Processing Emotions Real Time

Trading is 10% method and 90% emotions. I am not underplaying the importance of method. It's a must and a pre-requisite but not a guarantee of success. A study attributed to Harvard University found that Success = 85% attitude and 15% aptitude. This is also true in trading, and you need to trade to understand what I mean. Trading successfully is not about having a right system but a right mind set in place. That is why despite having all the great trading systems available in the market, and large numbers of self proclaimed accurate market forecasters, more people fail and only few succeed. How do you process your emotions in real-time? There are only three emotions in the market - GREED, FEAR and ANXIETY When market starts moving up, the GREED factor kicks in, and lot of people get attracted to market. It is the period when optimism starts building up. Once market continues to move up, it attracts more buyers on the same emotions - and the stock chart reflects that on Volume and Price chart. We all know that stock prices do not go to moon, but the greed factor always makes one to believe so. That's why very few people book profits on time. Similarly, when market starts moving down, the FEAR factor kicks in. All dreams start getting shattered. It is the period when pessimism starts building up. Once market continues falling, fear becomes panic, and suddenly, realization sets in that market is falling through the floor. We all know at the end of the day we are trading stocks/businesses, and they cannot become worthless, but fear factor makes you believe so.

That's why great legendary investors say - Buy when there is blood on the street, even if that blood is yours. There are also times, when market does nothing, and just trades sideways. It's a period that creates lot of ANXIETY. Is market consolidating to fall or rise? Consolidation happens when stocks aren't making any progress, but they're not doing any damage either. But the uncertainty of what's next creates lot of nervousness and anxiety. This is the way financial markets work. The greed gives way to fear. And when nothing happens, anxiety takes over. These emotions have the tendency to destroy rational thinking. Good judgments are easy to make after the fact, but it is difficult to make the right decision in the heat of the moment. Hence trading success hinges on how you process your beliefs in real time when market moves from one emotion to another. It requires lot of controlled behavior. The game is how one can protect himself from getting into panic mode and also not let euphoria take over. Solution - Write more and trade less. Lot of times, writing your thoughts and feelings down (in a trading diary) can help you understand how you think and act when market goes through different phases. Remember, Trading is the game of mistakes and emotions. It always has been and will always be. The trick is how you learn and don't repeat the same mistakes again and again.

Law Of Supply & Demand

Price is the intersection of supply and demand. In financial markets, law of supply and demand is determined by the flow of trading capital. It is trading capital that pushes a market one way or another. An oversupply or imbalance of buy orders will push the market up. An oversupply of sell orders will push the market lower. When there is a large demand for a stock, price goes up; and when there is large supply of a stock, the price goes down. Trading is purely price-based; and closely follows supply demand principle. Simple, right, but we always ignore this fact; by thinking we are smarter than market. Cement has been one of the darlings of market pundits in last 2-3 years. It has been a play on infrastructure spending. The price of cement has been hitting the roof. The Net Profit has been growing exponentially for all the cement companies. As a result, in last couple of years, all cement companies have entered portfolios of all leading financial investors. I would not be wrong in stating that it has been one of the well owned sectors in portfolios. All the good news was in the price. Then, around Jan 23-24, Government came out with a diktat on duty cuts on import of cement products. The news was more of a signal that Government is not going to tolerate unrelenting rise in prices of cement; and is serious about inflation control. Lot of people trashed the move stating that this move means nothing. But there is a saying you should always look at what investors/traders are doing rather than thinking/saying. Cement stocks witnessed huge selling on the day of announcement. Lot of analysts came on TV, thinking they are smarter than market, and shared their wisdom - "There is no change in fundamentals, and they will be buyers on the fall". Mistake - They ignored the fact that cement is heavily owned sector in large number of portfolios and even small unwinding can dampen the sentiment. This was a transition point when supply started overpowering demand. Lesson – Momentum always feeds momentum and the danger, of course, is that this works both ways. Good times tend to make us forget about those kind of markets. Stocks go down, and then continue to go down. History teaches us that "what goes up must come down". Supply catches up with demand.

