Investing Landscape: a Financial Allegory
Using animals to represent important financial concepts helps us invest strategically. This thought led me to ask Lucie Lortie, a conceptual artist, to depict the most essential animals of the financial world in a painting. This initial piece is the first painting in the financial collection series. This series aims to represent the financial system of our time.
The back and forth between the painter and the financial expert made this composition a cyclical story where every component has its place in space and time.
Lucie believes that the depiction of these animals will add layers of understanding to your financial strategy.
If you have experience in finance and investing you might already know which animal you are. As time and the environment evolve, your financial animal may change.
In this spectacular desert landscape at dawn; opportunity awaits. . . .
The Stag
The stag is an observer, always on the lookout for fresh opportunities. He or she likes investing in the early stages of a company. The successful stag investigates the movements of the other significant financial animals, so his timing is an informed speculation.
Notice, in the painting, the stag looks at us no matter where we move.
The Bull
The bull is an optimist. In financial markets, those who believe their purchase will increase in value are referred to as bulls. Buying and holding onto a financial instrument (such as a stock or index) is bullish. Then, the bull can strategically profit from the uptrend. It is possible to be bullish on an entire industry. Then find a specific stock in that industry to be even more bullish about. Bulls would rather take some risk instead of missing out. They can become so ecstatic about their investment that they never want to sell. However, a versatile bull can become a bear by selling overpriced assets.
The bull is a permanent force of nature and the most established animal of the collective financial imagination. Illustrated by a rock formation, the bull must always be kept in perspective even amid a painful bear market.
The Bear
The bear is pessimistic and cautious by nature. They believe the price of a financial instrument will go down. That is considered to be a bearish projection. Fortunately, a bear can still make money on the way down. For example, they can short a stock. Or could just decide to sell a stock with the possible goal of rebuying lower.
Bears patiently wait for less uncertainty. Some think the bear was selected to represent this behavior because of the way it attacks in nature. When bears see an appetizing opportunity, they slash their dangerous claws downwards. In contrast with the bull who thrusts its head upwards.
The transition from Bull Market to Bear Market.
A rapid uptrend can be overdone, resulting in a sudden price drop and therefore volatility. The volatility patterns are represented in this painting by the geologic formations inspired by the sandstone hoodoos of Bryce Canyon.
A trend reversal, such as the transition between a bull and a bear market, can happen when concerns about the rapid price increase become mainstream. Bulls become overwhelmed by bears who believe the market’s general direction is heading downwards. The bear market that follows might not be long-lived. Bears must stay attentive if they don’t want to be left behind. History has shown that bear markets are significantly shorter than bull markets. New opportunities arise on the scene when market sentiment or general opinion starts shifting.
The bull and the bear differentiate themselves from the sheep because they have confidence in their strategy.
The Sheep
Blindly following the herd can be a symptom of insufficient financial knowledge. Hundreds of sheep have actually been witnessed dying from following the previous sheep off a cliff. A sheep that tails only because it fears missing out might tumble in or out of financial markets with terrible timing. A seasoned investor might take advantage of that.
In this painting the bear sure looks like it found something appetizing.
Of course, following is not necessarily wrong. For example, if a shepherd (the sheep’s adviser) is also a good financial planner, that’s great. The problem is, an under-informed sheep finds it harder to choose a worthy shepherd. A potential mistake is to consider easily accessible information as reliable. Learning how to investigate an investment can avoid the need for you to get a shepherd. Your guidance can come from the conviction you build from studying the art of financial freedom. The need to rely upon the guidance of others will fade with knowledge and experience. Still, pertinent information and expert opinions are always welcome.
The dead cat bounce
Cats are known for their impulsive reactions to price movements. They try to time the market in the transition from bearish to bullish. So these extremely agile felines find footing on the edge of a cliff. Their buying power brings the price up. But a volatile collapse at the slightest resistance is possible. On the way down if the support is broken even lower prices are imminent. When an early bounce in price dies out, it’s called a dead cat bounce. Some quick and technical cats can trade these intermediary moves to make money.
The Dove
Most of the time, our economy grows. There are always many opportunities; a tree can grow even in the desert.
When policymakers, represented by the dove, perceive that the growth requires help, the dove flies in to stimulate the economy. Anybody can have dovish opinions but only a policymaker can do something about it; the Federal Reserve Board has that power. Dovish policymakers energize the markets by printing money and by lowering interest rates. As a result, the markets are hyped up again, because lots of money is injected into the economy. Bulls are charging up that inflated slope. Consequently, more money is moving around so stuff becomes more expensive. It is called inflation.
Money printing stimulates the economy, but it increases inflation. If money printing is done during a recession, the reduction of money velocity (the rate at which a dollar moves from hand to hand) can cancel the effect of an increased money supply and therefore minimize inflation. The Federal Reserve of the United States usually aims for a 2% yearly inflation.
The Hawk
Reasonable inflation is acceptable, but when you perceive your food getting drastically more expensive, it’s typically the time for the hawk. The hawkish policymaker spreads its powerful wings to save the value of money. He or she brings back equity by taking more from those who owe, with its flesh-tearing claws. The hawk is now receiving lots of money from higher rates. The transition from dovish to hawkish can be scary but they are preparations for the next economic cycle.
Eggs can be observed in the hawk’s nest, representing reserve assets, such as gold. Retirement funds and the next generation should benefit from this preservation of wealth. The hawk intends to build a big enough nest before we need the Dove again.
Conclusion
This painting is a cyclical story. Can you put your finger on where we are presently?
The behavior of these animals can help investors understand themselves, plan and strategize. Is it possible decentralized finance will change this landscape? I believe it will because more people will have the tools to become their own bank.
To keep on expanding this financial collection we are actively working with talented artists to represent the current financial revolution.
Sharing this article is encouraged. Together, we can empower more individuals to take control of their financial futures.
DISCLAIMER: While I did my best as the author of this article to ensure the accuracy of the information provided, I make no guarantees or warranties of any kind. Please note that the information in this article is based solely on my personal experience, research, and knowledge. The information provided in this article is for general informational purposes only and should not be considered professional financial advice.
The reader is solely responsible for their own financial decisions and should seek the advice of a qualified financial professional before making any financial decisions. Myself, my associates, and any company I own are not liable for any damages resulting from the use of the information provided in this article. The reader should also be aware that the financial industry is always evolving, and the information provided could become outdated or inaccurate over time.
“COPYRIGHT NOTICE: This painting/artwork is the intellectual property of Sacha Landecker, and all rights are reserved. The physical painting and copyrights have been transferred from the artist Lucie Lortie to Sacha Landecker. Unauthorized reproduction, distribution, or use of this painting/artwork or its derivatives without permission is strictly prohibited. Any violation of these rights will result in legal action.”
