How I Went Through Investing Hell Just to Write a Blog Post
December 1, 2014
Have you heard of writers immersing themselves in unusual environments to come up with great material? Last month (on November 11, 2014), I did just that.
I visited a local investors’ club at the Pasadena library, and I was hoping that this meeting would give me insights into the mindset of the average investor. I got exactly what I wanted. You know what they say, “Be careful what you wish for; it might just come true.”
When I first stepped into the library auditorium, where the meeting was held, I was surprised to see a lot of people. I approached two people to get a sense of the meeting. They both said they have been attending the meeting for a while now, and that they liked it.
In just a few minutes, the moderator joined us. One of them asked the moderator, “Why do you like the 17-day moving average, and not the 16 or 18-day moving average?” The moderator responded, “Because the 17-day is the leading indicator.”
This doesn’t make any sense!
There is no logical reason why the 16 or 18-day moving average can’t be the leading indicator. The moderator didn’t even bother explaining why he thinks that the 17-day is a leading indicator.
This gave me warning signs that this is going to be a hell of a meeting, but for some reason, I ended up staying a little bit longer. I thought to myself “I am already here. I might as well give this guy some slack, see a part of his presentation, and not just leave after a few minutes of chit-chat.”
The presentation started and the moderator said that he was a portfolio manager from 2002 to 2009. He was laid off since then, and now just trades his own money.
Do you remember what happened during that time? The market had a good run from 2002 to early 2008. Then the financial crisis started in late 2008, and continued through 2009. I would guess that he was riding the wave during the up years, then lost his shirt during the downturn.
The moderator moved on to reviewing how the market performed since their meeting in early September. He talked about the market dropping about 10% in late September. He then asked, “How many people have held their stocks all the way through from late September until today?”
Out of 80 people, only 3 hands went up. I was shocked to see that only a few people could hold their stocks for a month and half. I initially thought maybe people are just shy in raising their hands. But as the meeting went on, I noticed that a lot of people were eager to show off their good trades. So maybe there really are only 3 people that have held their stocks for a month and a half.
After that, he reviewed the graphs of the market sectors, and the top performing stocks. Then people gave their stocks as an example (bragging time). But the speaker kept asking for more examples. He wanted only stocks that have gone up at least 100% year to date.
At this point, I texted a friend, “My ears are bleeding.”
In the next segment, he went into detail regarding 2 of his trades since his last meeting.
He bought the stock of a famous social media company on Sept. 2nd, sold half of it on Sept. 15th, and sold 30% more on Sept. 25th. Then he bought some again on Oct 20th. That’s a lot of trading on one stock, at least for me anyway.
Here are the other “interesting” things he said. (My thoughts are in parenthesis.)
- If this stocks hits 73, I am out. If it breaks 76.5, I will come back in. (What happened to buy low and sell high?)
- Our style of investing is buying stocks as they trade new highs. We call this “blue skies”, because there are no sellers once stocks hit new all time highs. (Even my wife, who finds investing boring, laughed out loud at this one.)
- Once a stock moves up over 20% in 1-3 weeks, you must hold it for 8 weeks no matter what happens. He called it the 8-week rule. (Sounds more like an 8-week fool to me.)
- I taught myself from this publication. (I can tell.)
- This publication’s portfolio managers are the “best of the best”. (Really?)
- In the rare occasion that he wasn’t talking about charts, he added pretax margin to the return on equity. (To my fellow savvy investors, you know this is bonkers!)
- He quoted Michael Jordan’s famous words twice, “You miss 100% of the shots you don’t take.” (Well if you are a bad shooter, you should just stay on the sidelines.)
After an hour and a half, I finally gave up and left. There were still a lot of people asking for his advice on particular stocks. He would just look at the graph, utter some mumbo-jumbo, then give a recommendation. I couldn’t take it anymore.
I was so disgusted that I had to buy a Big Mac from McDonald’s, and one of those yummy cheesecakes from the Cheesecake Factory just to make myself feel better.
The lesson for me in all of this: Don’t go through hell for a blog post. It’s not worth it.
If you have not read my first article on technical analysis, click here.
If you know a new investor, let them know they need to be careful in attending investment club meetings by sharing this post. Some clubs don’t know what they are doing.
If you know a savvy investor, share this story. I think they will get a kick out of it.