80/20 Principle

There is no principle that makes more sense than 80/20 principle when it comes to investing/trading. What is 80/20 principle? Some things are more important than others, and success depends on recognizing those important things. 80% of the results flow from 20% of the causes or effort. Lot of people may dispute this, but remember this is a well researched principle. Now, let's apply this principle to Investing/Trading - 80% of the portfolio profit comes from 20% of stocks - If you want to test this rule, look at your portfolio. It's very rare that you may find all stocks in your portfolio doing great. It just happens that you pick few right stocks, and it makes up for all the other stocks, and gives you super returns. I am not a big fan of diversification. I know investing gurus strongly recommend well diversified portfolio, but that does not change the fact that 80% of the profit comes from 20% of stocks. If you feel this argument is too stretched, you can make it 70/30 i.e. 70% of the profit comes from 30% of stocks. Over diversification is one mistake lot of people make and then get ordinary results on their portfolio. You can get best results by concentrating your portfolio on few quality stocks, rather than diversifying among large group of mediocre stocks. Diversification dilutes overall result. Hence, next time when you add a stock to your portfolio for diversification - think about it. Are you putting eggs in right basket or too many baskets? 80% of what you achieve comes from 20% of the time spent. Thus for all practical purposes, a large part of the time spent towards success is irrelevant. That's why trading is all about waiting for that 20% of time - when it makes most sense to trade.

Market timing is against the conventional wisdom of Investment Gurus. I know its tough to time the market, but as a trader, my job is to time the market. It's another matter that it's a tough skill to acquire. You may have seen the ad - "Time in the market is more important than timing the market." I agree, but even if you don't time the market, the fact doesn't change that 80% of your profits come in 20% of the time. That's the nature of the market - it does nothing for long time, and then suddenly shoots up and make exponential move in short span of time. Market is not a tortoise that slowly moves all the time, it's like a hare that sprints for a while and then takes a long nap. That's why, it's said that the big money is made by sitting and waiting. As a trader, I am paid to wait for the best opportunities. It's a very tough act to follow. And above all, remember 80% of the money is made by 20% of the traders. That's why trading/investing is considered as a risky job, because there are more losers than winners. The Loser becomes a common man, and becomes a lesson for large group of people as a role model of failure. Lesson - Be Patient, Have focus, Buy Right and Buy Big. Momentum chases momentum. Any asset/stock where there is strong business momentum, momentum money will chase it down, but on first signs of business weakness, momentum money will exit. Remember, when there is mad rush to own assets; there is no value argument at play. The only rationale that works is Supply versus demand equation; and desperation to own the asset. Never buy stocks on momentum, and hold on Value. Be clear on what you are buying, and why you are buying? If you are doing a value buying, stick to value buying. Don’t mix Value with momentum, and vice versa – it can be dangerous for your portfolio. Always ask a question if you are buy and hold - What is the value in holding a stock? Remember, there is always an opportunity cost to holding a stock. You may be missing a great opportunity by holding a dead stock.

Losers Average Losers

1. Never, under any circumstance add to a losing position.... ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. "Markets can remain illogical longer than you or I can remain solvent." Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds... they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.
11. Respect "outside reversals" after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more "weekly" and "monthly," reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets and so also are their retracements.
17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are "right" only 30% of the time, as long as our losses are small and our profits are large.
18. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed.
19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable.
21. There is never one cockroach! Bad news often begets bad news
22. All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!

You Are Not Your Money

If you've ever strolled through town listening to a Walkman, you have experienced the feeling of great wealth. With headphones on you need not hear the panhandlers’ cries for help. Your money doesn't solve the world's problems. Rather, it gives you the choice to simply tune them out. With money, you are who you want to be. It's the cab rides. It's the cell phone. It's the comfort of not really having to care. When you are at the top of your game, you are your money. It is everything you have worked for. It is all of what you have and most of what you'll ever have. If someone leaves you something of meaning, it probably was money. Money mops up your medical and clears up your credit card. It's your sudden interest in collectibles, in eBay, in fine art. It's your secret test drive nobody knew about. It's your penchant for Pavarotti and product request from Rayban. Your money is your mojo. It's your swagger. It’s your sway, safety and stability. Your money is your politics, ethics and values. It's more than a little difficult to "put your money where your mouth is" when you don't have any. People without any money usually don't have very big mouths. They can't afford to. Your money is your knowledge. It is your magazine subscriptions and your data feeds. It's your high-bandwidth recipes, chat rooms, pornography and sports scores. Would you like dessert? A defibrillator? Another drink? A day off? Your money is about having that choice. If you are about the variety of life, then you are your money.

