The Gambler

"Every gambler knows that the secret to survivin'

Is knowin' what to throw away and knowing what to keep

'Cause every hand's a winner and every hand's a loser

And the best that you can hope for is to die in your sleep"

So sang legendary American singer Kenny Rogers on the title track of his album, "The Gambler," over four decades ago.  Written by Don Schlitz, the song compares playing cards to life and offers lessons about judgement, self-awareness and knowing when to act or retreat.  

I've thought about the song a lot the last six months as the market has trended steadily higher in the face of trade wars, social unrest, a cluster of "distribution days" that went unresolved, interest rates that look (to me) set to move higher, and longer-term negative divergences on the major stock indices.  And while I can certainly point to a number of positive inputs, as well, I can't help but admit that I've felt a little lost for a period of time longer than I can ever remember.  

"He said, 'Son, I've made a life out of readin' people's faces

And knowin' what their cards were by the way they held their eyes

So if you don't mind my sayin', I can see you're out of aces

For a taste of your whiskey, I'll give you some advice'"

"Out of aces" - that sounds about right.  Sometimes, with investing, you get dealt something akin to a full house - a high confidence hand that makes you want to push every last chip onto the table (think April 2025).  But, for the last six months, it's been the opposite.  While it's true nobody knows the outcome of any investment decision, we can assign probabilities.  After all, investing is a pursuit of both chance AND skill, where wisdom lies in adapting to changing probabilities and making the best of your hand. 

"You got to know when to hold'em, know when to fold'em

Know when to walk away and know when to run

You never count your monty when you're sittin' at the table

There'll be time enough for countin' when the dealing's done"

I've been folding a lot lately.  Most investors want to play every hand, always being 100% invested. I don't agree that's the right way to do it.  At least, not with an entire investment portfolio.  Sometimes, the right thing to do is nothing.  After 15 years of investing I've realized another higher probability investment opportunity will come, eventually, it always does.