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The Best of Kass


What Do When You Are Wrong
Originally published on Wednesday, March 6 at 1:28 p.m. EST.

I have a little poem I'd like to read in honor of the occasion of being wrong on the markets since mid-January.

And I would like to provide a checklist of things to do when things go different than one's baseline expectation.

If I may ... and Spaulding, get your foot off the boat.
"It's easy to grin when your ship comes in / And you've got the stock market beat. / But the man worthwhile is the man who can smile / When his shorts are too tight in the seat."
- Judge Elihu Smails, Caddyshack

OK, Pookie, do the honors!

Here is my checklist when things go differently than I expect in the markets.
  • Most importantly, spend some time objectively re-evaluating one's investment thesis.
  • Be honest with yourself, challenge yourself.
  • If conditions have changed, change your investment strategy.
  • Seek counsel from smart investors you know and sit down and discuss your thesis and get his/her feedback.
  • Take 10 deep breaths and do nothing for a while. Like Being There's Chauncey Gardner ... just be there and watch.
  • Try to stay balanced emotionally. (Physical exercise is usually a good idea. So is a good book).
  • Speaking of books, go back to your library and do some homework by reading about the legendary masters and their investment methodology.
  • Do not double down or average up until some time elapses and you have enough time to settle down, analyze your positions again and get input from others.
  • Lastly, if you conclude your currently wrong-footed investment position will prove accurate, do not be dissuaded. Stand firm in view.

Remember, in the investment business we don't necessarily swing for averages. It is discipline that helps us deliver superior returns.

At the time of publication, Kass had no positions in stocks mentioned.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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