Don’t Accept Losses from Virtue Investing

A tweet from me:

Jared Dillan Tweet

You put on a trade. You are short bonds, or something like that. It may be tempting to see the people on the other trade as the “bad guys,” while you are the “good guys.”

For example: You may see yourself as part of a movement or effort to impose fiscal discipline on the federal government, and the people on the other side of the trade, the longs, are the enablers. You are the good guys, and they are the bad guys.

Don’t do this.

If you believe that a trade will make you virtuous, you will be more willing to accept losses.

There were some very angry bears toward the end of 2022 who were enraged about the excesses of the bull market and the losses sustained by individual investors. They wanted to punish those whom they believed to be the bull market cheerleaders in 2021—like Cathie Wood. They were the good guys, and Cathie Wood was the bad guy. They were limit short in October… and got carried out.