[quote=earlyretirement]I said it before and I’ll say it again. The VAST majority of the people out there vastly overestimate their investment skills/abilities/timing.
I’m not saying everyone. But I’m comfortable with saying the vast majority of people out there. Everyone thinks they will do wonderful and their leverage/arbitrage play will work out for them. Especially in a stock market like this where it keeps going up. Everyone thinks they are some genius or guru. (Kind of like in the dot com days…. and the real estate bubble years).
Yet they won’t admit they probably $hit their pants during the financial crash and the Great Recession. Where no matter how many times they tried to catch a falling knife their hands got awfully bloody. Nope. They won’t admit that.
I’ve seen it time and time again over the last twenty years.
The people that leverage will always argue how they will always do smart and wise and fantastic things with the money that make it a smart or wise investment. Yes, sometimes it is. But lots of time it doesn’t turn out well for them.
And in many of those cases, you’ll never hear from them. They will tell you about their best investments but never about their worst investments or leverage plays that didn’t turn out well.
Human nature….[/quote]
Absolutely true.
I had a friend who was a fairly big-time commodities trader on Wall Street. He made many millions over the years, and I figured he still had most of it, especially because of the way he talked and how he and his wife spent money. We often talked trading and he would make fun of my positions (not terribly small, considering they were never leveraged) while showing me his very large positions and puffing his chest out. Always thought that was all his money. I always deferred to everything he said because he was an old-timer on Wall Street and had held powerful positions there.
Long story short, we ended up in a situation where they owed us money (just a few thousand, but still…), and we are now entering our second year in our collection efforts. They are flat broke, and I mean really, really broke. Apparently, all of those large positions were leveraged to the hilt. Because of his Wall Street connections, he was able to leverage far more than most people ever could, and his positions turned against him. Because of his age, he will never, ever be able to recover from this.
