365QOD- Day1240

Crazy Thoughts

“Crazy… Crazy about you…”- song lyrics

According to James Altucher:

Lesson#10 “This is crazy” means you are crazy 

The market will do what the market will do.  Unfortunately, we like to think that we know better than what the market is doing.  This causes great losses and leads to craziness.

Market movement is due to thousands or even millions of transactions that move the investment price  up or down.  Yes it is very volatile.  Yes it is sometimes driven by large players and bad news.  And at times it is driven by pure stupidity.  

But we must realize that it is driven.  If some move you make goes against you, you need to make sure it is limited in ability to hurt your whole portfolio(10% rule) and walk away.  The market will do what it wants to do, not what we want it to do.  The worst thing we can do is outthink ourselves by adding to a position if the market is going against us.  Now, that is crazy!

The best that we can do is go along for the ride, up or down, for a bit and then get out.  Do not fall in  love with investments!  Every company has a story.  Don’t fall in love with the story!  Just simply ride the move up or down.

Today’s question is:

“Have you ever doubled down on a loss?”

365QOD- Day1239

It Doesn't Matter

“How can one decision destroy me?”- a common belief

According to James Altucher:

Lesson#9 It doesn’t matter if a trade (or a day, or a life) is good or bad

Our lives are full of decisions.  We makes so many decisions that our brain can not process all of them.  Well it can but it chooses the automatic response most often.  This is done so that we actually do  something instead of just think all day.

Even though most thoughts we have are the same as the day before and our actions mimic what we  have already done, we need to not take those thoughts and decisions and make them so automatic.   They do matter.  

I disagree with James that these decisions do not matter.  They do.  Especially if we want to improve  and get better.  

For the financial perspective, we must take our best shots at the market and when they do not work  out spend a little bit of time analyzing what went wrong.  What was our thinking and doing process?  Do we need to adjust it somehow?  We need to taste the pain of the loss.

After a small amount of time is spent thinking about the loss we need to move it behind us and not  dwell on it.   We have tasted it, now we need to improve the next trade.

Today’s question is:

“How do you analyze a mistake?

365QOD- Day1238

Laughing at Your Self

“I personally resemble that”- my words after an insult

According to James Altucher:

Lesson#8 Laughter

I do not take myself seriously.  I expect to NOT know more than I do.  But I do expect myself to  continue learning and improving.

So when I seem naïve on some trading technique I will look it up and do some research.  Or I will  simply ask.  Often times I have been insulted and looked upon as stupid.  I just laugh off the insult and use the line from above.  It completely takes the person off guard.

Why?

Most people are afraid to ask because they fear looking stupid.  To me there is a big difference between being stupid and being ignorant.  Ignorant just means that you have never been exposed to that  knowledge and do not know any better.  Stupid means you have been exposed to the knowledge but  you consciously chose to do the wrong thing.  I would rather be thought of as stupid and remove my  ignorance than to stay ignorant and really be thought of as stupid.  Asking the question saves me time  learning the new concept and that enables me to learn faster.

Today’s question is:

“Do you laugh at yourself?”

365QOD- Day1237

Health Issues

“Humans are funny creatures.  During the first half of their life they trade health for money.  In the second half they trade their money for health.”- Unknown

According to James Altucher:

Lesson#7 Health

Day trading is no different than any high intensity type of job.  Most of us would probably classify the work that we do as high intensity.  Or at least medium intensity.

The problem with most people’s lives is that the things that are easy to do are also easy not to do.  It is easy to exercise for half an hour and that is why it is easy not to exercise for a half an hour.  That  decision is a very small decision in the scheme of things.  You will not drop dead if you do not  exercise now BUT over the long run it will catch up to you with bigger medical issues.

The stress of the high intensity is another aspect of the job.  Most jobs take their mental toll on us even when we do not recognize it.  If you are waking up in the middle for the night thinking about work  then you are stressed.  It is as simple as that.  

