My mentor’s IQ was tested by the military as 9 points over Einstein. He’s bright.
One thing I’ve noticed is that you don’t have to be a genius to act like a genius – you just copy. If Forrest Gump was right when he said, “Stupid is as Stupid does,” then “Genius is as Genius does.”
Think about how much pain in life, and losses in the market, could be avoided just by doing the “smart” thing. The emergency room is filled with adrenalin/alcohol/coke addled people who say, “I know I was being stupid, but…”
Watching the Commodity and Futures markets for over 25 years has led me to conclude they were created to teach humility to those in desperate need of it. I’ve watched the pattern over and over: man makes big money, man’s ego inflates disproportionately, man hears about the huge gains made in Coffee, Oil or Pork Belly markets, and man bets stupid sums of money against professionals. Doesn’t Man know “The proud shall fall”? King Solomon said that 3,000 years ago, and it’s still true today. Solomon was not just smart but wise.
Seven Pillars of Wisdom
I hate losing, and that got me to wondering: how could I become more Wise? King Solomon also said, “Wisdom has built her house, she has set her seven pillars.” I read that phrase and it set me on a decades-long search for wisdom. I think I’ve found the 7 Pillars Solomon said are fundamental to making wise choices. I’ve taught them on the radio, for the Chamber of Commerce and even had a chance to preach them one time. Here they are, as applied to investing:
The first Pillar of Wisdom is you have to love Truth, even more than your opinion. Facebook is full of people who are in love with their opinions, and they have visceral reactions to true statements that reveal how ignorant their opinions are. Solomon suggests we get Wisdom, even if it costs all we have. It’s that important; When you team up with Stupid you tend to be on a path of losing money. And freedom.
King Solomon said, roughly, “Awesome respect for Truth is the beginning of Wisdom.” Investing has rules. You can break the rules and get lucky, but eventually there is a price to pay. Rule # 1 is, “Always save enough to trade another day.” The rule is true for a lot of reasons, but one of them is Rule # 7: ”Most of the time you don’t know, you suspect” the next market move. Maybe you read an article that really resonated. The market is full of intelligent and informed people who take opposite sides. For every seller there is a buyer.
Maybe your gut told you. (Maybe you should eat fewer tacos so your gut talks less to you?) But if you’re wrong, betting all your money on one position, and you get wiped out, with such a bad experience you’re not likely to fund your account and take another shot. Thirty years of retirement is on the line. It’s not worth it. What’s the truth? The truth is you don’t know what is coming; you suspect, and therefore wise people save enough to trade another day. Love Pillar 1 of wise trading and it will save you some pain.
Pillars 2, 3 & 4 are more straight forward than Love Truth. King Solomon said it this way, “Listen to advice and accept instruction and in the end you will be wise.” Said another way, “A wise man listens to advice, but a fool does what seems right to himself.” Pillar 2 is Listen to advice.
What happens when you listen to wise people? You grow in knowledge. Solomon said simply, “Wise people store up knowledge.” Aristotle quotes Hesiod, “He who cannot see the truth for himself, nor hear it from others… that man is utterly useless.” In his book The Intelligent Life Father Sertillanges calls knowledge a cure: “What is knowledge, but the slow and gradual cure of our blindness.” Listen to wise people and grow in knowledge. You might recall a wise saying that people are destroyed due to a lack of knowledge.
We find that if you
Incline your ear to Wisdom, and apply your heart to Understanding,
Seek her as for silver, then you will Understand truth, and find Knowledge.
For Truth gives wisdom; From its mouth come Knowledge and Understanding.
My favorite fortune cookie says, “Knowing and not doing is the same as not knowing.” Understanding implies wise action. When your awesome respect for truth compels you to listen to wise advice, you’ll grow in knowledge; and as your knowledge increases to the level of competence, you’ll act with understanding. Should I hold? Is it time to sell? With informed understanding you act with more than a guess.
Years of practice trading creates awareness and trains our instincts. Sometimes we feel apprehension in our heart or chest, a tightness, and it gives warnings our brain missed. I find my intuition has a certain genius. The 5th Pillar of wisdom is discernment. Solomon said, “Wisdom is placed in the heart of the discerning.”
Pillar 6 is similar but relates more to our action than our decision. Solomon said, I and wisdom dwell together with prudence; I possess knowledge and discernment. Prudence guides our behavior, choices and actions.
Trading takes discipline, the 7th and last Pillar. Hope isn’t an investing strategy. Solomon also said, “Whoever has no rule over his own spirit is like a city broken down, without walls.” Let’s put it all together:
You learned how to forecast from that trainer who predicted September 11’s market crash (and a bunch of others) and US Steel looks like it is close to a bottom. The forecasting method is proven; it works over all time frames and sure seems true. You listened and practiced, grew in knowledge, and now understand markets in a way you never did before. Now you discern opportunity with US Steel stock below $6.50, but any company can go bankrupt and you don’t want to lose your whole investment if bankruptcy is announced.
Suppose you look at the option chain and notice if you Sell — a bet the stock will fall– even though you think it’s bottoming, someone is offering a 42% return if you’ll give them a year for the stock to sink below $5. Your calculator says if you’re paid over $2 for a $5 strike, your break-even cost is less than $3 – the stock would have to fall by over half for you to lose money. Thinking the trade, analysis of US Steel’s chart and risk assessment sufficiently cautious, you determine placing the trade is prudent.
Result? Six weeks later the stock doubled and it was obvious to everyone the stock wasn’t falling below $5; you close the position (buy to close) 10 months early by giving back 10% of the profit paid to you 6 weeks ago. Your initial investment is freed up so you reinvest it in Sprint. Someone thinks paying you 30% makes sense…
To learn how we routinely find the bottom of charts, please come to FreedomFest and attend our 50-minute breakout session Thursday July 12th at 3:20; and if you want to see the strategy described above demonstrated fully, please attend our ½ session in the Fast Money Summit. Saturday July 14 at 2:25. It’s titled “Make Money While Having a Life” because it only takes 15 minutes per week and trades can be entered from your phone at the beach or from the hotel wifi. In Italy.
Eric Gemelli is the principle at Market4caster,LLC, owner of Learn2invest.co. He is the author of The Pattern of Life ™, How to Make Money in Any Market ($5.99 on Amazon or free at our booth) and former talk show host of Investing In You on KRCN AM1060 in Denver and best known for predicting the market crash that coincided with September 11th.
For tickets to FreedomFest, “the world’s largest gathering of free minds,” go to 2018.freedomfest.com or call 1-855-850-3733 ext 202.
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