Money is the right to just about anything. When you can't talk, money will. When there's nothing to say, your money buys you silence. It buys you a window seat. It buys you a bottle of wine. In a private moment, you'd admit to being neither terribly talented nor special. It's what gets you in. It's what makes you right. Money is your only justification for everything that came before now. It's how you explain yourself in no uncertain terms. Money is what gets you high. It's what makes you turgid. It's what gives you the strength to get out of bed in the morning. You are Dean and Deluca, not Denny's. You are Lepanisse, not the Lone Star Steakhouse. You are a controller of capital, a mover of men. And unlike your marriage, your mother-in-law, your relationships or religion, money is something you'll never be tired of. In New York City, cops busted Liv Tyler's celeb-infested pot party and decided to stay for the fun. However, the dude caught stuffing a turkey under his coat gets roughed up on Rikers Island. You are not going to Rikers.....not when you have money. You are an intelligent, well-groomed, upwardly mobile, law-abiding citizen. You are this because of money. With money you are Joe Q. Public. Without it you are public enemy No. 1. It is the fresh flowers. It is your kid's clarinet lessons. When you send it back or want it faster, it is because you are determined to get your money's worth. When you demand a refund, you demand it in dollar-denominated terms. Good karma won't cut it. If you pay bills, you are your money. Your only right to have bills comes from your ability to pay them.

It's HBO, Skinemax and the Movie Channel. It's the book you bought from Amazon.com but never read. It's what is behind your sudden lack of interest in the environmental movement. Why protect what we have…..when we have so much? Money sucks your empathy for the sickly - after all, they're getting the best that money can buy. Money is the answer to most any question you can think of. When you are in a jam, money gets you out. It is the online brokerage account. It's the new kitchen cabinets. Time is money and you are a very busy individual. When you are out of time, you are usually also out of money. Money is the 401K you never thought of before 1997. It's Bloomingdales. It's Banana Republic. It’s the right to celebrate: your birth, your baptism, your confirmation, your communion. Like it or not, your daily bread has a greenish hue. With your $25 membership to the fine arts museum comes the silent smug of arrogance privy only to card-carrying supporters - financial supporters. If you love the arts, then you are your money. Fine art is there for those who can afford it. Everyone in your life wants something, and most of them would prefer cash over anything else. With money you are a valuable commodity. When you have money you are someone worth wanting. You hate to wait on people, but with money people wait on you. You are cultured and well coifed because of it. When the money runs out, so does your lifestyle. Money is what makes premium items de rigeur. It’s what makes downscale fashion upscale. Your money is your respite. It’s your fun. The things you like to do cost money. Without it, you'll have to find new things…..or simply stop having fun. Money is behind most of what you actually desire. It can be nothing more or less than everything that exists. It's everything that you are. Your intrinsic value can be rounded down to the dollar. You are your money.

As the world's benchmark currency, the U.S. dollar has the unfortunate distinction of also being the most stable. Interest rates will rise and fall, but the good 'ole greenback will never get you more than 100 pennies, 20 nickels or a big fat Susan B. Anthony. How boring! It's not an existence…..it's a death sentence. You are different. You are not your money. Unlike your money, your value isn't printed on your face. What luck! Every day you are given the opportunity to decide how much your life is worth..…how much it counts. Your karma is flexible, not fixed. Can a wallet full of Washingtons make the same claim? Not a chance. You are not your money. You have a name, not a number. Behind your PaineWebber account, there's a person. Remember? Somewhere along the line, you forgot. Maybe it was when you only started looking at other people with dollar signs in your eyes. Maybe it was after the fund you picked got five stars from Morningstar. Maybe it was when you started looking at cab drivers while thinking, "I buy and sell guys like you." But you are smarter than that. You are not your net worth. No matter what your bottom line is, there's more to your soul than Cisco, more to your heart than Home Depot.

