Catalysts To Change: What I Learned On Our May 7th, 2010 Plunge Day

Today was a special day for me because I was given two refreshing life lessons, one of which was humility and the other on how something bad reminded me that our goodness and pleasure in life is in the present, in today, and in the simple things of life.

Humility

In my yet soon to be published book and workshops titled Catalysts To Change, we talk about moments which can act as transforming catalysts to your consciousness, to give you an “aha!” type of realization that is appreciated, to shift your sense of values and priorities. Yesterday, I had two such powerful experiences in one day which are the topic of this article.

First of all, I have spent the past two years working very hard and seriously as an investment trader of worldwide equity and asset markets including stocks, etfs, gold, oil and currencies. So when a few hours ago I learned about and had just missed witnessing, Wall Street’s greatest plunge in history with the Down Jones index plunging a hair short of 1000 points in afternoon trading, it really got my attention and made me think. Investors and traders like myself find that kind of event unforgettable. Surprisingly it made me think about how little the supposed proclaiming gurus know. Over the past few months, I keep noticing how gurus want to be able to cheer “I called the top” or some other version of “I made that call” Ergo, I’m King Kahuna Emperor of Wall Street and you should listen to what I say. Never mind, that a few hundred thousand other people also shared the same sentiment that very same day and for many days before. So if they said “Along with 100,000′s of thousands of other investment advisors and traders who all agree that the top, the crash, the plunge, the blackswan day is coming very soon, never mind you say it every day so that eventually you have to be right!

Today therefore, I am King Kahuna Emperor of Wall Street because my entire portfolio has been short the market the entire past two weeks as the market has undoubtedly and finally and distinctly made its classic, identifiable “The Top”. My portfolio of ETFs is up 20% in just the past two weeks. Wow. Ooh. He’s good!

Folks, its all a bunch of hoopla and Bull@#$t. If you happen to be short when the market plunges, you’re a genius. If you happen to be long when the market keeps trending higher, you’re a genius. Unfortunately, as Taleb points out so well in his classic “Fooled By Randomness”, the vast majority of investors lose money trying to achieve that timing to accomplish what seems so easy but is at best tough to do. That’s because human beings have emotions which affect our decisions, discipline and control. 90% of human beings seem to have a very hard time controlling those emotions when it comes to investment and trading decisions and that’s why they don’t make money. Over the years, I made those same mistakes and lost money and over the years of experience I”ve learned how not to make those mistakes.

And so I lead to what I learned and enjoy feeling from this: Humility. Because being right and being short this past two weeks doesn’t make me the King Kahuna Emperor of Wall Street who called The Top which finally arrived this week, even though I did. I was in fact, short the market several weeks to early and so didn’t book anywhere near as much gains as I had hoped I would to now. We’ve all been calling the top and wanting to claim it for ourselves because we want to increase the number of people who follow and appreciate our ideas and analysis of business including the investment markets.

I enjoy this feeling of humility and sense that so many gurus out there in fact are full of crap up to their ears doing not much better than straddling on the 50/50 chance that what they say will match what happens.

Something Good From Something Bad

On this very same morning that I faced the news of the 1000 point plunge of the Dow Jones stock index, we had another power outage on my street, all electricity out, a blackout, which lasted about three hours. Such power outages happen several times per year in Sanya and many other cities throughout China. It is very hot and humid today, about 34 degree with typical high tropical humidity. Faced with no electricity I had to decide what to do with my time; do I head into town with my laptop and park myself at a coffee shop to do some work or do go for my afternoon run and figure that the electricity will probably be back on soon enough? I opted for option two. I went for one of my typical 6k runs and needless to say, I knew that I would be soaking wet with sweat as I finished the run and continue sweating for at least another 45 minutes after the run. The sun was down and there was an afternoon breeze which did a nice job of keeping me cool.

Here’s what happened. With the electricity out, for whatever reason, the water pressure goes and we also had no running water. So, as though I was on a camping trip, I decided to empty a litre bottle of drinking water into a bowl, grabbed a handtowel, and stepped out onto my balcony where the breeze was hot but nice. I had no shower, no faucet and no running water. I could easily be annoyed about it. From head to toe still soaked with salty sweat, I dipped the towel into the water bowl and without squeezing it dry I dropped in on top of my head and let the water run down and rinse my body. I did it a couple more times, rinsing all the salty sweat off my body and suddenly it hit me that it felt great! I was standing in the breeze splashing down my body with cool water from head to toe and it felt terrifically refreshing! I spent twice as much time unexpectedly enjoying such a simple thing: a rinsedown in the breeze, as though I was along a mountain stream. I expected and had the typical attitude that the power outage of the modern world would be an annoying inconvenience but instead it delivered a back to nature refreshing rinse in a cool breeze, reminding me that our goodness and joy is found in the present, not the regrets of the past or the anxiety of the future.

Read the original story at Mario Cavolo