Thanks for the link. I was hoping that it would be relevant to my current situation, but having re-read it, it clearly isn’t, as it suggests:
It’s much less risky to just sell the stocks as soon as you think there’s a bubble, which foregoes any additional gains but means you avoid the crash entirely (by taking it on voluntarily, sort of).
But this negates the whole point of my strategy, which is to buy these stocks at a “risk-free” price hoping for a bubble to blow up later so I can sell into it.
Yeah, I don’t think that advice applies to your situation. [In my way of thinking about things, you were trying to time the market less than you had skill for, and are now attempting to adjust towards calibration.]
So, any advice, either theoretical or practical, on what to do with TRNE and HCAC, which have mergers coming up soon, which (judging from history of other SPACs) implies likely further price increases as long as the current SPAC bubble stays inflated?
IMO, the first problem here is psychological: you need to decide whether you’re doing something more like regret-minimization or more like profit-maximization.
In the regret-minimization world, I think the dominant strategy is deciding on (and then adjusting as new info comes in) price schedules. Think “If it hits $20, I’ll sell to this fraction; if it hits $21, I sell to this other fraction, etc.” or “Each day from here to the merger date I’ll sell f(t)% or $N of the remaining stock I hold” or whatever. The thing that’s going on here is that, regardless of whatever actually happens, you can point to your strategy and say “I did the thing that I believed would do well across all possible worlds, and so rather than focusing too much on whether or not this me did well or poorly, I focus on whether I believe in my strategy for expected gains.”
I called it the ‘profit-maximization’ world, but in my mind it’s actually closer to the ‘hug the query’ world; rather than trying to come up with a strategy that defends against future-you criticizing present-you, you try to figure out which world you’re actually in, and put both your computation / emotions / resources into that. Sleepless nights worrying about prices is one of the tools used here; when you make a move and then regret it in the future, that regret is you learning what to do the next time.
There’s obviously gradations here; the point is not to maximize hard in one direction, but to have a unified and coherent approach to how your emotions will interact with your investing, and how your investing will interact with your emotions. Once you have that, I think things flow more clearly.
[If I were trying to correct short-term inefficiencies, the first strategy I would try is a leaderboard-like one, where I’m both tracking the ~5 bets that I’m in, and also tracking the ~25 bets that I would be in if I weren’t in them, and using that as my judge of whether or not to stay in; what matters is not whether ABC went up when I wasn’t in it, or went down when I was, but whether being in ABC was better or worse than being in DEF.]
Thanks for the link. I was hoping that it would be relevant to my current situation, but having re-read it, it clearly isn’t, as it suggests:
But this negates the whole point of my strategy, which is to buy these stocks at a “risk-free” price hoping for a bubble to blow up later so I can sell into it.
Yeah, I don’t think that advice applies to your situation. [In my way of thinking about things, you were trying to time the market less than you had skill for, and are now attempting to adjust towards calibration.]
IMO, the first problem here is psychological: you need to decide whether you’re doing something more like regret-minimization or more like profit-maximization.
In the regret-minimization world, I think the dominant strategy is deciding on (and then adjusting as new info comes in) price schedules. Think “If it hits $20, I’ll sell to this fraction; if it hits $21, I sell to this other fraction, etc.” or “Each day from here to the merger date I’ll sell f(t)% or $N of the remaining stock I hold” or whatever. The thing that’s going on here is that, regardless of whatever actually happens, you can point to your strategy and say “I did the thing that I believed would do well across all possible worlds, and so rather than focusing too much on whether or not this me did well or poorly, I focus on whether I believe in my strategy for expected gains.”
I called it the ‘profit-maximization’ world, but in my mind it’s actually closer to the ‘hug the query’ world; rather than trying to come up with a strategy that defends against future-you criticizing present-you, you try to figure out which world you’re actually in, and put both your computation / emotions / resources into that. Sleepless nights worrying about prices is one of the tools used here; when you make a move and then regret it in the future, that regret is you learning what to do the next time.
There’s obviously gradations here; the point is not to maximize hard in one direction, but to have a unified and coherent approach to how your emotions will interact with your investing, and how your investing will interact with your emotions. Once you have that, I think things flow more clearly.
[If I were trying to correct short-term inefficiencies, the first strategy I would try is a leaderboard-like one, where I’m both tracking the ~5 bets that I’m in, and also tracking the ~25 bets that I would be in if I weren’t in them, and using that as my judge of whether or not to stay in; what matters is not whether ABC went up when I wasn’t in it, or went down when I was, but whether being in ABC was better or worse than being in DEF.]