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Philip Mause
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My name is Phil Mause. I am a Senior Advisor with the Pacific Economics Group, focusing on energy, regulatory and valuation issues. I retired from 40 years of law practice earlier this year. I am a yield oriented investor and in the last two years, I have done reasonably well in junk bonds,... More
  • Racing, Cruising, Speculating And Investing 0 comments
    May 2, 2012 9:07 PM

    In the past couple of weeks, there have been two fatal sailing accidents on the West Coast. The first involved a race from San Francisco around the Farallones Islands and back; the second was in the popular Newport to Ensenada race.

    I am not going to go into details, but in each case the boat appears to have hit a fairly substantial island - in the first case, one of the Farallones Islands and in the second case, one of the Coronado Islands (near the border between the United States and Mexico). I am not sure exactly what happened but what struck me when I read about the accidents is that each boat had a large and experienced crew and the wind conditions were normal.

    I contrast this to the experience my wife and I had in the Aegean in 2007. We are day sailors accustomed to the forgiving conditions of the Chesapeake Bay. We had a Bavaria 42 under charter and were relaxing in Mykonos where we dropped off my son and a friend, after which we planned to take the boat back to Paroika on Paros. I picked up the Paris Herald Tribune and saw the winds listed at 7-8 and figured we would head out, spend a quiet night anchored South of Mykonos and head over to Paroika at our leisure.

    It is probably an indication of my acumen that the "7-8" I read in the paper was not calibrated in knots but in the Beaufort scale. As soon as we pulled out of the harbor we realized that we were in for something that sailing near Annapolis did not really prepare us for. Over the next 24 hours, we found times we couldn't make headway and at night we could not get the anchor to hold. We struggled mightily and probably unnecessarily but made it back to Paroika only to discover that all the other boats in the "fleet" we tied up tight - even those with "professional" captains.

    So, what is the punch line. Well, we were two sailing duffers in our 60s dealing with 45-55 knot winds in unfamiliar waters with an unfamiliar boat (but, once again, I have to praise German engineering - the Bavaria was built like the Tirpitz) but we survived. Why couldn't younger and more experienced sailors survive in easier conditions over the past two weeks?

    The answer is simple we were CRUISING, not RACING. Every decision was made conservatively. When in doubt, we dropped sail. We never relied on automatic pilot. We closed hatches and hunkered down. We gave all rocks and shores a very wide berth and we got assistance mooring in Paroika from a pro. We were not trying to cut close to every rock or island in a desperate effort to make time. It made all the difference in the world.

    There is the same distinction, I think, between investing and speculating. An investor seeks a margin of error in his investments and does not plunge ahead unless that margin is available. A speculator may be forced to take risks because of the need to show short term returns. An investor is not looking to squeeze the last nickel out in monthly returns by trying to "time" the market although by buying only when there are deeply undervalued targets of opportunity he often winds up timing the market very well in spite of himself. Investing isn't really as hard as speculating just as cruising isn't as hard as racing. But I honestly believe that certain personalities - especially those with a hyperkinetic bent - will always be uncomfortable unless they have all the little things to do that racing and speculating provide.

    I am going to try to get into the Newport Ensenada race next year but only in a very laid back, tortoise beats the hare, cruising mode. I am still trying to figure out where the Coronado Islands are and I will be very, very careful not to hit them. The harder question is just what equivalent to the Coronado Islands is there awaiting us on the investment front - somehow, I think it will come from the other side of the "other" ocean.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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