5 Reasons You Deserve To Lose Every Penny In The Market

The body of my best friend from childhood, Eric Philips, lay motionless on a gurney in the county hospital.  He had just died.  Twice.

Eric was at the nadir of what had been a two-year addiction to heroin that took him from class valedictorian to strung out junkie.  One who broke into people’s garages in order steal things that he could fence in order to support his habit.

The journey had now ended under the harsh lights of an emergency room ward, surrounded by nameless and faceless medical professionals who were trying to ensure that the children he had yet to have would some day exist.

At the time his situation had sparked a very intense discussion among those of us that knew and loved him; who should be held responsible, the pusher or the junkie? Put in financial terms, the mortgage broker or the borrower? The financial “professional” or his customer?

We know that the financial pusher is consciously selling something that will cause harm to his customer, all of which has been documented recently in one of the best books ever on the subject by Josh Brown.  But what about the customer?  Don’t they have any culpability in this devil’s dance?  Where does personal responsibility come into the picture?

I ask this question because I just spent the weekend attending the San Francisco Money Show where I had a chance to interact with hundreds of financial customers.  I spent hours basically doing the “in person” version of what I try to do on this blog, helping people to better understand the markets and trading by showing them a different perspective.

I had a number of great conversations with some intelligent and thoughtful investors and traders.  But unfortunately, the vast majority of the people I spoke with did not fall into that category.  Instead they chose to embrace “active ignorance” about the financial markets.

They roughly broke down into five different categories, and if you are one of these “types” you deserve to lose all your money as far as I am concerned.

The answer to everything is gold.

These people are what are known as “gold-bugs” but they should be known as “gold-idiots.” And although thanks to the “broken clock” phenomenon they may have seemed wise at times over the last few years, remember, most have been calling this same tune since 1980.

“I don’t trust the markets so I am buying gold.”

“I don’t trust the financial professionals so I am buying gold.”

“I don’t trust the government so I am buying gold.”

“I think my wife is cheating on me so I am buying gold.”

“I am having erectile dysfunction issues so I am buying gold.”

That is all they can answer to any question, “gold!”

What’s even more ridiculous is that their distrust of the markets makes their myopic view exponentially worse.  They pay  huge transaction fees, taxes, and risk thievery by hoarding physical gold instead of “owning” it in a more efficient way that would free up space for homemade preserves and elk jerky in their shelters.

Technical Analysis is voodoo.

Let’s have a $100,000 Pyramid moment shall we?

Clue : “You find this on pottery.  It is often on doughnuts.  You will see it in the eyes of most people when you mention technical analysis.”

Answer: “What is glaze?”

I saw that glaze come out when I mentioned such crazy and exotic TA concepts like the simple moving average or a support/resistance level.  I might as well have been saying that Martians landed on the Earth as far as most were concerned.

It still boggles my mind as to how many people who are active in the market have never looked at a chart of the instrument they are buying, let alone tried to use some basic TA concepts on it.

On a TA side note, as I was turning down the hall at the hotel to go to my room, I heard a very well-known market technician who peddles his eponymous indicator say to his wife….

“Obama is going to ruin this country.  They should kill him!”

Democrat or Republican I have to say that is one of the most ignorant things I have ever heard someone say in public, even if he thought he was alone.  I only regret that I wasn’t quick enough to add to his “kill” list by saying as I passed him…

…”and promoters of black box vanity indicators that haven’t worked in ten years.”

The whole system is manipulated.

Algorithmic bots control the markets.  High-frequency traders control the markets. The Fed controls the markets.  The illuminati control the markets.  Justin Beiber controls the markets, well…at least the Canadian markets.

These folks have bought into the conspiracy theory that the market is controlled, but what is even crazier in light of their beliefs is that they refuse to stay out of it.

They use their theories to excuse their lack of success in the markets instead of adapting to the machinations that they claim are so “obvious” and then using them to make money.

I know everything.

I admit it, the people who fall into this group I have the least amount of patience for. Not only do they not want to learn anything new about the markets, but they feel that they in fact know all there is to know about the markets.

One lady I met spent thirty minutes talking to me, no…more accurately, talking at me, about her trading.  She knew all there was to know.  She had obtained trading perfection and had come to the show just to let people know about it was what I could only surmise.

When I brought up ideas like “The Most Important Concept For Successful Trading,” she either knew about them and had dismissed them or didn’t know about them and dismissed them.

At one point “A-hole Brian” showed up and asked her what she had thought about Rolo Tomassi’s book on finding consistently profitable trading setups.  She answered “I don’t find that his stuff works very well.”  Check please…!!!

Afraid of Social Media.