You're the patience that waits in line at the post office. You're the empathy that can see the other guy's side. You're the humility that couldn't answer one question on Jeopardy! but enjoys watching just the same. Your money wishes it had the freedom you possess. So why does money rule your mood? Think about it: when the economy was in the dumps, so was our music. But who's playing Pearl Jam these days? Ricky Martin and the Backstreet Boys solidify the unsaid: a strong stock market is something to sing about. But it's no coincidence that pop-personification Debbie Gibson's "Only In My Dreams" peaked on the Billboard rankings just before the '87 crash. Of course! Pop music is just a reflection of the national vibe. Britney Spears might be the sell signal of the century. The point is that money in the bank tells us what we have, not who we are or how we should feel about ourselves. And you are not your money. Your neighbor loaded up on LSI Logic before its recent advance. You know this because he won't stop talking about it, taking every opportunity to remind you just how brilliant his stock picking has become. But a bit of good fortune doesn't change the facts. He's still the same jerk that hits his wife, makes jokes about Mexicans and never bothers to recycle the New York Times. By no stretch of the imagination does making a million make you a martyr, just as every poor person doesn't deserve a Nobel prize just for being broke. Have you been dreaming of MRK? Try MLK. You are judged on the "content of your character," not the size of your Schwab account.

Having money is a convenience, but also a curse. It's too easy to pretend that purchases make the man. So you stay at the Marriott instead of the Mercer. So your car is missing a crankshaft. You do many things money could never even think about, and the measure of your worth and self-esteem isn't correlated with the thread count of your sheets. You are intelligent when you want to be, inquisitive when you care and helpful when the situation warrants. You are not your money. Money can't bond with a friend over beers. It can't do cannonballs off the high dive or cut class for a Cubs game. Your money just sits there -- and the view from Account No. 23823 ain't that damn grand. You would like to try fly-fishing, and you hated Fight Club. Your money didn't even see the preview. You found Martha Stewart's recent IPO to be one of the more sickening displays in recent memory -- but not because Martha made a billion dollars. You actually feel bad for her. Imagine having millions of investors continually evaluating your own market cap? Right now, thousands of analysts are determining the worth and future profitability of her entire likeness and image. You don't need a buy recommendation from Bear Stearns to feel good about who you are. So when did it happen? Think back. When did you start checking the funds in your 401(k)? When did the AOL portfolio tracker start telling you what kind of day you were having? When did you start surfing CNBC instead of Sportscenter?

The stock market, like most things in life, is decidedly double-edged. The 401(k) phenomena, for example, has been heralded as the best thing since Stop Making Sense. "You are in control!" "You call the shots!" And while it's amazing that you can track your retirement tick-for-tick, it doesn't do much for your mental health. There was a time you couldn't care less what the market did. Now you wake up with coffee, bagel…..and the S&P futures. Now jerks like me come along and remind you that if you "had only started earlier," you could have made a million dollars by now. Now Fidelity pops up in the middle of Felicity, reminding you they've got 100 more ways to analyze assets. Now E*Trade sends you friggin' boxer shorts in hopes of corralling you into their online casino. Now a lack of interest in money seems…..well, sacrilege. Remember when you started learning the lexicon? "P/E ratio?" "Market order?" The cumbersome language has now become cool. You find yourself reading annual reports, glancing at the London gold fix. You are hooked. Secretly, you'd sometimes rather not even know. That Pandora thing really sucks, huh? But you are not your money! You are an entirely different animal altogether. Peel away the portfolio for a moment. You will accomplish much more than just getting into Amazon in the single digits. Money is annoyingly objective…..but you are the perfect paradox. You are prone to impromptu air guitar solos, and make one hell of a margarita. You sang karaoke on a dare and would probably do it again. Your money can do nothing of the sort. Your life won't be judged by the assets you accumulate. No tombstone is inscribed with a total return. When you remember good days with friends long past, it's the time you spent, not the dollars. Family trees aren't categorized by credit card. Ultimately, you are whoever you want to be. Your cash just comes along for the ride. You are not your money.

