"checklist, lets get as drunk as @#%# tonight and just fail at everything"
This post will explain how being in the market is like getting really drunk, and why in the end it always feels like we are failing more than we actually are. The subject line is the words of one of my best buddies on St. Patties day, just a few days back. Zeke, as we shall call him, is a terrific human. He's extremely large, weighing maybe 280, and was undefeated in several years of golden gloves boxing as a heavyweight back in the day. He is a frightening man, but so mellow and chilled out that its almost odd. He doesn't talk much, unless you talk to him, but he has an IQ of 150, which we learned as this, while drinkign heavily:
"Checklist, you're a pansie"
"Screw you Zeke, at least I'm smart"
"Screw that, you aren't that smart, I bet I'm smarter than you are"
"Thats just silly talk, Zekie boy, you have no idea"
So we, drunkenly, took online IQ tests by the half-dozen. And old Zeke, the former Golden Gloves boxing champ, who never talks much at all, and who is extremely intimidating, did indeed get in the mid 130s. And then sober the next day he landed 140's to 150 on the same ones. There is an extremely important lesson to be learned here. If you actually take a moment sometime, and really pay some attention to the people in your life, you will probalby discover some relatively exceptional talents that they possess. Its one of the keys to happiness in life: properly appreciating the people you have the chance to be friends with. Thats why I think I probably get more out of the CAPs game blogging scene than anybody, I probably realize more than most of you that there are a crapload of really smart people here. There really are... I maintain, as I always will, that the person whose opinion you should respect most is YOURS, and there are so many reasons for that, and you should probably basically never take somebody elses opinoin and run with it... but thats another story for another day.
Anyway, Zekie and I did in fact go drinking. My girl and his wife got sick of us quite early in the night when they realized we were probably going to just get completely drunk and act badly, and left. The next morning, it is a fact, they came with coffee and found 2 indians (native americans) passed out on the floor and an entire heavy metal band passed out in the guest bedroom. Zekie and I were passed out on the floor of my master suite, me in the bathroom and him in the closet, no real idea why I didn't sleep in my bed.
Hey, its St. Patricks day, the day of the Irish. There are a few Irish folk in these parts. They are generally smaller in stature than the German/Scandanavians who are the majority, but they act bigger than they are, and one can find some great friends among them, and as such one must celebrate their holiday. Its just the way it is. It is to the honor of the Irish that once per year you must, it is just the law, drink yourself completely stupid on St. Patties day. They are good people.
I will now spare you the stories of our behavior while we were out in public. But it is a fact that, before the discussion of IQ's at 4am, and subsequent taking of online tests, Zekie did call me a pansie at the nicest bar in our city. Liek the kind of place with jazz bands where well to do folks dressed up to the 8's do sit and enjoy, with significant dignity, a cocktail or 3 before retiring at 11 to a dignified slumber. Then he said if I hit him in the face it wouldn't even hurt him, so thats exactly what I did. Just got up off my barstool and clocked him. He flinched a bit, and got a bruise and a sore head, but I'd be a liar if I said it actually hrut him much. It didn't at all. He just looked at me and said "you dip@#%, you hit me in the face". I said "you told me to and said I wasn't tough". He said "whatever, you want to go to >local irish bar where the party was really happening<". I said "ok". The owner of said dignified bar is a friend of ours, and he just laughed at us, and thanked us for coming. Said "I don't understand you boys at all, one night you're in here having dinner, all dressed up, beautiful ladies on your arms. The next day you're all punching faces and stuff". We just left, we couldn't talk that well at that point.
You guys are all sitting there thinking "oh its so distasteful to get that drunk" and "you maniacs ar epunching faces?@!!?", and missing the real brilliance of all this: name one person, that you have ever known, in your entire life, that woke up to 2 indians and a heavy metal band in their condo. Thats right, you don't know ANY. So there. I take credit for this, its my greatest talent in life: I possess an absolutely undeniable ability to come across strange and improbable experiences.
There is a point to all of this. Getting extremely drunk on St. Patricks day and participating in the markets are quite a great deal alike. A very great deal indeed.
Zeke likes to describe getting really drunk and misbehaving as "failing". Now, to set the record straight right here, right now, I do not drink that much, or that often, and neither does zeke. We probably have drinks every other week or so. But on that 14th day, we just figure if you're going to do it, you might as well just do it. And the rest is usually ridiculous.
So drinking on St. Patricks day is "failing", most truly. Its not like you're going to bed having impressed alot of people worth impressing or having improved your social status. No, you're going to bed in a closet with a heavy metal band in your 2nd bedroom.
Well here's the news, participating in the markets is also, exactly like drinking on St. Patricks day, "failling". If you play this game, you will fail. Its not a question of maybe, its absolute, cast in stone, you will get things really wrong from time to time, lose money, feel stupid, and fail. Period.
But therein lies the beauty of this game. The fantastic, forgiving beauty. You don't need to get it right every time, or even 50% of the time, to win. And win big. You just need to get it right once in a while. In fact, sometimes in this game, even when it seems like you are failing royally, you are actually winning. And that can be true of drinking on St. Patricks day also, we "failed", as Zeke likes to say, most incredibly. But we're buddies with a heavy metal band now, and we have free tickets to 2 shows of theirs near us in the near future. Similarly, on Jan 5, 2009, I got extremely excited to see shares of ASH trading for $12 and blew like 3% of my portfolio buying them. I then "failed", royally, for a couple of months, watching them fall to $5 and change. I tripled down and all, but...
