The Tipster

Mike began his trading career in the early 90s. He started out working for a bank but switched to a proprietary trading firm after a couple of years. It was a risky move but he figured he was young enough to take some risks. He could always go back to banking if he couldn't make it in prop trading. Back in those days the market was a lot smaller than it is now. Fewer stocks, less money, much less information. Stocks were not a huge part of the national conversation. That all changed in the late 90s. Before he knew it, everyone was talking about stocks non-stop. They dominated headlines. Before long, people were giving up their jobs to become day traders. Even his parents started investing in dot-com stocks, something he didn't think was possible. Mike made plenty of money but he always thought he could have made a whole lot more. He didn't make nearly as much as everyone thought he did. Enough is never enough when it comes to the stock market.

Another thing happened in the late 90s that Mike did not see coming. He started being hounded for tips constantly. By his friends, his parents, his aunts and uncles, his barber, and even the women he dated. Everyone in his world was convinced he was a hot shot trader and they all wanted a piece. He was flattered at first. He was pretty good at what he did so he obliged and gave them what he thought they wanted, sound financial advice.

"For long term growth I would just invest in index funds. The S&P has returned 8% a year since its inception and throwing a little bit into every month is the best way to go. It is heavily diversified and the best companies in America will always be in it. It is also systematically engineered to go up as it is constantly removing failing companies and replacing them with new promising ones. As long as this country is still around the S&P should thrive. Yes there will be down years but that is all a part of the process," he would say.

It was a simple investment strategy for long term growth. This is what he did with his own money so he thought it would satisfy anyone looking for sound financial advice. And he felt good because he was not being a hypocrite. After he gave this advice people would generally go away for a while. But then they would come back, asking for more advice. He didn't get it. He already gave the advice, there was no room for further questioning. But there were still questions. It took him a while to realize that they did not want sound financial advice, they wanted free money. They simply wanted to take their duffle bags to the market, armed with his tips, fill the bags with money, and take the bags to the bank. Eagerly waiting for his next free money tip.

The people asking him weren't idiots. They were doctors, lawyers, scientists, etc. Intelligent people. And yet they thought that they could simply show up to the stock market one day and make a fortune. All based off a tip. It didn't make any sense. Even if he did tell them a stock he thought was going up, which he was not allowed to do by the way (he could lose his trading license), how would they know when to sell it? Where would their stop loss be? How would they know when to add to their position? These were all things that took him years and years to learn. And yet people expected to know it all instinctively. That's insane! How could people work so hard to make and save money only to gamble it all away in the stock market? He revised his advice.

"Do not go into the stock market. It is a dangerous place for the untrained speculator. You will lose all you're money. Unless you are serious about developing real trading skill, which requires full time dedication and takes years to learn, stay out of trading and buy index funds."

Again people listened to his advice for a bit but then they came back looking for more. They always wanted more. The allure of easy money was so powerful that no one was safe from it for long. Mike figured it was just one of those things that humans could not escape no matter how hard they tried. Every year millions and millions of new suckers would come to the stock market looking to make a quick buck only to lose money. There was nothing he could do to stop it. And why would he want to? He knew that the more participants there were in the market the better the trading conditions were for him. They more wild speculation in the market the more money he made. That's the game. But he didn't want to make money off his loved ones.  But he also couldn't stop them. No matter how hard he tried.

When the dot-com bubble burst in the early 2000s and millions of newly minted day traders lost everything. Mike hoped that everyone had learned their lesson. He hoped that they realized that making money is easy in the short term but keeping it in the long term is really difficult. That trading is a full time job that requires tremendous dedication to be successful. And he hoped that he could go back to living his life without having to talk about stocks 24/7. But this was not what happened. As a matter of fact, people came to him more than they had ever before. They had to make their money back, right? They had lost money, but they had not lost their appetite for easy money. Mike was dumbfounded. He had to come up with something before he lost his mind.

He decided he could not fight human psychology anymore. It didn't matter what he said, people would find a way to lose money and then come back looking for more advice to lose more money. He could not keep them from losing money but he could preserve his peace of mind. He came up with a simple system. He started with the ticker AAPL. If someone asked him for a tip he would lean in close and say, "buy AAPL." The next person that asked him he would tell them, "short AAPL." The next person, "long AAPL." He would keep alternating until someone came and asked about a different ticker.

"What do you think about AMZN?" they would ask.
"Long AMZN," he would reply.

The next person, "Short AMZN."

Again he would alternate until someone came and changed the ticker. At which point he would tell them to go long that ticker. Whenever someone tried to ask him why he said long or short he would simply say, "You know, I just think its going to the moon," or, "you know, I just think its going to zero."

As long as he said it with tremendous confidence people would take the tip and then leave him alone. People really didn't care about the reasoning, they just wanted the tip and he simply gave them what they wanted. His life became simple again. Of course he knew he would be wrong half time but that didn't matter. What's the worst that can happen, people stop asking him for tips? In the long run everyone who was asking for a tip was going to lose money anyway. But at least Mike didn't lose his mind.