Separating "emotions" from investing

[MrLoco]

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.

 

[bclover]

O.K.

When I was in elementary school I had to learn a saying for a dude name "Fredick the great".."Every man must find his own way to heaven" I think he was king of Austria, Prussia or something

For me, I don't want to totally separate my emotions from my financial dealings but I consider myself a women of God.

Anyone old enough to remember an old commercial on tv, I think it was a hot dog ad that said "we answer to a higher authority"??

So no, I do not do things I find morally offensive simply because they are "legal" I do not manipulate my assets to qualify for subsidies, I recognize it's legal but I also work with those in deep poverty so I have a problem with it

BUT I also do not care if others do unless they are some how in my life.

 

[Mdlerth]

Expect controversy here

No doubt there will be as many perspectives as there are humans on where the line is. A lot of engineers are skilled at compartmentalizing.

I certainly would draw the line at obviously criminal ventures like extortion and heroin smuggling. But while I would be open to owning petroleum or defense stocks I know people who would refuse to invest in either of these industries. That's fine with me. Chacun a son gout.

Congratulations on a tidy profit. It could very well have been a tidy loss. You never know how these things play out. Major news stories often generate a big wave early on, either up or down, and then things revert asymptotically to their previous level as some other news story claims the spotlight.

 

[easysurfer]

I try to keep my emotions totally out of investing. One of the benefits of just trying to follow indexes.

For me, investing in something like socially conscious mutual funds doesn't make investing sense. Nor would making an investing based on events like natural and man made disasters.

I think of that chess movie "Searching For Bobby Fischer" in the scene where the teacher for Josh (the young student) tells the student he as to be tough at all cost, to give no mercy his opponents. I think his mom tells the teacher off saying that's not how he was raised and how he is not going to be. In the end of the movie (sorry..spoiler alert) he offers a draw after to his opponent instead of winning outright. What's better? Winning at any cost vs how you play the game with class? Decisions, decisions .

 

[Luck_Club]

Charity Vs Government Safety nets

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.

I've noticed the same thing.

It is a pet peeve of mine that the govt safety nets are often pretty rich when compared to busting your but at the bottom of the socioeconomic ladder. Eldercare (like college) is just the most extreme example of this disconnect, where those who have scrimped and saved all their lives get screwed when compared to those who haven't. The problem with govt providing charity is there are little to no checks and balances, and there is an inherently inefficient distribution of resources.

For example Medicare rents a wheel chair monthly instead of buying one at a fraction of the cost.

So when a person tries to structure their finances, after paying taxes for 50+ years, in such a way so they don't wipe out all they have saved, I begrudge them nothing.

Why should the worker and saver be wiped out, when someone who has never paid taxes, never worked, get the same care and benefits for free.

It is my theory that if the government got out of the social safety net business, that families and Charities would be revived to fill in the gap. They would be in a much better position to ferret out the waste fraud and abuse.

 

[Z3Dreamer]

The market overreacts to bad news. I have thought of setting up a system to take advantage of news, but never have. In theory, it would have to be mad money or some small percentage of your portfolio. You would have to react quickly. I am not too knowledgeable of puts and calls, but would have to educate myself. Last bought them 30 years ago. I first thought of this in the 80's during the Tylenol scare. Should have bought J&J when it tanked by 20 points then went up in a week or so. After the 7 mile island scare, I bought the parent company, GPU, but not enough. Only 100 shares.

Anyone do this?

 

[Senator]

I see no problem in any legal investing.

As a real estate investor, you must capitalize on other people's misfortunes. Buying after a divorce, a death, a job loss, a medical issue, real estate market downturn, (i.e. distressed sellers) etc. makes the most money.

Sometimes the lenders take the financial hit, sometimes the IRS takes the financial hit (with liens extinguished on property), and most often the homeowner takes at least a small hit.

Often the homeowner thinks they lost money, but they likely lived payment free for a year+. They started with a nice place and let it get run down, 'spending' the maintenance budget rather than re-investing. Or they took out many second mortgages and spent the money on 'stuff', and could not make the payments.

