"I have heard that your first fall off of a horse may determine what kind of rider you will be." I didn’t write that, my daughter Anna did. She continued:

"My heart dropped as I watched Sally fall to the ground, but I knew I had to stand back and watch to see how she would handle it. So did her coach, Sydney. Sally cried, stood up, got a hug from Sydney and hopped back on that horse with tears streaming down her face. Her lesson continued, and another rider who was in the arena came over to me and said, "That daughter of yours is going to be a great show jumper."

"There are so many basic things to learn before even thinking about going over jumps. That is why a coach is needed. A good coach knows when to push a rider and when to hold them back. It’s a matter of not only judging a rider’s skills, but also noticing when they become over-confident in their abilities or too trusting in their horse. It’s when they get these things right that they can guide the horse with clear and unambiguous signals.

"To the untrained eye this looks like nothing - barely perceptible movements - especially when watching an itty-bitty six-year-old. But I can tell you, it takes tremendous precision and skill. Over the last year, I have watched in amazement as my daughter has improved her skills and shown me what bravery, dedication, joyfulness, and passion looks like. I have also watched a relationship grow between a student and her coach. Sydney is an Olympic level rider who adores my daughter and treats her as a fellow rider with whom she is sharing her skills, imparting her wisdom and passing on her knowledge."

Anna’s not only my daughter, but also a fellow advisor with whom I have been sharing my insights and knowledge. And, like Anna being amazed by Sally, I have been amazed by the growth in Anna’s skills, passion, and dedication. Instead of just copying me, she is helping to push our firm into more efficient directions, new programs, and new ways of communicating.

Recently we joined with Integrated Advisor Network, a national advisory firm. This, along with the addition of my youngest daughter, Hillary, as an administrative assistant has made our operations more scalable and sustainable. We are adding a digital interface to our existing systems that will allow us to handle clients with relatively small account balances. And Anna is developing a podcast called Transitions to help people deal with the transitions we face in life – college to career, military to civilian, single to married, working to retired and so forth.

These changes will help us serve our clients better, increase our capacity to add new ones, and provide continuity if something should happen to me. They are not a means for me to slow down or to turn the reins over to Anna. Instead of replacing me, she is adding a focus on clients at the start and midpoint of their careers as a complement to the focus I have always had on clients at or near retirement.

When Anna was an itty-bitty girl, she was on a horse that spooked and, while she never fell off, she didn’t get back on for 30 years. Inspired by Sally, she started riding. Inspired by me, she became an advisor. However, it is her passion that is driving her now and her common sense that is keeping her from making over-confident mistakes and from relying too much on her dad (or trusting her horse too much.) You’ll have to ask Sydney or Sally about her riding, but I can honestly and unambiguously say, "That daughter of mine is a great advisor."

What I saw was unforgettable. What I heard was unrepeatable. Many years ago, I was helping a mortician and a police officer pull a car with a dead body in it from the Sacramento River. It appears that the driver had driven her car into the river, probably at the old Ord Bend ferry ramp and, over the course of the next few months, it had drifted a few miles downstream. The low summer water flow eventually exposed the vehicle. Hooking a cable to the car, we used a tractor to pull it out of the river. Once on dry land, the mortician reached into the car and what happened next was so repulsive that I had to turn away. It was at that moment that the cop made one of the most vulgar and dehumanizing jokes I had ever heard. It was my introduction to how many first responders cope with death.

On the Nurse.com website Cathryn Domrose wrote, "Nurses often use humor to deal with death... Sometimes it's just the way you maintain your sanity." The same reality applies to police officers and first responders. Mary Roach in Stiff: The Curious Lives of Human Cadavers explains that we all find ways to avoid the reality of death. "It's the reason we say 'pork' and 'beef' instead of 'pig' and 'cow." She goes on to say that medical students in their first anatomy class quickly learn that "Dissection and surgical instruction, like meat-eating, require a carefully maintained set of illusions and denial."

It appears to me that the propensity to deny the certainty of death is only surpassed by the predisposition to deny the uncertainty of life. In Managing with the Brain in Mind, David Rock writes, "Our brains don't merely prefer certainty over ambiguity. They crave it..." So, in an effort to reduce this uncertainty, Julie Adams pens in Mindful Leadership for Dummies, that "...your brain seeks information. The problem is that often this information is unavailable until later... [Thus], in a bid to create certainty where none exists, your brain starts to construct stories about what's happening and what's likely to happen... It then treats these stories as facts and uses them as the basis for decisions and actions."

