Scared Straight

Given the fact that we’ve never even been able to teach any of our puppies any trick at all, the saying “you can’t teach an old dog new tricks'” while perhaps not true in every situation, is definitely true in my household.

Maybe I can blame that on “Low T,” as it seems that just about everything else is being piled on its shoulders. Besides, that would make sense, especially if both trainer and trainee suffered from that malady.

In Laszlo’s case, his descent into “Low T” came fairly suddenly, so I do  wonder whether his reluctance to learn any tricks is just a manifestation of his passive-aggresive behavior.

Although I’m at the point that I’m not likely to learn much new anymore, I’m getting increasingly proud of my ability to adapt, if not learn.

I’ve certainly recognized my advancing limitations as I’ve completely given up on the idea of learning even the most simple of technical analyses.

I don’t even do cost averaging anymore, but I continue to be able to count by “fives.”

But over the past few years, I’ve noticed the ability to make some behavioral changes as push would come to shove.

Monday was a good example.

Armed with lots of cash due to the assignment of about 60% of my portfolio, in the past, I would have felt compelled to burn through all of the funds, regardless of where prices were headed on that day.

If they were heading down, that often was fine, as given the market’s behavior, there would be a predictable bounce upward sooner rather than later and then why not buy at a presumed bargain price?.

On the other hand, there really was no rationale reason to rifle through the money chasing rising share prices.

But I did, over and over again.

Not yesterday, though.

Restraint and judgment helped to start this morning with a decent amount to still play with, looking for what appeared to be bargains that weren’t there yesterday..

Had retraint not been there, I would have picked up shares of Deere at about $2 more than where they were purchased today.

Scared StraightI felt good about that, although that’s just a small step resuting in a small advantage. Mostly, I’m proud of that small step because I did it all on my own.

Learning how to exercise restraint to prevent premature speculation is a big achievement.

But sometimes you need others to help you and sometimes they have to take drastic actions to scare you straight.

In my case, I needed to be scared straight into inaction.

Do you remember that series of specials describing the seemingly drastic and harsh measures taken to deal with hardened bad boys. Lots of yelling, lots of crying and then success.

Okay, maybe a suicide or two, as well, but by the end of the episode, all we saw wa success.

There was probably a lot of bad breath, too. That would get even the most hardened to go straight.

Another “dead ender” rescued from a life or misery, crime and dependence on society, at least until the cameras were on.

By the way, I do feel a need to remind readers that the version of “Scared Straight” that I’m referring to is not the same as practiced by Marcus Bachmann.

But yeah. That’s me. Bad boy to the core. I needed the drastic kind of medicine.

In the past, I’ve written about how investors need to avoid the emotions of greed and fear. I’ve also thrown in “envy” and its derivative “fear of missing out.” Not really emotions, but they’re something.

But now I think it may be alright to be afraid.

All it took was being scared straight by what could have been disastrous results following some reckless behaviors taken during the last earning’s cycle in October 2011.

I’ve chronicled it before, but in quick succession I bought shares of three momentum stocks: Amazon, Netflix and Green Mountain Coffee Roasters.

By itself, that’s probably not a terrible thing to do, although doing it all at once is a little harder to justify.

In hindsight, looking at the charts, which I rarely do, they were hitting their peak levels, with the exception of Netflix, which had already come down by 50% or so.

I could probably rationalize those purchases as wanting to satisfy that small portion of me that still likes to speculate, as my remaining expression of living dangerously.

But the really stupid thing to have done was to have purchased those shares right before earnings were released. To be fair, they did seem like “screaming buys” at the time.

And people to respond to screams, sometimes even exiting their own behavioral DNA.

But you know how it is. The people that need to be scared straight are the ones that think they can take an easy ride to a good life, without paying the consequences.

Although the call options were great immediately before earnings, the reulting screaming free fall in the share’s prices made it a real uphill climb in using successive week’s option sales to try and cushion the drops.

Lesson learned.

So here I was this morning, with no one around to scream at me, no one to watch over me so that I don’t become one of those recidivist statistics.

The cash that remained wasn’t red hot, as I’ve learned that a level of restraint cools it off, bit it was still smoldering.

I looked at share prices of Apple and Amazon and so much wanted to add to the former position and re-establish the latter.

“Money, money, money.” That was the chant that I heard being screamed right at me.

That is until I realized that Apple was reporting its earnings after today’s close and Amazon just a few days later.

I hemmed, I hawed and then circled around the coffee table a few times, especially after salivating over the weeklycall premiums.

Then, to complicate things even more, every single commentator and analyst pointed out that over the past four quarters, at least, Apple has plummeted after announcing earnings.

Being the contrarian, to me that only mant that Apple would go up after announcing the latest numbers.

There they were. The proverbial angel and devil, one on each shoulder.

I wanted it so much, but I didn’t want to go back into the dark place.

Instead, I went for the “bargain” priced Deere and picked up more shares of Morgan Stanley, which also goes ex-dividend in a couple of days.

I don’t know what gave me the strength to resist the temptation this time around and only time will tell how long I can keep behaving in a judicious way.

Maybe it was a testosterone surge or maybe it was the fear.

Maybe I should try screaming at our dog and give him a shot ot testosterone



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Today’s Trades Security Type Action Type
Januaty 24, 2012 DE Option STO Weekly
January 24, 2012 V Option STO Weekly
January 24, 2012 FCX Stock Sold  
January 24, 2012 MS Option STO Weekly
January 24, 2012 MS Stock Added
January 24. 2012 DE Stock Buy