I’ve talked about a coming tech boom that could be related to wireless electricity. Nobody really knows exactly when that will happen except that it could be 5-10 years away. Well, it could be even sooner that that. Much sooner.
Electronics such as phones and laptops may start shedding their power cords within a year.
That’s the prediction of Eric Giler, CEO of WiTricity, a company that’s able to power light bulbs using wireless electricity that travels several feet from a power socket. (more…)
Always take your profit too soon.
Sell too soon. Don’t hope for winning streaks to go on and on. Don’t stretch your luck. Expect winning streaks to be short. When you reach a previously decided-upon ending position, cash out and walk away. Do this even when everything looks rosy, when everyone else is saying the boom will keep roaring along.
The ONLY reason for not doing it would be that some new situation has arisen, and this situation makes you all but certain that you can go on winning for a while.
Except in such usual circumstances, get in the habit of selling too soon. And when you’ve sold, don’t torment yourself if the winning continues without you.
When the ship starts to sink, don’t pray. Jump.
Learning to take losses is an essential speculative technique. MOST never learn it. Take losses at once and move on. Take small losses to protect yourself from the big ones.
Beware the 3 obstacles to jumping ship:
– fear of regret ( that the loser will turn out to be a winner when you’ve bailed-out )
– Unwillingness to abandon part of an investment ( become willing to abandon )
– Difficulty of admitting you made a mistake.
The Wizard of Oz, Greg Coffey, has clicked his heels together and said there’s no place like home. He is bowing out of the London hedge fund world, retiring to his native Australia at the ripe old age of 41.
One of the city’s best-known traders, the slick-haired investor who famously left his employer, GLG Partners, in 2008 after turning down a £156m “golden handcuffs” offer to stay, is the latest superstar hedge fund manager to leave the industry this year.
Rumours have circulated that he has fallen out with the founder of his current employer, Louis Bacon of Moore Capital, but the true explanation may be that after riding high during the boom years, like some of his fellow superstar traders, he’s decided to bow out at the top. A £430m fortune probably helped his decision, but it has also been a tough few years for the married father-of-three, who was once named the second sexiest hedge fund manager in the world.
He has gone from generating around £200m of GLG’s performance fees in 2007, capping an impressive annual return of 22% since 2004 (and ultimately leading to the massive golden handshake offer) to underperforming at Moore Capital, with two smaller emerging-market funds losing 16% and 2.3% respectively.
So could Coffey’s departure mark the end of the big-name trader? Jacob Schmidt, head of analysts Schmidt Research Partners, thinks so. “I think we have reached the end of the trend of the last 10 to 12 years of relatively easy money. Up to 2008, we had a fantastic run in the hedge fund business, but since then it has become much more difficult. The guys like Coffey who have had an easy run are thinking: ‘Why do I need this?’ That’s why they are leaving.”
Mark Dampier, head of research at Hargreaves Lansdown, agrees. He says: “Investment is like fashion. One moment it’s all flashy, the next it’s not. They are all fallible and when they start to think they can walk on water, that’s usually when it all goes wrong.”
The best “hedgies” achieved exceptional returns in the build-up to the financial crash in 2008. They weren’t alone in that: it was easy to make money in the boom years. However, what set the superstar traders apart was their ability to create the myth that they were infallible, tempting investors to put them in charge of billions of dollars. (more…)
Attachment
When I was in college, I had a class in investment analysis. On one particular occasion, we had a group project which consisted of selecting a stock and then giving a recommendation on it. We chose a technology company whose earnings were shot and whose outlook was dismal. As we were deciding on what recommendation to offer, I suggested that the stock was headed down and that we should recommend a sell. One of the gentlemen in the group immediately replied that he thought we might sound stupid for picking a stock and then recommending to sell it.
That’s when it dawned on me that the ego affects stock selection, evaluation, and recommendation significantly. I told this fellow that the data suggested that the stock was a sell. I also reminded him that the OBJECTIVE of the project was to a evaluate a stock, not to pick a winner. After some thought, I recalled that many analysts viewed the industries which they evaluated as THEIR industry. In doing so, those same analysts were often bullish much too often, including times when it was totally unprofitable to be bullish.
Mine is Better Than Yours
Another example is when I went for an educational seminar. There was no selling whatsoever and it was strictly educational. There were teachers from fixed income, equities, and real estate. Each speaker spoke about how the investment they were discussing was the best performing asset class in history. It was ridiculous but very illuminating. Individuals become emotionally attached when they use the word “my”. “My shoes, my car, my profession, and even my stocks are superior!” Then, I began wandering how detrimental this sort of thinking was. It eats away at profits and increases losses! (more…)
Always the contrarian, Marc Faber’s investing advice for 2010 is this — listen to the experts, and then do the opposite. Faber, the editor of The Gloom Boom & Doom Report, wrote in his most recent January newsletter that he was bullish on U.S. stocks.
Nothing lasts forever, though.
He’s changed his mind after participating in this week’s Barron’s round-table discussion. “Everybody was looking for further gains in stocks,” he tells Henry in this clip. That opinion is also reflected by Bloomberg’s latest investor survey, which registered its highest level of bullish sentiment since the survey began in 2007.
That overwhelming consensus worries Faber. He now thinks a correction in U.S. stocks could come much sooner than most predict. Momentum players who are driving the market could “pull the trigger relatively quickly,” he says. He also observes that the charts of stocks favored by momentum investors, like Google, RIM, Apple and Amazon, look to be flattening out.
Overall, 2010 will not be one for the record books, as 2009 was. He’s looking at a more normal 5%-10% rate of return for global investors.
No, I’m not talking about Security Analysis or Intelligent Investor by Benjamin Graham or even Greenblatt’s You Can Be a Stock Market Genius. I’m talking about Doyle Brunson’s Super System: A Course in Power Poker.
OK, so the title of this post is a bit of an exaggeration and yes, there are probably tons of better poker books out there now post-extended-poker-boom. The first edition of this book was published in 1978. The connection between poker and trading is nothing new. Just google “poker and trading” and there’s a lot of stuff out there; how poker guys started hedge funds, how a hedge fund guy became a poker guy, how they are similar/different, what can be learned from one or the other etc. And the connection between gambling and trading was well documented in Fortune’s Formula.
But I just wanted to make a post about this book because I’m starting to reread it again (don’t ask). I am not a poker player, but I remember reading this book a few years ago having borrowed it from a poker-playing friend. Knowing that many traders and investors are very good poker players, I wanted to see what I can learn from reading about poker.
I remember falling out of my chair at the similiarites between poker and investing. I come from more of a trading background than an investing one and what was written in this book, particularly the early chapter “General Poker Strategy”, has great advice that applies to traders and investors too. I would make that chapter required reading along with the other investment “must reads”.
Anyway, here are some comments about what Brunson talks about in this chapter by sections. I only comment on some of the stuff so this isn’t a summary of the chapter by any means. (more…)
