It’s so hard to balance the emotional side from the rational side in all aspects of life.
Although I often write and talk about setting aside human tendencies like fear, greed and envy when it comes to investing, it’s so much easier to say than it is to practice.
Life itself is no different.
The other day I posted a comment on James Altucher’s blog. If you haven’t read the Altucher Confidential, you really should take a look. He writes in an entertaining way and addresses universal emotions and trials by recounting his own life experiences.
However, in response to the comment, I received a reply that was interesting, to say the least and was the impetus for today’s theme.
My initial comment was in response to Altucher’s recommendation to author wannabes to consider the route of self-publishing.
Once, self-publishing was only for the wealthy, those not minding to waste their money and the delusional.
These days, it’s a reasonable way to put out a product. Success is limited only by marketing efforts and ingenuity.
Speaking of which, take a look at an 11 year old’s contibution to the theatrical marketing efforts of Option to Profit. We’re still open to suggestions as to who to cast as the protagonist in the film version.
Obviously, having gone that route and increasingly happy with the results, I responded with my own experiences and as is often the case, in an attempt to increase readership of this blog and to spur book sales, I left a link to this site.
Thank you, James.
The response to my comment was:
“Hey AcsMan, just some constructive criticism for your blog. I tried to look around but I couldn’t stand it as it was just too full of google ads and irrelevant tag clouds…”
My initial reaction was, “it’s TheAcsMan. Only my parents call me AcsMan.”
Given that I am a dyed in the wool capitalist, I do use pay per click ads on my blog, but there’s only a single such ad on the home page and two ads on subsequent pages.
Not overly obtrusive or greedy.
Ever since using the ads as a source of revenue, the little waif that I’d taken in for humanitarian purposes, in addition to cheap labor, now gets two helpings of gruel daily.
What caught my attention though was the juxtaposition of the rational offer of constructive criticism together with the emotional comment “…I couldn’t stand it…”
There was an imbalance in those thoughts that offended the rational portion of my brain and initially made me disinclined to even consider the overall message.
The emotional part of my brain doesn’t take kindly even to constructive criticism, but the essence of the unsolicited observation was correct.
In addition to the Google pay per click ads, a contextual text ad program was loaded a few days prior.
That revenue tool places annoying green underlines all over the text with links to largely irrelevant ads.
He was right. I couldn’t stand it either, but saying so sounded so much more refined coming from me.
It did look cheesey and was very distracting.
My words. Not his.
So the rational part of me removed those links, depite their proven ability to generate revenue and now Little Timmy will die.
As it turned out, the criticism was constructive and I’ve made the bearer an unpaid design consultant. Had the ads remained, I probably would have paid very handsomely.
But that core concept of rational versus emotional carried through to the first trading day of the week.
As writing today’s post, I came across a Tweet from one of my favorites, SellPuts. I’ve mentioned him before. He fits into the category of people that Tweet, yet I have no clue of what is being said, as I know knothing of fundamental chart analysis.
But SellPuts is entertaining and impassioned. I would guess that if you knew anything about technical analysis he would really be worth following, not only on Twitter, but on his website, as well.
Anyway, his 140 space or less piece of rational wisdom was “trade what you see not what you think.”
Perfectly said, although his usual stuff has more emotion attached.
Last week defied rational thought.
This week opened the same, although the rally faded by mid afternoon, as it did on Friday
I was faced with a bundle of cash sitting in my account as 30% of my portfolio was assigned following irrational moves in such holdings as Green Mountain Coffee Roasters, Caterpillar and others.
Normally, I can’t sit for more than a few minutes with the cash burning in my pockets.
Despite knowing better I tend to be like a drunken sailor on shore leave and buy everything in sight, even in the face of a rally.
That’s not rational. I know it. I know that there’s a need to “Exercise Restraint to Prevent Premature Speculation,” but again. like all things emotional, it’s harder to do than to say.
Today, though, the rational side seemed to be in place and functioning much better than the portion of me that would be afraid of letting a rally slip away from me.
Remember the dangers of falling prey to the FOMO?”
But I was restrained.
I also tried to defer to my rational side in thinking that despite more talk about a melt up, it wasn’t going to happen this week.
So instead of furtively squandering the money, I sold calls a bit more deep in the money than usual in order to lock up some nice premiums, in anticipation of a fade in the underlying stocks.
The same anticipation that proved to be wrong last week.
Now part of that, though, was based a little on envy, since last month was my best ever for generating options premium income and thus far, after 2 weeks, the December cycle is middling.
Envy is a lot like FOMO, but I was really envious of November’s options premiums.
Along the way, I did find the time to buy shares or add to existing positions, but even those saw me sell deeper in the money calls than usual.
I picked up additional shares of Netflix, Mosaic, Sallie Mae and ProShares UltraSilver ETF and quickly sold calls.
I also opened up a sizeable position in Alcoa, despite today’s negative analyst comments and sold a combination of weekly calls and December 2011 calls. The prospect of a 2% premium for a single week appealed to both the emotional and rational brains.
The truly irrational side of me bought shares in Focus Media, to complement the puts that I had previously sold, as Muddy Waters does nothing to erase doubts about its recent activities.
And of course I sold the calls.
Despite the restraint, there still turned out to be too many trades to recount them all, as if you really cared. But if you do, just go to the Portfolio Transaction page.
Going into the last hour of the trading day, the market’s gains were mostly gone and I still had spending money.
Best of all, silver was beginning to look as if it was ready to give up the Ghost, having turned its early day gain around to a substanial loss.
That followed a disappointing week when silver did nothing but climb and I watched my short leveraged ETF fall.
Even worse, I’d prematurely bought back my calls, thereby returning a portion of the rich premiums.
I decided to be a spectator for the final hour.
At that point actual news began filtering in and was ultimately responsible for the reversal of the market’s fortune. WIth all of the component Euro nations being put on credit watch by Standard and Poors, there was less joy in Mudville, but more joy on my La-Z-Boy.
It wasn’t quite like seeing a roadside deer, but I was happy to relax after churning out 24 trades for the day.
What makes me especially happy, if I can delay jury duty for yet another day, is that there may be some bargains to be had tomorrow and I still have cash.
That almost never happens.
The emotional side of me is chomping at the bit at the prospect of actually timing it like that.
The rational side is beginning to warm to the emotions of the moment and is likely to cede all control if the market takes a breather and then some tomorrow
Hell, we may even be able to make .enough to feed Timmy anyway.
Screw those obnoxious green underlined words. We didn’t need them anyway.
And from both sides of my brain, a special thank you to DannyBoy990.