Whether it is physical or mental stress, the long term damage is subtle and it will eventually sneak up on us.  That is why it is easy to ignore on daily basis.  As the quote teaches us, if you are willing to work so hard for the financial freedom then work on your health as diligently.

Today’s question is:

“What are you doing to improve your health?”

365QOD- Day1236

Commitment Issues

“When do I walk away?”- a great question that is often asked too late

According to James Altucher:

Lesson#6 Say “no.”

One of the dangers in trading is committing to an investment and then being unable to walk away from it.  It is called commitment bias.  Once committed, we see walking away as a loss of time, money, and energy.  It plays with our mind and we find it difficult to stop.

A great question that starts the process of walking away is, “Knowing what I know now, would I get into this investment at this moment?”  That tells you if there is a potential for change.  But unfortunately most of us lie to ourselves and would probably stick with the investment.

SO what is a better way?

I like the 8% rule.  If an investment drops by 8% from my initial investment I need to sell it and walk away.  No questions or guilt.

This minimizes the loss to 8% and it only requires roughly 8% (actual number is an 8.7%) return to get me back to where I was.  I can look for another investment that could give me that return instead of hoping this falling knife will not cut my foot off. 

The secret is to automatically determine an exit point and to pull that trigger.  Say NO! to that investment and find a better one.  You have to be able to believe that anything that goes down by 8 will be replaced by another investment that can go up by 8%. 

Today’s question is:

“Do you know when to say no?”

365QOD- Day1235

A Basket Full of Cracked Eggs

“Smash… the basket was destroyed”- my paraphrase of a story an investor told me

Many years ago I did an investment presentation to a Fortune 10 company and after the presentation one of the attendees asked me for some advice.  His words were that he had picked his former employer’s stock and when that employer crashed so did his stock.  I was not surprised.

According to James Altucher:

Lesson#5 Diversification

I have never been too big on extremes.  I do not think we should invest in single instruments.  Similarly, the other extreme of having many investments is no better.  So what does diversification mean to me?

Diversification means having multiple sources of income coming from very different instruments.  Work brings in income but only a minority of your investments should be in your company stock.  If both sour then you are left with the basket fulkl of cracked eggs. 

Many people think of index funds or even segment funds as diversification.  I do not.  You can often place the plot of many foreign mutual funds vs. index funds and they will match in shape.  How can a Brazilian fund match the US market?  Well, the world is very interconnected and you do not get the disconnect that you would expect.

If I am focusing on ETFs then in my world picking several consistent investments is better than picking the hottest ones.  I want true performance and not something that will go up like crazy and come down just as fast.

SO pick a few mutual funds, a few stocks, a few ETFs, few sources of income, residual income, write books, etc. and you become diversified.  Do not pick too many because you will not be able to keep track of them efficiently and respond quickly if there is a need.  Keep It Simple Sweetheart!

Today’s question is:

“What does diversification mean to you?”

365QOD- Day1234

Reducing vs. Eliminating Risk

“Pitiful is the person who is afraid of taking risks. Perhaps this person will never be disappointed or disillusioned; perhaps she won’t suffer the way people do when they have a dream to follow. But when that person looks back – and at some point everyone looks back – she will hear her heart saying, “What have you done with the miracles that God planted in your days? What have you done with the talents God bestowed on you? You buried yourself in a cave because you were fearful of losing those talents. So this is your heritage; the certainty that you wasted your life”- Paulo Coelho, By The River Piedra I sat Down and Wept

According to James Altucher:

Lesson#4 Taking risks versus reducing risk

Maybe no pain no gain really should be reworded as “No risk, No Reward”?  Everyone has heard the old saying of no pain no gain.  The closest quote I can find to no risk, no reward came from Niccolo Machiavelli, “Never was anything great achieved without danger.”