If you could go bcak to January 5, 2009, and buy shares of ASH for $12, would you put your entire net worth into it, on that day? Of course you would, you could have sold it for 5x your money 14 months later.
TCK was even worse. Jan 5, 2009, the first day I really bought stocks for myself. I blew like 25% of my money buying things. And then they dropped. I bought XL for $4.10, I bought ASH for $12+, I bought TCK for like 5 bucks, I bought OSK for like 12 bucks, I bought MTW for 8. And they fell. And fell. And fell. And fell. I would guess that 25% of my money was worth no more than 11% at the March bottoms. But they will go down in history as some of the best buys I will ever make in the market. They failed for 2 months, and then they 2, 3, 4, 5, 10 bagged.
And you have possibly read me run my mouth about my returns, which are good. But what you don't realize, and what I (in the same sentence as running my mouth in pride) probably don't post enough, is how much stuff I have gotten wrong.
I have probably gotten more stuff wrong than right. My biggest bets, in initial dollars invested, to date are: 1) TCK in the summer of 2010 (win), 2. RJET (massive fail), 3. IRE in early 2010 (massive fail), 4. ASH at in early 2009 (win), 5) NCX in early 2009 (win), 6) BAC at various times very little of which was march 2009, much of which was july 2009 and more in early 2010 and summer 2010 (fail, barely up in a hugely up market), 7) NBG in early 2010 (enormous fail), 8) XL in early 2009 (win), etc etc etc.
If you sat down and broke down my top 10 investments based on the initial $ value invested, you would find that I was about 50/50, 60/40 at best. Yet I have emerged not a winner but a huge winner.
And here is the point that I want to make, and I can only hope that somehow it strikes home with people:
Its not that important if you fail once in a while at this game, or even quite often. Read Ibankcoin and "the flys" blog, he fails all the time. Yet, while there isn't really enough info posted to discern his actual returns, I don't doubt that he wins in the end. Read my blogs, even if its just a scan of the titles, back to early 2009. You will see me fail repeatedly. I got cautious in late march 2009 and started hedging, I was cautious in the fall of 2009, I was cautious in march of 2010 and I was scared after the flash crash in the summer of 2010. I have gotten a great, great many things wrong. My mistakes haunt me when I sit, truly, I think about them as I toss and turn at night. I think waht might have been, I curse myself for my own cowardice and folly.
Yet I guess I am the winner. 7x my money from the march bottoms, probably better than every single blogger and hedgie extant. Yet I fail REPEATEDLY, the proof of which is avialable for anybody to read, even without reading my blogs, just by reading the subject lines of my blogs over the last 2 years+. I got a few things right. I went all in in early 2009, I got bullish again in July 2009, I made a good bet on boring divi stocks in early 2010, and I bet big on TCK and GOOD in the summer of 2010. And thats about it. Really, so far, I got like half a dozen thigns right. And many more than that wrong.
You don't need to be perfect, you odn't need to be prescient, you don't need to be the great man who foresaw the great event, you don't need to time anyting exactly right, to win in this game.
It is a cruel and brutal game, yes. It has other players, out to get you, with far more information and computers and skill than you, yes. It is stacked against you, yes. It can make you hate yoruself and your life, and it WILL, if you play it, soon enough, no matter how smart you feel today, yes.
But its our game to win. My next blog will, I hope, explain why guys like us, just idiot individual investors, really have the upper hand. Its not the big hedgies who have the advantage, truly, completely, it is us. You have probably failed,if you haven't,you will fail. But thats honestly just a part of the game, and failing 3/5 times probably makes you a big winner. Its not important to not fail (look at me and RJET, holy fail batman!... at least so far, i'm still holding), its just important to not royally extremely fail (like Dick Bove calling C at 20 the buy of a lifetime).
You see, getting drunk on St. Patties day involves failling. But... Whats your girl going to do when she finds a heavy metal band snoring in your condo the day after? Shoot you? Not likely. More likely she'll just think "thank god Zekies wife and I left when we did", roll her eyes, and get over it.
You see, investing will also involve failing. But... if you keep a level head and act rationally, you can win at this game. And the FACT of the matter is the odds favor you, not the big guys. You see, if you sit down and really analyze your surroundings, .... you'll realize that you must win, if you act rationally, big. YOU can short VXX into a panic, big hedge funds can't. There isn't enough liqudity and the actions of VXX are too opposed to what they need to do to attract capital. YOU can sell calls on FAZ by the tends, hundreds, or thousands in the summer of 2010, big money can't. YOU can say, in November of 2008, "well, this sucked, but no point in selling now", big money can't.
See what I mean?
I am very sorry if you didn't get drunk on St. Patricks day. And I am very sorry if you will spend th erest of your life chasing the hot momo stuff (today thats commodities). I am very sorry if you never realized that nobody is really judging you that harshly for getting drunk and, in a way, they sort of enjoy it. And I am really sorry if you haven't realized that you don't have to be picasso in the stock market to make big money. NOBODY is picasso, NOBODY ever has been.
Life isn't about being perfect. Its about living and seeing what shakes out. Investing is the same. Just don't go to prison, or die, and your mistakes in life are forgivable. Just don't REALLY mess up, and your mistakes in investing will be forgiven by the market in the same way.
Its no big deal to wake up to a perplexed girlfirend, 2 drunken indians, and a heavy metal band. This isn't serious. Its just a big deal if you shot someone and woke up in prison.
Just dont' go to prison as an investor and its easy enough to beat this game! And beat it big.
This has invovled a great deal of rambling, I hope in my nex tpost to clarify somewhat. I may then retire for a few months from blogging...