Hurry Up and Wait or Get It Now?
I’ve been able to get some nice runs in here in Kauai and I also have not been waking up for the open.
This, legitimately, is the first time in many years since I have done that and it feels nice to take a break and not have too many positions on.
(By the way that’s Pierce Brosnan’s house there on the right, for all the Bond fans)
There’s nothing more than I have not liked in markets anymore than to sit at the desk all day and if you’ve been around me I’m vocal about it.
There are situations in the markets where you get ‘fat pitches’ - trades I mean, where, if you get it right they make up a majority of your P&L for the year/quarter.
In fact, I personally think my housing short ideas are going to be a fat-pitch and could make it to one of the larger trades this year.
But a trade like that is a ‘hurry up and wait’ idea v. a get it now.
I am going to break the two down here below.
Hurry Up and Wait or Get it Now?
“One of the most important things to do is to not play when you don’t see a fat pitch.” - Stanley Druckenmiller
He’s not the first great investor to say something along those lines, you can read about many others and like I said above I agree with this.
Earlier this year I bought into Schwab and cleared about $500K for the fund.
I’d call that a trade, not an investment and obviously how I define that is unique.
But then you have the mentality that everything is a day trade and it’s not, nor does it have to be.
And to be fair to my argument here Stanley also had this to say:
Markets are inherently unpredictable, and even the most seasoned investors cannot predict the future of individual stocks or markets.
So if you take that perspective your view is “why hold and wait, even for 3-4 weeks when I can day trade a position and remove variables of uncertainty”
At least that’s what your thought process should be.
Because in part, that thinking is true. When you place a day trade you remove outside variables and you are effectively trading momentum.
But all momentum is NOT created equal.
For example - you have no business trading a low beta name intraday when you can effectively just trade SPY or QQQ back and forth for the same results.
But I genuinely think most retail investors miss this idea. They are trying to justify why a stock should move with a narrative v. price and when you’re running an intraday strategy on high beta (Like in the Momentum Monitor) you need P/A and sentiment, not fundamentals.
But that as well can be a trap because traders take that framework and think that applies to everything.
There are situations where genuine research is warranted, like Schwab, or like the housing longs earlier this year from the report.
And now in current times: housing short.
But separating from those ideas - a trade v. an investment is the difference in making a little bit of money to making ALOT OF MONEY.
And this is where average retail traders get it wrong; the ones that cannot hurry up and wait are the ‘get it now’ types so they replace the duration, research and conviction of an idea for size/leverage.
They lever up (futures/equities/options) intraday and swing for the fence and when they miss they miss big.
And this is why you see so many of the generic day traders use this one line:
“Keep your losses small”
What they mean is this - Because you leverage up so much on a trade, in fact way to dam much for the account, you have to babysit it minute to minute and if it gets a little red you have to cut.
Because you are ‘keeping your losses small’ and by that thinking you’re following your plan.
That’s not how you’re going to make a lot of money doing this.
And that mindset is what drives failed results for the individual investor/trader (among other things) because they simply cannot separate the idea of a trade v. an investment and they haven’t even begun to understand what that means to them.
Wrapping it Up
All I can say is that codifying this in your investing is a difference maker and the failure to do so produces subpar results.
There’s a time for investments, trades and speculation and all three have their purpose if you allow them too.
I am going to be discussing a lot of this framework in the upcoming 4-week Mastermind in October and I am excited to break it down.
Anyway, back to my mini vacation.
CPI data among other news is coming the next 3 days and that just might get me up early to mess with it but we’ll see…..
This article is presented for informational purposes only, is an opinion, is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investments. Any such solicitation of an offer to purchase interest will be made by a definitive private placement memorandum or other offering documents.