Wednesday, 3 August 2011

What to Do When Fire Rages?

At this time of economic uncertainty and stockmarket turmoil, I thought about the following. It may not be immediately obvious why I am writing about a SATs paper from years ago but I hope it will become apparent.

Years ago there was a reading SATs paper entitled ‘Fire: Friend or Foe’.
In my opinion, it was one of the more interesting SATs papers. I base this on no more than its contents stuck in my head and inspired me to learn more.

One of the sections of the paper was about how certain forests and bush areas rely on fire to keep them regenerating – burning off the dead wood and allowing new seeds to grow, if you like.

Since reading the paper for the first time, I sort of think of it as a metaphor for major investing cycles. Yeah, I know that’s arty farty but it helps me understand things.

The idea is that certain habitats occasionally get destroyed by fire. Devastating you would think, but actually, not necessarily so.

When a fire starts, animals can fly, run away or burrow deep into the ground. Obviously, some die. Plants, being rooted to the spot, have to burn but have also found ingenius ways of ensuring their species can survive.

In order to survive fire, some plants have developed traits that allow them to reproduce or regenerate. Some plants behave in a particular way during the fire, others have physical features or some other characteristic that helps it to survive both during the fire and in the aftermath.

Of course, all fires are not equal and sometimes the plant burns but the conditions were not right to start germination and regeneration. For example, some seeds are only released for dispersal after the fire reaches a certain temperature.

In addition, too many burnings can be terrible for the habitat as growing plants will not have had time to flower and produce the seeds necessary for the next generation.

I know of plants in the USA, Southern Africa and the Australian bush that are reliant on fire for their ongoing survival. Although some plants are killed off when a fire takes hold, this heat triggers seed dispersal and thus starts the growth cycle, free of deadwood (and unfortunately, many perfectly viable previous inhabitants – but nature can be cruel).

Other species store their seeds in the soil until a fire reaches the right temperature for germination to occur. It has been known for fires to be deliberately and carefully set in order to trigger germination from soil seed banks and to kill weeds.

Yet other species rely on certain gases found in smoke (nitrogen dioxide) to kick start their germination.

Jack Pine, Mountain Gum and Old Man Baksia are examples of plants whose seeds are dispersed by fire. Although not pretty or colourful or aromatic, you have to admire the hardiness of these little little fellas.

Once the seeds have germinated and the plants life has been re-established, insects return followed, in time, by birds and small animals, followed eventually, by larger ones. It may take many years, but the habitat eventually reaches maturity and the whole cycle begins again.

So now my portfolio is showing monthly changes in fire red, what to do?

Sell out and run away? Hold on burrow deep and baton down?

I’ve given this a lot of thought and, for the moment, I’m going to hold on and burrow deep.

I should stress that I'm relatively young, can afford to wait for many years and not reliant on my portfolio for living expenses. I also think the current conditions will pass eventually. I’m confident that the seeds (investments) I have previously chosen will, overall, last the course. Some will drop dead, some will prosper and some will do something between the two extremes.

Yeah, for now, I'm planning to sit tight, bar the odd tweak, and maybe even start to top up once the fires subside.

Might even have a holiday. Italy, anyone? ;-)