The Pit and the Pendulum (Part 3)

Poe wrote the original Pit and Pendulum. And it has lessons for investors today.

Poe set his story during the Spanish Inquisition. The narrator doesn’t explain why he’s there. He is sentenced to death and undergoes elaborate tortures. At the moment he falls into the dreaded pit he is pulled to safety by French invaders who have just taken the city.

It is a study of the effect of fear. The narrator communicates his fear quite well, for all the fact that we already know that he survives—after all, he’s telling the story. Poe’s writing is effective because he’s so realistic. And fear is a great motivator. It pushes the narrator beyond his limits—and beyond ours, as we read.

Investors deal with their pits and pendulums all the time. There are aspects of investing that seem like slow torture. We’re now seeing the steady erosion of purchasing power by moderate inflation, forced on investors by the Fed’s easy money policy. Others evoke the horror of 2008: references to a possible Greek default always seem to mention Lehman. Finally, everyone seems to be looking for a redeemer: a German bail-out of Greece, a Chinese bail-out of Europe, or some other rescue.

But one of the enduring lessons of investing is that there often is no white knight. While a rescuer is welcome, the pits we encounter are often of our own making. When we face our fears, we often find that they are less terrible than we imagined.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By |2014-09-12T10:45:48+00:00June 28th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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