I recently made a terrible investment, but let me back up: I have never made a good one.
I am pretty sure I am the only person I know who has made lots of terrible investments. How do I know? Because people talk about all kinds of things–failed marriages, bedroom embarrassments, drug addictions, jail sentences, and children who missed a question on the SAT–but they never talk about that.
In fact, during the eight hundred thousand hours I’ve spent riding bikes with people, none has ever said, “I just lost a ton of money in a stupid investment.” And if they’re unwilling to say that, imagine how much more loath they are to say, “I just lost a few hundred bucks on a stupid investment.”
The only thing more reprehensible than stupid decisions with huge sums is stupid decisions with small ones. You’re not only a loser, you’re a small-time loser.
So anyway, back to this stupid small investment that I made, which is the only kind I can make because all I apparently have is small money …
I used to have a cyclist friend who is still the one if not necessarily the other, and he recommended that I put my money with Ol’ Bill. I didn’t know that money managers like Ol’ Bill would open up an account with a bunch of pennies and nickels crammed into an old gym sock, but Ol’ Bill was happy to take me on as a client.
As time went by my investment shrank, but it shrank gradually rather than being erased all at once, so I could tell he was a pro. We hit the Great Depression of 2008 and when I checked in with Ol’ Bill to find out how things were going and to ask if maybe we shouldn’t put my money back in the sock and stick it under the bed, he vigorously assured me that the market was going to go up any day.
It did, but just before it started its meteoric ascent I demanded that he put it back in the sock, which he did, and there it sat while the market roared up, up, and the sock just sat there.
A few years later I checked in with Ol’ Bill and asked him to put the pennies back into the market and to keep the nickels in the sock, which he did. The market continued to roar, but somehow each one of Ol’ Bill’s picks was an underperformer. He had great hopes for Bonehedz, a social media site for archeologists, but that fizzled and we barely got our money back.
I say we but it was actually just I, because every time Ol’ Bill bought a bucket of shares of Rancid, Inc., or Stinkworthy Amalgamated, he got a little commission, and all I seemed to get was fewer pennies, but since it was a gradual reduction in value I figured he had a master plan, which he did, and its focal point was Ol’ Bill’s Retirement Fund.
One day Ol’ Bill called to thank me for my continued confidence in his acumen. “What?” I said.
“Thanks for your continued confidence,” he said. Ol’ Bill had called me once in ten years.
“Was there some reason you thought I wouldn’t be confident? I mean, you’ve reduced my net worth in a perfect mirror image of the current bull market.”
“Oh, you know, I just wanted to check in … ”
That sounded like a lie, so for the first time in forever I told him to send me copies of the statements he’d been sending for years but that I never looked at and always tossed in the shredder, figuring they were either great news and I was rich, or they were terrible news and I was broke and didn’t want to know. I’ll let you guess which one it was.
I glanced at the PDF’s he sent over. “Wow,” I said when I called him back. “We’ve underperformed the market by eight zillion percent like clockwork. Whenever the market does something good, we do something terrible.”
“Yeah, but almost in a bad way.”
So I fired him and put all my pennies in an S&P index fund.
“Don’t do it,” he advised.
“Because retail investors always buy high and sell low, which is a losing strategy.”
“Like we’ve been doing the last ten years?”
“Yes, but if you do it I don’t make any money.”
He had a point, but I wasn’t sure it was a good one.
After two days the market continued to tick up and suddenly, for the first time in ever, my penny portfolio was growing right along with the market. I don’t have to tell you that I felt like a genius, so I immediately decided to quit my job and become a day trader.
“You’ve lost your fucking mind,” said the Destroyer while we were out riding bikes.
“No, I’ve got it figured out. I’m moving everything into German stocks.”
“You are a complete idiot,” he reiterated.
“Nope, I’ve been listening to the German news every day and the DAX has fallen on Greek worries and everyone is pretending they’ll boot Greece and sacrifice the euro but at the last minute they’ll all agree and the DAKS will skyrocket and I’ll be a millionaire or a trillionaire.”
“Listen, dummy,” said the Destroyer. “Every clown who makes fifty bucks at the tail end of a bull market thinks he’s a genius. But no one can predict the market, except for The Rule.”
“What’s The Rule?”
“The Rule is this: The market goes up and down and down and up.”
“I can remember that.”
“But you can’t master it. No one can. If they could, that person would own all the fungible funds on earth. Instead, some two-bit halfwit like you gets lucky three days in a row, makes a string of terrible decisions, then the market drops, and the sucker holds his breath waiting for it to come back up, but then the market is down 30% and there’s no way he’s taking that bath so he decides he’ll hold his positions for the next thirty years to recoup and then in a midnight moment of panic he sells everything just when the market bottoms out. THIS IS HOW RETAIL INVESTORS LIKE YOU ALWAYS BEHAVE.”
“The market hasn’t started going down, though.”
“It will. And you will get ground up by it. Ol’ Bill was terrible at stocks but he was great at saving.”
“Saving you from yourself.”
“You think so?”
“I know it. It’s just like poker. If you sit down at the table and don’t immediately recognize the sucker, YOU’RE THE SUCKER.”
“I’m no sucker.”
A few days later the market started to go in the wrong direction. My thirty-cent gain became a ten-cent gain, and after a few more days it became no gain at all and then a couple of days later I had thirty cents less than I’d started with. Did I mention that I’d stuck the nickels into the fund as well?
As I was pondering all this late one night I started listening to the Chinese radio station. I don’t speak Chinese, but they were excited. The more I listened, the more I could divine what they were saying. China’s stock market had tanked. I know this because in between the howling strings of Chinese, every few minutes someone would say in English, “The stock market has tanked.”
I switched on the German radio station. No mention of China. It was all about Varoufakis and his no-tie Harley Davidson approach to negotiation with the EU.
I flipped on the Internet. China had indeed tanked, but it would have zero effect on Western markets, the analysts lied. “Whew,” I thought, “because I’ve already lost two more dollars.”
Then it hit me. I really was the sucker. First thing the next morning I cashed out, just as the Chinese markets froze into a congealed mass of debt, panic, and government intervention that only made the catastrophe worse. You mark my words, it ain’t over yet and if China’s economy has no effect on ours then I want to sell you a training program that can increase your FTP 50% with no drugs, exercise, or weight loss.
So, yeah, another bad investment. But you know what? A sock full of nickels under your mattress isn’t as uncomfortable as you think.
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