The Foibles of Money

 Direct Answers
from Wayne & Tamara

The Foibles of Money
Q I am a career banker with a nice little sideline as an investor. My style is not high risk with bitcoins, penny stocks, and the like. I try to buy the best companies when they temporarily stumble.
 I try to advise others. When my aunt would call and ask, “What do you have for me, son?” I was able to help her make some money.  I have not had results that were as good with my best friend. I was helping him run some money, and at the one-year mark, he had a 95% return; $8,000 turned into $15,600. His portfolio was doing better than mine on a percentage basis, because he was far more aggressive and less risk averse than me. Even so, we could have done better if he had listened to me.  The thing is I advised him to sell one position, or at least one part of it, in which he had a big gain. He and his wife love the industry and she would not let him.

 This stock is down. One stock he bought without us talking, and another he bought against my advice. Now, the $15,600 is down to $13,800. At one time, he was holding cash from a stock sold for a gain. I said sit tight until we find a bargain, but that cash was burning a hole in his pocket. Why?  I advised my younger cousin to buy a pot stock that I have a huge gain in. He researched the industry, and told me he bought another one just like mine. But he lost his ass on the one that was “like mine”. Why? It reminds me of an old episode of The Mary Tyler Moore Show (showing my age here). Lou Grant was losing on football bets with his bookie. Then, he began winning using Ted Baxter’s system but it wasn’t any fun anymore.

Lou then bet his entire  bankroll on the Super Bowl, even though Ted’s system did not allow for any bet on the Super Bowl. Lou lost but was happy. It was fun again.
What part of human nature is this? Is it just a guy thing, because my aunt did not have it?
Cameron

A Cameron, let’s talk about your aunt first. Her attitude is, “Money is good, it makes my life more secure, and listening to Cameron is way easier than laying bricks for a living.” She doesn’t care if she is betting on the guy with the hot hand or betting on a guy smarter than the rest. She just wants the money. We would call her a realist.

Then there are your cousin and your best friend. We have a general comment about them. When you realize people usually act from their most base nature, it becomes easier to understand their behavior. Your cousin wants a sense of mastery. He wants to control something. Investing successfully will give him that feeling, the feeling of a do-it-yourself project done well.
He’s also troubled by FOMO, the fear of missing out.  “Cameron had fantastic success betting on a Canadian marijuana stock. How hard can it be? The sector is booming. I don’t need due diligence. I simply need to throw my hat in the ring so I don’t miss out.  “But I want my own pick, so when I get my big win, it isn’t due to Cameron.”

     In addition, if he felt you were bragging, he feels envy (he wants to possess what you possess), threatened (my mastery is in doubt), and competition (I’ll show that smarty pants Cameron). Then there’s your best friend; money burns a hole in his pocket. That sounds like the itch of the gambler. It’s the excitement! Your friend and his wife “have a good feeling” about an industry, the way some people have a good feeling about “sectors” in a casino. They prefer poker to blackjack or craps to slots. Much of their preference is simply good, old-fashioned greed. They want to take advantage of your advice, but they still want more. However, your best friend and his wife haven’t made any money yet. Their chips are still on the table. It won’t be money until they cash out.   
  And honestly, if you examine your own motives, you feel possessive about their winnings, as if they are losing your winnings. What would you like? You’d like your little ducklings to follow you and thank you for their success.
     People are funny about money. Some are more likely to tell you about their sexual life than about how much money they make. When it involves money…money often doesn’t have a bonding effect on relationships, it has a breaking the bond effect.

     What’s in it for others in giving you credit? For most people, the answer is nothing. Your guidance becomes their savvy decision to invest their money.

     That goes back to our first premise. When you realize people usually act from their most base nature, it becomes easier to understand human behavior.
Wayne & Tamara                                             write:  Directanswers@WayneAndTamara.com