But this statement misses the twist that James puts on it.  The idea is not necessarily to eliminate the risk but to reduce it.  James even offers an example of driving without a license on you.  Once you realize that you do not have the license with you you would drive carefully and obey the rules of the road more closely.  By doing this you are still risking getting a ticket for driving without a license BUT you are reducing the likelihood of it happening in the first place.

How do we apply it to day trading?  For day trading, this mean that each day at the beginning we must reset our stops.  Don’t assume that stops you placed one day are good until you decide to sell.  The investment could have gapped down overnight and your stop is worthless.  You are betting on it protecting you but the net is gone.  So reduce the risk by setting a new stop. 

Today’s question is:

“Do you reduce or eliminate risk in your life?”

365QOD- Day1233

A Bit of Certainty With a Little Bit of Uncertainty

“One of our primary needs is Certainty.  Another one is Uncertainty”- Unknown

According to James Altucher:

Lesson#3 Uncertainty is your best friend

Human beings are interesting to study.  We like certainty.  It fulfills a need that we have that if leave our keys in a place that when we come back they will be in the same place.  The idea of someone messing with our keys bugs us.

Keys are a simple example but overall we want our lives to be full of certainty.  Unfortunately, we reach a point when there is such a thing as having too much certainty.  When we reach this point we get bored with certainty.

So at that point we tend to seek a bit of uncertainty to spice up our lives.  This makes things new again and we enjoy them until we feel certainty and start looking for uncertainty.  It is a cycle of certainty followed by uncertainty followed by certainty and so on.

An application in trading would be to not always just pick the investment that you feel will beat the market but to also consider ones that have been loosing recently.  This Warren Buffet strategy of buying when an investment is on sale works well if we accept that we might be wrong at times.  In the past I have read of people who strictly apply this idea by buying what is out of favor and riding it back up as it rebounds.

Today’s question is:

“Do you seek out uncertainty often?”

365QOD- Day1232

Hoping vs. Controlling

“I hope this turns out well”- famous last words

In the article 11 or 12 Things I Learned while Daytrading Millions of Dollars, James Altucher gives us his second lesson to be:

Lesson#2 Hope is not a strategy.

Lesson1 taught us that we are horrible at predicting the future.  As I advised, we need to enjoy the adventure because we are not going to be able to predict the future precisely.  So sit back and enjoy?

Well, what else can we do?  We can hope that the future unfolds the way we want it.  And at some level we all hope this will be the case for most  or all of our lives. But as the lesson warns, hope is not a strategy.

A strategy has the form: 

If X happens, then I will do Y.

It starts with identifying a few Xs that can happen and thinking through how you will respond.  This process should not be one in which you dwell on the bad X that could happen but just realize that if it does happen you have options, Ys, and that you can recover. 

As I often say, what is your plan B,C,D,etc.

An application of this lesson towards trading is that we must follow a detailed plan.  If we say that if an investment drops by 10% that we will say, the moment that condition is fulfilled then we must sell.  We can not sit there “hoping” it will rebound. The rebound could continue working against us and pretty soon we are desperate not to lose too much.

Today’s question is:

“Do you identify your strategies for recovering from a bad outcome?”

365QOD- Day1231

Having a  Crystal Ball

“I see a great future ahead of you”- a fortune teller’s words

I read an article from a day trader about the lessons he has learned from that trading.  I used to day trade so this was of interest to me.  And hopefully it will be of interest to you.  In next 11 posts I will explore the ideas from his post.

In the post, James Altucher gives us the first lesson he learned to be:

Lesson#1 You can’t predict the future. 

I believe that we often spend too much time worrying about what will happen in the future.  As I have written before, our powers to predict the future are very small.  We like to think that we can in order to remove most of the uncertainty of what will happen.

As James points out, marriages end in divorce. Healthy people suffer medical setbacks.  Non-smokers die from lung cancer.

All this predicting sets us up on the path to unhappiness.  By believing that we can predict in the first place and control in the second, we are racing towards unhappiness.

The solution?  The solution is to accept and enjoy the adventure of life as unpredictable and one that will end the way it is supposed to not the way we want it.

