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I have been looking back a bit lately at how much things have changed in the financial markets over the past quarter century. In so doing it has occurred to me how much society and the way we are “told” to look at things has changed in that time. Today I would like to tie this altogether and “enlighten” you with some New Investment Rules for the New Age.

Old Days Rule #1: You are responsible for your own success or failure

New Age Rule #1: You have no control over success or failure

In the “old days” investors and traders were always told to “take responsibility” for their own success or failure. The argument back then was that, “Hey, you know the financial markets will fluctuate, so it is up to you to conform to this reality and to ride the waves as best you can.” Today that thinking is completely outdated. The new “reality,” apparently, is that everyone is entitled to generate profits in the markets and to accumulate untold riches. The one thing we have “learned” in the past quarter century is that the stock market “always goes up.” And if and when it does not, we want – nay, we demand – answers as to why it is not going up. Most importantly, we need to figure out whom to blame (see New Age Rule #2).

Awkwardly, a glance at a historical chart of the Dow Jones Industrial Average – going back to say 1900 – reveals the fact that the past quarter century has seen the greatest advance in the history of the U.S. stock market, and that there were several long stretches where the Dow made no new ground. But in the New Age, historical perspective is just so “yesterday,” and doesn’t seem to mean much to anyone these days. In fact, in the New Age, historical perspective is best ignored. We are enlightened, not to mention the fact that we have really fast computers. What more do we need? What’s that you say? As recently as the years between 1966 and 1982, the Dow made no new net gains and traded sideways for sixteen years? Well, here is a perfect case in point to contrast the old days with the New Era. In the old days, this tidbit of information might have given an individual pause to ponder the possibility that such a thing could happen again. In the “New Era” we can blithely dismiss such nonsense and simply repeat the mantra, “The stock market always goes up.”

Old Days Rule #2: Blame yourself for your mistakes

New Age Rule #2: Blame someone else for your mistakes

Back in the old days we were told to “learn from our mistakes.” The thinking back then was that it was simply a fact of life that everyone makes mistakes from time to time. Therefore, it was believed by the simpletons of yesteryear that one key to success was to own up to one’s mistakes. The thinking went that by taking responsibility for one’s mistakes an individual might empower himself or herself to achieve success the next time around. This type of thinking too is now completely outdated. If the pardon of Richard Nixon and the acquittal of O.J. Simpson have taught us anything, it is that we would have to be a sucker to blame ourselves for our own mistakes. “Beat the rap.” That’s the name of the game now. And it’s hard to play “beat the rap” if you go around blaming yourself for your own mistakes. So in the new era, just stop doing it. Just blame someone else. If you lose money on a trade or series of trades, blame your broker, blame the markets, blame George W. Bush, blame Congress, blame the magazine where you initially got the tip, etc. But most importantly, simply remember that “it’s not your fault.”  So don’t blame yourself. And there’s an important reason why.

In today’s world if you blame yourself for a mistake you’ve made you run the risk of “damaging your self esteem” (gasp!). And everyone knows that in the New Age, few things are more important than self esteem. Why, if we damage our self esteem, then we might have to spend a certain amount of time “not feeling good about ourselves.” And that is simply no longer acceptable. Remember from New Rule #1, everyone is “entitled” to generate profits in the market. If you’re not getting your fair share, well, let’s face it, someone somewhere is cheating you and a forced redistribution of wealth is clearly in order. Bottom line: it’s time to think about suing someone. Anyone.

Old Days Rule #3: Keep a trading journal to track your trades

New Age Rule #3: Do NOT keep track of your trades

In the old days we were told to keep track of as much detail about our trading as possible. This idea was tied into the outdated “You are responsible for your own success or failure” theme. We were told that by keeping and reviewing a journal of our trades we might learn things about trading methods that might help us to improve our trading over time. This clearly flies in the face of New Age “reality” for a number of reasons. Although Optionetics is a bit old-fashioned, I guess, in that we still strongly advocate the trading journal, here is a quick review of those reasons: First off, remember that you are not responsible for your own success or failure – forces beyond your control are. Secondly, you are “entitled” to succeed. Thirdly, if things are not going well for you then the New Age question to ask is not “What am I doing wrong,” but “Who can I blame.” Lastly, trade journaling takes time. And let’s face it, we are all way to busy these days for extra work like writing down trade details. Besides, this type of activity can severely limit the amount of time we can spend “unwinding” from our “stressful lives” by playing really cool video games, watching cable TV on our big screen high-definition televisions and text-messaging our friends via the Blackberry. In the New Age you have got to block out the “distractions” and make time for the “important” things in life.  

