For Charlie. Some Suggestions

“Maybe I am beyond stupid!”


The problem with using negative language to describe oneself and one’s actions is that it limits the chance for positive change. The problem with the more common problem of over-estimating one’s abilities and worth is that it leads to true failure. So, yes, admit that you lost money due to thinking you understood how to gamble in the equity markets, when you really didn’t, and now try to fix the problem, but not by doubling down on your bets, which is what I’d say you did with buying TSLA.

Yeah, yeah. It’s probably a good company, or at least it scores well on the basis of its fundamentals. But is it really a stock you should be buying at this point in your learning journey? I’d say not.

Graham divides stocks --and them who play in the equity casinos-- into three bins: ‘Defensive’, ‘Enterprising’, ‘Speculative’. Clearly, TSLA, CRWD, ENPH, etc., are NOT ‘Defensive’ stocks, with long-established, recession-tolerant, consistently-profitable businesses. Rather they mostly fall into the transition zone between ‘Enterprising’ and ‘Speculative’, and they shouldn’t be the bulk of anyone’s portfolio except them who have a proven track record of being able to manage the risks of that asset class. (And you’re not there yet.)

So, dip a toe in the water and buy a share or two for bragging rights, but expect to lose money on them, on average and over long haul. No biggie if they are just 2% of assets under management. But a huge problem if they are 20%, or all of it.

Here’s how I’d divide up the investing world with some suggested allocations:

Cash & Equivalents (10% minimum up to 50% maximum)
Defensive Investments (20% minimum up to 50% max)
Enterprising Trades (10% min up to 50% max)
Speculative Bets (2% min and 5% max)
Non-performing Mistakes (Hopefully 0%, but tolerably, 5%)

Some comments:

Cash & Equivalents: Right now, T-Bills are offering 5% and better. You ought to be in there buying.

Defensives: finding good defensives is going to be research intensive on the front-end and then mostly just coasting once the positions are put on. Note this is the Buy&Hold stuff Quill scoffs at, but actually holds quite a lot of. Given our current macro-economics, I’d put precious metals and their miners in this group.

Enterprising: Nearly anything could fit here. Use a trending-following system to get in and out of them. Expect holding periods of 3 to 20 days. The commodities make good candidates. (E.g., look at CANE.) But anything with favorable macro-economics and/or a clean balance sheet could be considered.

Speculative: this is the in-and-out, same day stuff. The cryptos and the 3x/-3x ETFs are good candidates. The reason for trading them is to learn how to make good decisions fast. That skill will help you better manage the slower moving stuff.

Lastly, the Non-performing. A good rule of thumb is this. “Sell down to your sleeping point” especially given that the economy is going to crash and that stock prices are going to go lower.


Thanks Arindam. Really appreciate that!



I can’t find the thread right now where you and I discuss what to do about losses. But you should be comforted to hear that I eat my own cooking, not just give out advice, and that I cleaned up five losing positions just now that I had let get away from me for not charting them nightly as I should have been. Whack. Whack. Whack. They all went.

As a fraction of assets under management, all of them weren’t even a rounding error, because I never make big bets on anything. But they were mistakes, and they needed to be admitted to and fixed. So I did so. Feels good.

A couple weeks ago, I did the same with the preferreds I was holding and sold 72 (if I’m remembering right). In that case, I got rid of anything I was underwater on and anything having anything to do with banks or REITs, whether the position was profitable or not. And thank goodness I did clean house.


Thanks Arindam…That is precisely what I am hoping to get…

It was utter stupidity thinking that I don’t need to sell at a loss as I don’t have any urgent need for the money and will come out as soon as it becomes even…That may be okay if the stock I bought are stalwarts, and the amount I distributed towards them are appropriate…Neither were true in my situation…Now I know!

Looking forward to making some wholesale changes soon, so that I can dwell on what to do, rather than what happened…

Thanks Arindam!