Human Tendencies That Lose Us Money, Position and Power

We all have to fight to stay awake

Remember, the pros on Wall Street must also fight their "robot selves." That's how they know about yours, and they've been using that knowledge to take your money for years. Get clear that financial markets are best understood as the device for the transfer of assets and power from the unconscious to the conscious, from the uninformed weak hands to the informed strong hands. Welcome to the winning side.

How can you stay awake? Constantly reminding yourself…

So how do you do all this? How do you strengthen yourself and get ready to win in the most challenging and yet the most promising financial environment ever seen on our planet?

I invite you to join me in constantly reminding ourselves of the following:
1) Making money is the opposite of human nature
2) My only real opportunities to improve my financial and social position come at major societal inflection points, and ironically, those are the time when I am most scared and compulsive.
3) My mind is hardwired for physical survival, and for bad performance in sports and money games. By using my brain, I can easily transcend this.
4) I am hardwired to be great at procreation and terrible at finance. By using my brain I can easily transcend this tendency.
5) Because I am hardwired to follow the leaders of my herd, I have a mad compulsion to believe whatever I hear people say on TV. The experts on TV are Wall Street's modern day priesthood, and something about us makes us VERY receptive to the feeling that our priests stand between us and God. They are anointed and appointed to interpret for us what God wants, and how he behaves. In my heart, I know that how certain they sound or how attractive and articulate they are has nothing to do with whether they are actually correct at any given moment. Ironically, I am hardwired so that the better they look, the more articulate they are, and the more certain they sound, the more compelled I feel to believe and follow them. By using my brain, I can easily transcend these money-losing tendency
6) Because I am hardwired to be a herd animal, I have a mad compulsion to believe the guys at my club or at work, especially when they act confident, happy and prosperous. By using my brain and staying awake, I can easily transcend this money-losing tendency
7) Because I am hardwired to survive in an environment that changes very gradually over thousands of years, I have a persistent tendency to base all my assumptions and calculations on whatever I see as the established past. Obviously, this tendency will take me right over the cliff at inflection or turning points. Fortunately, all the people who are after my resources are slaves to this tendency and by using my brain, staying awake, and recognizing that the immediate past is not working as a good reference point, I have the edge over the millions of investors who are determined to separate me from my wealth, but may not have the horses.

It's a Lot Easier to Play the Short Side

I keep getting asked if the market's turning around right now. Yes we've bounced a bit over the recent week, but don't think we're out of the woods yet.

Remember, there are such things as bear market rallies and I believe we're staring straight in the face of one right now. It's a whole lot easier to play the short side right now. Every time the market's going up the volume decreases, which makes betting on the market going down is a lot easier.
So how do you make money on the short side without taking on unnecessary risk? It's a lot easier now with the ETFs they have out there to eliminate the unlimited risk.

I guess if I HAD to make an argument for equities right now it would be that you can sell happiness and buy fear right now. But you have to be nimble, VERY nimble. Investors are getting happy very quickly right now, even though we're only getting relief rallies. I know this because all that's driving the market right now is stories of global growth, which isn't what you'd be seeing if serious investors were getting in the market. So all we're seeing is people covering profitable short positions, which definitely does not mean we're in a new bull market.

Crazy Investors Make You Money...AGAIN!

My Crazy Investor Index isn’t always a buy signal. People who get fearful in a bear market are right to do so. But the Crazy Investor Index can be a great sell signal if there’s exuberance in a bear market, or it can be a great buy signal if there’s outright panic in a bull market.

Right now the Crazy Investor Index is flashing volatility and fear, but I don’t think we’re seeing a buy signal. Soon enough though, we will see people getting more and more happy and confident and THAT will be the time to strike and sell, sell, sell.