Woulda, Coulda, Shoulda

Exiting on liquidity, not being exit liquidity

Following a boom and bust, there are always hindsight millionaires that, at one point, were worth a life-changing amount but got sucked into the "narrative" and rode it over the top and down the other side.

I explained in the Monkey Trap:

To have a good outcome in a market that goes parabolic, we need to accept we will get out early and be ok with it. 

This means leaving money on the table- maybe a lot of it… which is fine.

This is no secret; I could fill a page with the below quotes.

"I made a fortune selling too early." — JP Morgan

"I made my money by selling too soon." — Bernard Baruch

"I never invest at the bottom, and I always sell too soon." — Nathan Rothschild

Sell too soon, leave a lot of money on the table, and make out like a bandit.

Easier said than done.

How to avoid getting caught up in the narrative?

We all like to believe we'll act rationally in a bull market when the reality is those numbers going up in our portfolio get to a point when we might as well inject them into our veins.

At this point, we latch on to any narrative to rationalise staying invested and eventually enter the cult stage where you get frustrated/abuse anyone who doesn't share your enthusiasm for the sector/company.

Price action requires a narrative, and there will always be someone (bankers, sell side, gurus) willing to bend reality to keep up with the price and spin a bullish narrative.