The Outliers - Malcom Gladwell

Today, Chris Langan lives in rural Missouri on a horse farm. He moved there a few years ago, after he got married. He is in his fifties but looks many years younger. He has the build of a linebacker, thick through the chest, with enormous biceps. His hair is combed straight back from his forehead. He has a neat, graying moustache and aviator- style glasses. If you look into his eyes, you can see the intelligence burning behind them. "A typical day is, I get up and make coffee. I go in and sit in front of the computer and begin working on whatever I was working on the night before," he told me not long ago. "I found if I go to bed with a question on my mind, all I have to do is concentrate on the question before I go to sleep and I virtually always have the answer in the morning. Sometimes I realize what the answer is because I dreamt the answer and I can remember it. Other times I just feel the answer, and I start typing and the answer emerges onto the page." He had just been reading the work of the linguist Noam Chomsky. There were piles of books in his study. He ordered books from the library all the time. "I always feel that the closer you get to the original sources, the better off you are," he said. Langan seemed content. He had farm animals to take care of, and books to read, and a wife he loved. It was a much better life than being a bouncer. "I don't think there is anyone smarter than me out there," he went on. "I have never met anybody like me or never seen even an indication that there is somebody who actually has better powers of comprehension. Never seen it and I don't think I am going to. I could, my mind is open to the possibility. If anyone should challenge me 'Oh, I think that I am smarter than you are' I think I could have them."

What he said sounded boastful, but it wasn't really. It was the opposite - a touch defensive. He'd been working for decades now on a project of enormous sophistication but almost none of what he had done had ever been published much less read by the physicists and philosophers and mathematicians who might be able to judge its value. Here he was, a man with a one-in-a-million mind, and he had yet to have any impact on the world. He wasn't holding forth at academic conferences. He wasn't leading a graduate seminar at some prestigious university. He was living on a slightly tumbledown horse farm in northern Missouri, sitting on the back porch in jeans and a cutoff T-shirt. He knew how it looked: it was the great paradox of Chris Langan's genius. "I have not pursued mainstream publishers as hard as I should have," he conceded. "Going around, querying publishers, trying to find an agent. I haven't done it, and I am not interested in doing it." It was an admission of defeat. Every experience he had had outside of his own mind had ended in frustration. He knew he needed to do a better job of navigating the world, but he didn't know how. He couldn't even talk to his calculus teacher, for goodness' sake. These were things that others, with lesser minds, could master easily. But that's because those others had had help along the way, and Chris Langan never had. It wasn't an excuse. It was a fact. He'd had to make his way alone, and no one not rock stars, not professional athletes, not software billionaires, and not even geniuses ever makes it alone.

Leadership

People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand.

Rich Eat Themselves

Look, we all know there is a lot of bullshit that goes on at the top of the food chain. But let's be clear about something, the rich eat themselves, not the poor. People in power are usually threatened by others in power. That's why there are wars. That's why there is theft. That is why there is corruption. The poor offer no threat to the rich and never will.

Happiness

There are people today that live in complete and utter happiness in Tibet with no material possessions or desires. We keep talking about all those people who are suffering without ever thinking about the true source of their unhappiness. This hyperbole about what will happen to all those that can't find work is just that, hyperbole. Put down the anti-capitalism books and start reading about the depression. It was really bad. Much worse then now. And we got through it. We got through it because as individuals we changed. Instead of the excess and greed of the 1920's, people actually started saving money. They didn't buy stuff. They didn't try to impress their neighbors. And you know what else they didn't do? Trade!!!!! That's right, they weren't chasing a dream of making millions by looking for a holy grail in the market place. Today our society seems to be more interested in the quick buck then actually building something. Whether it's flipping real estate, marrying for money, suing someone for all their worth or just stealing it from unsuspecting investors. The pain we are going through now is absolutely critical for us to survive as a species. We cannot, we absolutely will not survive without this pain. If I come over to your house and kill you, there really is nothing society as a whole or you as an individual can do about that. We are talking about the broader economic landscape that we all shape and form. The way out of this mess is to look inward, not outward. Fix yourself first. Then help those around you. It's the exact reason why on a plane the flight attendant tells you, in case of an emergency, put the oxygen mask on yourself first, then on your child. Because if you can't breathe, you won't be able to help your child. The same rule applies to society. You are asking for these broad economic disparities to be fixed yet you don't want people to fix these problems in their own life. Where do you think these "broad" problems come from? They don't come from outer space, they come from each of us as individuals.  Do you know who the Yanomamo tribe is? They are one of the last surviving tribes of people who live in the Amazon rain forest that have virtually no contact with the outside world. Only in the last half century have a few people made contact with them. They have no electricity and live off the land. They are a very happy and content people. No doubt they have no free health care, no public school system. I don't think you will find any traders in the bunch. In your eyes, you would see them as having nothing. In their eyes, they have everything. And what's more important...they are happy.

