Going Full Tilt...

"You can’t blame anyone else... no one but yourself.  You have to make your own choices and live every agonizing day with the consequences of those choices"

                                     ~ Max Brooks
                                        World War Z
 

Last week I happened to find myself back in Las Vegas for the annual SEMA and AAPEX exhibitions.

Las Vegas is one of the most interesting cities in America especially if you like to watch people; people who come from all walks of life both far and near.

Like an anthropologist observing a tribe of natives, I find the behavior of people especially fascinating... especially when they are out of their normal element and perhaps slightly intoxicated.

As it often happens while visiting trade shows, the days are spent in a booth or walking the show, while the nights are reserved for fancy dinners and entertaining clients. Such was the case last Tuesday when I was hurrying to meet some people for dinner.

Since the restaurant was only a few blocks away from my hotel and I had some time to kill, I decided to walk instead of trying to find a cab during the after-show rush hour.

While strolling down the strip toward my dinner date, I was forced to duck into one of the larger casinos to avoid an unseasonable desert cloudburst. 

Once inside the casino, I immediately noticed that the casino was practically empty of gambling patrons.

It was a Tuesday night nonetheless, but I expected a fair amount of table play due to the large convention contingency (SEMA second only to the Consumer Electronics Show in terms of attendance).

While waiting for the rain outside to subside, I noticed a man playing blackjack alone at a $10 table. I watched him as he was dealt hands from a show in fairly quick succession. His chip stack was perhaps a few hundred dollars and while I sat there watching him, he appeared to play very methodical with two $5 chips in front of  him to start each hand, playing strictly by the odds... winning one hand while losing the next... seesawing back and forth between being up and down a few chips.

I stood there watching him for perhaps 20 minutes and then decided to head off to my dinner appointment.

After a nearly 4-hour dinner, I found myself walking back to my hotel and decided to peek back into the very same casino to see if the action had picked up since earlier in the evening.

Imagine my surprise to see the same gentleman still playing blackjack at the very same table that I had left him some 4 hours ago.  

As I approached the table, I could plainly see why the man was still playing... he was winning big with several large stacks of black $100 chips in front of him.

Whereas earlier in the evening he seemed quite subdued and stoic, now he looked fully animated and full of energy... engaging the dealer and the two other players sitting at the table in spirited conversation... and instead of simply playing two $5 red chips, he was playing two $100 black chips on every hand.

I sat there watching him for several hands. I began noticing that he was no longer playing blackjack by the book but rather he was making riskier and unadvisable plays such as hitting a hard 14 when the dealer had a 4 showing.

I couldn’t help but think that maybe it was time for this guy to cash-in his chips or at the very least take a break to re-group.

On the next hand, the player was dealt two face cards against the dealer’s 7. When the dealer’s second card was turned, it revealed a 4 followed by a face card causing the player to lose.

This seemed to annoy the player who added several more black chips to his bet on the next hand. This time the player busted. Again, more black chips were added to the bet and once again the player lost.

It only took 15 minutes of bad luck for the player to lose his entire stake including an additional buy-in at the end for a few hundred dollars more.

For more than 4 hours, the man played disciplined and methodically and then went "full-tilt" losing everything and then some in a matter of minutes.

As I turned and walked back to my hotel, the look in the man’s face at the end of the night haunted me.  Had he just walked away... 

Back in 1999, I had a similar experience only instead of playing black jack in Las Vegas, I was day-trading during the great dot-com boom... using options and derivatives to leverage my buying power and multiplying my returns.

Within a 12-month period, I took a modest $25,000 investment (all the savings I had at the time) and turned it into a portfolio worth just over $500,000. 

Most rational people realized that the stock market couldn’t continue to rise at this amazing rate, but I wasn’t most people... I was smarter than all of them... this was a "new economy"... in less than two short years the Nasdaq rose from 1500 to over 5000 points much of the gains coming from new dot-com companies and technology companies providing internet infrastructure.

Then in March of 2000, the dot-com bubble burst. When the first sell-off wave hit, I saw my "investments" plummet by 50%, but I had seen market corrections like this in the past 12 months, so this great sell-off was for suckers. 

I looked at this as a great opportunity to buy additional options at a greatly discounted price. Surely the market would roar back within a day or two... and it did... the following day, the market regained about 20 percent of what it had lost the previous day... but the bubble had burst as the NASDAQ ultimately lost nearly 80% of its value by 2002 and 100% of my savings.

So what is it that causes normally rational people to abandon all common sense and discipline while continually to wildly double down on their losses? 

Is it greed?... is it ego?... is it a feeling of invincibility?

There is a great deal of difference between knowing what the right thing to do is and actually doing it.

This is the very reason I rarely judge a person by what they say or with what they know but rather what they do... especially in the heat of the moment.

Staying calm and focused during periods of crisis is something you can’t read in a book or learn in a classroom... it’s only something that we can learn from experience.

Gambling, be it in the casinos of Las Vegas or on Wall Street, is a losing proposition in the long run and should never be confused with the sound investing principles and the discipline to continue to make the right decisions.

Continuing to make good decisions will ultimately lead to good outcomes...

Thank you very much for your support of OptiFuse where we hope that you don’t gamble with your circuit protection.