Harnessing Market Timing to Your Advantage

Back in the days of the dot.com bubble, I was flush with cash for the first time in my life. 

It was a crazy time when any company with the acronym ‘.com’ in its name could go public and watch its share price skyrocket. Internet trading platforms came into their own and for the first time it was easy for anyone anywhere to set up a trading account and join the frenzy.

So, I did.

The platforms made it seem not just possible — but probable — for people to strike it rich. Commercials showed people flipping off their bosses and turning to day-trading.

So, I gave that a go.

Everywhere I went, to restaurants, in airports waiting to board a plane, even in public restrooms people were sharing stock tips. 

Everything was a sure-fire trip to the moon.

I bought an additional computer and monitor. Back then they were the size of small cars and my home office was quite small. I squeezed myself between the two monitors, worked on emails to the right and trading to the left.

I discovered I was a genius…

My every trade turned green. 

Within a week, I was making more profit day trading for a couple of hours a day than at my regularly paid job in a month. 

But I wasn’t alone. My regular conference calls with my boss and my hires became trading discussions. Everyone was at it. Everyone had a success story.

Within six months I had turned $10,000 into more than $400,000 in stock value.

I didn’t take profits because this was just the beginning. Every expert said so.

The Dow was dead, Yahoo told us. Nasdaq was the new future. Buffet was old and out of step the news channels said with glee. 

We all wanted to believe it… so we did.

In late 2000, I had to fly from my home in California to a meeting in Chicago. Hand-held devices and wi-fi were things of the future. Although they existed, the average person was still using a public pay phone. 

Accessing your trading platform required dialing a toll-free number, punching in the numbers of your account, then one by one punching in the stock ID for an up-to-date price. 

Trading this way took ages (and was fraught with dropped calls and misdialed names).

Between the time I left my home and arrived at my hotel in Chicago, the dot.com bubble burst. I didn’t need to ask anyone. It was written in the frantic expressions of everyone dashing through the foyer and lining up to use the one pay phone. 

It was carnage and I was helpless.

I tried using my hotel room phone, but all lines were engaged due to call volume. 

I switched on the TV, found a stock channel and felt sick to my stomach. 

Ticker tape stock prices dripping like red blood from an open wound scrolled across the bottom of the screen — including my biggest position, ENGA. 

I still remember it vividly. 

Down 75%.

I remember nothing about the meeting the next day, and when I got home that night I found I had turned $400,000 not just back into $10,000 but into $2,000.

It had all been about chasing fool’s gold and a quick buck. Fear and greed wiped out most people…

Failing to manage risk lost thousands of traders their homes, marriages, jobs.

So, I felt a fool. I was annoyed with myself. I thought: How can I, of all people, someone who prides myself on mentality control, fall for it?

It was an expensive lesson in the power of the media to hypnotize and trigger emotions of greed and fear. 

Ah, but the most expensive lessons are usually the best. 

Clearly none of us were overnight stock geniuses. We were all fools, manipulated by those who were professional traders. For them it was like taking money from babies: Pump everything up, suck out their money, crash it and bet on the collapse. 

The trading platforms made a fortune because they made commissions whether the markets went up or down.

Like Warren Buffett famously said…

“If you’ve been playing poker for half an hour and you still don’t know who the patsy is, 

you’re the patsy.”

There are plenty of stories like this one…

For all we know, one might be playing out right now. History will show.

In the meantime, just don’t be the patsy.



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