THE strange thing about the West is that there are more cows and less butter, more rivers and less water and you can look farther and see less than any other place in the world." —Anon.
When I was a kid, there was nothing I wanted more than to be a cowboy. Now that I’m that much older, I’m again thinking I’d like to be a cowboy. How much easier it would be to just ride off in the orange sky of a setting sun than have to deal with all the stuff we tend to worry about nowadays.
Cowboys didn’t buy their hats on credit. Billy the Kid didn’t lease his guns. The Dalton brothers didn’t worry that the banks might repossess their horses. They robbed the banks; the banks didn’t rob them. The regulators hadn’t yet got a hold of everything. You didn’t have to tolerate braggarts who were "all gurgle and no guts". When people came up to you from behind, they knew to give a loud greeting before they got within shooting range.
Cowboys had rules. And even though they never wrote them down, everyone knew what they were and wouldn’t try to snivel out of them.
Had there been traffic lights in the Wild West, cowboys would have stopped on orange … okay maybe not, but on red for sure.
Best of all, they’d just hang the ones that didn’t — right there and then. Of course, that was before the developers came along, so there were still a few trees about. Cowboys didn’t try stealing another man’s horse. And they knew to look out for their own.
The famous western writer Zane Grey in his 1934 novel chronicled those "laws that even ‘bad men’ learnt to respect" as The Code of the West. Some would still serve us well today, as rules to live by:
• Be considerate of others; don’t stir up dust around the chuck wagon;
• Never walk when you can ride, never stand when you can sit;
• Talk low, talk slow, and don’t say too much;
• Don’t look back at someone you’ve just passed on the trail, it implies you don’t trust them;
• Lettin’ the cat outta the bag is a whole lot easier ’n putting it back in;
• Never kick a fresh turd on a hot day;
• Good judgment comes from experience, and a lot of that comes from bad judgment;
• A private railroad car is not an acquired taste. One takes to it immediately;
• If you get to feeling you’re a person of some influence, try ordering someone else’s dog around.
Then there were the rules cowboys lived by that seem almost to have been written with investors in mind, for instance:
• Don’t inquire into a man’s past. Take him for what he is today. As everyone knows, past performance is no guarantee of future results. But as US Securities and Exchange Commission chairman Arthur Levitt once said: "I read the ads. I see nothing but performance, performance, performance." And with the market pushing ahead, you can bet investors will continue chasing the performance god;
• Be pleasant even when out of sorts. Only quitters complain and cowboys aren’t quitters. No one wants to hear about your losses. They might be important to you, but for the rest of us, except for a little schadenfreude, it’s just plain boring. As for quitting, no one said it was going to be easy, but if the game’s not for you, the sooner you realise it, the better. Because there’s another cowboy saying that goes: the time to quit is before you wish you had;
• Don’t wave at a man on a horse, it might spook the horse. If you envisage the man on the horse as the investor and the horse as the market, it’s easy to see how those who are forever trying to spook us with this and that might eventually spook the horse. Which brings to mind another saying: nobody but cattle know why they stampede and they ain’t talking;
• Say things plain and save your breath for breathing. Advice the media could take to heart;
• Don’t get mad at somebody who knows more ’n you do. Yes, it hurts when you wind up on the wrong side of a trade, but it ain’t the other guy’s fault;
• Don’t squat with your spurs on. Don’t borrow money to trade. Then again, there’s another school of thought that says, If you can’t squat with your spurs on, you ain’t a real cowboy;
• Never drop your gun to hug a grizzly. Or a bear market;
• No matter who says it, don’t believe it if it don’t make sense. If ever there was a useful piece of advice for investors, this is it. Question it, poke it with a stick until you’re satisfied. "A man never reaches that dizzy height of wisdom that he can no longer be led by the nose," as Mark Twain warned;
• Timing has a lot to do with the outcome of a rain dance. How true is that when it comes to trying to figure out how smart you really are? And yet, we still think we’re geniuses when we make money in an up market, and curse ourselves for losing money in a down market.
I’m not the only one who thinks cowboys had valuable lessons for today’s investors. In his book, Being Right or Making Money, Ned Davis tells the story of two cowboys who, having lost their jobs, went into a bar to drown their sorrows. Over the bar was a sign that said Bear Hides $25. When they asked the bartender what that meant he said, "It means what it says," so the two cowboys went out, came back with two bear hides, and received $50. One of the cowboys (being a capitalist) said, "All we need now is inventory," so they got on their horses and rode deep into bear country. When it got dark, they put up their tent and went to sleep. Early the next morning, they heard a rumble, so one cowboy looked outside to see what it was. When he opened the tent, he saw 10,000 growling bears. He looked at all the bears and then looked at the other cowboy, and with a grin said, "We’re rich!"
One good definition of the difference between professionals and amateurs, says Davis, is that amateurs ask what the potential rewards are, while professionals ask what the risks are.
Amateur investors — blinded by greed — often can’t see the risks that are literally staring them in the face.
But then, as the saying goes: a man isn’t born a cowboy — he has to become one.