samedi 5 septembre 2020

Poles apart

My last travel with a friend of mine made me understand much better his approach to the stock market. I knew we were far away from each other, but this trip made me understand that we were on different planets:

  • I introduced him to the stock market maybe 5 years ago;
  • Back then, I told him to buy these companies: MTY, Apple, Couche-Tard, Biogen, Dollarama (and some others);
  • He bought them all, but sold them all some time after. I don't know when;
  • One day, he told me that he had bought some oil and gas company. I told him that it was exactly the kind of company that he shouldn't buy;
  • He didn't listen to my advice and started to buy more and more of these companies and he eventually sold all the ones I recommended;
  • Lately, he told me that he had buy airlines, mines and he was heavily into oil and gas companies;
  • During the trip, he told me that some stock was up 25% or so and he told me that he planned to buy it, solely on the fact that this stock was rising;
  • Everyday, he told me that this stock or that stock was up 5% after-hours or another stock was up 20% since he sold it. Everyday, he watched the market with emotions and regrets about stocks that went and gone in his portfolio;
  • During the last days of the trip, he told me that one of his stock was up 3000% or so. He told me he had made 8000$ and it was the most beautiful day of his life. The next day, he realized that it was a reverse split and he actually made almost no money during that day.
  • While we were in Vancouver, Vicario and me talked about some stocks for a couple of minutes (95% of our time was devoted to fishing or talking about anything else than investment). My friend intercepted this discussion and said that he would buy the stock Vicario was talking about. And also another stock which I talked about that Vicario liked but didn't own. I was shocked. After 5 years of telling him how to invest, he stopped listening to me and bought stocks which I didn't like at all. And now, after 2 minutes of a quick discussion, he told he was going to buy some stocks which he knew jack shit about, just because a guy that works in finance in Vancouver tells a very brief opinion about that stock. 

Frankly, I was sad. How can someone put thousands of dollars on the stock market without trying to understand what he owns? How can someone trusts somebody he doesn't know just because the guy works in investment and live in super expensive Vancouver? 

I tried to make him understand that if we were with Vicario, it was because him and I shared a similar approach about the stock market. Otherwise, how could have we got together if our philosophies were very different? In other words, why trusting Vicario if he didn’t trust me?

I wrote that before but it's as true as ever: that friend wants emotions with the stock market. He sees it all like a big casino and acts with feeling instead of reflexion. He never took the time to calculate his performance and I bet that he would be pretty disappointed to see it VS the market. But I don't think that it matters to him. He wants to come back from the casino one night, telling his friend that he made 1000$ on the roulette. Not poker, not Black Jack: the roulette. The game were your chances are as random as possible to make money. 


After all, buying a mine or an oil and gas company, is comparable to buying a normal retailer that sells clothes like 100 other retailers. Why would you buy Sears over Macy's? Which one has an advantage over the other? What's promising with these businesses? 

Worse than that, an oil and gas company depends on the price of the resource which is fixed by a cartel and there's a shitload of competition in that field. That's the exact opposite of a company that builds and sells Iphone, for instance (yes, there's competition with cell phones, but each company has it's edge and they can charge the price they want, if they have a big edge). 

1 commentaire:

  1. I know someone who had luck with Wayfair, but now have 90% of all his savings in that stock and Virgin Galactic !!!

    A few of us are really rational!