Monday, August 31, 2009

The Kirk Report

The Kirk Report


The Mill Flat Fire

Posted: 31 Aug 2009 06:50 AM PDT

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Over the weekend we experienced our first time with the scourge of living in the West - an out-of-control forest fire 15 miles south of our home. While danger is low that we'll be directly impacted by the fire, it reminds one of how important it is to constantly manage risk.

The fire has been in place for well over a month now and started back in July after a lightning strike. Right after it happened, we asked several of our friends and neighbors about it as we could see the smoke from our home. They told us not to worry, that the fire was "under control" and that this is "normal" for a "controlled burn." Frankly, we were dumbfounded at the laissez faire approach. I mean, if you have a fire, you put it out, don't you? I mean, we haven't seen rain for well over two months now. Well, "not to worry" we were assured.

Then Saturday came with slightly higher winds and the fire suddenly became out of control, destroying lots of land and at least 10 homes and probably more. The area remains filled with heavy smoke and from my office window I can see and hear numerous fire helicopters and planes fighting the fire very aggressively now. As of this morning, they still don't have it under control.

As a trader, I'm always putting out little fires (i.e. closing poor trades at small losses) and I'm constantly working proactively and aggressively to avoid out-of-control disasters. After all, an out of control portfolio is a losing portfolio. Which is why I was so shocked to see how people were treating the fire, until, of course, it was too late. An ample reminder of how very important it is to stay proactive in keeping mistakes small even when were are lulled into complacency by thinking that the risk is "normal" and that things are "under control" based on past experience. The truth is that the only thing in control is our reaction to problems and mistakes we make and staying proactive and never letting your guard down no matter what is always the best defense.

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