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The Value of Losing Money?
On
Saturday morning, I caught a glimpse of CNN's Dr. Sanjay Gupta
interviewing Dr. Joseph Maroon, a neurosurgeon at the University of
Pittsburgh Medical Center and a team physician for the Pittsburgh
Steelers. Dr. Maroon is a member of the NFL's concussion policy
committee, which has recently been criticized by the House Judiciary Committee for inadequate research and ethics related to player concussions.
But
I'm not covering any NFL controversy here. What caught my attention is
that Dr. Maroon hit a brick wall years ago when he experienced the three
D's: death of his father, divorce, and a deep depression. He got on the
treadmill one day and started running. He felt so good that he said it
was the first night he slept well. And from then on, he was convinced
that exercise was the key to maintaining his mental and physical health.
He's now a 70-year-old ironman competitor (unfortunately, controversy still hounds him).
What
does this have to do with the value of losing money? Hold on, I'm
getting there. I also remember an interview with George Soros (think it
was with Charlie Rose) where he was discussing when he graduated from
London School of Economics. He was sitting in some corner in London
watching people go by and thinking that he's broke and in debt but
"there's only one way to go, up".
Some of life's most valuable
lessons are taught to us when we hit a brick wall. You don't see it when
you're in your personal hell, but typically that's when people find out
what they're made of. I remember when I lost my job back in 2006, then
separated from my wife in 2007, and my health was deteriorating fast. I
hit a major brick wall. Had it not been for the support of my family
and close friends, I would have still been stuck in a rut.
I also remember what Tom Naylor,
a professor of economics at McGill and close friend of mine, told me
back then: "You lost you job, lost your wife, losing your health, the
good news is you hit rock bottom". Then he gave me some wise advice.
"Take out a piece of white paper and start writing down all the worst
possible things that come to your mind. Write everything down: you'll
become severely handicapped, you'll never get another job because the
pension pricks are blacklisting you and sending you nasty legal letters,
the mob is looking for you, no woman will ever want you and you'll
never get laid again for the rest of your life. Write down every
terrible thing that comes to your mind."
So I did it. Then I asked him what am I
suppose to do with this sheet containing all these terrible thoughts of
mine? He told me to put it away and look at it after a year has gone by.
I asked him "how's that suppose to help me?" He replied: "Because when
you look at it after a year, you'll laugh at how silly your thoughts
were." And then he told me something else which I'll never forget: "You
don't see it now, but with this blog, you have tremendous leverage and
the pension pricks are scared of you. Use this leverage to your
advantage and write your own ticket in life."And that's exactly what
I've been doing ever since. I've toned it down, remaining as
professional as possible, but I continue to blog on pensions and
financial markets.
Now let me get to my topic, the value of
losing money. During a recent lunch with my former boss at PSP, Pierre
Malo, we talked about what we value most in life. In our previous lunch, Pierre and I discussed process over performance.
In a nutshell, we believe that too much attention is being paid to
performance and not enough to process. The way investment managers
achieve their performance is a lot more important than overall
performance and yet very few institutional investors pay close attention
to process until it's too late.
Pierre also talked about luck in investment management. I used to go
into his office every morning and ask him "where is the US dollar going
today? What about the euro or CAD?". He would take out a coin from his
pocket and say "you tell me". He doesn't believe in short-term market
predictions. He told me over lunch, "Anyone can be lucky, even over a
long period, but that doesn't make them a good money manager. And the
worst thing that can happen to anyone is start making a lot of money off
the bat".
I then shared a personal investing story with him. After I got fired from BCA Research
(alas, I've been fired a few times but always managed to land on my
feet!), I started day trading stocks, focusing on tech stocks (1999). I
was also buying out-of-the-money call options on these tech stocks and making
good money. I then joined the National Bank Financial as an economist
but continued trading options. I wanted to get rich quick and retire
early.
I then learned firsthand the value of losing money. I bought cheap
out-of-the-money call options on Nortel's stock the day they were
reporting earnings. I laid down $10,000 of my money, which was a
substantial amount of my portfolio back then, and waited for the
earnings release after the closing bell, confidently predicting that
Nortel was going to kill the estimates and the stock would fly higher. I
was expecting windfall gains on those call options.
