 and it is a very good time to assess where we are and where we are going.

The stock markets surged for an extended period of time and are still at heady heights. The property market in many countries are in different grades of distress and the world economy yo-yo between the continuing strength of China, India and a few other countries on the one hand and the balancing act that is happening in the USA on the other hand. Tension is in the air in the Middle East and in Iran it is almost touchable.

Here in the middle of 2007 we will therefore have to wait for definitive waves to start building up again and we surfers in troubled waters will most likely have to wait patiently to experience a clearer pattern of things to come sometime in 2008.

They do come. Again and again.

Wim van der Walt
June 22, 2007