what i learned losing a million dollars

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Alphaville
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what i learned losing a million dollars

Post by Alphaville »

reading “black swan” sent me on a tangent after this book, which taleb recommends in a chapter 8 footnote thus:
nnt wrote: The best noncharlatanic finance book I know is called What I Learned Losing a Million Dollars, by D. Paul and B. Moynihan. The authors had to self-publish the book.
there’s a typo in my kindle version: it’s jim paul (so, j not d). anyway, the first half is highly amusing and reads a lot like a condensed picaresque novel. i stopped there because it was late at night, and what looks like the technical part, which is more headache-inducing, begins next, and requires lucidity and coffee and more tangents.

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Re: what i learned losing a million dollars

Post by jacob »

This is a great book(*) that any trader should read. They're both from around here. BTW Jim Paul died on 9/11 in one of the towers.

(*) Before it was republished, used prices were very high.

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Re: what i learned losing a million dollars

Post by ertyu »

I read it too, and it was an excellent insight into the author's psychology. It was useful to me, but in a limited way. The author's downfall seemed to be ego and the belief in his own greatness - the denial of the losses, the, "surely it will turn itself around," the need for someone else to come and pull the plug on his positions because he was so deeply in denial and did not dare to confront the reality of his losses.

I tend to be the other extreme. I am too fearful - too fearful to enter trades, but also too fearful of letting them run. The moment I see red, the terror kicks in. I think I shared this joke with the forum already -- I don't get greed and yolo, I puke my cash position. For obvious reasons, few who have a disposition similar to mine end up becoming professional traders. So there are few lessons out there applicable to my psychology and situation. On the one hand, I am very much interested in trading and markets. I find trading very interesting and fun -- but I need to do something about the risk aversion.

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Re: what i learned losing a million dollars

Post by 7Wannabe5 »

@ertyu:

Well, if you were really risk-averse, you might revert to defendable solar acres rather than cash ;)

My problem with trading/investing is I keep churning up too many analogies that are not quite applicable. I think the Heath brothers and/or Taleb said that the closer the analogy the lower risk/reward, and I am not great at judging the distance of my analogies.

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Re: what i learned losing a million dollars

Post by Alphaville »

7Wannabe5 wrote:
Thu Oct 29, 2020 11:47 am
My problem with trading/investing is I keep churning up too many analogies that are not quite applicable.
what are analogies? i mean in trading, not in ordinary language.

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Re: what i learned losing a million dollars

Post by 7Wannabe5 »

Simple example would be value based investment is like permaculture.

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Re: what i learned losing a million dollars

Post by Alphaville »

7Wannabe5 wrote:
Thu Oct 29, 2020 2:15 pm
Simple example would be value based investment is like permaculture.
i know what an analogy is, i even used to teach SAT test when i was in college.

but in “churning analogies”...did you mean... strategies?

ps i have not read antifragile yet so if taleb used there idk

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Re: what i learned losing a million dollars

Post by ertyu »

i presume similarities to past set-ups that might be misleading. close analogies mean lower risk reward because you're not the only one drawing the analogies and trades get crowded (see gold trade rn and its supposed similarity to the 70s)

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Re: what i learned losing a million dollars

Post by 7Wannabe5 »

Close analogy would be this buyout is like this other buyout that happened last year. Distant analogy would be this buyout is like a bear swallowing a raccoon.

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Re: what i learned losing a million dollars

Post by Alphaville »

oh you’re looking at things metaphorically? why?

i had presumed analogies was a technical term as it was correlated to returns but investopedia was silent on the matter.

in any case, speaking of analogies:

charlie munger says buying stocks is like betting at horses: the higher the odds, the lower the payoff, and viceversa.

he’s got his list of mental models yes? i have that pdf somewhere...might be handy
Last edited by Alphaville on Thu Oct 29, 2020 4:12 pm, edited 1 time in total.

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Re: what i learned losing a million dollars

Post by Alphaville »

ah, here is a transcript of munger’s famous 1994 speech where he talks about pari-mutuel betting plus a bunch of other stuff

https://www.dividendgrowthinvestor.com/ ... ntary.html

he’s got a book too but i haven’ t read it (yet) where i presume he goes deeper into these subjects

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Re: what i learned losing a million dollars

Post by Alphaville »

jacob wrote:
Thu Oct 29, 2020 10:06 am
This is a great book(*) that any trader should read. They're both from around here. BTW Jim Paul died on 9/11 in one of the towers.

(*) Before it was republished, used prices were very high.
so i made it to the psychology part, and yes! wow! so very insightful. it kept me up awake reading late into the night. investor/speculator/trader/bettor/gambler.

found his obituary online too, and found the (still pricey, like $130) first editions. i was lucky to get it on kindle for something like $3 after applying some digital credits.

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Re: what i learned losing a million dollars

Post by 7Wannabe5 »

Yeah, I’ve read the “Intelligent Investor” and I get the mental models model. Probably what I am doing is, as Munger described, “torturing” stock market analogies out of other realms with which I am more familiar. For instance, I can’t stop trying to work out how the stock market is like the rare book market. My take is something like the stock market sucks in comparison to the rare book market because it is more competitive/efficient, but the stock market is great compared to the rare book market because you don’t have to get out of your pajamas or lift 40 lb boxes.

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Re: what i learned losing a million dollars

Post by Alphaville »

7Wannabe5 wrote:
Fri Oct 30, 2020 9:22 am
he stock market is great compared to the rare book market because you don’t have to get out of your pajamas or lift 40 lb boxes.
:D :D :D

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Re: what i learned losing a million dollars

Post by Alphaville »

been reading this book on and off still

found this quote from edward de bono in it, which applies to so much social interaction with smart people:
Edward de Bono, Teaching Thinking (New York: Penguin, 1991), pp. 72–73. wrote:A person will use his thinking to keep himself right. This is especially true with more able pupils whose ego has been built up over the years on the basis that they are brighter than other pupils. Thinking is no longer used as an exploration of the subject area but as an ego support device.”

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