I have pounded the pages of this blog on what a powerful tool social media is when it comes to trading.  It may not be for everybody, but if you don’t even make an effort to get familiar with it and what benefits it can bring you, then you are just ignorant in my opinion.

After suggesting to one man that he sign up for StockTwits, his first question was, “what do they charge?”  I explained that it was free, but he could sign up and then follow some really good traders and leverage their trading ideas.

“Oh, well what do they charge?”

Once again I explained that it was free, but I could see the skepticism in his face.  I finished up by suggesting that he read my blog where I talked about trading in a different way.

“Ahh, I get it.  What do YOU charge for your blog,” he snapped as if he had finally discovered my hidden agenda.

“Nothing,” I said.

“Well, then why do you do it?”

“I’m just stupid,” I replied (in my mind).

Spending as much time as I do on StockTwits, it is hard to remember that no matter how large and deep the community is, it still occupies rarefied air compared to the public at large.

So much of that public has either put their head’s in the sand or decided that financial education is finite, relieving them of the need to keep evolving their thinking.  No wonder they have been like lambs to the slaughter for the financial services industry.

It’s never too late to learn though.  Some of the best conversations I had were with folks old enough to be my parents and who were as current and educated about the markets as anyone I know.

And as for Eric, well, it wasn’t too late for him either.  Those medical professionals were successful in their efforts.  Eric was revived for a second time, eventually cleaned his life up, and moved to France where he has lived ever since, now complete with a lovely wife and two beautiful children.

 

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  • Mr. Juan Goldberg

    that a nice boy ryan… obama bad obama bad… show my mom… obama bad

  • Great stuff, I really admire you for trying to enlighten these people I would have zero patience for them.
    But I have to say I am thankful they are in the market, they are one of the reason we can make a living trading actively, every day I buy stocks from them when they pee in their pants and I short stocks to them when they are euphoric.

    • Isn’t there an old saying, “buy when the pee runs in the street…?”

      thanks for reading.

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  • Good one Brian, but probably you are a trader more than a longer term speculator

  • Jeff Raines

    So, you’re saying that 50 years from now finance professors will be referring to the turn of the century as the period of experimentation with self-directed pensions and then falling on the floor laughing as their students shake their heads in disbelief?

  • halfofone

    I’m very curious where places like Fidelity’s PAS; Vanguard’s “elite”or whatever it is called; and myriad others fall in your spectrum… Then I’m equally curious where places like FutureAdvisor.com; wealthfront.com and similar “low fee; low cost” fall in your spectrum. Fact is, investing takes tons of time and work and at some point… many of us are looking for help. I marvel at “stocktwits”; abnormal returns; blogs such as yours and in short order I max out… the current environment is terrifying. Maybe these questions are beyond the scope of this discussion? Maybe not?

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  • DaveyNC

    Well, let’s have some Rolo Tomassi:

    [youtube http://www.youtube.com/watch?v=63guoWW5Y3E&w=560&h=315%5D

    Eh, embed didn’t work. (can you even embed in Disqus?) Here’s a link: http://www.youtube.com/watch?v=63guoWW5Y3E

    I got a 3 minute Roadrunner cartoon before this, so it was a twofer fer me.

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  • blackmarkt

    Hit the nail right on the head with this Brian. I think the worse are the “Know it Alls” which a lot of the “market is manipulated” fall under. Seems like traders and investors are ego maniacal by nature.

    • What’s really hard is how self-indulgent the “know it alls” are. They sit there and take your time away from others who may not “know it all.”

  • Love the writing and agree with the analysis. Any investment idea seen as absolute is bound to be proven wrong over time. Like when everyone else believes in it.

    • Yeah, you just have to be flexible, keep your mind open, and always be willing to learn.

  • rjlfsimons

    Great article Brian! Comes down basically to something I wrote as well back in July. See link here and maybe you can give me your opinion about it as well. Rgds. Robert http://www.sorstrade.com/En/seeComments.php?idc=93

    • Good stuff, right on the money.

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  • balex

    Brian, that was brilliant

    • Too kind, appreciate it.

  • Really enjoyed that Brian. Your posts are always entertaining and this one really covers some good points. Now if I could only make TA work and lose the glaze once I get beyond moving averages. Great job!

    • Just keep at it, you will eventually get it.

  • carl_sf

    another excellent article! Ha, I had to look up Rolo Tomassi 🙂

    • Thanks for the nice words. And check out “LA Confidential” it’s a great movie.

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Brian C. Lund

Brian C. Lund

Great father. Good friend. Decent trader/writer. Lacking husband. Solid drummer. Sometimes funny. Often A-hole. Terrible poker player. Too smart. Punk rock. Work in an ice cream shop.

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