Pigs Get Slaughtered

pigs get slaughtered

“Bulls make money, bears make money, pigs get slaughtered” is an old Wall Street saying that has been on my mind lately. Why? Because more than once in the recent past I have found myself thinking in a way that is distinctly porcine and I’ve had to remind myself sternly of the fate that befalls greedy little pigs.

 

When the Slow and the Steady Meets the Fast and the Furious

We’re attempting to achieve financial independence and early retirement the good old-fashioned way. We’re invested in boring old index funds (yes, you guessed right, VTSAX figures large in our investment portfolio). We’re saving as hard as we can. Our journey to financial independence is measured in years. With our high incomes we are fortunate that our journey, unlike those of many others, is not going to be measured in decades, but it still is clearly the path of the tortoise, and not that of the hare.

So here we are, plodding along ever so sensibly, wearing our ever so sensible shoes, and suddenly we are beset by the siren song of the quick buck. If you frequent financial forums and have not been living under a rock, you would know that cryptocurrencies recently went berserk. On April 1st 2017, the total market cap for all cryptocurrencies was about $25 billion. Approximately two months later, it was $100 billion. That, my friends, is pretty damn insane.

Let’s take a look at Ethereum over the last year:

 

The gradient of that graph makes my inner piggy salivate.

In March 2017 Ethereum was trading at $15.85. On the 12th of June, 2017, it was at $404.02. In the same time period Bitcoin went from $1181.69 to $2673.35.

 

Suddenly the online forums were filled with folks who were instantly financially independent. You couldn’t turn without stepping on a crypto-millionaire (and in my envy I will confess that I wanted to step on them hard, while wearing pointy high-heeled shoes). And there was no escaping it in real life either. I have a few colleagues that made some money on cryptocurrencies and were more than eager to talk about their great good fortune (not I’m-buying-a-private-island-fuck-off money, but in the range of a couple of hundred thousand). It didn’t help that Mr. BITA had briefly considered investing in a handful of bitcoin way back in 2011.

 

It felt like I was clip clopping along merrily in my horse drawn buggy, and suddenly folks in Ferraris were roaring past me to the finish line, leaving me covered in much dust and more jealousy.

 

Of Greed and Temptation

Despite knowing better, I found myself drawn to this world of fast money. I caught myself considering speculating in crypto coins. Should I get myself some Monero? Litecoin? Ripple? I found myself in the throes of some serious #FOMO. I would catch myself fantasizing about what it would be like to be financially independent in 6 months, instead of when I’m 42. My greed was calling out to me, and I was turning into a pig.

Here is what I realized as I wrestled with temptation:

Knowing better does not mean that you will definitely do better.
Knowing better does not automatically mean feeling better about what you know to be the right thing to do.

Doing better (and feeling better about doing better) take effort. A fair bit of effort sometimes, because trying to outsmart yourself is a bit like playing chess against yourself.

pigs get slaughtered

 

How To Not Turn Into Bacon

If you ever feel yourself on the verge of turning into a pig, here are some tricks you can try so that you don’t end up becoming bacon:

  • Review the fundamentals. Remind yourself of your plan, of your investment policy, of all the hard work you have done to get where you are today. Imagine how pissed past-you would be if now-you blew all of that hard work in one greedy move.
  • Research the downsides. Dig deep and find the laundry list of things that can go wrong with the shiny new toy you are considering. Imagine Losing. Every time you find yourself locked in a daydream where you are in a yacht sipping champagne, replace that with the nightmare of losing your shirt, the disappointment in the eyes of your spouse and watching your FIRE date fade away into the distance.
  • Raise the bar. Let’s say you planned to save $X this year. Give yourself a stretch goal. Tell yourself that if you achieve 1.2*X, then you will be allowed to blow one month’s savings on your speculative investment of choice. Or go buy a bunch of lottery tickets. This results in a win-win. If you manage to push yourself to save more than you thought possible (by cutting costs elsewhere), it won’t hurt too much to then speculate a bit.
  • Remember Monopoly. Allow yourself to scratch that itch right now, but do it with ‘play’ money. Want a crypto coin? Set a very small budget and then go to town with it.
  • Pay to Play. Allow yourself to speculate, but not at the cost of your existing investments. If you want to speculate, you have to find the money somewhere in your budget.

 

I’m Not a Hog

I’m pleased to report that I beat myself at chess and that VTSAX is still king of our portfolio. I have resisted turning into a pig, and have thus saved my bacon. I may use the play money strategy outlined above in the future, but for now I am staying the course.

Have you ever faced the temptation of making a quick buck? What did you do? Have you made a killing on cryptocurrencies?

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25 thoughts on “Pigs Get Slaughtered”

  1. Ah well, you can always have a bit of play money to spend on these type of risky investments. You will lose some, but then occasionally you have a really big winner, crypto currencies are definitely one of them!

