(Long Island, NY) Whenever I go to the gym, I always wind up on the cross trainer machine next to guys watching the financial reports on the gym TV system. I finally got curious to see what was holding the attention of sweaty dudes with determined looks on their faces, so I switched over one day and wound up being sucked into a mini-obsession with stocks.
I don’t know how it happened, and I’m not sure why NOW was the time for me to suddenly develop an interest in learning how to play the game. All I hear is gloom and doom from Wall Street, and the economy certainly does seem to be in the toilet. So why would I bother looking into this?
It had a LOT to do with a book called “Invest Like a Shark” by James DePorre. His book makes it seem almost easy to get into the buying and selling game. He claims that a strategy with little corporate research but a lot of reliance on past indicators of activity is a viable way to invest. Naturally, his approach involves a complete disregard for the traditional “buy and hold” strategy most people like me would associate with investing.
It’s SO tempting! Get in on a stock that seems to be on the rise, bail out when the price looks like it’s topped out, rinse, lather and repeat. A newbie like me is all ready to leap right in after reading a few chapters.
Fortunately for me, I actually LISTENED to the little voice in my head telling me to finish the book before I started on a stock-buying adventure. Especially in a bear market and an economy about to stop being in denial about our recession.
The little voice told me that I didn’t know something really important, and that I should keep reading. It also told me that people who invest money after reading a few books on investments were potential suckers with empty
bank account potential.
That little voice was dead right.
By the time I got to the end of “Invest Like a Shark” I learned that you not only have to watch the 52-week averages of a fast moving stock and try to calculate the way the market will behave, but you also have to look at
a little tricky (for me) calculation called a Price to Earnings Ratio and compare THAT with the amount of money the stock is EXPECTED to do over the next year, two years, etc.
Then you can start to assemble a vaguely coherent idea of what kind of risk you’re getting into by hopping on board a fast-moving stock and trying to ride it like a damn surfboard. A very vague idea.
Next, I read Jim Cramer’s “Confessions of a Street Addict”. Cramer is the guy on TV screaming, using the crazy sound effects, and telling people what he thinks is the next hottest thing. Cramer is a hero to the newbie
stock head, and I am certainly drawn in by his charisma and hubris when he stands firm on an opinion.
But “Street Addict” showed me a second and third dimension that “Invest Like a Shark” didn’t reveal. The smart stock people are information junkies. They look at a wide range of information and base their risk-taking on what the military would call good intel. You have to develop an insane, Cramer-like obsession for this stuff if you want to make any substantial money at it by making your own decisions.
You have to get a bigger picture. The experienced investment guys say this stuff is easy. And for THEM, it is. Because they’ve made all their early mistakes, suffered all their setbacks that happened out of ignorance of the REAL market game, the one that doesn’t make itself apparent until you’ve screwed up in precisely the ways they have. Some investors never recover from these screwups. Some bounce back right away. Some jump out of high-rises.
I came to the conclusion that I could probably hop in and play the game and make a few bucks. But I also decided that I had a lot more magazines to subscribe to, a lot more information to gather, and a big nasty bear market to pay attention to before I could invest dime one.
My initial excitement over the books I’ve read has mellowed into a wait-and-see attitude with the notion that I am definitely GOING to sink some money into the game and give it a whack. What I am NOT going to do is be one of those people that the entire investment book industry SEEMS to be made to lure. I’m talking about the excited amateur who is thrilled at the idea that because Stock Alpha is currently slumping at 19 dollars a share, but has performed at 40 dollars a share when times were good. That is precisely what lured me to the market in the first place…but that surface impression does NOT tell the whole story, and very few of these investment books that I’ve seen (in my limited but fervent page-flipping of a variety of volumes aside from the two I’ve mentioned) tell it either.
These books lure the newbie trader into the game, and they help the pros because the newcomers fit into a specific part of the food chain. As in, “a fool and his money are soon parted”. That’s where us newcomers are SUPPOSED to go until we learn from mistakes that we haven’t made yet. So when you get all excited over the markets and think you should start throwing money at E-Trade.com to make some buys, remember that no matter how much you’ve read, you’ve got a severe lack of real experience to draw on to know when to make the right moves. Pretty sobering, eh? It is for me, at least. I headed to market at some point. Just not this second.
I’ve obviously got some more reading to do. I’ll keep you posted.