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That Four-Letter Word

1/13/05
By Hany Saad

A few years back I drove through a high end Toronto suburb and looked at the mansions which at the time served as an inspiration to where I want to go and got me to think of the line of least resistance to get to my destination. I chose the stock market, which turned out to be far from being the "line of least resistance."

I remember then the first thing that came to my mind was, "Surely the owners of these mansions took above-average risks." Risk was the keyword to me in my early twenties. My friends, however, chose to call it different things. "They must be drug dealers." "They must be related to the Mafia." It surprised me even at that age as it does now how people refuse to accept that someone can reach for the stars and get to the stars honestly.

The one thing that amazed me then was the ownership turnover of one specific house in this high-end residential area. This house/castle was the most elegant and spacious and definitely most pricy of all. I came to the conclusion that, yes, these people took a lot of risk but they grew accustomed to the risk and couldn't get enough of it, so when their luck turned they had to sell their real estate and live more modestly to cover their debts or their margin calls (an obscure concept to me then).

So, through observation, while almost everyone I know reached the conclusion that these people were dishonest drug dealers and Mafia members, I could only think of risk.

This beautiful four-letter word that I myself grew later accustomed to and in love with. In my trading years and years later I try to quantify this concept and find the point of maximum risk and usually find myself an entry point.

Yes, Virginia, I learned the concept of risk and I made a living quantifying and trading the highest risk point, but that's not the end of the story. I also once pawned my Rolexes and sold my car to pay my margin calls (a concept I am very well aware of now). As if by magic I learned the concept of risk but forgot to digest the lesson from the high real-estate turnover. Why did I skip that chapter of the lesson? I couldn't answer that when I was twenty and I still can't answer it now that I am trading the same concept, the highest-risk entry, a point that I found today in the markets. I could not think of anything other than finding an entry price on the long side at these levels. Nothing else mattered.

That four-letter word, the four-letter word that's ruling my life and will either take me one day to the stars or the bankruptcy courts.

Remember Gordon Gekko in Wall Street saying to Bud Fox "Greed is good, greed works." I would only substitute greed with risk. The real estate left an impression on me but oddly the ownership turnover didn't. I will take risks till the day I die and, yes, I acknowledge my poor money management skills and, yes, I refuse to learn and, yes, "qui ne risque rien n'a rien." I believed the French then and I believe them now. Risk is how this earth turns. Risk took us to the Moon and Mars and risk will bring a better tomorrow.