#135: Buy the News, Sell the Facts, Get the Stamp

S2N Spotlight

My best friend and I started going to nightclubs at around 15 years old. I was always a big kid for my age; I got into my first casino when I was 12. My friend Mark and I would go to this club downtown most Saturday nights and meet our friends there. It was quite a rough crowd, but that wasn’t really the issue. The problem Mark and I had was that we weren’t really club people. You couldn’t talk with the loud, throbbing music, and after a few dances, and more often than not, rejected approaches. Yes, that was during the era where you went up to girls to ask them to dance; we were bored. So Mark and I had a ritual: we would go every week to the club and go in and get stamped. Yes, another feature of yesteryear where you got a physical stamp on your wrist. We would then proceed to walk to the local coffee shop down the road and drink coffee, eat cake, tell jokes, and have a great time.

The important part of the story above was the fact that we got the stamp.

The stamp gave us the ability to show other patrons of the coffee shop who came in much later from the club that we were part of their crowd. We made sure not to wash our wrists so that at school on Monday we would be sure to show off our stamps so that everyone knew we were at the club. The stamp gave us access, but on our own terms.

This week I went to the Finance Magnates Forex Conference in Sydney. I am often mistaken for an extrovert; I am somewhat of an ambivert (it is a word), but I am really more of an INTJ according to the Myers-Briggs personality type tests. Conferences are very difficult for me. I like going to them to learn and to meet interesting people, but I hate the forced feeling of networking for the sake of networking. I also cannot stand the big swinging d!ck’s who walk around thinking they are special.

Forty years later, I am still going to get stamped, these days scanned. I go because one needs to sometimes do things that are part of the game, but I do it on my terms.

One of the main observations I took away from the conference that is applicable to business and life at large is that often the people who seem most successful are not. Let me explain.

My late father used to say to people, “Turnover is vanity, profit is sanity.” I am not going to mention names, but I can think of a few companies at the conference who do very large turnover and hardly make any money. They get to tick boxes that stroke their ego and give them status in their circles of influence.

I once worked for 2 Cambridge-educated brothers who were heirs to a 100-year-old family business. The younger, more socially normal brother was the CEO and the busiest guy I have ever met who never made a cent. His older brother, armed with a Ph.D. in economics and zero ability to socialise, was a prolific business writer. John wanted the social status of dining at the best restaurants over boozy lunches talking about all the business exploits he was going to do. Peter was eating canned tuna and cashing commission cheques from the work he had done.

Boy I had no idea where I was going with this. I tend to really chillax on Friday’s and write whatever I think.

When it comes to investing and trading, you get the same type of people I have been describing above. Some are interested in trading so they can tell their buddies on the golf course that they were trading the Swiss Franc or shorting natural gas. Some will brag that they did $200 million of trading volume. Others will talk about the size of their position in gold.

The advice I can give is that it is really important that you understand the true underlying motivation behind your investing or trading style. When it comes to investing and trading, you should be interested in one thing and one thing only. Make the most risk-adjusted profits you can. Having a Bloomberg terminal, a super low-latency data feed, or 12 monitors isn’t going to make you money if you are a buy-and-hold investor, but it might make you look cool.

Get your ticket stamped, as you need to be in the game to play, but remember why you are in the game and how the game is scored. You are in the game to make money, not for stories to tell your drinking buddies or show off that you have the fanciest office in the industry. I am not naïve to the importance of the appearance of success; just don’t lose sight of what is really important.

S2N Observations

The fact that Nvidia sold off 6%+ since it released its latest results that beat its lofty forecasts explains how the market is a discounting factory, inputting news, churning out valuations fashioned on interpretation.

Buy the news, sell the facts.

No charts today.