But that earnings
release was a disaster and from there on, the rest is history. Nortel
took me, and hundred of thousands of other small and large investors to
the cleaners. I never forgot the pain of losing that money, essentially
gambling it away. I had no clue whatsoever what I was doing. It took me
years after that debacle to learn how to trade properly and I'm still
learning every single day. I now avoid options preferring to buy and
hold a concentrated portfolio of stocks. I prefer focus on a few eggs
than a diversified portfolio of eggs (read my comment on the big secret).
In
my follow-up comment, I will discuss how I invest my money, using
publicly available information on what elite hedge funds are doing and
other information. We are all in the information arbitrage business, and
it's how we use this information that will enable us to limit our
losses and allow us to make money in these crazy markets dominated by
macro events, high frequency trading and large hedge funds.
The
point of this comment was to let you know that there is value in losing
money. Even the best hedge funds lose money but the top funds will
adjust and learn from their mistakes. That's exactly what each and
everyone of us should be doing. Finally, please note I corrected my
donation button at the top right hand side of my blog,
right under the pig, so it should be easier to donate via your bank or
credit card. I appreciate all donations and plan on earning my money one
donation at a time.
»
It's retarded shit like this that really detracts from the quality of the site.
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The first thing in the morning ZH read makes me wonder? Is the confidence and faith in the Government and Media so destroyed that it can not be rebuilt? Not to say that I believe any one of the sons of bitches. Just sayin that some how some way, trust has to be re-invented.
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You're still making variations of the NT bet today... High risk gambling on securities that have already made huge moves, never planning for the party to end. Parties always end. Bankers and insiders are selling into the high prices. To succeed one needs to do what they do -- buying when it's uncomfortable. You do the opposite and keep losing.
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Leo, sadly you don't seem to have learned from your loss experiences. You're still making variations of the NT bet today... High risk gambling on securities that have already made huge moves, never planning for the party to end. Parties always end. Bankers and insiders are selling into the high prices. To succeed one needs to do what they do -- buying when it's uncomfortable. You do the opposite and keep losing.
We live in a world where all the big players are playing a different game from the game the little guys are playing. The big players can never lose and not because they are any smarter than anyone else.
That is the sad fact.
You can learn from your successes or you can learn from your failures. Since I prefer to to celebrate my successes, regardless of whether they resulted from skill or happenstance (and I can often barely remember their names a week after the celebration), I find it more convenient and practical to learn from my mistakes.
Here's some advice. Buy physical gold and silver and preserve your wealth. It has worked for 11 years running.
FWIW, I started walking 1000 miles a year with a back that was completely destroyed (according to my orthopedic surgeon) 12 years ago, and I have lived in Maui for the last year and a half. I have no complaints Leo. Life is short. Live well.
I have been thinking about this in a different way. I think one of the things that really screwed up the economy was the tightening of the bankruptcy laws and companies ignoring the Statute of Limitations and creating debts like Student loans that weren't subject to Bankruptcy or the Statute of Limitations at all.
When someone went bankrupt or a debt went past the statute of limitations, that allowed whatever credit money they had spent into the economy to stay in circulation. The interest on the debt was also forgiven. It was like an escape valve that let some excess money into the economy and set the guy free to start over and try again. I think there are a ton of 'frozen' debtors out there that can't really do anything like start a new business because they have a huge debt load taking away all of their capital as soon as they earn it or they are so depressed that they just stop contributing to the economy all together. They have been through the pain^2 already.
If they could forgive the ones past Statute and heavily discount a bunch of those old stale debts still in statute or the ones that are not able to be included in bankruptcy it might get things clicking again. I talked to a dental student. She said that when she graduated school, she would have a quarter million in student loans. She was talking about how lucky she was that she could take over her fathers practice so she wouldn't have to pay to start her own. That is a huge load to put on a young doctor. How can they expect them to practice good medicine with a debt like that hanging over their heads?
