In previously coaching my son's ice hockey teams, after drawing up a new play and visually explaining it to the players, I would ask if they had any questions before we installed it into our practice plan. Once any remaining questions were answered, and before they set out to go practice it live, I would finish by asking the kids, "What could possibly go wrong?" This latter question was by design, partially to provide some levity yet also to get them thinking ahead, because if mistakes were made, I wanted them to consider in advance about how they would adjust in the moment, as hockey is a game of speed predicated on time and space.
Earlier this summer a close friend of mine and I decided to hike a super challenging mountain in the state of Washington. For me personally, this hike would be in my top five in the difficulty category, and I was excited to check it off my list. On our two- and half-hour drive from Seattle to The Enchantments, we discussed the severity of the upcoming hike and I joked with my friend by saying, "What could possibly go wrong?" Little did we know that later in the afternoon we would find out! Our hike up the mountain was uneventful, yet longer than we had estimated as it was unseasonably hot that day and the scree covering the final 2,000 feet of elevation (Aasgard Pass) made our hike much slower than we had planned. We hit the summit by 4:00 PM (our initial estimate was 1:00 PM), and acknowledging we were behind schedule, we did not stay long admiring the views. With a big afternoon ahead of us heading down the mountain, we started our descent as we wanted to get to our car before nightfall set in. Approximately 1/3rd of the way down (we were about 5,500 feet from the basecamp/parking lot) we came upon two young ladies, one of which was lying on the ground and in obvious pain. Her friend confirmed she was having severe leg cramps and we suspected she was extremely dehydrated. After diagnosing the situation (they had minimal water, food, layers of clothing, and the one hiker was barely speaking and could not walk) it became obvious that we would have to help them get off the mountain or they would be stranded overnight (dehydration, starvation, and bears were all scenarios they would possibly encounter). Pulling from our previous experiences, as well as the resources we had packed, we devised a few different plans to get her and her friend off the mountain. Ultimately, we made contact with the local park rangers via our Garmin SOS device (if you are a hiker and don’t have one I strongly encourage you to purchase it). and Approximately 3 hours later park rangers arrived via a helicopter to remove them in a stretcher and helicopter them off the mountain directly to the local hospital. Once the helicopter departed, reality sunk in - we were left alone and still had to climb 5,500 feet down the mountain in the dark using headlamps as our only light source. We made it back to Seattle twelve hours later than expected, grateful for both a hot shower and shelter.
Whether you are competing in sports, hiking a treacherous mountain, or designing a portfolio construct, one must consider, and plan for, unfortunate scenarios - not doing so is setting yourself up for potential failure. Within my profession, there are a number of ways to “de-risk” and create contingency plans, including:
- removing concentration risk in one's portfolio,
- incorporating a multi-asset class allocation with periodic rebalancing,
- maintaining numerous liquidity facilities for unexpected expenses/opportunities,
- creating and periodically revisiting one's financial and estate plan, and
- providing a trusted contact with secure passwords to critical accounts/assets.
Too often I meet with individuals who either intentionally or inadvertently rely on hope or luck as their primary strategy - this is a fool's game. Implementing protective measures within one's plan takes time and incurs costs, from my perspective this is the price of admission in protecting our greatest blessings (i.e., family, health, and wealth).
As we head into the back half of the summer, the capital markets continue to perform well, with minimal overall volatility, and some investors may get complacent. For some context, the current bull market started in Oct 2022 (approximately 655 days as of this Craig’s Corner) and may have more room to go as the average bull market has lasted 1011 days [1]. That said, periodically challenging the current equity market trends with questions such as, "What Could Possibly Go Wrong?" isn't being incredulous, rather it's a prudent position which may uncover some proverbial rifts in one's portfolio (i.e. allocation gaps, sector and/or concentration risk, size and style drift, etc.) which is more pleasant to address during market highs rather than market dips.
When I think back to that unexpected encounter with the two hikers just below the Aasgard Pass, I recall an overall sense of confidence and calmness as we diagnosed the entirety of the situation. Our preparation for the hike was not perfect, yet it was a solid plan and carried us through the day when uncertainty came upon us. I played back the day in my head on the flight home to Atlanta later in the week, and I realized the most important part was not crossing the Enchantments off my hiking bucket list. Instead, it was navigating through the curve ball which was thrown at us - something which life does to everyone.
I will finish this latest Craig's Corner with a quote from Bear Grylls, a former SAS trooper with the British Army who stars in the Man vs. Wild survival television series, "Adventure is not about the destination, it's about the journey and the lessons learned along the way".
1 Bespoke Report, July 12, 2024, page 4