Hindsight is not always 20/20. Sometimes it's Blinding.
It's a commonly-held belief that hindsight is perfect. Sometimes this is true, and sometimes the opposite is the case. People will often justify a random outcome with a story that makes them believe things couldn't have been different. Though few people would do this with a coin flip, in areas like markets, where the desire for an underlying order is enduring and widespread, people are generally quick to seek or create explanations.
When people see markets behave a certain way, they often look for a story to explain that behavior. How often have you heard a question like, "Why is corn up so much today?" The problem with that question is that it assumes that there must be a reason and that one can know what that reason is. While there may be a reason, and possibly even one we can understand, it's not always the case. There is a lot of randomness in markets, and no one sees or understands the whole picture. Markets are often unexplainable.
Assuming we can know how and why markets did something is dangerous because it can lead us to think we might be able to predict those markets in the future. We cannot know the future. Worse, even if we did, we couldn't necessarily predict how markets will react. Imagine that you had access to a USDA monthly or quarterly report before anyone else - would that be enough to predict how the markets will respond when that information becomes public? Probably not. You would still need to know how rest of the market participants will react to that new information. How many times have you seen a seemingly positive report result in a selloff? How many times have you seen the reverse? Predicting what is to come is hard, and guessing how a large group of people will react to what happens is harder still.
When we explain the past, we might be right, and we might be wrong. When we think those explanations give us the power to predict the future, we put ourselves at risk. So, how can we best protect ourselves from this threat? The answer we use at Quartzite Risk Management LLC (Quartzite) is to treat the markets as if they're almost entirely random. By doing so, we put our clients in a position of strength and help them take control of their marketing strategies.
When we treat the markets as if they're mostly random, we relieve ourselves of the burden of prediction. It's hard to know what tomorrow will bring. It's less difficult to understand how different versions of tomorrow might affect us. Taking the predictive step out of the equation allows us to focus on managing risk. From there it’s a short leap to adding or subtracting the right tools to make tomorrow more stable. If we understand the risk, and we know how the tools available to manage that risk work, then we can build an effective plan to navigate an uncertain future without being blinded by the past.
At Quartzite, we know how to measure and how to manage risk. Quartzite exists to bring that knowledge to agricultural producers. Our experience with a variety of risk management methods and tools is unique, and that experience gives us an edge we strive to share with our clients. There are effective marketing strategies that benefit from randomness and volatility in the markets. At Quartzite, we're experts in customizing these strategies for producers. We work with our clients to understand their businesses and add stability to their marketing plans. Take control of your future; don't be blinded by the past. Contact us today to learn more.
