Over the last few years, I have been striving to become more action-oriented. As I look at my behavior over the past few years, I can see that I still have a ways to go.
Due to my natural curiosity of finance and economics, I have enjoyed reading the thoughts of thinkers like Mish, Gary North, Ron Paul and others. In addition to that, I have a degree in Finance, I know a great deal about Keynesian and Austrian economics, I am well-trained in technical analysis, and I have CNBC on all day at work.
Suffice it to say, I saw this market crash coming.
So, armed with that vast amount of knowledge, how much money did I make off this crash?
None. I probably lost slightly less than most people. I held TIPS in my 401(k) instead of equities, so I lost only 5%, not 30% or more. My regular accounts, gold and oil-heavy, got beat up like everyone else.
As I saw the madness unfold last Fall, I regretted that I failed to take action to cover my ass for the inevitable market downturn. If I would have paid attention, I should have been able to profit by simply being 100% invested in cash or holding a short ETF position.
Rather than just complain about lost money, I thought about why I had let this opportunity slip by.
The more I thought about it, the more I realized that comfort can be the enemy of action.
Too often it is comforting to read someone intelligent like Mish and talk him up to friends. It is also easy to sound smart quoting others who are doing very well. It is easy to sound and feel smart without actually acting smart.
A friend of mine who’s a good trader once wrote to me
“Don’t play the market unless you are ready to lose money. Don’t ask me how to trade. Read books. Come up with your own system. Every good trader does. I have a friend who daytrades the NYSE. He’ll make about a million this year. He can’t explain his sytem anymore than Beethoven, or any other uniquely accomplished person, can ‘teach’ you how to do it.”
I agree, action is required. Not the comfort of inexperience.
As a result of what I’ve learned since last summer I am following the markets again and I have created a spreadsheet where I have “paper-traded” some options and will see what happens. When I feel confident risking capital, I will do so. In the interim, I am holding some defensive positions and staying on top of the overall market. In other words, I am trying to dust myself off and act smart.
We live in an age of information, and it takes work to find excellent sources of information from great thinkers. I believe I have found these, however, armed with that information, what am I doing with it? Am I reading it, nodding and then going back to my same old habits, or am I putting what I’ve learned to good use?
Also, am I sharing my knowledge and analyzing it with others who care to critique it? Or am I limiting myself to just the “expert’s” point of view?
I close with a personal story: My friend Neville has his own company, House of Rave. He lives and breathes the life of an entrepreneur. Rather than simply talk about it or blog about it, he actually makes his living buying and selling products. It is his actions, step by step by step, that have helped him build up his company for years, from nothing to the thriving enterprise it is today.
In my own way, I am attempting to take these steps, however small, to make the best of my job, relationships and financial situation.
It is never too late to take meaningful action. Even though this blog should have been started years ago, I’m glad I’ve finally made it happen.
Thank you for reading.
To read more about taking positive action, read here.
I recently posted a comment at HuffingtonPost in response to a Paul Begala article. The article was called Bring Back the Stocks. In summary, Paul Begala is complaining about Wall Street and railing against people who have harmed the country.
- The writer mentions deregulation. She does not mention deregulation does not force anyone to buy complicated or “confusing” debt instruments. Furthermore, a structured finance product is, on its own, harmless. A high grade CDO can be a useful instrument for both buyer and seller, assuming the underlying collateral is suitable.
- The writer makes no mention of rating agencies that called bad CDO’s “AAA”. Why not?
- The writer praises Warren Buffet – A full-time investor, or, “greedy speculator”, depending on your view.
- The writer blames tax cuts for “the rich”. However, tax cuts encourage individuals to open businesses and, more importantly, create jobs.
- The writer praises Bill Gates and Oprah for giving money away. Both made their money in the free market.
The general theme of her response was defensiveness and “Us vs. Them”. She assumes Democrats are angels and Republicans are devils. I believe she is a lifelong Democrat and trying to protect her ego from accepting the truth that Democrats have as much of a role to play in this as Republicans.
She neglected to mention:
- Tim Geithner will be appointed Treasury Secretary. He is a Keynesian (no change from status quo).
- Wall Street gave far more money to Obama than McCain.
- Robert Rubin’s “Rubinomics” instituted a policy of deregulation. Rubin was appointed by Bill Clinton, a Democrat.
- Alan Greenspan, responsible for interest rate policies that created investment bubbles, was not removed during Clinton’s tenure.
This problem will not be solved until the problems are understood as systemic (overleveraged banks borrowing at below market rates at the Discount Window).
As I grow older, I am learning to refrain from trying to drive my point home by plugging a party or a person. I used to be smitten with Ron Paul, however, I have tempered my optimism and am now more interested in things like:
- How exactly does the Fed work?
- How can I profit from the Fed’s actions?
- How can I help others raise their awareness of what the government is doing?
I’d like to think that those three actions are more beneficial to myself and others I care about rather than simply singing Ron Paul’s praises and beating my chest. It is more effective to seek out the truth and communicate the truth, rather than simply speaking/debating in generalities/stereotypes.
I am making a concerted effort when communicating my beliefs to not espouse an individual or an ideology, it is time for me to move beyond my ego and be more concerned about learning and understanding rather than winning a debate or argument.
With that thought in mind, I am doing what I can to increase my understandings of the fixed-income markets and will share useful information as best I can.
Thank you for reading.
To read more about choosing positive action, read here.
