In this week’s article, we consider that investing does not need to be entertaining.
All the World’s a Stage
Jordan Peele’s 2022 movie Nope is about an alien that consumes people who can’t look away from it. Spectacle, and how we respond to it, is a strong theme in the film. Hollywood itself is alluded to as something both appealing and potentially disastrous. Indeed, all that glitters is not gold!
In markets, participants are often wooed by entertaining people, hot takes, and extreme movements in price. Unfortunately, those people usually have ulterior motives, those hot takes typically have no real substance, and those wild moves have already happened by the time you see them.
Just like financial capital, we have to be careful in how we allocate our mental capital in the landscape of information.
Attention Deficits
It’s not surprising that the market has a short memory.
There are so many “trends” it will make your head spin: Gamestop and cocoa and Bitcoin ETFs, oh my! We don’t want to miss out on these opportunities, do we?
What you read on Twitter or ZeroHedge or Bloomberg is supposed to change how you behave in markets. Make you feel awful so you sell near the bottom and wonderful so you buy near the top. If you can remember that you are usually being sold something, then keeping your wits about you is much easier.
Want to know the nasty secret? You will miss out on most of the opportunities you read about. The chaser: that’s okay. Instead of having some third party inform you on what to invest in, your skills and your process can tell you that.
Your Process is Your Process
If you keep at anything long enough, you begin to develop an intuition. In my book, intuition is the preferred trait.
Smarts make it possible to reduce a problem to its fundamental parts, but smarts can get you in trouble if you attempt to overengineer a solution in the pursuit of feeling clever. Being sociable is great when you can keep a pulse on the activity in a scene, but being too agreeable can lead to groupthink, and groupthink is deadly in finance. Contrarianism can be deadly too, make no mistake.
But intuition is simultaneously all of these qualities and none of them.
There will be little hints. If you look at myriad charts, study the moods of bubbles and panics, and monitor at least the daily close values of a watchlist, you will start to feel their changes. Eventually, your intuition will calibrate your emotional responses to be balanced. You will be able to think via your emotions, an essential tool.
You won’t need somebody to tell you how to think about a company, or what to invest in, your process will tell you that and your intuition will confirm it.
Stick to your process, minimize the noise of the information you intake, and remember that investing is a game of endurance, not entertainment.
Dodging Bullets
Neo: What are you trying to tell me? That I can dodge bullets?
Morpheus: No, Neo. I’m trying to tell you that when you’re ready, you won’t have to.— The Matrix (1999)