Change Will Happen

Ever heard of the story about the bet the sun made with the north wind? The north wind goes up to the sun and says, I bet I can make that man take off his jacket. The sun says, I'll take that bet. So the north wind blows and blows as hard as he can. The harder he blows, the harder the man holds onto to his jacket. When he is done blowing the sun comes out and warms up the air. Man takes off his jacket. The moral of the story is usually anything done by force is met with resistance. Create the environment for change to happen....and change will happen. 

Difference Between Doing And Saying

The benefit of "being" something does not come from saying it, but by actually living your life by it. For example, say I call myself a vegetarian. Saying it provides no healthy benefits to me. But actually living my life as one in practice does. Calling myself an avid reader does not bring any knowledge to me by proclaiming it. The knowledge actually comes from READING! The same goes with being a Christian or any other religion. The benefit of actually being one does not come from saying you are one, the benefit comes from actually living your life like a Christian. It does not matter what we say but what we do. The benefit comes from the DOING. Not the SAYING. 

Gordon Gekko's Speech

Here is Gekko's new speech he gives in the movie - You don’t know it yet. But, you are the NINJA generation. No Income, No Job, No Assets. You got a lot to live for too. Someone reminded me the other evening that I once said greed is good. Now it seems its legal. But folks, its greed that makes my bartender buy three houses he can’t afford with no money down. And it's greed that makes your parents refinance their two hundred thousand dollar house for two fifty. Then they take that extra fifty and go down to the mall. They buy a plasma TV, cell phones, computers, a SUV, hey why not a second home while we are it, cause gee whiz we all know the prices of houses in America always go up, right? And its greed that makes the government of this country cut interest rates down to one percent after 9/11 so we can all go shopping again. And they got all these fancy names for trillions of dollars of credits, CMOs, CDOs, SIVs, ABS . You know I honestly think that there’s maybe only seventy five people in the world who know what they are. But I’ll tell you what they are - WMDs, weapons of mass destruction! That’s what they are.

When I was away, it seems greed got greedier with a little bit of envy mixed in. Hedge funders were walking home with fifty, hundred million bucks a year. So Mister Banker, he looks around and says my life looks pretty boring. So he starts leveraging his interests up to forty, fifty to one, with your money, not his, yours, because he could. You’re supposed to be borrowing not them. And the beauty of the deal, no one is responsible. Because everyone is drinking the same Kool-aid. Last year ladies and gentlemen, forty percent of all American corporate profits came from financial services. Not production, not anything remotely to do with the needs of the American public. The truth is we are all part of it now. Banks, consumers, we’re moving the money around in circles. We take a buck, we shoot it full of steroids. We call it leverage. I call it steroid banking. Now I’ve been considered a pretty smart guy when it comes to finance and maybe I was in prison too long. But sometimes it’s the only place to stay sane and look out through those bars and say “Hey, is everybody out there nuts?” Its clear as a bell to those who pay attention, the mother of all evil is speculation, leveraged debt. The bottom line is borrowing to the hilt. And I hate to tell you this, it’s a bankrupt business model. It won’t work. Its systemic, malignant, and its global, like cancer. It’s a disease and we got to fight back. How are we going to do that? How are we going to leverage that disease back in our favor? Well I’ll tell you. Three words, “Buy my book!” Prices and profits work.

Taxes

No one cares if the tax rates go up 2% or down 2%. It's a shell game. Since the rich don't pay any taxes, the idea of raising taxes on that is of course a farce but it really gets an applause from all the poor in this country who think they are socking it to the rich people. Instead, we inflate our money supply and thereby inflate the assets of the rich and destroy the middle class. So let's see how this works in principle. The President goes around the country and tells the middle class they are going to save $400 this year in taxes. And he explains how getting rid of the tax cuts is going to take money from the wealthy to bring equality to society. Here is what really happens. The middle class do indeed get their $400 while 10k come out of their savings from the loss in currency. Oh yeah the rich pay little to nothing in taxes since most of their income comes from long term gains and asset appreciation. Meanwhile that guy who has 100 million invested in various assets sees his assets appreciate by 20%. He might pay a few thousand here and there in extra taxes and makes an extra 20 million on the asset pump.  The money has to come from somewhere. And it comes from the middle class. That is what is unconstitutional. Steal from the middle class, subsidize the poor and inflate the rich. Only the subsidies don't really help the poor because they are getting priced out through inflation. It's a wonderful system.  No, I have no problem with tax payer money going to shelters or food banks. They cost us nothing. I'm talking about all the things we subsidize in the name of lifting the poor out of poverty. You know poverty rates have gone up every single decade since even though we keep throwing more money at it.

