How To Avoid Getting Blindsided By Bubbles

In The Blind Side, Michael Lewis tells the story of a young man named Michael Oher who rises up from a violent and chaotic childhood to this year’s 23rd first round pick in the NFL.

Michael Oher is no ordinary man, and the position he plays is no ordinary position.  As Lewis shows his readers, the salary for left tackles now clocks in as the second highest paid position in the NFL, right behind quarterbacks.  The reason why forms the backdrop to Lewis’s story:

The left tackle protects the quarterbacks blindside.

Evolution of the blind side

Before the 80s, that wasn’t such a big deal.  But then speedy giants like Lawrence Taylor exploded onto the professional football scene to deliver blow after pounding blow to unsuspecting quarterbacks

They came through the blind side.

Before Lawrence Taylor, sacks weren’t even kept track of.  After Lawrence Taylor, football managers realized something had to be done to protect their most valued asset.

That something was to find opposing giants of men who had the reflexes of a lightweight boxer and the protective instincts of a mother.  Gentle giants like Michael Oher.

Without a guy like Oher, a powerful linebacker can rush through the line and smash a quarterback into the ground, sometimes with disastrous consequences.   In a 1985 game between the Redskins and the Giants, Lawrence Taylor delivered a career ending injury to Joe Theismann by snapping his leg in half.  Lewis paints the opening of the scene vividly in his book:

Four Mississippi: Taylor is coming.  From the snap of the ball Theismann has lost sight of him.  He doesn’t see Taylor carving a wide circle behind his back; he doesn’t see Taylor outrun his blocker upfield and then turn back down; and he doesn’t see the blocker diving, frantically, at Taylor’s ankles.  He doesn’t see Taylor leap, both arms over his head, and fill the sky behind him.  Theismann prides himself on his ability to stand in the pocket and disregard his fear.  He thinks this quality is a prerequisite in a successful NFL quarterback.  “When a quarterback looks at the rush,” he says, “his career is over.”  Theismann has played in 163 straight games, a record for the Washington Redskins.  He’s led his team to two Super Bowls, and won one.  He’s thirty-six years old.  He’s certain he still has a few good years left in him.  He’s wrong.  He has less than half a second.

– From The Blind Side by Michael Lewis, page 19, 2006, W.W. Norton & Company, Inc.

To beat the market, you’ve got to know where the blind side is.

If you don’t, you won’t see something big and nasty rushing right through it at just the wrong time.  And since in the stock market you can’t hire a guy like Michael Oher to protect your back, you’d better get as far away from the blind side as possible.

Otherwise, instead of a broken leg, you might be left with broken dreams.

The blind side for most investors

Where is the real blind side of most investors?

Financial bubbles.

Most investors fall into one of two camps:

  1. They deny obvious bubbles (this is where most people fall) before they pop
  2. They acknowledge that there is a bubble, but think they can play it just right and get out with big gains

The first camp of investors gets crushed by the market.  And the second, despite knowing about the bubble, rarely get out in time.  Investing in asset bubbles is always a tremendous risk, and leaves investors exposed with no gentle giant to protect them.

Instead of standing with your back to the blind side, not knowing whether you’ll be able to dodge the impact of a bursting bubble, why not get as far away from it as possible?

The age of bubbles, and the biggest blind side of them all

This is the age of bubbles.  In the late 90s, we had the Nasdaq bubble.  From the turn of the millennium on, it was the housing bubble.  And just a little over a year ago the emerging markets bubble burst.

All of these bubbles blind-sided scores of investors.  And now another bubble threatens much of America.

It’s one being blown by enormous spending increases in Washington, incredibly fast monetization of debt (read: printing money), and all of the bailouts and now nationalizations taking place.

Plus, there is a clear pin that will one day pop the bubble: The massive accumulation of dollar reserves abroad that one day will come back home.

Today there are many places to invest your money that shout ‘value’.   But there is also another bubble waiting to burst.

So it might be time to get as far away as possible from the blind side.

To learn more finding real values in today’s crazy markets and avoiding punishing blows, subscribe to Happily Ever After Investing.

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