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Missed Opportunities


One man learns he manages his life like he manages his portfolio.


Editor's note: The following work of fiction is courtesy of Paolo Pezzutti, who contributes to the Daily Speculations website and writes the blog, Short-Term Trading. He's also the author of "Trading the US markets." This is his first piece for Minyanville.

There was a lady in Sorrento wearing a pink dress at a party that night. At the end of May, it was a wonderful night. The terrace of the hotel was overlooking the bay and the evening breeze was rippling the calm sea enlightened by a full moon.

She asked the man in front of her, "Do you think that someone who has been married to a woman for 25 years could decide to leave her for me?"

She was staring at him now with her deep green eyes. She was intriguing, and beautiful. How could it ever be possible for someone to resist her?

He saw his own life passing by. The relationship with his wife had become difficult and his job was keeping him very busy, but unhappy. Now in his mid-40s, he was seeing his life progressing on a declining trend. He knew he had to do something about it.

Finally, he answered the lady: 'He's a lucky man, but it's not so easy. There are people who don't accept taking a loss." He paused. "You manage your life the same way you manage your portfolio of stocks."

The bear market had started a year earlier. At the time, it was difficult if not impossible to see what was coming. In the same way, at a certain point his relationship had started to get worse. When prices printed the first leg to the downside he hoped it was only a correction. But prices moved again down to lower lows month after month. He could see his losses accumulate and still he couldn't act.

His relationship was exactly the same - low after low with some rebounds from time to time. The trend was clear, but he couldn't make a decision.

Hope, fear, sense of guilt. It was difficult to take responsibility for a failure.

He said: "People don't want to sell at a loss. They keep their positions hoping that things will improve. It's human nature. Eventually, when they're desperate and get their margin calls because markets capitulate, they finally liquidate and take huge losses."

She stared intently as he continued. "Similarly, most people won't close their relationship until there's really no other alternative and things have become unmanageable and nasty."

She didn't understand much about markets, but nevertheless she wanted to know more: "They live separate lives. Ignoring each other. They havem't made love in months. What does it mean?"

"'When the bear market starts, you check your stocks prices every day on TV and on the Internet several times daily," he explained. "You count your losses at the end of each day. The lower prices drop, the more painful it is. But after a while, the delusion and the discomfort are so big that you stop following the market in disgust."

She was really puzzled.

"When things start going wrong in a relationship, you argue continuously, you feel the pain of seeing your loved one as a different person from the one you married," he continued. "After some time, you realize that it's all useless. You don't discuss any more, you simply let it go. You ignore it."

He could see clearly that he was living this phase. He knew that normally this happens right before the panic selling, the catharsis.

He had lived the market crashes of 1987, 2001 and now this awful market born from subprime mortgages. It was scary. He shivered. It was cold now on the terrace and they went inside. The place was crowded and noisy, but they were both immersed in the conversation, although for different reasons.

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No positions in stocks mentioned.

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