Lessons from a weekend..

I'll start by confessing that this is indeed an attempt to justify a weekend spent primarily watching sports on the tube and hanging around those fine establishments and cultural centers I am so fond of frequenting, with names like Babe's, the Shanty, and Annie’s Paramount Sports Bar. Right up there with the Met and the Kennedy Center. Much of the weekend was devoted to watching sports, as this was the weekend of the all-hallowed ACC basketball tournament; preseason baseball is underway with all the attendant speculation and wishing, and of course the days of drive fast, turn left have begun once again. Throw in my Saturday morning raid on Barnes and Noble for fresh reading material, some steak and the last of the late season oysters and you have a weekend that would seem to have achieved no particular purpose. Or did it?

Much was there to be learned for specs and other interested participants from the roundball orgy this weekend. Some thoughts I managed to take away..

1. If you play great defense and exploit every opportunity you find, especially the easy ones, your chances of winning are much greater. My own beloved Terps had been among the worst in all of college hoopland at the free throw line. They lost a lot of games simply because they couldn’t make the free ones. This weekend in upsetting three straight nationally ranked teams to win the tournament they shot 60%+, including a blistering 70% from the line beating Duke on Sunday. Additionally, they were able to play enough defense to keep the star shooters from Wake, NC State and Duke from blowing up the score. Markets strike me as the same. Playing great defense, keeping losses from becoming overwhelming, taking the lay-up trades when they occur, not letting an easy winning trade turn into an ugly loss. You’ll have to decide for yourself what a free throw trade is for you. Liquidations are my turn at the stripe,along with multi-day lows.

2. The game will go against you at some point. It is very rare to lead from start to finish when playing a quality opponent. Saturday, Maryland went in down 19 at the half. How easy to get dejected, rationalize, accept less than possible. This one showed up in the racing world as well, with Earnhardt Jr’s team being devastatingly, embarrassingly bad last week in Vegas. Through hard work, analyzing, fixing mistakes and testing (gee, where have we heard that before?) they put it back together and won this weekend in Atlanta. Games have an ebb and flow; teams will get on runs, and how you handle a run against you has a lot to say about your chances of ever winning the big one. When it’s not going your way, you’re banging it off the front of the rim, quitting, giving up, doing anything but analyzing your mistakes and stepping up your game precludes victory. If you trade, you will have losing streaks, your style or manner of investing will be hopelessly out of favor, or you’ll just have a string of losses. Just because your system or methodology has 70% winners, doesn’t mean a whole bunch of those 30% losers can’t run in a string. In fact, they probably will. How you deal with it emotionally and in practice has much to say about your ultimate success as a trader.

3. Another one from the racing world. Learn as you go. Jr’s car was a mess at the start on Sunday. They learned, calculated and fixed on the fly and by the end of the race were dominant. Jusy accepting the way it is right now as the way it always will be is limiting. I have always been an avowed value type investor. What I have learned here about shorter term approaches, counting and investing has made me better trader and investor. Had I just ignored other approaches and been unwilling to change my setup, I’d still be running around in the middle of the pack.

4. Play to win always, but celebrate with class. How you win says a lot about who you are. The new tradition of burning down your home town or rioting to celebrate a championship is asinine. Celebrate, enjoy, but don’t gloat, berate the other guy or act like an ass. There’s another tournament someday where the other guy might whip your backside. A great winning trade today does not preclude you from a wastebasket heaving loss tomorrow. If you gloat when you’re winning and the other guy is losing, its a pretty safe bet you can scratch his list off the list of names you can call when your car has broken down at 2am (and if his name is off the list it WILL be his town you break down in, and it'll be the wrong side of town. Life is just like that) and you need a ride. Enjoy your victories but don’t take pleasure in another’s defeat.

5. Sometimes you’re going to draw a tough bracket. The Cincinnati team is one of the best in the country. Unfortunately for them the bracket half they play in contains Duke, Arizona, Illinois and Seton Hall, all great teams. Other teams, notably I think Gonzaga, have a much easier path to the title round. Sometimes it just is the way it is and you have to play through it. Cincinnati does have a shot but it’s tough one. That doesn’t mean they should stay home and not play the games with everything they have. Even when you’ve done all the right things, studied, tested, practiced, played hard and learned, there will be obstacles. Do everything you can to overcome them. Accept that sometimes you won’t be able to, and it’s back to the gym.

6. When it’s there and the path seems clear, you have to take the longshot. Every winning college team has become proficient at the three pointer, and if they get an uncontested one there’s something on the order of a 60% chance of its going in. You can’t base the whole game on your three point shooters but if you can hit over 50% of the longshots, or even 40%, in a game, your chance of winning goes way up. Kind of like buying sub-$2 tech stocks at the start of 2003, or bonds still paying the coupon trading under 50 cents on the dollar in 2002.