As an application to trading, I would say that one often finds themselves believing that an investment will go up in value.  Our belief is so strong that we are predicting that it will. The market sometimes does the opposite.  The market is what it is.  It is not our prediction that counts but a sum of everyone’s actions that lead to an investment going up or down.

Today’s question is:

“Are you enjoying or predicting your life?”

365QOD- Day1230

Doritos Fingers

“Your actions speak so loudly, I can not hear what you are saying.”- Ralph Waldo Emerson

I have always marveled at the disconnect that most of us face.  It is amazing and often times hypocritical.  I call it the big disconnect.

If for a moment you think about the different areas of our life (physical, spiritual, emotional, mental, financial, social, etc.) you could easily find one that just seems out of whack.  You can hear yourself saying the right things but not doing them.  That is where the disconnect comes into play.

Unfortunately, as Emerson observed, it is not the words but the actions that speak so loudly.  People will observe you before they will hear you.  You telling them X without them observing X is immediately perceived as a lie.

As an example, consider someone who says all the right things about eating well.  They talk about the number of fruits and vegetable servings that they consume.  You even see am apple calendar above their desk.  But then you walk by their desk and their fingers are orange.  Immediately you realize that the talk and the walk do not match.

All of us being human will experience the Doritos fingers phenomenon.  We will let ourselves down.  It is not that one choice that kills us.  It is repeatedly making the same bad choice.  After we fall, we must lick the orange off and give ourselves a better “if I want Doritos, I will do Y” option.  And for most of the time that should get us through the moment of weakness.

Today’s question is:

“How do you keep yourself away from the Dorito fingers?”

365QOD- Day1229

Two Types of Presents

“Wherever you are, be all there”- great advice

The word present is a powerful word.  Interestingly enough the word has a dual meaning.  One meaning is that it is a gift.  The present that someone has given us or we give.  We should receive it with joy and give it with love.

The second meaning is one of time.  To be present in the moment is the greatest gift we can give ourselves and others.  When we are working we should be working.  When we are relaxing we should be relaxing.  Multi-tasking is a myth.  Stick to one thing and really savor it.

Being present also affects others.  Have you ever walked into someone’s office and they were busy in the middle of a task?  They are trying to rush to finish before giving you attention.  Unfortunately they do not do either one well.  So the task gets delayed and their attention is going back and forth between you and the task they set aside.

A while back I tested a mindfulness app and found it very helpful.  I believe that random reminders to check in and determine if we are present are a powerful tool to get us to be more present.  The reminders allow us to measure it by asking ourselves if we are truly present at that moment.

Today’s question is:

“Are you present?”

365QOD- Day1228

Do you Track Everything?

“That which is measured can be controlled”- my belief

In my Moleskin grid notebook, every day I keep a log of what I plan to do and what I actually get done.  Until a year ago I had separate notebooks for professional and personal tracking.  Then I realized that my life needs to be in one place so I just simply inserted my personal tracking next to my work tracking.  It has been very helpful to only have one notebook to look at. I usually fill out two of these notebooks per year.

Each day I track the normal dimensions: physical, spiritual, emotional, and mental.  In addition I track focus, urgency, discipline, creativity, learning, the good, the bad, and risk I take.  In addition I track my weight, the food I eat, and self-judged amounts.

So I am a tracker?   I can sit at the end of the year and look at patterns in my work performance and life performance. 

One thing that I need to add to my list is financial tracking.  I believe that most of us focus poorly on our financial state.  It is almost as if we expect someone else to do it for us.  No excuse but ignorance costs too much.  So I will add it to my daily tracker format.

By tracking anything, you will bring focus to that area and can look for ways to improve.  Without tracking everything is left to chance.

Today’s question is:

“What in your life should be tracked?”