Old Days Rule #4: Use the information in your Trade Journal to make changes to your trading methods

New Age Rule #4: Never change anything you are doing, OR,

Alternative New Age Rule #4: Change your trading plan constantly

Once again, back in those “unenlightened” days we were told that by carefully examining our previous trades we could learn things that might allow us to make informed and intelligent changes to our trading methods. For example, if we found that our stops were too tight and that we were getting stopped out very quickly on trades that would otherwise have been profitable, we might come to the logical conclusion that we should widen our stops. Today, as you are by now aware, the rules have changed dramatically. Altering your initial trading plan could damage your self esteem, because by altering your trading plan you are essentially admitting that, a) your initial trading plan wasn’t “good enough” (ouch) and, b) that it was your own fault that you were losing money.

In the New Age, no one should ever again have to feel such pangs of doubt. So just tell yourself, “I’m good enough, my trading plan is good enough, and gosh darn it, I’m entitled to make money.” And if by chance that doesn’t work, consult New Age Rule #2 and blame and/or sue someone else.

For the multitudes of investors who have chosen to make designer coffee and/or energy drinks an important part of their lives, there is an Alternative New Age Rule #4. This alternative rule involves taking a more proactive approach and tinkering with your trading plan constantly. The key to this approach is never to accept blame outright or to take responsibility for any lack of success, but simply to profess that you are just adapting to the market – which is clearly wrong, I might add – and to resolve that you are simply adapting from trade to trade in order to overcome those who are actually responsible for any previous lack of success that you may have experienced.

Old Days Rule #5: Invest to make money

New Age Rule #5: Invest to “do good”

Back in the old days, investing was all about making money. It was pure, old-fashioned capitalism back then. And the more you made, the better. In the New Age this kind of thinking is no longer tolerated in the light of day. Trying to make money for yourself and your family is considered “selfish” and serves as proof positive that you are thinking only of yourself and not your fellow man. So since we are now all “entitled to make money” and since the stock market “always goes up,” it is of paramount importance that your investments “do more” than just “make money.” Your investments must “do good.” For example, in the New Age your number one priority as an investor is not only to avoid buying shares of tobacco companies but also shares of any company where anyone actually smokes, because cigarette smokers (at least from what I’ve read) are responsible for all that is wrong in the world today (ironically, while smokers are in fact persona non grata, alcoholics and addictive gamblers are essential members of our society, as many municipalities across this great land rely on casinos to keep their economies afloat. This New Age stuff can be tricky).

New Age Rule of Thumb: the more profitable a company is, the less likely it is to be an “acceptable” investment in the New Era. It is to be assumed that any company that reports “record profits” is gouging the customer, polluting the planet and failing to provide adequate health care for its employees – otherwise, they wouldn’t be making all that money. So avoid these companies as they clearly need to have their profits “taken from them” and put to “better use.” Likewise, from what I’ve been able to discern, any company with something known as a “CEO” is pretty much out of the question also, because from all reports, they are “evil” and keep all of the money for themselves and never give any to anyone else. So beware of any company with a CEO.

Lastly, while I cannot seem to decipher the science from either side of the argument, in any event, any company that emits a greenhouse gas (especially if it is emitted by the CEO himself) is definitely out, because it is fast becoming an article of faith in the New Era that man-made global warming is destroying the planet. So beware!  Now if you will excuse me I have to go out and shovel and salt my driveway – for the third time – this week.

Almost forgot. In the spirit of the New Era, do you mind if I call you “dude”?

To search for previous articles written by Jay Kaeppel, please click here.

Jay Kaeppel
Staff Writer and Trading Strategist
Optionetics.com ~ Your Options Education Site

Editor’s note: The opinions presented here are Jay Kaeppel''s and not necessarily shared by everyone at Optionetics and/or its instructors.

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