There’s a high chance you will think I have been tripping on Acid after you’ve read this - or perhaps been crushing up the Horse Pills.
It’s only Tuesday Evening when I am getting this Blog under Starter’s Orders and already I have had a terrible Week betting on the Nags with both my AA. and UTW Shares tumbling at Fences and taking up the rear of the field. I have really been through the Meat Grinder with these (since writing that chunk TCM has been involved in a dramatic series of events with firstly an awful Profit Warning then the CEO having to take ‘Leave of Absence’ due to historical Fraud Indictments - what a week !!).
I’ve often had a Horseracing analogy in mind with Stocks. People who don’t muck about with the Stockmarket regularly call it “Posh Gambling” and suchlike and say “you might as well put your money on a Horse”. It gets me thinking because in some ways they are right, but in many others, which I will go into in this Blog, they are very wrong and Stocks could hardly be further away from the kind of ‘Win or Lose’ Bets that Horses entail.
For Traders who use strict Stoploss Rules, Target Gain and suchlike, you could very much see Stocks like a Horse Race - these really are Bets on a Horse that runs in a Race and either it Wins for you or it doesn’t. It is either Champers in the Winner’s Enclosure or you are Billy No Mates trying to shove the carcase of your Animal into the back of the Horsebox. No one likes a Loser.
For Long Term Investors it’s more like a Horserace that goes on forever - or until you decide to stop the Race by flagging down your Horse and bringing him in or perhaps he has a terminal fall and has to be Shot and you have to cover the Body so no one notices your embarrassment (thankfully this is rare if you stick to the Best Race Courses and look for real Thoroughbreds not Mules). On very rare occasions your Horse gets eaten by another Horse - which is a bit weird cos you always thought they were Herbivores didn’t you?
This is my key point - whatever happens to your Horse during the Race, until you decide it is over, he keeps on running for you - he may go through periods where he is dropping back (often he is taking up the Rear of the Field) and other times when your Jockey gives him some serious Whip (sometimes this can upset the Stewards) and he pushes through to the Front. Thing is, he keeps on doing this with varying success along the way but the key point is you decide when the Race stops for your Horse - and often it can be a huge mistake to Pull Up your Horse too early and the longer you let him run, the more Laps he will do and the more chance he will be able to get up with the Leaders.
If you use Stoplosses, you are ending your Race and for you it is a case of Selling your Horse at a Cut Price to another Owner - that’s fine if you know the Horse has a bad heart or something but if you are just letting another Owner get his hands cheaply on a Superb Horse that just needs a visit to a Top Trainer, then perhaps you shouldn’t have stopped him running for you. In many cases the Horse simply gets a new Jockey and soon catches back up with the Pack and pushes through to the Front. If you have a tight Stoploss, then it is like you Sell your Horse about 15 Seconds after the Race has started - that’s a great idea if it turns out that the Horse has been trained in the US where they run the other direction around the Course, but if it is simply because he is a slow starter and needs a bit of time to get the blood pumping, then you might be stopping his Race way too soon. If your Stoploss is too wide then you could be bringing in your Horse and selling him on for a big loss that might have been avoidable and unwarranted.
It is important to consider that when you decide to end the Race for your Horse and sell him on, you are waving goodbye to a Horse that you have trained for a while (could be many years) and you have learnt how the Horse runs, you have trained it and you have paid the Vet Bills and stuff, you have spoken with other Owners and you might even have spoken to the Jockey etc. - so it is invariably a Horse you know really well. On the flipside, the New Horse that you are thinking of Buying a Stake in (note, ‘Stake’ not ‘Steak’) clearly cannot be as well known by you and you need to be extremely thorough in watching it run, closely looking it in the mouth and checking its teeth, fully checking its Vet History and Vaccinations and all that. Obviously this means that you need to be really certain you are doing the right thing by deciding to back a new Runner.
So in what other ways are Stocks like Posh Ponies?
That’s it for Part 1 - in Part 2 I talk more utter Pony & Trap,
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