365QOD- Day1227

100% Responsible

“I feel a responsibility to the people who've helped me. There was the senior analyst who mentored me, the boss who hired me when no-one else would, the boss who gave me my first big promotion when I was hugely pregnant, the scholarship program that paid for my education, the high school guidance counselor who told me to stop acting like a dippy southern belle throw-back, the several CEOs who heaped more responsibility on my plate than they likely should have, my parents…….you get the point. Each of these people took risks with me, and in turn I feel an on-going responsibility to them.”- Sallie Krawcheck, LinkedIn article

Let me tell you a story.  A while back, I listened to a CD in which a presenter questions an audience about their responsibilities. 

The presenter asks the tough question, “In relationships, what percentage are you responsible for the success of the relationship?”  The audience starts with the easily derived 50/50 ratio.  Then someone gets smart and offers the 51/49 as an answer because you have to be willing to do a little more than your partner. Next someone offers 80/20 as the ultimate answer.  It must be!  You have to be willing to carry majority of the weight of the responsibility in order for it to succeed.  Lastly, the presenter writes 100% on the board. 

I believe that this is a powerful lesson.  The only way we can help the other person is by assuming 100% responsibility for the relationship.  Assume that the other person will give nothing back.  This will feel awkward most of the time but do it anyway.

As Sallie teaches us, we have responsibilities toward people who helped make us a success.  The people in our lives at this moment are having the same effect on us.  Often times we blindly do not see the little things that they are doing to nudge us. We should be willing to take that responsibility in order to help nurture the relationship.  By doing so we ultimately accept responsibility for all of our actions and choices that have led us to this critical point in our lives.

Today’s question is:

“Do you take 100% responsibility for your relationships and life?”

365QOD- Day1226

Can Both be Correct?

"No I am right."- the ego talking

The other day I watched two people get so mad at each other.  The first had meet  with a customer.  He was told what the customer required directly and saw an  example of what the customer wanted.

When he went to coworker the coworker told him that what he had delivered was wrong. The co-worker said that the product was not in a proper format and that it should be done differently.  This made the  first guy to go to a third guy to confirm. The third coworker agreed with the second guy.  First guy left in a  huff.  An hour later he corrected it the way the two co-workers had suggested.  

What he had he had done was not wrong just did not fit the standard way of doing  the design.  It satisfied  the customer demand but it showed a lack of knowledge.  In his defense, he realized that he needed to follow  the standard.  The customer  got their data but in a different format.

Interestingly, by combining the way he did it and they way he wad told to do it  both would have been  satisfied.  The solution chosen was one of OR and not AND.  The AND solution was a better choice.

Today's question is:

"How do you know when you should follow a standard solution?"

365QOD- Day1225

Being One

"Quantum physics thus reveals a basic oneness of the universe."- Erwin Schrodinger

The other day I had a conversation with Tommy.  He had watched the Belmont derby and wanted to tell me what he thought of it.  He had watched the other two races in which California Chrome competed and could definitely tell that they did not find a rhythm.  He observed that the house and rider were never in sync.  As he explained it, the rider and the house never became one.

I loved his example.

My counter example was of the NBA finals games between the Spurs and Heat.  I love playing basketball and pride myself on being a passer. One thing that stood out to me during the games was how great the Spurs were as a passing team.  The Hear could not figure out who will shoot.  I predict that the Spurs will win mainly because of the superb passing skills.

Both examples lead us to conclude that becoming one, whether two or many, is vital to winning.  As the old saying goes, there is no I in team.  We have to realize that making a great pass to a co-worker is as important as making a score ourselves.  Unfortunately no performance system tracks or rewards this behavior.  They should.

Today's question is:
"How would you behave if your performance is based on how well you sty your teammates for success?"

365QOD- Day1224

One With the Source

"To the mind that is still, the whole universe surrenders"- Lao Tzu

Imagine warming to grill.  You would get some charcoal, some fluid, and matches.  Typically you will soak the charcoal fluid and them let it sit for a while.  Next you will light the charcoal.  Once you have lit it, you will wait for the fire to reach full heat.

