Last night I watched an old movie made in 1974 called The Gambler starring James Caan. The movie was remade in 2014 (time goes by) this time starring James Wahlberg. The remake wasn’t as good as the original as they usually aren’t and took away a lot of what made the first movie interesting and weird. Watching it made me ask myself when it comes to trading the markets what is the difference between gambling and smart successful trading and investing?
The James Caan gambler character is like watching a train wreck throughout the whole movie, but watching it last night I saw how psycho he is. He’s a college literature professor during day and a gambling addict when he is not working who keeps taking himself to the point of oblivion over and over again.
The movie opens with him gambling and losing to the point where he owes $44,000 to people you don’t want to owe money to. He leaves the gambling joint in the morning and after he leaves you see this six minute scene, which ends with him hinting to his class of students his psychological motivations.
Soon he takes a trip to 1970’s Las Vegas and hits the blackjack table were he puts this philosophy into motion.
Of course this type of betting is insane and leads to wipeout – which Caan soon does to himself.
But why?
Watching the movie asking myself what is a gambling addict about I tried to figure out why Caan’s character is so demented. I couldn’t really come up with an answer as he is such a mad man. His philosophy makes no sense.
So I decided to think about results – the gambling addict never really gets ahead. Instead he just wipes out over and over again and can’t stop. He might be able to win if he learned from his mistakes to build working strategy, but doesn’t. Therefore winning isn’t really his motivation – it is simply doing it over and over again that is. That is what they call madness.
In the 2014 remake of the movie there is a good scene where the Wahlberg character is given a bit of advice from a character played by John Goodman whom he is borrowing money from to gamble again.
Stock trading is not gambling. But it can be. If someone gets in to the markets and has a pattern of making a lot of money and then wiping out and doing it again and again they might have a gambling problem. Of course this can be the pattern of someone just passively investing in the market 100% in stocks thinking it is safe while they aren’t trading or doing anything as the markets go down then up and down and up again and again.
But when big money gets into hedge funds or looks for a real money manager they look for the opposite – they look for a track record in which the losses are controlled and don’t lead to wipe outs. Right now we have seen the market have a big rally now for months with margin debt growing and some wild moves in stocks – with many people coming into the markets for the first time in their lives with things such as the Robinhood apps.
Some of these people will turn the stock market into a casino for themselves and others will take the time to learn from their experiences and become a real winner. That’s the difference between being someone like James Caan or the John Goodman character.
If you want to learn from my experiences grab my book Strategic Stock Trading.
-Mike
