Credulity and Wealth Destruction

bubble-lifecycle

by JT Marlin

This post was written on April 10, 2016

We live in a 24/7 news era. It started with CNN, then 24 hour business news, then the internet, mobile phones and now social media. When it comes to investing this is the kind of environment that poisons judgment.

Things have only become worse since the financial crash of 2008. Of course the CNBC’s of the world are the biggest put option in the financial world. When things get dark and scary, people tune in and their ratings go through the roof.

I myself was guilty of consuming Bloomberg TV and the likes nearly all day back in 2008. It would be on in the background and then I would tune in when I got home. I wanted to consume everything that was going on as it happened in the financial world. I figured it would inform me and make me a better investor. It did the opposite.

Instead of relying on my research and my own opinions, I allowed myself to be swayed by idiots screaming on the tv. Jim Cramer, Fast Money and so on. I wasn’t able to make decisions. I was always second guessing myself and not sticking to a strategy. Then a funny thing happened. When the financial crash of 2008 occurred, these idiots were exposed for the clowns they are. Suddenly when they were saying everything was going smoothly they were able to justify their calls by saying it was a black swan event. Fuck off. You don’t know any better than the homeless man on the street what will happen to markets tomorrow, never mind in three months time.

I began to read more about investing. Picking up strategies from those that were old and grey and who had been through these ups and downs over and over again. There were no grey hairs around me in my job that could teach me things. There were just clowns in monkey suits claiming they were the next Warren Buffet, when they were just another Patrick Bateman.

Like a sponge, I soaked up everything I could. In combination with the fallout from the financial crisis and the realization that nobody except a few outsiders that were ignored predicted this, it became clear what was important. I learned that a three pillar approach is all I would need.

Firstly you must learn to block out the noise. No more consuming Bloomberg news or any other hack journalistic sites. Read the occasional article or research report, but with a critical eye. If you do listen to journalists, take it all in with a grain of salt. Years later I would read the book “Fooled by Randomness” by Nassim Taleb that would justify everything I had began to believe. That is a great read for anyone that has not read it.

Having a strategy that fits your personality and habits is the most important starting position. Without this you are lost. Without this you are likely to get swayed by the morons screaming at each other on Fast Money. You will sit on ideas for days without having the courage to make a call and act on it. If you are surrounded by finance professionals in your life, never share your strategy with them. Actually, it’s best not to share your strategy with anyone. Would you tell a criminal the best way to enter your apartment? View these vultures like criminals when it comes to money.

Most importantly, having the conviction to believe in your strategy is the most important aspect. Without this, everything falls apart. That’s it. If you keep it simple, you will have the courage to act. If you over complicate things, you will doubt yourself.

Anybody who listens and obeys the financial media is setting themselves up for massive wealth destruction in the future. As we stroll on in 2016, and markets were never given the chance to properly cleanse themselves of the massive leverage, we are setting ourselves up for an even worse crisis. Debts have been transferred from private to public hands. Governments are setting themselves up for a currency crisis, currency war and likely, military conflict. Central banks have put a floor on the markets that is made of cardboard. You’ve been warned.

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