Separating "emotions" from investing

[candrew]

It matters little what others may think or say about your investing decisions. At the end of the day, it boils down to whether or not one can live with the person staring back at them in the mirror.

 

[OldShooter]

I have noticed a trend in a few posts where some take offense to strategies used to shelter money, utilize loopholes in the tax code , etc. These include millionaires manipulating income to qualify for an ACA subsidy (Guilty!!!) or transferring assets to children to eventually qualify for MEdicaid benefits.

Well, at the risk of getting flamed (I can take it), yesterday morning after watching CNN....I watched the opening of the markets. At 9:45am MGM (MGM Resorts Int'l.) which owns Mandalay Bay spiked up to close to $32/share. I took a deep breath and shorted 10,000 shares. MGM lost 5.5% yesterday. At 3:45 pm I covered my short position for a profit of $12,000.

I do not tell this to brag in any way. Also, let me say the shooting was a tragedy of epic proportions. But would some say I was callous and dead wrong for "taking advantage" of a tragedy to profit...OR...was this just an investment opportunity which succeeded? Remember, it could have gone the other way as well. Also, I am sure that insitutional investors were doing the same thing ....perhaps... in some cases where investors profited without even knowing it.

After HArvey, I went long on both Lowes and Home Depot, which to date has seen both move higher.

My point is are we in this game to make money or is there a "line" you would not cross? If that makes any sense.

BTW, I am donating 20% of my profit on the MGM trade to the go fund me account for the victims of the Vegas shooting. So I do have a heart.

Wow. I don't see any ethical issues here at all. It is not like you are taking advantage of misery or of miserable people. You are simply taking advantage of other traders' emotions/irrationality. It is hardly new news that this is possible. Every day there is news on lots of stocks and some of that news moves a stock in a way that you can bet some money on. Whether it is a disaster, a WTO ruling, or a big contract win it is the same thing. Looking for emotion moving a stock and creating a possible opportunity.

In fact, IMO it is one of the few ways in which small investors can win. You don't have all the information that the big guys have, but you don't need it. You expect a drop and a bounce when there is bad news on a stock. Further, you are trading such at tiny amount that you don't move the market and you don't have to take days to build or liquidate your position. This is where you win over the big guys, who simply cannot use these trading tactics -- elephants can't dance!

 

[gayl]

For me, I don't want to totally separate my emotions from my financial dealings .... I do not do things I find morally offensive simply because they are "legal" I do not manipulate my assets to qualify for subsidies

+1

 

[Jerry1]

These include millionaires manipulating income to qualify for an ACA subsidy (Guilty!!!)

I was just talking to DW and something came up where I used this forum and the well to do members on it, who show no income in order to qualify for the subsidy. The thing is, that my anger is directed at the dumb a$$ who devised a subsidy program based on income without consideration of net worth.

That you take steps to minimize your tax burden or complying with a program in order to save money bothers me not. Neither does your stock purchase. I guess having done taxes and working to some degree in a compliance field, I draw the line where the contract or law draws it. Profiting off a catastrophe did not change the lives of the poor souls involved in the Las Vegas attack.

I guess if I was knowledgeable that my actions were directly causing harm to someone, I would move the line a bit. However, in the case of something like the ACA, stating that those dollars could have helped someone else more needy is too far removed. Any compassion I have or feeling of helping, is expressed through volunteering or contributing to causes I care about. I try to keep the two separate.

 

[RunningBum]

I think the dumber idea is that there's a cliff, where $1 extra income can cost you thousands. I don't actually manipulate income that much, but rather limit the extra income I'd have from my tIRA->Roth conversion to qualify. One could say that deferring income and then trickling it into a tax free account is manipulation, so I'm just trading one manipulation for another. Some of my spending money comes from return of capital on sales in my taxable account, which was built up on income that was heavily taxed. If I didn't have a tIRA to convert I'd be under the subsidy with just minimal care selecting which shares to sell.

I lost the last of my guilt when one of the presidential candidates dismissed the high cost of health care by noting that it wasn't all that high with subsidies. If their notion is that subsidies are baked into the equation and almost nobody will pay the rack rate, I'm going along with that.