Investing for Survival

 Investing for Survival from Kid Dynamite

Trading Rule #9 – Blame is for Losers

It’s been a while since I posted something to my “The Rules” series, but yesterday prompted me to get back on track.

We’ve all seen the comments on message boards or sites like Stocktwits from “complainers” every time a position goes against them – comments blaming “manipulation,” “HFT algos,” “short sellers” etc. for adverse price action.   These complaints are the marks of losers – those unable to own up to their own shortcomings and take responsibility for their actions and their positions.

The market is set up to give you options to exercise your “voice”: if you think a stock is too cheap, you can buy it.   If you think a stock is too expensive, you can short it.   You can also sit there and do nothing – which is frequently not as bad a strategy as it first sounds like.   Buy/Sell/Hold – you have choices.

Ironically, while most of the complainers usually talk about their positions being manipulated lower in price, there is almost never a case where buyers are unable to exercise their opinion/option/market view and buy a position.  Contrast this with the other side: rich stocks – where one may often find that it is expensive or impossible to borrow stock to enter a short position.  In other words, longs can always logistically exercise their “influence” on the market, but shorts cannot. *

Anyway, let’s get to Howard’s** post.  I don’t agree with everything he writes, but there are some good tidbits.  Howard is writing about complainers in Plug Power ($PLUG: no positions).

“No one puts a gun to your head to buy a stock that’s already up 800 percent or 1 percent. You are the ‘Fat Finger’.”

I love that line – were people really surprised that a stock that doubled in a week (after increasing 1000% in the previous several months) could come back down to Earth too?  That was a rhetorical question.  Let’s move on, emphasis mine:

“If you can’t understand the catalyst that will move an investment in your favor, you are the catalyst of someone else’s profit. Even if you understand the catalyst, you will be wrong and must have a plan.

Wall Street is pretty good about cleaning up the ill prepared.

People chase, they hope, and are ruled by fear and greed. That IS the stock market. The companies, the paper, the banks and the computers are part of the business of Wall Street. If you treat Wall Street like a game or a casino, it is you that will get played. At least in Vegas they will bring you some booze.”

Indeed.  Although I disagree slightly that Wall Street isn’t a game:  stocks like $PLUG in the last few weeks are indeed a game: it’s a poker game of fear and greed – a video game played for real money.  Of course, human psychology is hard to evaluate perfectly: it’s hard to tell when that greed will turn to fear and the trend will reverse.    No one said it was easy.

Own your mistakes.  Learn from them.   In the words of Joey Knish from Rounders: “I’m giving you the playbook I put together off my own bad beats. “  Of course, Howard’s first line in the quote above: “If you can’t understand the catalyst that will move an investment in your favor, you are the catalyst of someone else’s profit” brings to mind another quote from Rounders:

Mikey McD:  “If you can’t spot the sucker in your first half hour at the table, you *are* the sucker”.

Blame is for losers.  Own your actions.  Those who blame others are destined to duplicate their mistakes.