A very old buddy of mine named Coty Wheeler is the younger brother of one of my best friends, Syrus, both of whom grew up and live on the Mescalero Apache Reservation. One night a few years ago, I couldn’t sleep and I flipped on the TV and the channel was starting to play “The Worst Butt-Kickings in the History of Mixed Martial Arts” (or something like that). I did a double take when they talked about the Mescalero Apache from New Mexico named Coty “The Ox” Wheeler and proceeded to show him getting absolutely annihilated in one of his very first fights.
The Ox didn’t let that loss slow him down. He got back in the gym, kept training, won a few fights, got a sponsor, got a trainer and will be retiring in his final headline fight probably in an arena in Albuquerque later this year. He’s toured the country and seen and had successes and failures and wins and losses, painful losses, over the last few years. Like any good fighter, you have to get back up when you’re knocked down. And don’t force the punches when the other guys are flailing, ie, take some profits!
The markets are at all-time highs again. That’s why we ebb when the markets flow. Recall that we sold our VIX calls, covered our SPY short and parts of other shorts and bought DIA calls and other long positions when the markets were at their lows a couple weeks ago and our contrarian indicator of “Who’s more scared right now, the bulls or the bears?” went to extreme on the “Bulls are more scared” side. We had originally built up the VIX calls (which are a bet that the markets are about to get more volatile and/or sell-off) and shorted the SPY back the last time the markets were at all-time highs about a month or so ago.
I’m selling the last of my DIA calls into this morning’s pop. We got 400% gains in this last batch over two weeks’ time. I also think it’s time to trim a little bit of our Ciena, Amazon and Google longs this morning, just to lock in some profits and further hedge our net long positioning down a little bit while we are at new highs.
We’ve remained net long and in a bullish framework in my overall stock portfolios since I came back to trading in 2010. I tried to convince people that we were heading into a brand new bigger-than-ever stock market bubble courtesy of the unprecedented policies promoting corporate profits and liquidity and artificially low rates. I reiterated my overall net long positioning and market bullishness about the continued blowing bigger of this new stock market bubble even as we trimmed my long positioning down and added some hedges/shorts at the highs last time.
It’s not complicated to hold those two disparate thoughts of continued bubble blowing stock prices for the next year despite wanting to trim down and hedge some of our big gains in the portfolios courtesy of having been two or three years ahead of the curve in calling for this ongoing stock market bubble. Perhaps the ability to hold two conflicting thoughts is one of the keys to long-term outperformance?
Hubris is often at its peak right before a big downfall, and maybe I’m being hubristic by pointing out the success we’ve been having with TradingWithCody.com and our approach to the markets since we launched and since I first came to Wall Street with a suitcase and guitar and lived on a mattress on the floor in Harlem back in 1996. But the flipside of that would be — how would you approach countering your own hubris other than doing exactly what we’re doing right now — hedging our exposure when the gains are good and scaling into diversified assets that have been crushed while they’re at new lows.
Like my namesake, Coty Wheeler, I’ve had my butt kicked plenty of times and sometimes on TV. I waited til I was 38 years old to buy my first piece of real estate because I was busy paying my dues, renting horrible dives all over NYC and trying to be patient about waiting for a real estate crash before putting my money in a non-liquid asset like that. A couple years ago I did buy a bunch of land out here in NM at a huge discount from its recent selling prices. I recently started rebuilding my physical gold and silver assets while their recent bubble had popped. Maybe the price I paid for the land I bought won’t be the bottom. Maybe land prices will go down a bunch over the next decade and maybe they never come back. Maybe gold and silver crash and burn. Maybe every long I’m sticking with for now will also crash and every financial and other short bet I’ve got spike right here and never look back.
Look, I also make a lot of horrible trading decisions and market calls. I lost money on Apple call options, on the aforementioned financial sector shorts I’ve been in, and countless other places in the last twenty years of trading, not to mention even the last year of mistakes I’ve made. Like I said, any trader is going to know the same lessons about how everybody gets their butt kicked sometimes when they’re in the game.
I put my neck out there and I put my money where my mouth is. I’ll make a lot of mistakes. So does everybody.
I plan on staying in this fight forever. So stay flexible and remember that we will be knocked on our butts again so get ready for it now while you’re feeling good.