I DO IT ALL ON A WHIM
My best friend I have known since I was 8 years old calls me whimsical. It's true. I am prone to making important decisions on whims. I like to move every several years. I have never bought a home because I don't know if I will be in the same city for more than a few years. I have started countless companies, some successful, others not so much. My bosses, I remember (last time I had one was 1998 at Bank America Investments), would have nothing but praise for me the first 6 months of employment. But that praise would turn to steely eyed skepticism as I would become disinterested and make it very obvious in the workplace.
My whims are what led to my advisory service being created in the late 90's, which led to the formation of my hedge fund. My whims have also led to my attempt to play poker for a living (made reasonable money but couldn't stand it); attempting to open an art gallery regardless of the fact that I couldn't paint (I thought I could); starting a distribution business which I ended up selling off a few years ago. During my late teens to early twenties (circa 1993-1996) these whims took the form of much less savory adventures that I would describe except for the fear of arrest.
Whimsicality is a thin-lined attribute. By that I mean that there is a thin line separating genius from madness. If you end up successful, then your whimsicality is regarded as an eccentricity which is the key behind your success. If you end up unsuccessful, then your whimsicality is considered a liability and you are regarded as reckless or careless. Life is filled with thinly lined attributes, as is trading.
Now that I have gaggles of children running around my house that depend on me for juice and crackers, I have been forced to curb my appetite for whimsicality. Sometimes I envision picking up everything and moving to an avocado farm in Peru, where I will live off the land, teaching English to senior citizens on Monday and Wednesday nights at the local Peruvian adult school. Upon presenting the idea to my wife, she reminds me of our children's schooling, soccer leagues, relatives and other perceived necessities. And then looks at me as if I have a furry tail and walks away.
Therefore, I am forced to channel my whimsical nature into this forum. I will not allow my readers demands for consistency in material and strategy to get in the way of my whimsical nature as my wife has. My strategies are subject to market conditions that are ever changing. I will be a trader for six months and an investor for a year.
When you can allow your money to simply sit in hyper-growth opportunities that are mispriced, during accommodating market conditions, you would have to be brain cell deficient to attempt to trade the markets actively. Allowing your money to sit yields better performance with the least amount of effort.
On the flip side, if market conditions are not accommodating, you would have to be brain cell deficient to allow your money to sit in a market that will punish you for investing in anything but a money market fund. Judging those conditions and being able to act upon that judgement is, of course, the key.
Very generally speaking, I do think that there is a disease of short-term thinking that has taken over the modern trading community. A great deal of this mentality stems from the amount of pain that has been inflicted upon investors. Over the past several years, anything longer than a time horizon of a few months has been punished swiftly and severely by the markets. It would seem to the modern trader that if you are to hold onto a position you will inevitably be giving back your profits as bull trends that take a full year to build are washed away in a matter of months, sometimes weeks, as the next round of shit hits the proverbial fan. Don't forget, however, that the market is built on programming these fears into your analytical DNA before taking on a completely form.
My attention is once again turning to longer-term opportunities in the markets investing in small-cap companies with exponential potential in share price. I have already shared a few ideas over the past week and I will be sharing more in the weeks and months ahead. As they become apparent, I will be sure to post them on this website.
With the exception of the nuclear rocket trading environment of 1999, all my biggest years have come from investing in companies with a time horizon longer than a few months. 2012 may be a year to put the trading goggles that can't see out more than a few weeks away and focus on bigger, better opportunities in companies with outstanding potential that the market is simply forgetting. Believe me, with the lack of liquidity and participation there are a ton of companies out there that are simply being overlooked and undervalued because the interest, whether institutional or retail, isn't there in order to unlock the value....yet. Should the bull trend continue, then the market will reward sectors in different phases. I outlined this phenomenon in my "Phase 4" theory that I wrote about nearly one year ago.
While whimsicality can be perceived as genius or a liability depending on the outcome, I feel that given the available data, the odds are weighted towards genius with my latest decision to scrap the short-term opportunities and stick with longer-term investments for the bulk of 2012.
