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Okay, so the feds threw us all a curve ball yesterday. I'm going to stick by my prediction that the measure will still pass by the end of the week, though I have more doubts now. I found it interesting that there were an almost equal number of Democrats and Republicans voting against the plan. For the nay votes on the Republican side, the plan was too socialist. For the nay votes on the Dem side, the plan wasn't socialist enough. And I imagine there were a few scattered nay votes thrown in just to piss off that idiot Pelosi after she decided to run her mouth.
Congressional drama notwithstanding, let's get back to the topic at hand. Namely, how to not only survive but to thrive in this chaotic market environment.
To survive and thrive in this current crisis will require balls and creativity. You can forget about spreadsheets for awhile. Some will panic because nothing in college prepared them for this. They will wash out and frankly be the better for it. The market is not for little boys in short pants. Others, however, will find the opportunities. They will figure out where the money is going, and they will get there first.
For me, I rode the crest of the LTCM bailout and the Asian Flu. It was only ten years ago, but I realize that a lot of you still thought a box of animal crackers for a bologna sandwich was a successful trade in 1998. To give you an idea of how bad things are right now, everyone thought the world was coming to an end when LTCM went tits up. The price tag on that bailout was less than $5 billion. But all the ensuing chaos allowed me to start buying crude oil when it was $12 a barrel, and unleaded gas on the NYMEX when it was 32 cents a gallon. It also created a predictable divergence between the S&P futures and the treasuries, which we were able to exploit several times a day for about six weeks. That was all the time it took to get rich (though the oil trading paid big bucks for several months longer).
What you have to realize is that you make your money where you make your money. I started out where all of you did (or will). I just decided to risk it all on the CPI at historic lows. Looking back, it seems like an easy decision. But in reality, I made a lot of mistakes in the early going. One trading error (an error in judgment, not a clerical error) cost me my next two month's pay. I actually threw up into a trash can when that happened. But if you're not willing to eat Ramen noodles, you might not have what it takes to get rich when things go bad (unless you've got Family Money, in which case your career is largely an academic exercise anyway).
Do yourself a favor and start dumpster diving. Find the opportunity that is the most ignored, reviled, mundane vehicle out there right now. Prestige don't pay the rent. Go where no one else is willing to go. Admit to yourself that nobody owes you a God damned thing, and go work your ass off. Work for free if you have to. The guys willing to take the biggest personal risks will be the ones you'll eventually read about. And take it from your old Uncle Eddie, when you're lying on your deathbed the only things in life you're going to regret are the risks you didn't take.
This is a big shit sandwich, and we all have to take a bite. But there are some silver linings in this mess. I'll cover them in part 3 later this week. Good luck, and let's be careful out there (but not too careful).
im curious on what you think about the bill on the hill as it is now and the administration claims that without it the markets will totally implode (keep in mind, im not advocating zero intervention). you seem to have longer term perspective.
i agree with your post above, but happen to think the strategy you recommend is one that is just great in general. its good to have a reminder of course. cause the red in the market can be paralyzing. i think we all need to be about ourselves in some sense. my trade for this time has been buying the skf index and HOLDING it. cha ching. i havent always made the best entry and exit points. and i still have to figure out when to completely get the heck out of it....anyway.
id also advocate the entrepreneurial spirit. i quit my job and im now im in the middle of launching a private venture capital firm and am actively out there looking for any investments. ha ha. which i guess means readers have to take what i say with a grain of salt, because i love this bear market. great buying opportunities for me and my vulture money. i was an investment banker and made some coin. i upgraded to trading and made even more coin. then, i took the dollars and ran, cause well the writing was on the wall (turns out i was right, for my situation anyway). plus it was time to do for me instead of the firm....and other personal reasons.
i do understand tho that not everyone here as been in long enough to have the luxury of trying a start up. but i challenge all of the other intelligent, savvy students and former ibankers to get busy and take a shot at being creative. if you think about it optimistically, your opportunity cost of passing up the massive (formerly!) salary and bonuses on the street just got a whole lot cheaper. if nothing, youll gain from the experience and have a great talking point on your resume or business school app.
edmundo, i look forward to your next post.
spoken like a true champ ... keep it coming
Congratulations on your new venture. That is exactly what I'm talking about. You're never closer to the top of your game than when you have ultimate downside and the ability to completely blow yourself up financially. My hat's off to you.
Personally, I come from the Austrian school of economic thought, so to my mind any government intervention into the market is not only undesirable, it is likely to achieve the exact opposite of its stated aim.
This situation has given birth to a whole lot of closet socialists on this board. Of course, it is all out of a sense of self-preservation and I understand that.
I think the claims of Armageddon are a little premature, though.
Awesome post Edmundo. Really the kind of thing I needed to read.
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