And what does our President tell the poor to do with any stimulus money they get? He tells them to spend it. That is the exact opposite advice you want to give the poor.  Let's see here. The rich are rich because they save and invest. The poor spend and go into debt. Heaven forbid we give them yet another stimulus check, the last thing I would tell them to do is go to Best Buy. He only perpetuates poverty by doing this. Honestly every time I see this President on TV explaining why need to give money to the poor and middle class because they are more likely to waste it and spend it, I shiver. I mean I can't believe this guy is saying what he is saying. If you really want to help the poor, you should teach them how to save.  You know after Katrina we had a very interesting experiment. The President decided it would be a wonderful idea to hand out pre-paid debit cards to all the victims. What they didn't know was we set them up so we could track where they were spending the money. And where did those "poor" people spend the money. On their rent, their medical, food? Nope, they spent it at the bar, strip clubs, cigarettes, alcohol and junk. There is a bigger problem we have to address. At some point we have to let natural selection take it's course. People need to be free to fail and suffer. You can't put a perpetual band aid on everything. And if these young kids still find a way to blow it, again, I have no issues with funding shelters or food pantries. So they won't die on the street. At some point man we have to start holding people accountable.  

Epiphany

I had what alcoholics call a moment of clarity. An epiphany. I realized that I had to be held accountable for all my actions in life whether I liked it or not. What I came to see and understand was that in order for society to function as a whole, we need universal accountability for everyone. Not just for the rich or the poor, or the whites or the blacks, or the men or the women, but everyone. If left to our own devices, we will always excuse our own behavior and condemn the behavior of others. That’s human nature. That is why accountability has to be universal. We must face the end results of our actions. We can't just call timeout in life when things happen that we don't like. If I lose all my money trading I can't cry for a do over and get my money back. The money is gone. We all make mistakes in life and we all have to pay a price for them, that's called life. That's how we learn. What kind of society would we have if we never had to pay for our mistakes? Think about it. I came to a point in my life where I realized I can no longer blame others for my own actions. I had to take responsibility for everything I did. And that made sense. There was something really free about that. There was something very liberating about that. The point is, I'm not a perfect person. I have made many mistakes in my life. But none of them bother me. None of them keep me up at night. You know why, because deep down inside I know that I got the result I was suppose to get. I didn't cheat myself. My life was fairly valued. Not undervalued, not overvalued, but perfectly priced. Perfectly efficient. There is a feeling when you get to this point that I cannot describe. It allows you to be free for the first time ever. And there is nothing that replaces that feeling. You see only when you realize that your life, your place in this world, is to be completely efficient with every choice you make, you no longer dwell on the mistakes you make or the wrong turns you take. You accept things as they should have happened. You admit to yourself that you got nothing more and nothing less then what you paid for.

Like I said there isn't a better feeling in the world. You actually see life for what it is. A set of choices. You make the choices, then you see the results. No do overs in the game of life. That's what makes it so much fun. There is so much on the line with every decision you make. It's a gamblers nirvana. I don't expect everyone to see my point of view because until you reach this zenith of understanding your own life, this will not make much sense. But if you are lucky, you will have this epiphany one day too, and I swear to you this, you will never be the same person ever again. You will finally reach a state of happiness that no amount of money, drugs or sex could ever give. Those things will only add to the happiness that you have every day. Remember, universal accountability. The choices you make, the end results of your actions, these are truly the things that will bring you happiness because you will see life as completely perfect. Remember, you made the choice; the end result is exactly what it should be. Nothing more and nothing less. And that is why no other outcome could make you more happy. Because any other outcome then the one you got would not be fair. Think about it. I guess at the end of the day, after all the bickering is over, it all comes down to this. Can you look at yourself in the mirror? Can you live with yourself? Can you sleep at night? Guilt is often the most harsh consequence of all of them.