There is a noticeable difference between US and World Journalism.
US Version – Al Qaeda is losing, US is winning.
International Version – Children are dying and citizens oppose US militarism in the region.
In order to get an accurate picture of reality, I have found it helps to take a look at both the US and international versions of events.
Given the media fawning over our new President, there is a great likelihood that the coverage will tend to be viewed through the lens of patriotism.
To read more about media inaccuracy, click here.
John Thain was in the news recently for being fired from Bank of America. He always intrigued me for a number of reasons.
- He has been methodical in advancing his career and his reputation.
- He has an enormous ego.
- He knows exactly how to play the game of banking.
I remember reading about John Thain in 2003 when he was CFO of Goldman Sachs. I used to subscribe to the Financial Times and I would be enamored reading about him. After he made the move from Goldman to be Chairman of the NYSE, it was clear that he knew how to self-promote and advance himself. When he took the Merrill job, it seemed like the next logical step for him.
Like a lot of people who are very career driven, he obviously has a huge ego. Within months of taking over the CEO role at Merrill, he spent over $1 million refurbishing his office. Highlights include dropping over $1,000 for a wastepaper basket and an $87,000 rug.
It seems to me that when someone indulges in such a fashion, it becomes hard to take their “social responsibility” pleas very seriously.
Like I mentioned in a post late last year, John Thain has been a master of talking tough while scrambling frantically to do everything he could to keep Merrill solvent. Mish covered this point brilliantly last July.
All of this brings me to my final point: John Thain was successful because he knew how to play the game of banking and finance. He easily lied to CNBC, institutional and retail investors, and Bank of America, before he was finally removed. He effortlessly talked his book while raising capital to avoid a liquidity crisis. He succeed in one of the most difficult business environments in recent history by effectively deceiving the world about Merrill’s liquidity, solvency and risk management. This Friday it finally caught up to him.
John Thain is a very intelligent, ambitious man. It is a shame that in our current economic system, a man like him is part of the FIRE (finance, insurance, real estate) economy and not employing others in new life-improving technologies. As global deleveraging continues, I hope that many brilliant and savvy thinkers find their way back to productive jobs which help compound and increase the world’s wealth.
As people become more conscious of the fact that Merrill received TARP funds and had access to the discount window and could borrow at 2.5% while using enormous leverage, only then will they will start groping around for solutions. Rather than the usual scapegoat of “the rich”, hopefully citizens will realize that a debt-based economy, fractional reserve banking and government management of interest rates cannot possibly succeed in the long run. Only then will people be open to solutions not espoused by the investment banking beneficiaries.
UPDATE (1/26): John Thain read my blog and has capitulated! 🙂
To read more about deceitful CEOs, click here.
I am making a concerted effort to generate original, useful content for this blog. I don’t want to turn this website into a “what he said” website. Despite my intentions, I feel compelled to share the following article from a great thinker.
Steve Pavlina has a great new article about relationships on his site. I encourage you to read it.
When I was in college, I often struggled interacting with women. I used to despise parties, filthy bars and low-quality alcohol. I wasn’t able to connect well with people at the parties and something always seemed phony about the atmosphere. Why so crowded? Why so loud? Why so dark? I always found parties and clubs to be an assault on one’s senses.
At the time, I felt there was something wrong with me for not enjoying the bar/party scene. I never understood the appeal of waiting in line for 35 minutes to (literally) piss away money on alcohol with women that were totally incompatible with me and who I had no interest in. The more I tried to force myself to enjoy the scene, the less interested I became.
After the college scene, I moved on to a less bar/frat-party scene and went to parties with friends of friends. These were far better than the parties in college since my “crowd” tended to be young professionals who weren’t there to get smashed.
What I learned from these types of parties was that a more comfortable, open setting was more conducive to engaging in real conversation with a real woman.
To take it one step further, I found my highest level of comfort when I totally disengaged from the party atmosphere and just engaged a woman one on one in dialogue. This is how I met my current long-time girlfriend and best friend.
I was working/commuting about 11 hours a day and had little time/patience to try and meet a girl at a bar; I realized the best way to connect would be by phone. Since I knew that this particular lady (a friend of a friend) was well-educated and down to earth, I began to engage her in conversation, first over email and then over the phone. As we talked more and more, we both began to discover each others value systems, attitudes and habits. It was this critical stage which was key to really moving past friendship and becoming lovers. Conversely, in bars and parties these types of conversations were avoided at all costs.
As Steve writes in the article, this process of directly connecting with someone is so much more enjoyable, compelling and human than inflicting a line on a stranger in a bar and then trying to decipher what their real motives are (sex, love, friendship???).
Trying to figure out what someone is like on the inside when they’re intoxicated, poorly lit, and shouting is a recipe for disaster.
There is still a stigma about online dating or long-distance relationships. In my experience I didn’t find that to be the case. By directly connecting and quickly engaging in deep conversations, my girlfriend and I both avoided the “game” of dating and moved directly to determining whether or not we had sufficient compatibility.
I’m proud to say that my girlfriend and I have been together for two and half years and we’ve built a close, caring relationship. We’ve both made our relationship our #1 priority. As a result, it has paid better dividends than any investment or any other way I could have invested my time/energy/money.
My advice is: be yourself upfront and avoid “games” at all costs. Your geeky, honest self is the best thing you have to offer to anyone who has the privilege of connecting with you.
Thank you for reading.
To read more about building relationships, click here.