Investment Poker: Nightmare in the Danger Zone

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(October 2012)

You just took $500,000 (half your net worth) and sat down at a no-limit Texas Hold ’em game in the Wall Street Casino. You are anxious but feel confident, based on good intelligence and planning. Then you look at the other players at the table:

  • A prominent Washington D. C. lobbyist.
  • A TBTF (Too Big To Fail) banker with deep political connections.
  • The CEO of a major oil company with tentacles into a dozen countries and strong influence in Congress.
  • A Senator known for his insider trading information derived from his Committee Chairman post.
  • A High Frequency Trader with banks of computers at his disposal in addition to several PhD’s in mathematics and sophisticated programmers on his staff.
  • A well-connected former politician known to have a very cozy connection to the Department of Justice.
  • The managing director of a Washington D. C. think tank that creates policy for the sitting president.
  • A former Army General who is now a prominent lobbyist for a major defense contractor.
  • A person rumored to have an inside track at the largest labor union in the country.

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The dealer at the Hold ’em table is a representative of the government agency in charge of regulating the Wall Street casino. The previous three leaders of that agency now work in highly paid Wall Street positions. Looking at the chips in front of each player, you note that the other nine players all have in excess of $4,000,000, eight times larger than your stack which looked impressive five minutes ago.

It occurs to you that this market (poker game) may not be your best opportunity, but you choose to play a few hands. After losing 9 out of the first 10 hands, an image flashes into your mind; you see yourself as a milk cow connected to a milking machine. Your next thought is ancient poker lore. “If you haven’t figured out in 30 minutes who is the mark, then it’s you.”

It is time to ask yourself:

  • Do you want to play in the Wall Street casino or go elsewhere?
  • Is this a safe game to play, or could disaster strike?
  • You might win in the short term, but what about the long term?
  • Do you think this game is fair and honest?
  • Is this the Danger Zone?

In the Danger Zone, the following 12 words define your interactions with the market:

  • You can’t win.
  • The game is rigged.
  • You must play the game.

Even in a rigged game, you might survive or perhaps wildly succeed in the Danger Zone. Regardless, you have a choice to either invest in the Wall Street casino or go elsewhere with your savings and retirement. If you choose not to play in the Wall Street casino, then move to a Safer Zone where the following 12 words define your interaction:

  • Long term perspective.
  • Maximum safety, minimal risk.
  • No leverage and no margin.

You have a choice. The world is full of opportunities. Find one that works for you, or create a new investment opportunity. Perhaps it is:

  • A biotech company with a cure for obesity and great management.
  • A startup company with a great product and brilliant management.
  • The next “Apple.”
  • The next “Microsoft.”
  • Your own dream company that is destined to succeed.

But for the rest of us, most of these opportunities are unlikely or totally unavailable. Most of us have seen limited gains and probably substantial losses in the last decade when we played in the Wall Street Casino. Do you see any reason to expect the Wall Street Casino will benefit you in the future? If not, what is safer than physical gold or silver in your possession or stored in a secure private storage vault?

Look at the exponential gains in both gold and silver over the past decade. The link for the gold graph is here and for the silver graph is here. Both have been and still are good investments, and both will help preserve your purchasing power during the inevitable inflation ahead.

Gold and silver are good antidotes to the risks in the Wall Street casino when purchased with no leverage, no margin, minimal risk, and maximum safety. There are many reasons why the exponential rally in both gold and silver will continue. Expect higher prices ahead!

Think safe! Purchase precious metals to preserve purchasing power!

For additional investment possibilities, for either savings or your IRA, read this article: IRA Investing: Gold and Silver for Your Retirement Safety.

GE Christenson
aka Deviant Investor

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2 thoughts on “Investment Poker: Nightmare in the Danger Zone

  1. The poker opponet analogy has flaws. First, we have a pretty good idea of what they are holding. Second, there is no cost to play…small and big blinds do not occur in trading markets. Suddenly we have the advantage…

    • Hmmm. You may have a pretty good idea of what the others at the table (in the market) are holding, but I submit that most non-professional investors do not. Secondly, you, as a professional investor, probably know well that experience, better information, and control over your emotions, give you an advantage at the poker table or in the market. Again, I submit that most non-professional investors are lacking experience, good information, and control over their investing emotions. And that lack of experience and good information constitute a cost to play – in effect a “big blind” when people are playing in the markets competing against professional investors. I happen to like poker and investing and timing the markets, but in my experience, this “game” is not for everyone. Worse, it seems to be dominated by professionals and computer driven algorithms since the 2008 crash, and that places most of us at a significant disadvantage. Good luck with your investing and Hold’em. Come visit again!

      GE Christenson
      aka Deviant Investor

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