Jason Zweig, the author of Your Money and Your Brain, concurs and cites a study which shows that most investment managers "felt that the most important task in evaluating an investment is to arrange the facts into a compelling story." More often than not, these stories are based on an "attempt to create meaningful patterns where there are none." Carl Sagan referred to this delusion as the "characteristic conceit of our species." While most animals can detect patterns, we are "uniquely obsessive about it," explains Zweig. "[Our] brains perceive anything that repeats a couple of times as a trend."

So investors, says Zweig, think a "...manager who beats the market for three years in a row is a... genius." And "The biggest investors on earth fall just as hard for this 'three's a trend' fallacy." That's why pension funds and endowments have for years poured money into hedge funds that were on hot streaks. However, the Economist points out what I have been preaching for years "...hedge-fund performance shares a trait boringly familiar from other forms of investing...past performance is not a guide to future returns." Of the "...93 funds that finished in the top decile during the crash, only three remained top performers." It appears what looks like genius is "...little more than a guessing game: one in which, over time, the losses from bad guesses eventually top the gains from good ones."

Sam Houston's Last Will and Testament refers to, "...the uncertainty of life and the certainty of death..." These are undeniable truths that the human brain, nevertheless, tries to deny. However, as we have seen, there are times when denial is acceptable and there are times when it isn't. So, when faced with unforgettable traumas, it's acceptable for first responders to say unrepeatable things. But when faced with random patterns, it's not acceptable for investors to see repeatable trends.

"Tell me what the symptoms are and if I don't have them, I'll get them for you." I actually said that to my doctor and he smiled, not because he thought it was a joke but, because he knew it was the truth. When you're a borderline hypochondriac, it's hard to distinguish the real from the imagined. That's why I ask my wife to read the side-effects for any medications I may be prescribed because, if I know what they are, I will get them.

With that type of mentality, it was only a matter of time before I started having panic attacks. I remember my first panic attack: I was in my car when my chest got really tight, breathing became labored, and I started sweating profusely. Having no idea there was such a thing as a panic attack, I thought I was dying of a heart attack. Since my doctor was closer than the hospital, I made a mad dash for his office. Parking in front, I ran in past the startled receptionist and into the exam room where he was with a patient. "Doc, I'm having a heart attack." He turned and put his stethoscope to my chest and made a few quick checks. After a short time he said, "I think your heart is fine. It's probably a panic attack." I asked what that was and he explained that my heart wasn't the problem, it was my mind that was screwed up. I replied, "Oh, I can live with that," and walked out.

The Mayo Clinic defines a panic attack as "...a sudden episode of intense fear that triggers severe physical reactions..." On the ABCNews.com website, a post states that "...during a panic attack the individual is seized with terror, fear, or apprehension..." Based on that definition and explanation, financial markets recently had a panic attack. The NY Times reported that "After Brexit... fear seized world markets... [as] investors are gripped by a panic last seen in 2008." Sam Ro, writing for Yahoo Finance, used similar emphatic language when he stated that Britain's unexpected vote to leave the European Union (Brexit) caused a panic that went "parabolic." In other words, the number of investors that had panic attacks soared exponentially (or for math majors - quadratically.) These individual panic attacks triggered simultaneous severe reactions to a perceived danger. The result, as described by Ro, was that "In the days that followed, markets around the world sold off sharply."

At times like this, I have two responsibilities to my clients: First, I need to help those clients, who are experiencing a financial panic attack, to realize that it is important not to react to their fears.

Because, as Ro points out, "Ironically, history shows that fear of a crash has a poor track record of predicting crashes. Conversely, some of history's worst crashes came when no was expecting one." And secondly, I need to educate all my clients so they can avoid having financial panic attacks in the first place.

To do that, I turn to The Keys to Overcoming Panic Attacks, written by the Anxiety Coach®, David Carbonell, Ph.D. Like his advice to patients, my advice to clients is as follows. First, "...acknowledge the present reality, that I'm afraid and starting to panic." Second "...accept the fact that I'm afraid at this moment." Third, "Wait... don't just do something, stand there." And fourth, "Watch. Use the occasion to observe how the panic works, and how you respond to it."

If you tell me one of the symptoms of a disease, I will get it. If you are having a financial panic attack, I can tell you one of the symptoms you already have. As Carbonell explains, "The thought that I am in danger is...[a] symptom of panic." But there is no relationship between the level of fear and the amount of danger, so it is "not an important or useful thought." And that's exactly what the financial research says about the perceived and actual danger from events like Brexit and other periods of uncertainty. Fear is normal during such times, but patience is more productive than panic because markets will stabilize and recover. So, acknowledge that your mind is the problem and - like me - learn to live with it.