In my real estate purchases, banks have taken hundreds of thousands of dollars in losses. Many were second position lien-holders. Some were first position and took less in a short sale. A different investor may not have gotten the deals that I have, as much of it is about the presentation of the offer.

Even in my rentals, I have to evict when someone has a misfortune, whether it be medical or other. Luckily, due to my 'perfected' tenant screening process, and despite I have 25 renters, I have not had an eviction in many years.

In my younger days, I made a bunch of money from some things that were slightly less than legal...

 

[RunningBum]

Reminds of the line in Wall Street where the trader says Gordon Gecko was on the phone shorting NASA immediately after the Challenger disaster, as if you can short a govt agency.

Usually by the time I figure out what to do, the institutional investors have already reacted and I'd be too late to act. You managed to act in time. I don't see a problem with that, and I like your move to donate some of your profit.

Like Mdlerth says, I wouldn't finance anything illegal. Back when I was investing in individual stocks I think I remember investing in Phillip Morris once, which some refuse to do.

The only time I really let emotions get in the way was after 9/11. I think I'm remembering right that the president asked people to stay invested and not pull out of the market, so I did nothing. I just went back and checked what happened. There was a 7% immediate drop in the Dow that might have been tough to get in on, but another 7% drop in the following week. But a month later it had pretty much fully recovered, according to the article I found. So I might've been able to profit, but only if I got back in at or near the bottom. I don't regret the missed opportunity at all.

IMO it's all what you can sleep with. I don't worry about what others think of how I invest or try to get the ACA subsidy. The ones squawking here about that I mostly have on ignore anyway, so I've previously decided I don't care or agree with what they have to say.

 

[donheff]

I don't think many here have dissed posters for taking advantage of legitimate opportunities to maximize returns or take best advantage of laws and regulations (e.g. optimizing income to maximize ACA subsidies). As I vaguely recall, people got bent out of shape when posters reported deceptive tactics that were either illegal or very gray to advance themselves.

I think that line you ask about may involve taking actions whether through investments or otherwise that actively and knowingly do harm to others.

 

[audreyh1]

Oh, I thought you meant emotions as in staying invested through market crashes, etc.

Since we own so few individual stocks, and what we own are shares held for decades, I don't get involved in jumping in and out based on news.

With an AA portfolio of mutual funds, rebalancing occasionally takes the emotion out of it to me.

 

[MRG]

Nice gain. Similarly both SWC and RGR bumped up yesterday. I don't have any issues with legal investing.

I'm working on giving up caring what others think. Too many people don't understand situations and make up their own mental stories reflecting their experiences.

I can't cater to folks needs of everything being EIL5.

 

[brett]

I see no issue whatsoever in taking an investment risk. Investing is about risk and reward. Nothing wrong with your investment strategy. Good for you for thinking out of the box, taking a risk, and being rewarded by the market for doing so.

I also have no issue with people using the tax codes to their advantage. This is not about breaking the law or doing something that is deemed immoral. It is about tax avoidance.

 

[Aerides]

I don't think it's so much "emotions" but principles and personal values.

That said, they are personal for a reason, and you can determine where your own line may be. I have no qualms operating within the law, but I do like to think about the intent and spirit, vs. threading through an unexpected needle eye.

I buy very few individual stocks, mainly for mad-money fun (I don't gamble otherwise). I won't put my money into a company that I find ethically challenging, which precludes most start ups of late. Uber doesn't care that they don't get my $500, but I care.

 

[CoolChange]

The market overreacts to bad news. I have thought of setting up a system to take advantage of news, but never have. In theory, it would have to be mad money or some small percentage of your portfolio. You would have to react quickly. I am not too knowledgeable of puts and calls, but would have to educate myself. Last bought them 30 years ago. I first thought of this in the 80's during the Tylenol scare. Should have bought J&J when it tanked by 20 points then went up in a week or so. After the 7 mile island scare, I bought the parent company, GPU, but not enough. Only 100 shares.

Anyone do this?

I am considering doing just this for a small portion of my portfolio.

