The Funniest Part About This Week

JC Parets
January 30, 2021

I think we can all agree that we learned something this week.

No matter who you are or how long you've been at this, we all learned SOMETHING after this week's events.

Some investors learned about short selling and short squeezes (my wife, for example). Others now have a better understanding of how brokers work and the fact that pretty much all of them sell their order flow. None of this is anything new to us, of course, but it is to a lot of other people.

I personally learned more about some of the Dodd Frank regulations, almost by osmosis. I mean, how could you not? But I realized that I officially care less about all that stuff than I did before. Talk about boring!

Anyway, the funniest part of the whole thing has to be the people screaming for more investor education to prevent this irrational behavior in the future. "We have to protect investors from themselves", "Brokers need to educate their clients"....etc etc

This is hilarious. They think that making people take some tests or answer questions is going to stop them from making reckless decisions????

Are you crazy?

Do you not know how humans work????

I get a chuckle just thinking about it.

Educate them all you want. Make them get a freakin' PHD before you let them enter their first trade. Go for it lololol.

Watch them blow up even faster!

So what's the solution? 

Well, first of all, let's be clear about something. This is not our problem. It's not up to us, as investors, to prevent others from blowing themselves up. In fact, it would be a shame if we somehow figured out a way to stop them. Because blowing up is part of the learning curve. It's when the learning process STARTS.

So if you don't let people blow up, you're never letting them begin to grow as an investor.

As Annie Duke told me recently, "JC, there is no cure". In other words, you can't just take a pill and stop being human.

The price of assets is driven by supply and demand. That supply and demand is driven by fear and greed. That fear and greed is driven by 100,000+ years of evolution. Our brains were not built for this.

And that's where the arb comes in. We KNOW that we have our flaws. That recognition and acknowledgement alone gives us a huge advantage over others who are completely unaware.

As investors, what we're actually doing is taking advantage of the fact that we have slightly better control of how we act on our emotions than those who are unaware. I say "slightly" because let's be serious, few of us have actual self-control. BUT, again to quote Annie Duke, "It doesn't take much. That little bit compounds over time and starts to add up"

So we don't need to be THAT good or THAT much more aware than others. That little bit of recognition is all we really need.

Now to be clear, I'm all for Investor education. I think it's great. We start way too late in this country. So any way I can help in this, count me in.

BUT, if you think that's the solution to volatility and reckless behavior, you're insane.

Speaking of crazy, did you hear what this maniac said this week?

*SEN. WARREN TO SEC: TAKE STEPS TO ENSURE PRICES REFLECT FUNDAMENTALS

"Prices reflect fundamentals".....lololol

Are you kidding me?

The fact that our politicians are this clueless about the way markets work is further evidence that we have no hope with them.

I don't even see the point.

It's quite obvious that we need to look out for ourselves. No one is going to help us. Those in charge don't even understand how markets work!

They're embarrassing themselves.

So it's up to us.

We have to manage our own risk.

We need to know that anything can happen and they can even change the rules at any moment.

I learned this lesson the hard way, as many of the best lessons are learned.

This was back in 2008 when I was leveraged short bank stocks and woke up one morning to a new rule that you couldn't be short bank stocks.

Boy did that suck!

My stomach still hurts just thinking about it.

Financials gapped up in my face in one of the most horrendous moments of my career life.

Those bank stocks, fortunately for me, peaked later that morning and then preceded to completely collapse, and some of them even disappeared.

But holy crap that morning was a rough one. I learn my lesson.

I didn't go crying to mommy.

I was a big boy. I moved on, and over 12 years later I'm still around to tell the story.

So it's hard for me to feel sympathy for traders getting burned.

It's part of the process.

Let them blow up.

It's good for them.

I mean that sincerely.

JC

 

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