At this point you have taken the time to build, ignite the fire, and reach full potential.  Let us define this end result as a source.  What will happen if we took one of those burning charcoals out and placed it on the cement? It will quickly go out.  A lot quicker than if we left it as a part of the source.

However, if we took it and placed it in the middle of a new set of charcoal that has been prepped with fluid it could become the start of a new source.  If the single lit charcoal is too small the fire will never start. So you have to set up the new environment in as good a shape as the first source in order for it to succeed.

The moral of the story is that it takes an effort to build a great team but once you do than do not allow  the  pieces  to  break  apart so easily.  An example? This  phenomenon  is  often  violated  by  a  successful owners single restaurant.  The owner decides to build another restaurant nearby and takes half of his staff to the new one.  Eventually both restaurants become mediocre and fail.

Today's question is:
"How fat are you from your source?"

365QOD- Day1223

Keep Doing This, Stop Doing That

“The other day I did the simplest thing. It took 15 minutes. And the amount of value it produced was totally ridiculous.”- Erica Ariel Fox Influencer column

Lately I have become fascinated with 15 minute increments.  Why would that fascinate me?  Well 15 minutes is 1% of our day:

15min=(1/4 of one hour)*(1day/24 hours)==1/96 th of a day=.01042~1.04% of the day

So 15 minutes is about as close as you can get to 1% of a day.

The fascination is how we do not realize this.  And even more importantly what to do to improve my life by maximizing each 15 minute increment.  This ties in with Erica’s blog post.

Erica decided that she would approach two co-workers and ask them to participate in a little brainstorming session in which they would each write down one thing she should keep doing and another one she should stop.  Providing a specific example should be a part of this exercise.

This idea is wonderful and could be very effective.  I suggest you get a set of index cards.  On one side write Keep Doing This, and a few spaces lower, and Please Provide an example of this. On the back of the card write Stop Doing This, and a few spaces lower, and Please Provide an example of this.  Give it to a couple of people with the instruction:

I am trying to become a better X (person, co-worker, team lead, etc.). 

Please help me by filling out this card.  Do not spend more than 15 minutes on it.

I will promise to make an attempt to improve based on your feedback.

THANKS

I believe this card could be used at work, home, and any relationship you wish to improve.  But be ready to truly hear the feedback and make an effort to improve based on it.

Today’s question is:

“Do you have the guts to ask for this level of feedback?”

365QOD- Day1222

Whose Plan is It?

“Ester asked why people are sad.
"That’s simple," says the old man. "They are the prisoners of their personal history. Everyone believes that the main aim in life is to follow a plan. They never ask if that plan is theirs or if it was created by another person. They accumulate experiences, memories, things, other people's ideas, and it is more than they can possibly cope with. And that is why they forget their dreams.” ― Paulo Coelho, The Zahir

For most of our lives we are mostly followers. This is a prehistoric instinct that assures survival.  We follow what our parents tell us so that we do not get killed when we are little.  We follow what our teachers teach us because we see them as all knowing gods. This continues into young adulthood and later.

As Paulo writes, we are the prisoners of our personal history.  We are even prisoners of other people’s plans for their life.  No wonder we are sad.

I believe the wisdom is in the line about accumulating experiences, memories, things, other people’s ideas.  But then we have to take those and process them to create our own personal plan.  Just because everyone is doing X maybe we should be doing Y?

In my world this takes wisdom and courage.  The wisdom to sort through those and even force yourself to experiment with new adventures.   The courage comes into play to be strong enough to actually pursue the plan we have generated.  Just because you create a plan does not mean it will be enough for you to accomplish it.  It is just a start.

Keep in mind that if the plan is not aggressive or cannot fail then you might be back to doing other people’s plan.  It should be an adventure without certainty.  It should scare the pans off you while being nurturing enough to keep pushing you forward.

Today’s question is:

“Whose life plan are you executing?”