  2. Nice article! I play around picking stocks in Robinhood with my play money but even that is just ~$1800, and earmarked towards buying a fishing trip in the future. 🙂 It all came from allowance funds, i.e. play money so essentially I am just hiding it from myself. Hard to spend when it’s sitting in an account somewhere. I only have 3 stocks in all of that though. 2 “pot stocks” and 1 storage stock. Yep, storage – exciting! I looked into that after reading a Freedom is Groovy article about self storage EFT’s and I thought, maybe I should quit specualting in pot stocks solely and go the more traditional route. Plus, Arena was still in the sub $2 range and screwed up some of the things that led me to invest with them anyway so it was easy to roll funds from them into a storage stock.

    Like you said, it scratches my spending bug itch, and I look at it like Vegas with slightly better odds. Looking at those graphs and realizing if I’d just put $500 in bitcoin I wouldn’t be in my office makes me start to think like a piggy. Like you, I also talk myself out of getting in now and instead stay the course. Maybe I’ll have to find some other currency to throw a couple hundred bucks into. 🙂

    1. I’ve been thinking about playing a bit with pot stocks as well. Storage! I would never have considered that. It would make for a _very_ unglamorous get-rich-quick story though, if they did take off. I got rich off of self-storage just sounds….yawn.

  3. I have chased the quick buck a few times in life. You always hear the story of the winners, but seldom the story of the losers. If you heard all of the stories, it would be so much easier to not be tempted.

    1. Perhaps I need to get in the sandbox and start playing a bit. I think I take all my investments way too seriously. I want to get me some good old crypto coins and some pot stocks.

  4. Knew a couple when we lived in Atlanta who had a stable, healthy portfolio of about 20 rental houses. Then, the husband caught wind of a fabulous new investment that would allow them to retire in just months! He pulled all the equity out of the houses, gave it to some fast talker, and … you know the rest of the story. Somehow they managed not to file for bankruptcy. By the skin of their teeth. That was my life lesson that getting greedy makes you lose your shirt. You put it well though, knowing better doesn’t make you necessarily do better.

    1. Oh ugh! At the end of that story was the husband still married? I would be pissed beyond words if Mr. BITA swapped VTSAX for ‘something exciting and fun’ one day.

  5. After being burned by penny stocks in college I am very much ok with the slow and steady path.

    The friend that convinced me to do it is still day trading and I’ve tried to help him see the light side of the force bit I think he has to feel the pain before he stops.

  6. Oh man, I have quite a bit to say about crypto currenty. Long story short, I’m not a fan. I believe in the technology (block chain), but seriously who the heck knows which crypto currency will win out? It’s seriously a gamble. That’s all it is at this point. So I can understand the allure. It’s a tulip crazy right now. With bitcoin and etherium and the hundreds of others that are out there. Like you, I would say stick with assets. The tried and true stuff. You can play around a bit, just with a limited allocation.

    1. If one can’t grok the fundamentals, the investment is probably not a good idea. I agree with your assessment that something cool is going to emerge from this technology. Something very, very cool. I just have no idea what, so I ain’t getting rich quick.

  7. I’ll admit teasing a friend who jumped in on bitcoin when it first came out for following trends, mostly because I’m so conservative, but clearly I was wrong about how long it would be around 🙂

    I’ve never been truly tempted – I watched my brother waste years and unimaginable amounts of money chasing the fast million and he’s worth nothing financially, and even worse off mentally, today. The living breathing cautionary tale.

    I would LIKE the fast buck but it rarely ever passes the smell test, if it ever does, so I stick to my slow-moving lane where gains are steady and the beer is cold. Or something like that.

    1. For reasons unknown the line “where gains are steady and the beer is cold” made my brain start humming “Take me down to Paradise City” in an endless loop. So thanks for that.

      I’m sorry to hear your brother is such a financial mess. Well, at least one good thing came from it – you will make those same mistakes over your cold and dead body.

  8. I’ve been looking into cryptocurrencies a lot lately too, glad to see I wasn’t the only one getting tempted with dreams of riches. I believe that blockchain technologies are the future of most types of transactions, but I’m also a firm believer in understanding what you’re investing in first. And it’s all too new to really understand. Personally, I’m waiting on getting approved with Kracken, and my wife agreed that I could invest some “fun money” on crypto’s – but it’s nothing we’re not willing to lose. We’ll probably use your “raise the bar” idea in the future – save more than we usually would, and then use the rest as fun-investing money.

    1. I hope you’ll continue to stop by here once you are crypto millionaire : ) I’m still considering the fun money strategy too. Perhaps good old procrastination will come to my aid.

  9. I am so grateful my brain doesn’t have space for this type of investing. I hate the feeling of FOMO and would hate it especially more if I was privy to an investment that could have made me FI by now! I’m keeping my head in the sand and sticking with the index. These days I guess I’m partial to the sure thing…even if it will take me longer to get there!

    1. I am jealous of your brain right now. Come over to the dark side. Be envious and greedy with the rest of us. Come salivate.

  10. No no no! Do not do it! I am older you. I invested in index funds, early retired, and am living your dream. Honest, don’t play with scams. You can win being safe, I did.

    1. The sensible voice of reason from someone who has walked the walk. Thanks for stopping by and taking the time to act as a Voice of Reason.

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