Conceptually Right; Practically Wrong

January 31st is an actual day on the Gregorian calendar, and this fact once saved me from getting arrested.

I came of (drinking) age in Boston in the early 2000’s. The running joke was that we only drank on the weekends, but the weekends ran from Tuesday to Sunday. There was just one problem with this way of life: I didn’t reach legal drinking age until just prior to my senior year of college.

The picture I used for my fake California ID, circa 2002.

The solution- a fake ID.

I used a few fake IDs during my early years in Boston, with varying levels of quality and credibility. At the seedier joints, no one cared. But at Faneuil Hall? No chance that’ll pass. I played this game for most of my collegiate career, until fate blessed me with the most fortunate of gifts.

A friend of mind found a (real) ID on the street, and the owner looked just like me! The best news: my new persona, Timothy D., was turning 21 in just a few weeks. On January 31st. Fantastic.

I actually went out and celebrated Timothy’s 21st birthday, as Tim. Well it was a Saturday night, so we’d be going out regardless. After January 31st, it was off to the races for the rest of my Junior year. I never had to worry about getting rejected at clubs and bars, and I could even make beer runs now and purchase kegs. Life as Tim was the tits!

The Liquor Store Incident

And then it happened. The hubris surrounding my foolproof persona came to a head later that year, when I was home on break. I waltzed into the local liquor store (we call them package stores, actually), and picked up a 30-pack of Busch Light. I nonchalantly handed over my ID when requested, cool as a cucumber. And was flatly rejected.

“This ID is not real,” the cashier told me. I was stunned, mostly because I knew the ID was legit, albeit not mine.

He called over the customer behind me, who happened to be an off-duty police officer. HOLY FUCKING SHIT. I had never come as close to shitting my pants as I did in this very moment. The only reason I stayed there and appeared calm was that I was paralyzed with terror.

The next word’s out of the cashier’s mouth were equally stunning: “This ID cannot be real. January 31st is not a real date.”

Really?!? That’s your reasoning? I literally laughed out loud, a mix of fever-pitch anxiety and relief. The cop barely glanced at the ID before saying, “yeah, January 31 is a day.” He took a brief look at me, and handed me my license.

The store owner knew I wasn’t 21. I wouldn’t actually look 21 for another 10 years. Maybe he noticed that I wasn’t 5’11”, which was Timothy’s stated height. Or maybe he just had a hunch.

But instead of just pointing out the fact that I wasn’t 21, or the ID was fake, or I was not the man featured on the ID, he made his one mistake: he argued that January 31st wasn’t a day. So close, yet so far away.

The liquor store owner was conceptually right, but practically wrong.

Wall Street Betters and Their Diamond Hands

I thought about this story again this past week, as I watched a group of degenerates from Reddit take down multi-billion dollar hedge funds and, for a moment, destabilize the market as a whole. Obviously, this story hasn’t finished playing out yet. But we can already make some assessments based on what has transpired thus far.

First, the hedge funds shorting GameStop were conceptually right.

Let’s be honest: without a significant pivot, GameStop will go the way of Blockbuster Video and Comp USA before them. They are a relic of a former time, and were poised to be done in by 2020, along with numerous other brick & mortar retailers. Hedge funds knew this, so they shorted the ever-living crap out of the stock.

And if not for their excessive greed and (apparent) inability to assess risk, they would have made out quite well when GameStop filed for bankruptcy. The only problem: Roaring Kitty and his cohort of autistic crusaders saw the hedge fund’s exposed position, and called them on it.

The WSB crowd was also conceptually right.

The group that made the GameStop investment thesis late last year were also right. In fact, many of the early ‘investors’ profited immensely from the short squeeze in GME thus far.

But the fact remains, the tide has begun to turn in Wall Street’s favor, starting with trading restrictions implemented mid-week. My prediction is that most of the Reddit army riding this current trade will end up losing in the end. That’s just how things work when you battle billionaires.

Of course, I could be wrong. My crystal ball always seems to be broken. But I can tell you this: no one will come out a clear winner, and the pain will be distributed. Why do I know that? Because being right is not the same thing as profiting.

Magnitude, Direction, and Timing

In physics class, we learned that every vector has two components: a magnitude, and a direction. If you only know one of these two components, it’s not very helpful. In the real world, we have to introduce a third component: time. Timing is everything, so they say. And in the case of derivatives trading, it’s crucial.

That’s why I don’t typically buy individual stocks; I try to spread my risk among many assets, and I dollar cost average. There are many moving parts in life, and it really sucks when you have the right idea but still lose money.

What’s the lesson here? I don’t know, I’m just typing stuff. But if I had to squeeze out a nugget of wisdom, it’d be this: history is littered with people that were conceptually right, but practically wrong. It doesn’t matter if you have a good idea and poor execution. Always remember to assess your risk appetite, and make decisions accordingly.

To the moon!

6 thoughts on “Conceptually Right; Practically Wrong”

  1. that’s hilarious that dummy confused jan. 31 with feb. 31st. that was a helluva score. we had our fake id’s made in times square in the 80’s and those lasted a while.

    i have been thinking of a post for all the “fundamental” and stock screener type investors who can’t see beyond valuation metrics. many of those would have preferred pfizer or kinder morgan to netlix and amazon 15 years ago and the whole time since then. they might be right about those valuations being too high but would you rather be right or would you rather be rich?

    autistic crusaders – i like that one.

    • Nearly all of my individual stock investing was driven by following those “value metrics.” I owned PFE and KMI, and never bought NFLX or AMZN because they were too expensive. I don’t even have to ask you how you think that played out. That’s around the time I quit individual stocks- too frustrating for me.

  2. Solid post, smiled all the way reading through it!

    About the timing, for stocks you have to get the timing right twice. Once while buying and then selling. One might get lucky a couple of times, but to do it consistently, oof.

    • That’s a great point. You have to know when to sell, as well. I was actually not bad at timing my buys, but I was terrible at timing my sells. My biggest issue was selling too early, after a 20% gain, and missing the next 100-5000% run-up.

  3. Fun way to point, Adam. It’s sad to see, but GameStop almost certainly can’t continue with their early aughts business model. The pandemic has sped things up, but their ability to continue as a going concern was at its end either way. I think the hype around them will bail them out a little longer, especially as its attracted a little talent to attempt a pivot, but it’s still rough sees ahead.

    Like the cop throwing you a lifeline but by recognizing the ID was real, it’s only a matter of time before the market figures out the underlying subject isn’t going to match up to the facade. 🙂

    • Haha, thanks for helping me to continue my bizarre analogy. Low and behold, GameStop is down approximately 75% since I published this post last week. Can’t say that was unexpected, and it goes to show that timing is critical with these kinds of bets (both long and short).


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