I am sitting inside the amazing Grotto Ristorante inside the glorious Golden Nugget Hotel Las Vegas, as I write the first of this 18 piece blog series on Poker, Investing and my 3 weeks in the desert. Looking through the glass into The - uber-cool - Tank Pool, pretty ladies catch my eye and all I can think is that life is good in America.
For the next few weeks I'll be in Las Vegas playing poker, visiting my folks, meeting up with friends and working part-time. I did the same last year when the idea to write about poker and investing developed. The correlations of poker and investing have been talked about before, so this isn't a completely new writing idea. Hopefully I'll add some insight before I'm done.
Today, some hedge funds already use poker as a way to screen their candidates. Play crummy poker and you're probably not cut out to be a hedge fund trader. I don't think not being a good poker player means you can't be a good investor though.
The stories I'll tell here, the ideas I'll suggest for thought, I believe can help you become a better investor. So, I hope you learn from my experiences and my mistakes - there are plenty of mistakes.
Oil's Armageddon And The Paradigm Shift To Alternative Energy
This week, I wrote what might have been the most read article on Seeking Alpha. As of today, Here's Why Oil Stocks Are Priced For Armageddon has generated over 450 comments. Join the conversation.
The general thesis of the piece is that:
- alternative energy is taking market share from fossil fuels at a faster pace than most expected and the pace is accelerating.
- oil is in a prolonged choppy downward trend as the market adjusts to higher supplies due to shale and flattening demand growth.
- the fossil fuel divestiture stock movement is real and having an impact.
- eventually, probably soon, the reduced investment in long-cycle oil projects, think deepwater and oil sands, and flattening shale production, will cause oil supplies to tighten to demand, causing oil prices to rise to around $80 to $100 per barrel.
- once oil supply and demand tighten - realize we were on the verge of seeing that recently - Saudi Arabia will be very assertive in maintaining their position as swing producer of oil, meaning, oil prices will be in a higher range for an extended period.
- many oil shale companies won't exist in a few years due to bankruptcy, mergers and acquisitions, but the survivors, especially those that go through mergers, will do very well for the better part of a decade.
- while EV adoption is low and slow for now, the pace is accelerating and eventually will be a tsunami that mostly wipes out ICE sales - expect advances in battery technology and new laws to be the catalysts.
- once EV sales are greater than ICE sales, oil demand growth will end and the curve will gently turn over until it suddenly plunges - I put the beginning of massive oil demand destruction around 2030.
Among the comments I got on that article were the typical backwards looking thoughts that solar would never be a viable energy source. The EIA and I both disagree. More importantly, the utilities disagree. If you want to know the direction of utility generated energy in the next decade, look at what their trends are. The trends are to tear down coal power plants and replace about two-thirds of that generation with alternatives.
I also got the usual "EVs are toxic and inefficient." The fact of the matter is that there are marginal environmental improvements switching from ICE vehicles to EVs now. As technology improves in batteries, that is happening quickly, the positive environmental impact will be massive, especially as the emerging smart grid incorporates solar as most of its new alternative energy mix.
For investors, it's important to know that there are great alternative energy investments out there. The sorts you will want to hold for a very long time. Think smart grid players and alternative energy, particularly solar and battery related.
In the intermediate term however, as I covered in Oil Investing Is Dead, Long Live Oil Trading, The Dirty Dozen Oil Stocks For 2019 and Permian Pure Play Merger And Takeover Targets there are some great trades to be made in oil stocks.
Poker Variance And Investment Volatility
In the first two hours of playing poker on Day 1, I made three big hands. I lost all three. Non-poker players won't understand all this and I don't want to explain poker too much here, so, muddle through the poker and look at the investment correlation at the end of the section.
The first was a three of a kind with 999 and a Q kicker. The blind woke up with K9 vs my Q9 to take $300 from me. I played the Q9 because I knew roughly what the person to my right was playing. I was trying to make what I made or a hidden straight. The play was right and there were very few hands that could beat me, but, the blind found one that did. The blind's original call was loose and it paid off. Such is poker and life.
The second hand, I flopped a set of Queens. I had called a raise with QQ against somebody I knew probably had a middle pair or maybe big slick - ace/king. I made the big hand, raised the original better who continued and then called. We got all our money in on the turn and the board went runner, runner to make a straight for the villian's JJ. Such is life and poker.
