There is a lot that we can learn from Warren Buffett, who many consider to be one of the greatest investors of all time. To me, the most important lesson of all of them, and there are many, is that there are no called strikes on wall street. In other words, in liquid markets, you are not penalized for “missing” a trade. This is a lesson that took me many years to finally understand and is something that has helped me tremendously.
Growing up with Cuban parents in Miami, FL, baseball was always a way of life. To the credit of my mom and dad, they put me on soccer teams when I was a kid, football teams, tennis camp, basketball teams, etc. As much as I enjoyed playing all of these sports, I would ask them why other kids were playing baseball and I was playing soccer? I was a baseball player, there was no doubt in my mind. I played ball for most of my life and was fortunate enough to play at the collegiate level for a few years. The life lessons I learned throughout those experiences continue to help me today.
Think about this: you’re a right handed hitter and a lefty pitcher back-doors a curve ball for a called strike. It wasn’t your pitch, therefore you didn’t swing at it, but it’s still a strike against you. Even worse, in other cases, the umpire may call a strike that you felt was low, or high, or away from the plate. Again, it wasn’t your pitch. In fact it wasn’t even a strike. But it still counts against you. There is nothing worse.
Fortunately in the market, we don’t have that problem. If we don’t like the pitch, we don’t have to swing. Furthermore, we can literally stand there all day in the batters box watching pitch by pitch go by without any consequence. In the market, we could be standing up there for days without swinging even once. We could stand up there for a week or even a month without having to swing at anything. We have the advantage to wait for the perfect pitch and nothing less. The beauty is that we know that it will come. That is the only guarantee in the market. What is not guaranteed is whether or not you’ll be ready for it when it does come.
Many traders and/or investors can get frustrated after a series of losing trades or investments. The frustration can come even after just one or two bad decisions. This can cause you to be discouraged and potentially allow you to miss the elephant as it walks right by you. For many reasons, only swinging at the best and most perfect pitches, is a huge advantage that we have over almost any other aspect in our lives.
If you’re out and meet a girl that you become fond of, and don’t get her number or figure out a way to stay in touch, you may lose her forever. There is definitely an element of “missing out”. In the venture capital world, missing out on an Uber or Facebook after the deal was presented to you, could be detrimental to your returns. There are no guaranteed second chances in the private markets or potential life partners. But in public markets, stocks, ETFs, Commodities, Currencies, etc, there will always be another opportunity. This is the one guarantee that Mr. Market provides us. We can’t forget that.
Jim Rogers was famously quoted, “I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up”. Waiting for opportunities like this requires the patience to sit there watching many imperfect pitches to pass you by. That “FOMO”, if you will (Fear Of Missing Out), can be detrimental to your returns. Why chase? Why blindly bottom-fish? Why not wait for the perfect pitch and THEN swing for the fences. With responsible risk management procedures, this is the approach we want to take.
The financial media wants you to believe that there are perfect pitches all the time. They even go out of their way to try to make you feel stupid for not participating in certain trades or investments. Don’t let that get to you. They’re just there to sell ads and try to increase page views. They don’t care about your portfolio. That’s not their problem. Therefore, we are responsible for ourselves. It is our fault if we lose money, no one else. It is to our credit when we make money, no one else. We don’t have to swing at every pitch. In fact, we’re better off barely swinging at all.
There is nothing wrong with raising cash and having it ready for that perfect pitch. Why? Because as the great Warren Buffett taught us, “There are no called strikes on wall street”.
Wait for your pitch.