How BARACK OBAMA friend lost billions? Real story shared by MR. OBAMA.

 

11^th May 2021

How BARACK OBAMA friend lost billions? Real story shared by MR. OBAMA.

Dear Fellow Travelers,

Namaste! Normal people judge by the results. But the smartest of the smart enjoy the process or journey. That was the message of our last post. At the end of the day, your real intentions count in the market and life. You can’t cheat life and can’t cheat the market. Both are RATIONAL most of the time. But when they act Irrational – you will lose your last shirt also. Let us see what happened to a Friend of Barack Obama.

From the Barack Obama Memoir: -

When Barack Obama discussed running for president in 2005, his friend George Haywood – an accomplished investor – gave him a warning: the housing market was about to collapse, and would take the economy down with it.

George told Obama how mortgage-backed securities worked, how they were being rated all wrong, how much risk was piling up, and how inevitable its collapse was. And it wasn’t just talk: George was short the mortgage market.

Home prices kept rising for two years. By 2007, when cracks began showing, Obama checked in with George. Surely his bet was now paying off?

Obama wrote in his memoir:

George told me that he had been forced to abandon his short position after taking heavy losses.

“I just don’t have enough cash to stay with the bet,” he said calmly enough, adding, “Apparently I’ve underestimated how willing people are to maintain a charade.”

Irrational trends rarely follow rational timelines. Unsustainable things can last longer than you think.

Two Examples of Indian Market: -

Thanks to Harshad Mehta Web Series – we have seen that MANDI CARTEL was about to lose their shirt when the market was closed down and the scam was announced. Had the the market remained open – the mandi cartel would have done suicide.

During 1999 –2000, Rakesh and other MANDI guys were one side short in K-10 stocks. They reached all their limits and shares were moving up, up, and up. This time also the SCAM broke out and Rakesh is said to have made Rs.4000 Crs in that year. 

What is Buffett had said?

This is famous sentence of Buffett: - “Market can remain irrational longer than you remain Solvent.”

What is the way out?

Be clear with your Purpose and Stick to it irrespective of market movements. Most people don’t have an EXIT strategy in the case of market crashes (those who are long) and in the case market goes up, up and up (those who are short).

Know your limits of earning profit and suffering losses.

If you are not RATIONAL in the above – Market irrationality will make you RATIONAL but after suffering losses.

Make your choice.

Follow me on Twitter @hiteshmparikh or on Whatsapp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.