Jan

26

The president has been reluctant to say much as he finds himself (once again) taking a side of the trade that the Chair finds disadvantageous. Specifically, it's a portfolio (it has been alleged) way overweight in natural resources. I dislike recording how these positions have turned out or how I believe they will do in the near or distant future.

Not for nothing do I have a file labeled "Dumb Posts," which seeks to track rash assessments made by various members (myself included). I have had opportunities to dredge these up when developments have proved them most embarrassing, but have over-ridden my animal spirits as I see no profit in it.

But as I check my portfolio against that of my wife (for whom I invest), I find that Marty Whitman was correct when he postulated that "I make more money just sitting on my ass." Her account has done marvelously well, but with infrequent trades throughout the year. Positions I long ago exited remain in her account with triple digit gains. On the one hand, I'm embarrassed by my lack of discipline, but on the other hand, I still have my tenacity in believing in my original assessment.

So, many mallards for her with the 20 gauge single shot. Far fewer for myself with a 12 gauge pump.

– Jack Tierney 

Scott Brooks comments: 

I never think how easy it is to kill a deer, just like I never think of how easy it is to make money in the markets. It simply isn't.

Sure, if I sit in the deer stand long enough, I will kill a deer … all I've got to do is sit long enough through all kinds of weather … bad conditions, good conditions and everything in between. The long term positive drift of the deer will eventually bring enough deer within range and I'll get enough shots so that eventually, I'll get a deer.

The same is true of the markets. Jack wrote a wonderful piece today and referenced his wife who has more of a buy and hold strategy … letting the long term positive drift of the market bring her positive returns.

There are some that just need to be satisfied with simply achieving investment success by sitting in the long term positive drift of the market … heck most money managers don't beat the market … why … because it's hard … really, really, hard!

You have to set your goals, set your standards, and be realistic about what you are capable of achieving. Always strive to push yourself, but don't try to achieve more than your capable of. I was a good high jumper in college, but I was never going to jump higher than 6' 8". That was the best I could do … and it wasn't good enough at that level … so I gave up high jumping and concentrated on my studies.

Did I fail? No! As a matter of fact, I never felt that I failed at that endeavor, rather I believed that I had succeeded greatly … I jumped much higher than I ever thought I could.

Most hunters are satisfied that they have shot a deer. I revel in their success! I love it when they get their deer! I take pleasure in their pleasure. Even though I take pleasure in others financial success, I don't judge my success by their standards. I set my own standards and work to achieve them.

When I feel like I'm getting in a slump, I force myself to fight through it. I have several things that I do to get through these phases.

I force myself to assess what I've been doing. Invariably, I'll find that I've gotten lazy about the "little stuff." For instance, in deer hunting, I can do all the macro work in the world on my farm. I can plant all kinds of food plots. I can hang stands on heavily used travel corridors, and practice with the bow until I'm dead nuts on for any shot up to 50 yards. I can then think about how I'm gonna go out and kill that big buck.

But all of that won't matter if I haven't paid attention to the smallest details … for instance, I refer you to my recent post on camouflage and the importance of scent control … maybe I forgot to take the neck strap off my binoculars and wash them in scent free soap in the wash machine. I know that sounds pretty trivial, but if I'm gonna kill that big buck (beat the markets), I have to pay attention to this kind of little seemingly insignificant detail.

I've taken what I've learned on the Daily Spec and applied it to my investment philosophy. I've always been a technical analyst. I love charts. I still love to look at them. But now I test them empirically by counting.

But, to be honest with you, I don't like counting that much. Sure, I can do it … but I don't like it. So I hired a quant to do the calculations on the hypotheses that I developed to improve my trading systems. Most of my hypotheses turn out to be a load of hooey … but every once in a while, I come up with something that improves my view of the systems.

As I become a better counter (yes, even though I don't like it, I force myself to learn it, do it, and get better at it), my mind is opened up to new possibilities that I otherwise would have likely never seen.

I also have a belief system. No, I'm not talking about religion … I'm talking about believing in myself and what I'm capable of doing. A long time ago, I read Napoleon Hill's book, Think and Grow Rich, and took it to heart when he said,

The dominant thought you hold in your mind will manifest itself in your life in some form of outward reality!

I've never forgotten that.

I've experienced the power of that belief in my life recently. A few months ago, I took into consideration the stock in my life and where I was at in the world and then compared that to where I believed I should be based on my skills, drive, and intellect … and I found myself coming up short.

I didn't like that. Not at all. So I planted the seed in my mind to look for opportunity, to look for the world to deliver me the opportunities that I was looking for … ok, so the world doesn't really knock on my door and say, "Delivery for Mr. Brooks." But I am surrounded by opportunities … all around me … and I have to tune my mind properly to be able to see them. I have to be in the right state of mind, otherwise, I simply won't see the opportunities that abound around me.

Eventually, my mind sees the opportunities, filters them, and arranges them in a fashion that makes sense, and Viola, I clearly see what I'd been missing before.

So it starts with a belief in yourself … an unbending belief that you will succeed and get what you want. Then it comes down to a meticulous attention to detail, and notice that nowhere did I think it was going to be easy!

There are other steps, but I think that's a good start.

Kim Zussman adds: 

'All wives are buy and hold cause if you wanna hold 'em, ya gotta … never mind.

Specs are familiar with friends and family who know next to nothing about markets, but due to a combination of luck and inaction, wind up beating your pants off (in certain periods). Jack mentioned stocks his wife held which he had regrettably sold below current prices.

Of course anyone looking at sells occurring in '01-'02 in most cases can kick themselves now. However one recalls a similar sport undertaken as a balm in 2002 when looking at sells from '00-'01 and noting how much lower they became since settling.

The knife cuts both ways (though upward trend makes one side sharper), and perhaps analysis of closed regrets contains some predictive value.

Sam Humbert comments:

friends and family who know next to nothing about markets, but due to combination of luck and inaction … 

One of my 'thoughts in the shower' recently was: why is "inaction" so lionized in discussions of stockholdings? A standard financial press trope is "oldster who has a cache of stocks from 1950 now worth $x million," as if it's a tremendous triumph of skill/willpower/perspicacity to throw some stocks into the oubliette.

It clearly requires no skill/willpower to hold "stuff" in general. I have an old pair of skis in the basement — last used them 15 years ago, and with the warm Vermont winters nowadays I may never use them again. They'll be in my basement till whenever (if ever) I get around to eBaying them.

So what's the big deal about inaction? The cause for pride?


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