In the first chapter of her autobiography Sipping Tea with Buddha and Christ , Alexa Benson-Valavanis tells the story of an old man in London who was trapped in a dead end alley by three young men. Certain that he would be beaten and robbed, and knowing that "fight or flight" were not viable options, he searched for another way. And then it came to him, he "...turned to face his attackers, opened his umbrella, and started dancing and singing like a mad fool. The men froze... [they] were so startled...they left the old man... unharmed."

In the early 1970s I found myself in a similar situation, trapped on a deserted New York City subway platform by two young men armed with lead pipes. Like the old man, I had no place to run and no chance of winning a fight, so I had to figure out another way. With my waist-length hair, no shirt, and Kelty backpack, I knew I looked unusual. Deciding to add the unexpected to the unusual, I flashed a stupid Gomer Pyle grin, walked up to them and let out the most ear piercing Minnie Pearl "How-Dee" I could muster. It set them back on their heels, and I could see in their eyes that they were confused. Not wanting to lose my advantage, I spun a yarn, which was actually true, about hopping trains and hitchhiking to see my sister on Staten Island. However, I deviated from the truth when I claimed to be broke - and panhandled my muggers. "Man, we're supposed to be rolling you," was the retort from one of my assailants. To which I replied, "You mean like down a hill?" and again flashed my Gomer Pyle grin. The other guy dropped his hands and, in exasperation, ordered his accomplice to "Give him the money."

A study by Deutsche Bank, quoted in The Economist, suggests that investors may also be backed into a corner. Their statistics show "The average... prices of equities, bonds, and residential property... is above the level of 2007 and close to an all-time high." With valuations so high, investors are worried. These financial concerns can, writes author Jason Zweig, "...ignite the same fundamental fears you would feel if you encountered a charging tiger, got caught in a burning forest, or stood on the crumbling edge of a cliff." And, just like the innate reactions both I and the old man had to physical danger, the book Portfolio First Aid informs us that "Adversity in the markets is almost without exception met by the most basic instinctive human response of fight or flight."

In recent years, the fight portion of the response has triggered a rush by investors to alternative investments in an attempt to maintain returns or to dampen losses by improving diversification. But the consulting firm, McKinsey & Company, reveals that the boom in alternative investments is something of a paradox, because the returns "...have lagged behind the broader market indexes." And Larry Swedroe, in Beware of Alternative Investments, questions the diversification claims because alternatives "...have exposure to the same factors that explain the returns and volatility of publicly available stocks and bonds... [and they become more correlated with stocks and bonds when there is a] flight to quality."

The flight to quality is the other end of the spectrum from the fight response. Investopedia.comdefines it as "The action of investors moving their capital... to the safest possible investment vehicles [such as] ... government securities and money market funds." According to the Association of Individual Investors, "Such an action limits the immediate damage to a portfolio, but can cause an investor to miss out on the big rebound that follows a large drop by not jumping back into stocks soon enough."

The old man and I resisted the instinctive response to imminent bodily harm and survived. Warren Buffet has shown that if you can resist the instinctive response to looming financial danger you cannot only survive but even prosper. He calls alternative investments "a fool's game" and sees volatility as... "a buying opportunity." So, when you're gripped by fear, and fight or flight seem to be the only options, it's time to stop and think of another way. If you don't, you could suffer a severe financial mugging.

"Can I talk with your better half?" was the caller's request to my sister-in-law.  She replied, "Speaking."  Not long ago, my wife, upon leaving for a prolonged stay with one of our daughters, uttered a similar self-evident truth. "You would starve to death with a full refrigerator if I weren't around."

I appreciate how much information can be conveyed in single word or simple sentence of sarcastic humor.  And I am amazed that women are referred to as the weaker sex.  While I may be able to lift more, run faster, and jump higher, my wife is far better at handling the day-to-day vicissitudes of life, which probably explains why she will live longer. She has the temperament and I have the testosterone.  Just the other day, a testosterone-fueled ego trip drove me to set a 1,000-meter age group rowing machine record that my trainer exclaimed will never be broken.  However, this stud turned into a dud when I came home to an empty house (my wife is gone for a few weeks.) Without her calming temperament, I couldn't relax enough to sleep.  Chamomile tea, reading the Psalms, and meditating didn't work.  I finally calmed down enough to doze off by curling up on the coach with my granddaughter's teddy bear.

As I reflect on the recent volatility of the stock market, I am reminded that the calming temperament of a female investor is preferable to what Jason Zweig refers to as, "...the testosterone-poised sandbox of the male investor." In a Mother's Day Wall Street Journal column he said, about male investors, "...the most important thing is beating the other guy; the second most important: bragging about it. The long term is somebody else's problem, and asking for advice is an admission of inferiority."

