Zen and the art of investing


I love the TV show Billions.

I always carve a little time from my work day on Monday afternoons to watch the episode from the night before while I’m doing paperwork at my desk.

In case you’re not familiar with the show, Billions tells the story of a complex cat-and-mouse game between a crooked hedge fund billionaire, Bobby Axelrod, and the equally crooked district attorney who’s out to get him, Chuck Rhodes.

 

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Sharp Writing

It’s a brilliant show, in my opinion, and it’s surprisingly realistic. The writers clearly do their homework and legitimately speak the language of finance.

But at the end of last season, Axe found himself in a bind. He allowed Rhodes to get under his skin and ended up walking into a trap.

Spoiler Alert: Thinking he was burning Rhodes, Axelrod brutally sabotages the IPO of “Ice Juice,” a fictitious juice bar founded by Rhodes’ best friend, by planting a non-lethal toxin that makes the drinkers violently ill.

When news breaks showing Ice Juice customers vomiting on the floor, the IPO flops. Its investors are sunk.

 

Sting Operation

Axelrod wiped out Rhodes’ trust fund, which was heavily invested in the IPO. But little did he realize that Rhodes had baited him in a complicated (and completely illegal) sting.

Rhodes intentionally let word get out that he was investing in the IPO, fully expecting Axelrod to try to blow it up.

It worked.

Axelrod couldn’t resist the opportunity to stick a knife in Rhodes and give it a good twist.

And the season ends with Axelrod sitting in a jail cell, with a gloating Rhodes lording over him.

 

Emotional Control

Axelrod’s ego and lack of emotional control cost him dearly. His wife leaves him and takes their children, and his professional reputation is mud.

We can’t take much in the way of trading advice from Billions. If you tried to do half of what Axe and his cronies do in the show, you’d have federal agents in dark suits knocking on your door.

We can, however, walk away with some general principles.

This probably goes without saying, but it’s generally a bad idea to illegally manipulate a stock and force an IPO to fail.

 

Stay Cool

The bigger lesson – and one that’s applicable to us all – is this: When investing, don’t let your emotions get the best of you.

Axelrod let his hatred of Rhodes lead him to take a massive risk that nearly cost him his fortune and his freedom. But you don’t have to go to those extremes to get yourself into trouble.

How many times have you held on to a losing position because you “loved” the stock and got attached to it?

 

Detachment

I can tell you that, over the years, I’ve done it more times than I care to remember. And nearly every time, I regretted it. My attachment to the stock cost me additional losses that I could have avoided by being more emotionally detached.

No matter how much you love a stock, it will never love you back.

A stock also couldn’t care less about your ego and whether you’ve wrapped your personal sense of worth into its performance. The stock is cold and impersonal, and that’s exactly how we need to approach investing.

But it’s not just the stocks you buy, it’s also the stocks you don’t buy.

I admit it. I hate Facebook (FB) on a primal, visceral level.

I hate the narcissistic culture it creates and that it prioritizes superficial online “friends” over the real flesh and blood variety.

Alas, I let my hatred of the company prevent me from buying the stock — to my detriment.

So, if you take one thing from Axe, make it this: Don’t let emotion get in the way when making investment decisions.

Photo Credit: Cynthia Barraza via Flickr Creative Commons

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Charles Sizemore
Charles Sizemore
Sizemore Capital Management LLC is a registered investment advisory firm located in Dallas, Texas. Charles Lewis Sizemore, CFA is the founder and Chief Investment Officer of the firm.