Have Financial Baggage?

A few weeks ago I referenced the “Miracle on the Hudson” and how Captain “Sulley” Sullenberger’s Flight 1549 heroics can guide us during financial emergencies. You may recall that Sullenberger safely landed a commercial airliner on the Hudson River after hitting a flock of geese and losing both engines. I was intrigued by his success enough to study a few of the attributes that led to this amazing outcome.

All of us have baggage, some good and some not. Sulley packed incredibly good baggage for Flight 1549.  In his bags were years of serious and specific training. While he had no idea of how the events would unfold, the resources he packed proved perfectly suited for the situation. When the engines blew out two minutes into the flight, Sulley drew upon among other things:

• 42 years of pilot training, he obtained his pilot’s license at age 14
• an Air Force military jet fighter background
• glider pilot experience- the US Airways airliner was essentially a glider after its total power loss
• he was a flight safety expert – Sulley operated a flight safety school and had personally studied emergency cockpit behavior under stress.

In his own words… “One way of looking at this might be that, for 42 years, I’ve been making small regular deposits in this bank of experience: education and training…and on January 15, the balance was sufficient so that I could make a very large withdrawal.”

Financially speaking, 2008 was a wakeup call giving us insight into some of our baggage.  As it happens with almost any sustained market run up, the ascent that occurred from 2004 – 07 seemed readily sustainable.  The tech bubble was in the rear view mirror, a distant memory.

But while pilots like Sullenberger spend 80% of their post-licensing training simulating emergency situations, we tend to learn little from past financial 911′s. Anxious to make up the losses from the last crisis, at the first break in the clouds we open up the throttle and let her rip down the tarmac once again.

Maybe going forward we can learn to leverage some our experience to navigate a soft landing the next financial crisis. The first and most important step is to realize that it will happen again.  Perhaps keeping a percentage of our assets in a tax advantaged, conservative position equal to our age is how we should pack our investment bags going forward.