As most of you are coming to know, I wear my heart on my sleeve sometimes. Trust me when I say it used to be much more dramatic. If you read my Quick Thoughts from Lake Winnipesaukee or Very Quick Thoughts from the Rock and Roll Hall of Fame, then you can see I look at things through the prism of life.
Life is about finding happiness, and money is just a tool. We all need to remember that money is not the most important thing in our lives and that other decisions will impact us much more, for far longer.
On this site, with this service, we are here to make money. I can tell you after 25 years in the financial industry, there is no more valuable trait than being able to control your emotions when analyzing something. I think that lesson is true for other things in life as well.
Finding Emotional Control
Finding emotional control is a challenge. I wrote about that in an article that stole and modified a line from Napoleon Hill: Control Your Emotions, Direct Your Thoughts, Ordain Your Destiny. It’s an important article.
To deal with emotions, some folks gush, others repress. It comes down to our pasts, our present, what we hope for our future and what is going on around us. When things change on us, when we are in transition, it is then that our emotions can get the best of us. When we feel fear or anxiety, that can often lead us to overreach or make mistakes (sometimes of commission and sometimes of omission).
I have generally held my emotions in check fairly well since the early 2000s post rotten divorce. My stock market success is some indication of that. I focus more on the fact that my kids eventually choose to live with me and turned out pretty damn well.
My emotions wavered a lot the past couple months though. A smart, funny, beautiful woman made me feel a lot of good and powerful emotions that I hadn’t felt in over a decade. I thank her for that. We’re best as friends, but new relationships make you think about things. Investments are sort of like that.
With investing, I have been able to build a firewall and a margin of safety. Knocking Silver Spring Networks (SSNI) and Exact Sciences (EXAS) out of the park can attest to that. Also, it appears my thoughts on a potential Iran war and more expensive oil were made very real by President Trump in his speech to the U.N., despite the massive criticism I received in the comments section of An Iran War Is Coming – Buy Oil Stocks Now.
To become more emotionally disciplined, I spent countless hours reading books on emotional control, emotional negotiation and on executive leadership (the book I recommend to everybody for life and investing is to read Beyond Reason by Roger Fisher). I’ve gotten very good at turning off the emotions when necessary, directing my emotional energy or at least building a firewall when it comes to investing. My long-time reputation has been that I’m unemotional. There are exceptions of course.
I have seen great investors get distracted or emotionally off kilter and get whipsawed. It happened to me once.
Back in April and May of 2015, I suffered a permanent tissue damage injury to my right leg, was struck in the heart by a baseball from a different diamond knocking me out while leaving a lesion (scar tissue) on my lung and then my house burned putting me out for 4 months.
From May 2015 to about December 2015 – when I woke up on my couch staring at Christmas lights having not slept in my bed since getting back into the house post fire – I was a crappy investor. It cost me a friend, several clients and a lot of money.
The wake up moment though was enlightening. I realized it was time to take a step back and reassess. That’s when I decided to change my entire practice and start teaching people how to invest on their own. Moving towards investment letter writing has been the best professional decision I have made.
I tell you these stories because I hope some grain helps you somehow. When you are going through something super emotional, it is usually a good idea to at least step back, settle and then refocus. Sometimes talking, writing or even singing a little to get our emotions back in check is the right thing to do. Each person is different.
Once we have our emotional control, then we can focus on the mission. The first step is of course deciding on the mission. For us, our mission begins with understanding two monumental trends.
The first is that the cheap oil period is coming to a close. It might take another year or two, but make no doubt, oil is going to get more expensive. I’ve written enough articles about it, but the shorthand is that the cheapest oil is running out, investment has been low globally and demand will continue to drift upward for about a decade – The Coming “Peak Oil Plateau” and Higher Oil Prices. Oh, and there might be a war in or within Iran that disrupts oil supply.
Next is everything involved with the Internet of Things and other emerging technologies like AI, AR and VR. There is massive money to be made here. We just made over 50% in a 4 months on Silver Spring Networks and we will be buying at least a few more similar companies.
There is so much out there to consider investing in that the universe is cognitively limitless. That is why I am putting out the Growth 30 in the next few days. We have to use our Core 4 process to narrow the field so we can put the appropriate time into the research and then build trading strategies.
Over the next year or two, our mission is to sidestep any big market corrections and use pullbacks to establish positions in more winners in energy and technology primarily, though there are also some other attractive spots, like REITs that pay income and act as inflation hedges.
Disclosure: I am/we are long EXAS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I own a Registered Investment Advisor, however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.