The people that own the debts that are past statute really have to actually forgive the debt because the Statute of Limitations is bar to the payment of the debt but the debtor still feels like he owes it. I read in an a really old law book somewhere that courts used to accept the defense of Statute of Limitations but would let the guy know he was practicing Knavery. Bunch of credit card Knaves out there!!! Let em have their honor back or at least let them buy it back at a discount so they can get things cranked up again. It would be better for everyone. "Forgive us our debts as we forgive our debtors." It would end up being better for the debt holders in the long run because if everything goes comepletely south, they will get bupkus. This way, the guy might get going again and even eventually make good on the whole note. More people than you think end up doing that.
Let the junking begin...
Q: Why is divorce so expensive?
A: Because it is worth it.
Ick.
This article is stupid. The value is in learning, not in losing money. But sadly, one can't easily learn the right ways to trade and invest without losing some money. And why is that? Because the people who could actually teach you are too busy making money to take time out to teach you. Everyone who learns basically has to learn own their own.
"Everyone who learns basically has to learn own their own."
Agreed but to do that you have to feel the pain of losing. I don't care who you are, if you've never felt that pain, you haven't learned anything.
I don't agree with everything you write, Leo, but why people are so vicious towards you is a mystery to me.
Fuck 'em - have a long, happy, and prosperous life, while these nasty pieces of work have to endure the misery of being themselves.
people are horrible. that's what i've learned . i used to think that everyone was kind & nice & honest ....... boy, was I ever stupid ! ........ the truly kind & honest people are very few & should be cherished.
BigJim,
Let them be, just ignore them. Let them vent their frustrations on me. It's all part of the game. I don't give a rat's ass about vicious trolls that lurk here. They're pathetic and they know it.
I have noticed that most of the truly successful people posess a large amount of self-control.
And they can voice a contrary opinion without resorting to vulgarity or personal attacks.
It is a rare quality I think.
gh
I really liked the article. Whenever I see a posting by Mr. Kolivakis I make sure to read it ..... great deep thoughts & his articles speak to me .
Duplicate, but keep up the positive attitude.
Go Leo.
I cannot even find the right adjectives to describe what a twat you are. Taking financial advice from you and George Soros would be like cutting your wrists in order to donate blood to a food bank. You are a diseased little man Leo Kolivakis and I hope someday those who follow your bullshit wake up and see you for what you are.
Leo Kolivakis ZH contributor.
Get a grip on humanity; no excuse for that kind of mental and moral tripe.
Go Leo.
Everyone I know who has been fired from more then two jobs (particularly during the 90's) is either an alcoholic,
is broke or dead. In your case you must be delusional as well if you think what your post is read with any seriousness. Tyler this guy is giving zero hedge a bad name.
You must not know many people. Some of the most successful people I've met across all industries have been fired more than a few times.
Don't forget the banks were out of Nortel at $80. Then the pump and dump really began.
A little anecdote for the faint-hearted...
I met my ex-wife at a gathering some 10 years after the classic ugly, ugly divorce. No one else was close enough to hear, so I whispered in her ear. "Because of you I lost all my assets, I lost my children, and for the longest time I lost my self-respect. But you know what ? Getting rid of you, was worth it."
Yes, you can pick yourself up and start again.
Good topic Leo. Thanks.
men always blame their mothers, their wives, their daughters; never their mistresses or their pet hobbies...we must have our priorities right since Helen of Troy. That was a ten year war too! But to get her back...some people never learn!
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Leo,
Sorry for your loss w/ Nortel options, but count yourself lucky for not being a Nortel employeee anytime from 2000 onwards...
Please, stick your Head up your Ass and turn clockwise....
Oh, I see you have already done so, sorry, I'll look away.....
Leo, there seems to be two types of people in your life... Those who fired you whom you like, and those who fired you whom you don't like.
Have you ever thought this pension business isn't for you and maybe it's time for a career change?
You only live once. It must be tough to write a story every day that has a title with a "?" in it...
canuklehead, I mean boiledass, see my post above and leave this place.
Yeomans duty is not all its cracked up to be.
a fuzzy headed cat with tiger claws and a mouth that roars...what is the world coming too.
... Nice parody comeback. Were you intending to "help" Leo or "hurt" Leo?
Did you actually attempt to author a post instead of a cut-and-paste orgy?
Boilermaker, with all due respect, leave Zero Hedge and never return you scum sucking mother fucking troll.