Paying the Price

Hey.

In the markets…

…our convictions fight against each other.

Cut to the ongoing core IT vs AI standoff.

With mega spends on standoff propaganda alone, currently, the AI lobby is winning.

Not…

…comprehensively.

I fight from the core IT lobby side, which, btw, is evolving, obviously not fast enough in the eyes of almost all, and the image badgering continues.

One admits to being wrong for a while.

Admission means action.

Low-conviction SaaS names bow out. Losses taken. From what remains, stronger names bought, in innovative arenas. Ballast. Bought. Clean balance sheets. Vision. Bought.

Coming to the high-conviction names, they will remain.

However, taking on the humiliation of admitting, accepting and dealing with low-conviction losers is something I am deliberately doing.

I’d much rather discuss my losers with you.

It doesn’t mean I’m not holding winners.

It’s just that I’m choosing to discuss my losers with you.

On purpose.

A little bit of humiliation everyday, admitted, acted upon, and gotten rid of, goes a very long way. One wakes up to holding multibaggers, one fine day, sooner than later, in this manner.

And on that day, some of my high-conviction IT names, if still around in portfolio when they beat the propaganda machines of the AI brigade by posting unexpectedly great results, will then also count amongst the multibaggers held.

On the other hand, if this doesn’t happen for a longish enough time, high convictions will turn lower, ultimately underceding a minimal threshold. Since I finance my expenses by selling losers, and put my income into fresh potential winners, underceders will eventually exit. That’s the price one pays for pursuing multibagger accumulation.

Point is, ultimately, losers find the exit door. Before they become losers, they get ample leeway, measured both in time, and in notional losses, since conviction is, for that long time period, high enough to not identify them as weeds. However, once mentality flips, the weed is born in the mind. Once the mind makes up its mind that something is a weed…

…that something needs to be weeded out, …

…only to be replaced with potential flowers, …

…again, and again and again.

An Anatomy of Loss Aversion

Just ask…

…a doctor…

…about the toughest course at medical school.

He or she will probably say…

…anatomy.

Well, cut to the stickiest field in market play.

You got it.

Loss aversion.

Is a thing, and is…

…not a thing.

Depending on the on-off switch.

Switch is off, and you don’t need to bother about how much your stock is down.

There is something in the story telling you that the broad market is wrong.

Gross discounting and mispricing.

So gross that you’ll buy more?

Maybe.

So gross that it scares you into capitulation?

Because you’ve lost faith?

Your story not sticking?

Welcome to a world where this particular switch has, for you, just turned…

…on.

And in this world, the Sun doesn’t shine so bright.

Your food doesn’t taste so good.

Your mood is below par at best.

Your ego just took a huge hit.

You were wrong.

Now you are either facing up to it, or…

…averting the gaze of your loss.

This is a common storyline. Happens all the time. To all of us. Please…

…don’t beat yourself up about it.

1). Since belief is gone, so must the stock … go.

2). From the remnants, buy into something where the story is rock solid, and where perhaps some margin of safety exists too. Basically buy where your maximum tick-marks hit.

3). Move on. There’s so much to do in life.

Once a switch goes on, please…

…keep the torture phase down to…

…zero.

By following steps 1). 2). and 3).

Till the time that a switch goes from off to on, till that time comes, please…

…enjoy your life in your world where the switch is off.

Please…

…don’t sacrifice off-time by behaving like it’s on-time.

Off-time means time and space to make some great calls elsewhere, those that come in handy, especially when a switch turns from off to on.

You know the next step.

Graduating

Hey.

It’s taken me the longest time to graduate…

…in the markets.

What, you expect me to show you a…

…college degree…

…for the…

…MARKETS?!

Graduation here is nothing like that.

It’s more a state of mind.

A mind that knows…

…how to get rid of a …

…loser.

And not feel broken up about it.

No emotional aftermath.

No overhang. Period.

Buy a winner with the money that remains. Spend it towards expenses.

Use it to fulfill a desire.

Move on.

On repeat.

That’s market graduation.

It’s also the difference between winning and losing.

Very few people win here.

Why?

Nobody wants to admit they are wrong.

Nobody wants to take the immediate hit.

Almost…

…nobody.

The 10-12% who do…

…win.

And they deserve it.

It’s a very expensive lesson.

Money-wise. Time-wise.

Many go broke and aren’t able to learn it.

Others run out of time. Still not graduates.

A lot like one of the deepest lessons of life.

The one that has a…

…‘sorry’ in it.

Admitting that one’s wrong. Taking corrective action. Doubling down with positive action. Moving on to fight many more battles, thoroughly enriched.

Welcome to the Graduation++.

I completed my post-grad before I did my grad, here, in the stock markets.

Was always good with numbers, so the post-grad lesson came earlier.

How to take a losing system, and make it a winning system, just on the basis of number-correlations…

…but more of that another day.

🙂