In a Forbes article about her book, Warren Buffett Invests Like A Girl, Lou Ann Lofton is quoted as saying, "It's all about controlling your emotions. It's all about temperament. Buffett has always said that it's temperament - not intellect - that makes you a great long-term investor." And temperament is more behavioral than it is emotional. That's why, according to a survey by Ellen Peters of the University of Oregon taken at the bottom of the 2008/2009 market crash, "The women were more concerned (fearful) but took fewer actions..."  This fact was confirmed by a Vanguard study that looked at movements in IRAs during this volatile time. As Peters explains, "...men were more likely to panic and sell at the bottom - at the exact wrong time. They were unable to control their emotions. Whereas women, who tend to be calmer, patient and with a longer-term outlook, did not. They held fast."

Holding fast is difficult, but it's exactly what Nobel laureate Eugene Fama recommended when asked how he personally handled market volatility.  "Do nothing... Choose the risk tolerance you're OK with and hold tight."

As an investment advisor, my job is to help clients build portfolios that have the right risk tolerances. But even when a portfolio has the right risk tolerance, Fama reminds us that, "The world is risky. It's not very easy to see through things while you're going through them..." And that's why it is also my job to educate clients on how volatility affects emotions before it happens, and to encourage them to hold fast when it does happen.

In the midst of a market meltdown, fear is the natural human emotion and flight is the instinctual reaction. And while we all have difficulty overcoming this disastrous predisposition, men are the weaker sex in this regard. So neuroscience informs us that we need to develop the temperament of a Warren Buffett that is tapped into his better half and invests like a girl.  It is not a natural instinct, but a skill that can be developed over time.  In the meantime, if market volatility is keeping you up at night you might want to follow my example and get a teddy bear.

"You might want to set that bag down." His voice startled me, but it was his tone and mannerism that really surprised me. He didn't seem the least bit nervous. As a matter of fact, he seemed amused by my obvious apprehension. I couldn't figure out how he could be so calm while I was so scared. It was the final round of the Transamerica Senior Golf Championship at Silverado Country Club and I was caddying for my brother-in-law. And while he was standing motionless over a putt that would tie him for the lead, I was standing a few feet away with my knees shaking so badly that the clubs in the bag were banging together like a castanet quintet. Being so overcome with fear that I was oblivious to the racket, my brother-in-law needed to step back and suggest that I set the bag on the ground.

After the round I asked him how he was able to stay so calm in such a stressful situation. He just smiled and said, "I just looked calm." This revelation was not an admission of weakness but one of reality. All golfers get nervous in stressful situations, even the great ones. Sam Snead admitted that "Of all the hazards, fear is the worse." Lee Trevino said, "Putts get real difficult the day they hand out the money." Jack Nicklaus acknowledged, "The biggest rival I had...was me." And Bobby Jones is famous for stating "Competitive golf is played mainly on a five-and-a-half-inch course...the space between your ears."

While amusing, Jones' description is actually neurologically accurate. In Your Money and Your Brain, Jason Zweig explains that, "Deep in your brain, level with the top of your ears, lies a small, almond shaped knob of tissue called the amygdala. When you confront a potential risk, this part of your...brain acts as an alarm system - generating hot, fast emotions like fear..." In The Drunkard's Walk, Leonard Mlodinow points out that in addition to the amygdala, other parts of the brain are also stimulated so our "response to uncertainty is complex [because]...sometimes different structures within the brain come to different conclusions and apparently fight it out to determine which one will dominate."

Unfortunately, fear usually wins the fight in the space between our ears. In Thinking Fast and Slow, Daniel Kahneman explains, "Frightening thoughts and images occur to us with particular ease, and thoughts of danger that are fluent and vivid exacerbate fear." So both golfers and investors succumb to fear because it is easy to imagine missing a putt or to visualize the stock market crashing. This is especially true if we have recently missed a putt or experienced a market crash, like the one in 2008.

The solution to the problem, according to my brother-in-law, is building habits by consistently following the same routine. Similarly, Zweig advises investors to make "...a habit of putting procedures into place, in advance, that help inhibit the hot reactions of the emotional brain." Rebalancing is such a procedure. A portfolio is in balance when the percentages allocated to stocks and to bonds are prudent. And when market volatility messes up that balance, rebalancing back to the targeted percentages is required. So in 2008, we were selling bonds and buying stocks when fear had most investors doing the exact opposite.

As a caddie, my nervousness caused the clubs to rattle. As an investment advisor, market volatility also gets me rattled. And since disasters are so easy to imagine, the reality is that I will never stop my knees from shaking. But that doesn't mean when financial markets are all shook up and my nerves are rattled that I react emotionally. My habit is to act prudently. I shake, rattle and roll into my rebalancing routine.

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