It seems like one of the big boy funds would already be all over it; but, it may be a strategy better suited to small investors who wouldn't move the stock price.

 

[Nemo2]

My late wife, (a smoker, but by no means a 'heavy' smoker, although I tried for 20 years to get her to quit), died of lung cancer......I've subsequently owned tobacco industry stocks.

My late wife knew the risks, but "Never thought it would happen to her"....likewise every other smoker. I had/have no qualms about owning tobacco stocks. I am not responsible for the bad choices made by others.

 

[brett]

There are many adherents to the major faith groups in North America that would be shocked at the nature of some of the investments made by their respective organizations.

Or a few of those faith based organizations who have, against the law, moved liquid assets out of North America and away from the long arms of bankruptcy courts and receivers.

The world is full of contradictions and double standards.

 

[Meadbh]

When I was in business school, we had an ethical fund manager come to class. His faith based fund did not invest in anything that could be remotely detrimental to health, the environment, or justice, and did preferentially invest with worthy enterprises aiming to support human development. The fund’s returns were very modest, no better than a savings account. My class concluded that it is best to keep one’s investments and donations separate, because their fundamental goals conflict.

 

[youbet]

There are many adherents to the major faith groups in North America that would be shocked at the nature of some of the investments made by their respective organizations.

Or a few of those faith based organizations who have, against the law, moved liquid assets out of North America and away from the long arms of bankruptcy courts and receivers.

The world is full of contradictions and double standards.

This seems particularly true up in your area Brett. I wonder if it has anything to do with local laws, tax codes, etc. ?

 

[brett]

Very common to the south of us. My guess is that it is happening all over.

People want to protect their assets, their positions, their reputations at any cost. And most importantly, their assets and their cash flow.

Same everywhere.

 

[jazz4cash]

The market overreacts to bad news. I have thought of setting up a system to take advantage of news, but never have. In theory, it would have to be mad money or some small percentage of your portfolio. You would have to react quickly. I am not too knowledgeable of puts and calls, but would have to educate myself. Last bought them 30 years ago. I first thought of this in the 80's during the Tylenol scare. Should have bought J&J when it tanked by 20 points then went up in a week or so. After the 7 mile island scare, I bought the parent company, GPU, but not enough. Only 100 shares.

Anyone do this?

I've never acted as far as I can recall, but I have considered buying companies that were already on my watchlist like Wells Fargo right now. We had a thread here on Equifax that not many would touch.

What is the 7 mile island scare? GPU?

 

[Nemo2]

What is the 7 mile island scare? GPU?

Four miles further than Three Mile Island? (General Public Utilities.)

 

[kite_rider]

Was already mentioned; but separating 'emotions' from investment decisions is one thing - an important thing - and different from investing on personal principles. Making investments that violate your personal principles probably creates unpleasant emotions; but investing purely on emotion (as opposed to logic or reason) is downright dangerous to your portfolio.

With the exception of illegal activity, I don't think it's right that people project their personal principals onto other investors. If enough people object to an investment strategy, they will make it illegal. It wouldn't have occurred to me that the Vegas tragedy was an investment opportunity, so I applaud you for recognizing opportunity where others don't.

 

[FIREd]

Buying and holding broadly diversified funds has pretty much taken the emotions out of investing. I am sure that I indirectly own some ethically challenged companies, but I have no qualms about it.

 

[Curmudgeon]

The profits you made were not only legal and moral, but they did not hurt any of the victims of Las Vegas or the hurricanes. They only hurt the people who were on the other side of the stock trade, and that is the side they chose to be on. There's nothing here to feel guilty about.

My question is, how do you beat out the other millions of people who are also trading on the new? I, too figure that HD would be up after the hurricanes, but I assumed that by the time I entered my trade the stock price would already reflect that news...

 

[Z3Dreamer]

I've never acted as far as I can recall, but I have considered buying companies that were already on my watchlist like Wells Fargo right now. We had a thread here on Equifax that not many would touch.

What is the 7 mile island scare? GPU?

I had a senior moment. 3 mile island.