When I traded the US Long Bond as a professional I learned how having a preconceived conviction makes one blind. You could even say delusional. The idea of holding tight to a market direction insisting you are Right while the market keeps telling you are not is kind of cray. Yes, this is somewhat a confession.
A while back, under the impression that I was right, not baseless but also not perfectly conceived, I went short the QQQ. Being a smart guy i used a leveraged ETF SQQQ which would naturally make me a bundle more than just sitting in cash or T Bills on the sidelines. Afterall, everything said I was right about an eminent market crash…some weeks later I am still still right based upon the same more or less fundamental environment that spawned my initial “rightness” and coincidentally some 20% less wealthy. If you can allow wealthy being used so loosely. How can that be? I'm right yet the evidence on the chart and my account say I am wrong, dead wrong.
To reconcile this one need only understand that the two can coexist and often do. Some luminaries like me see the future and others do not. Since I saw the future i can only be off by the exact timing. So if I just give it more time, my prognostications will arise from the ashes , recover losses and zoom into stratospheric gains. You might have guessed that this where my rightness takes a turn toward delusion.
Why is it so hard to admit you are wrong when the empirical evidence says otherwise? Speaking for myself it is just no fun to be wrong, very great to be right and between the two is the fence. I chose a side to trade and am thus far wrong. Notice even the use of thus far suggests I cannot let it go. Yikes. I am delusional.
To cut myself a but of slack, being wring comes with pain…nature's warning to stop or change what you are doing. When the pain is endured, one can feel noble or strong or something by demonstrating it can't conquer his will. OK, but how long would you want to keep a fork deeply imbedded in your thigh? I say not very long. Does it feel good to remove it? You bet, and it then can begin to heal. Same for this SQQQ trade. Pull the plug (remove the fork) allow the loss (stop the bleeding) and let it become rightfully just the past (letting it heal).
But why oh why can't I pull the fork out? Because I am right.
Best,
Donn Marier
DM-Your Own CFO