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.