By Justice Litle
As I look around and try to get a handle on what’s happening now, the word that comes to mind is “fatigue.” The markets have been lurching left and right like a rickety old bus careening down a dirt mountain road, with panicked investors hanging on to their seats for dear life. Over the past few weeks, we’ve had more volatility and more crisis than whole decades have seen in markets past.

So if these markets make you dog tired, you’re not alone. Everyone is getting tired of this madness -- even the scribes (like yours truly) who love to think and write about this stuff. You know you’ve become comfortably numb, as Pink Floyd once sang, when mind-blowing events start feeling blasé.

So Britain is nationalizing its banks? Hmm, OK. You say Germany is subtly declaring “every country for itself” as various EU compatriots see their financial systems implode? Kind of interesting, I guess. Meanwhile Iceland all but goes under, Russia and Indonesia halt trading, OPEC holds an emergency meeting over oil prices, central banks all around the world slash rates... and the reaction amounts to a blank stare. One can only take so much before it all starts to blur.

It is all serious stuff, of course. We’ll be digging deep into the fallout from all these events soon enough. But for now I think we could all use a break. Sometimes it’s good to just step back and get your head together before deciding what to do next.

Driving Lessons

As I walked the cool and balmy streets of Baltimore this week, mulling over a game plan for 2009 (and the rest of 2008), my thoughts turned to a book I’d recently finished.

The book is called Traffic: Why We Drive the Way We Do (and What It Says About Us).You might think there are fewer more boring subjects in the world than traffic -- cars driving in the street, etc. -- but the author, Tom Vanderbilt, makes the topic truly fascinating.

In Traffic you will find cannibal crickets, chaos theory, human psychology, supercomputers buried in the bowels of Los Angeles, topless Danish models (read to find out why), an explanation for how safe can be dangerous (and dangerous can be safe), and intersections in the Netherlands that handle well over 20,000 cars a day (plus scores of bikers and pedestrians) with no traffic lights or road signs to speak of.

And that’s only in the first half!

The reason I mention Traffic here is something I came across in the final chapter of the book. After sampling the traffic of half a dozen countries around the world, Vanderbilt finishes by enrolling at a “high-performance driving school” in Arizona. He shares three market-related insights there, which I’ll recap for you now:

Traffic takeaway #1: Breaking a fishtail is counterintuitive.

We’ve all had those awful moments when the back wheels lose traction and the car threatens to fishtail out of control. (If you’ve never experienced this, you’re pretty lucky.)

The three steps for breaking the fishtail run deeply counter to what we expect. First, you turn into the skid rather than trying pull out of it. (This helps the back tires gain traction.) Second, you step on the gas (as braking will only make the skid worse). Third, you let go of the steering wheel once the back tires have traction again -- so that it can whip around quickly before you realign and take back control.

None of these maneuvers are what the untrained driver would expect. Raw instinct is the opposite in every case: turn away from the skid, stomp on the brake, and hang on to the wheel for dear life.

Traffic takeaway #2: Most people are taught how to get a license... not how to drive.

Most people’s concept of “driving school” involves learning the proper stopping distance in front of a railroad crossing. It’s about learning how to get a license, not really learning how to drive. The DMV doesn’t teach stuff like how to handle a fishtail turn, or how performance drivers control the car more with the pedals (brake and accelerator) than with the steering wheel.

Traffic takeaway #3: Countless crashes could be avoided if more drivers would only look where they want to go.

It’s a scary but common occurrence: When the average driver sees that he (or she) is about to crash into something, he stomps on the brake and forgets to do anything else.

It’s as if, in the fear and adrenaline of the moment, the driver loses the capacity to drive. And because the driver’s eyes are transfixed in fear on the object looming before them, that’s right where the nose of the car is pointed, too -- and they slam right into it.

“Look where you want to go” sounds like painfully dumb advice, but Vanderbilt realized it was advice that could save someone’s life under the right circumstances. The high-performance driving school illustrated this point by making their students drive towards a giant wall of old tires at high speeds. The training objective was to focus on the gap to the left of the tires -- to look towards the opening and steer out of danger that way, rather than freeze up and run into the tires.

Market Applications

The market takeaways here are simple.

First, like the proper technique for righting a fishtail skid, the proper response in a market panic is often counterintuitive. Just like the untrained driver behind the wheel, our raw instincts in markets often direct us to do exactly the wrong thing.

This is where the value of training and experience comes in. Once you know how to handle a fishtail skid -- once the lessons have worked their way into your muscle memory -- your instincts go from “raw” to “polished.” As a benefit of the training you naturally start doing the right thing, instead of the wrong thing.

Not that it’s easy to suddenly become a driving expert, or a seasoned trading pro... It can take years to build up the right intuitive responses in high-velocity situations. But that’s a clear advantage that our editors here at Taipan can deliver. Sally Limantour has more than three decades of experience. Chris DeHaemer, Adam Lass, Cash McDash and I all measure our experience in decades, too. So in that respect, you don’t have to handle the fishtails by yourself.

As for the difference between getting a license and learning how to drive: There’s also a clear difference between understanding the basic concepts of investing and knowing how to invest.

Most of the time it’s OK to have little more than a fuzzy understanding of how markets work. But in times like these, there’s a real advantage to drilling down beneath the surface... to really knowing how to invest, in terms of things like market mechanics, portfolio management, industry and asset class focus, and so on. That’s why Taipan is focused on keeping you educated as well as informed.

And finally, “looking where you want to go” is more vital than ever in times like these. As the broader markets bleed lower day after day, it feels like all too many investors are hardly even participating anymore. Their hands are frozen to the wheel, foot stomped on the brake, as they slide into whatever obstacle they most fear. The answer here isn’t panic. It’s calculation and control... using offense as a form of defense... taking advantage of opportunities and refusing to be a victim. That’s a key element we’re focusing on here, too.

Enjoy the weekend (I know I will), and if you get a free minute, let me know what you’re doing to handle this merry-go-round of market madness, or what you’d like to know: justice@taipandaily.com