The third hand, I had AA in the cut-off. I raised the opener and a caller. To call would require them or the blinds to put in about 2.5x what was in the pot. One of the blinds asked to see my chips, which were at about $300. He called, others fold. The flop is J98 off suits. Blind checks to me, I go all in, blind calls and shows QT at showdown. I lose again. I might have bet that one wrong, probably should have gone with a blocker bet. Regardless, I lose, such is life and poker and second-guessing.
So, in poker, there are times when everything says you should win, but you lose. Sometimes it's due to a small mistake, other times, it's bad luck or variance. Just because I was 65-80% likely to win each hand, doesn't mean I will win any.
Studying And Controlling Your Emotions For Poker And Investing
With poker or investing, you can put the odds on your side and still lose. Sometimes you lose at several hands or investments at in a short period and feel as if you should just give up.
Controlling your exposure is thus important. In poker, don't risk everything if you can help it. With investing, manage your asset allocation so that you don't get too overexposed to any single investment or investment idea.
Honestly, some people should give up on investing and just index. Who are those folks? Generally, people who don't have the time or drive to study investing should index or hire out.
It's rarely intelligence that causes people to fail at investing. It doesn't take a rocket scientist to be a good investor, though I do know a rocket scientist who writes nifty neural network software for investing.
The biggest group however that fail are the overemotional investors. That's well over half and probably close to three-quarters of investors. You want to be a better investor? Read more, feel less.
In short, like studying the game and practicing controlled emotions in poker will make you a long-term winner, those skills are also vital for investing.
So far, after one day, I am down $900 playing cash poker, see above. However, I am up $443 after taking 12th of 307 entries in the Golden Nugget poker $150 NLHE daily deepstack. So, on net, down $457.
It was a fund tournament. I played next to some great people. One guy was wearing his MAGA cap right next to a gent from England who had some Trump mints.
The Englishman, Andy he said, maybe he was really from Texas though he said about his accent, was funny. The mints were funnier. He got scolded for talking politics at the table when he asked, "so, what do you all think of Trump." I don't think he was a fan. I told him my theory on the next election that Trump was almost certain to lose and very likely in a landslide.
The tournament was an exercise in perseverance. By the time I busted on a gamble to try to triple up, I had been up 24 ours including travel time from MKE to LAS. I might have gambled a few hands too early, but I wasn't playing to level up $140, I was going for a top finish with prizes between $2k and $7k. Such is life and poker.
One thing I relearned is that almost no players improve at the table. If they have a tendency or flaw, it will reappear over and over.
With investing, that is true as well. That's why the trend is important. If a market is trending up or down, it will generally continue to that until there is a catalyst for change.
There are a lot of different catalysts to changing a stock's, sector's or the entire market's direction. Too many to go over now.
With the oil markets though, the catalyst could very well be that we are, by my estimations 87% likely to have Democrats leading government again in 2021. If that's so, then oil rises due to restrictions on new drilling and environmental standards. That means the survivors soar. And remember, sometimes the market moves ahead of the event.
Time To Lose The Fat
Over the past decade, I've put on about 50 pounds. I'm fat. That's not good as I close in on 50 years old. I have grandpa duty coming, I don't want to screw that up by dying or something.
I've talked about losing weight for years. I've false started dieting and exercising a lot of times since I stopped playing soccer and faded from baseball. It's time to stick with it.
So, on this trip, I am jump starting by going super low carbs and no sugar. I'm sure I'll have a cheat day or two as friends arrive to play the WSOP Monster Stack with me.
I'm also mixing in fasting. I know not everybody knows about intermittent fasting, but I've seen others have amazing results on the body and mind.
On this trip, I've eaten an omelette, couple slices of bacon, a salad with chicken and some shrimp cocktail. No breads, potatoes, noodles or sweets. No booze yet either - in Vegas, crazy, I know. I also didn't eat for 16 hours at one point. And, in 24 hours, I only had two low carb 2-bite sausage sticks that a buddy who lost 60 pounds swears by. So, a good start.
We'll see how it goes, but I'm pretty committed. I want to lose 50 pounds by my 50th birthday which is in February. I'm convinced health and wealth are linked.
Plus, who cares if you get rich if you die. Can't take it with you. If you keep reading me, I hope I can help you make money and inspire some healthy decisions along the way, even if you are way head of me on both.