Don’t be a Dilbert Trader

This is not a column about politics, it about trading. So please save your Libtrad insults for another time and try to focus on what I am about to say.

Donald Trump is very likely to lose the race for the Presidency. Not because I desperately want him to, but because he has managed to piss everyone in the electorate who is not male, middle aged and white.

In fact there is a good chance that he may not get even 100 electoral votes in November creating one of the greatest blowouts in Presidential politics since Reagan v. Mondale.

Which brings me to Scott Adams. Adams is the creator of the enormously popular Dilbert comic strip and by all measures a very talented and intelligent man. His ability to gauge and accurately read the social mood of Americans proved highly prescient when he was one of the earliest pundits to understand the Trump phenomenon predicting that the man would go all the way. This was at a time when most conventional wisdom thought that Trump would gone after insulting the war hero John McCain.

Adams was brilliant in comprehending that Trump’s appeal transcended reason and logic and hit the electorate directly on an emotional level. (As my 20 year old son said to me this weekend, “Dad the reason Hitler and now Trump appeal to people is because they both offer simplistic solutions to complex problems, and since most people just want to hear a solution but don’t want to think too hard about its ramifications they offer him support.”)

For a very long time Adam’s thesis looked brilliant. Trump was truly the Teflon candidate, able not rebound from scores of political gaffes that would have forced any other politician to quit. But then came “p-ssygate”. Now whether you think the Trump tape was just the way men talk or the confessions of a brutal sexual predator, it really doesn’t matter. It was a TAPE. It showed him in the worst possible light as a human being and it made even the most diehard of Republican women ( and many men) throw up in their mouth when they heard those words over and over again.

So here is where it gets interesting. Did Scott Adams change his mind in the wake of this new evidence? Not at all. In fact a few hours after the “grab her by the p-ssy” scandal broke Adams penned a 5000 word blog post about how he was 98% confident that Trump would win the election.

And this is how very intelligent, highly talented people lose all their money in the capital markets.

Scott Adams is the classic case of a trader who is married to his position. Think back at how many times you’ve acted like Scott Adams in the past. How many times you were convinced that your point of view would prevail in the markets. Even as evidence in the form of price and news turned against you, you stubbornly held your losing trade until all hope and money was gone.

And just like Scott Adams you also created a litany of reasons as to why you were still absolutely right. Of course in the cold harsh light of the margin call, those reasons looked like pathetic excuses, but at the time you believed them fervently, because they were all that you had.

Scott Adams may even turn out to be right. In politics as in markets you never know what could happen from one moment to the next. But if he is, it will be due to luck rather than skill, because if we were to run the US election in one hundred alternative universes today, it completely improbable that Mr. Trump would win in 98 out of 100 cases.

Scott Adams is making a classic trading mistake. He is basing his decision on ideological, rather evidentiary principles. This is how very smart people lose all their money. We’ve all been there. The key for us as traders is to not repeat those mistakes going forward.

In short, don’t ever be a Dilbert trader.

Boris Schlossberg

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