The Tycoon Report

Are You The King Of The Jungle On Wall Street?

Friday, August 15, 2008 | Ethan Roberts

Have you ever noticed that Wall Street is sometimes like a wild and dangerous jungle, with treacherous bull or bear traps set everywhere for newcomer and experienced investor alike?  As someone once said about the stock market, "They don't play this game in short pants!"

Looking at the recent stock market volatility, it seems this jungle will eat you up and spit you out if you are not careful.  One day the Dow is up 300 points on a merger or a decent economic report, and you think the worst is finally over.  But then the next day, some mega retailer's earnings disappoint, or the unemployment claims rise, and the Dow crashes back down 200 points.

This metaphor of Wall street as a jungle stirred my writing juices for this week.  Furthermore, if Wall Street is truly a jungle, then all of us who roam around in it on a daily basis must be the various jungle animals and other creatures.  So today I would like to share with you my impressions of the many different "animals" which rumble in the Wall Street jungle, and ask you to reflect upon which species' behavior most closely resembles your own when it comes to trading style.

For simplicity sake, and with apologies to our many female readers, I will use the pronouns "he" and "his" throughout this piece, but feel free to substitute "she" or "her" if and when applicable to you.  You may also find some animals here that one would not find in a real world jungle.  I am aware of this, and am merely taking some literary liberties to make a point.

We must, of course, begin with the most common of the Wall Street jungle animals, which is:



The bull is someone who is very optimistic and no matter how bad the economic conditions become, always believes that the U.S. Stock market will go higher.  The bull only takes long positions, and will ride those positions through bull or bear market alike.  The bull also believed in the tooth fairy until he was 20 years old.  But people like the bulls because they are always smiling and happy.  Bulls tend to be right about 67% of the time, and that's really not too shabby, especially when compared with...



Which is, of course, the opposite of the bull.  The bear is the investor who is continually worried and pessimistic and always frets that the market is heading lower.  Prone to shorting individual stocks, or the market as a whole.  Said to have read the book, "Chicken Little", 27 times during childhood, and can frequently be overheard telling others that "the sky is falling".  The bear keeps a poster of Joseph Granville on the wall of his cave.  He is correct on the market about 33% of the time, but loses a lot of money when the market finally figures out that it was just an acorn that hit Chicken Little on the head!



The pig is a greedy creature who holds his stocks too long, and subsequently manages to turn Chateau Mouton-Rothschild into vinegar by riding a big winner back down to break even, or even a losing trade.  The pig was smart enough to have bought Nortel (NT) in 1999, but took no profits after the huge run up, and didn't sell it until it was almost worthless in 2002.  Suffers from inflamed- ego disease on a regular basis.  Assumes if he makes 50% on his investment, there is always another 50% to go, and can't be bothered to do the research to see if that is the case or not.  The pig's ironic lament is the saying made famous years ago by Pogo, "We have met the enemy, and it is us".  Oh, and please don't talk about buying "pork belly futures" around the pig- he's a little sensitive about that!



Unfortunately, this is a fearful sort of bird, who is afraid to take any risks.  The chicken won't buy a stock that's rising in price for fear that it's overbought and ready to decline 10 minutes after his purchase.  However, he also can't bring himself to buy a stock that has gone down, because who's to say that it won't decline even further?  So Chickens basically do nothing but stay in cash all the time, then complain to the other chickens that their portfolio is only up by 25 percent since Nixon was President!



The turkey is much braver than his cousin, the chicken, but is also the woefully gullible type.  He buys an IPO after it rockets up in the first few days for the privileged animals, assuming that it will continue to do the same for the common turkey.  Frequently believes and acts on e-mails he gets about some "hot biotech penny stock that is poised to go through the roof".  The turkey trusted and followed the advice of all the analysts who appeared on CNBC in mid 2000, saying "stay the course and don't sell your tech stocks".  Sadly, the turkey never seems to learn his lesson.  In fact, the turkey has a bumper sticker on his car that reads, "This time it's different!"  Unlike many of the animals who "Sell in May and go away", for some unknown reason, the turkey seems to disappear right around the third week of November.



The vulture is a slick and talented trader who smells a dead or dying stock and swoops down from the skies to short the heck out of it.  The past few weeks the vulture has enjoyed several fine dining experiences, on stocks such as Crocs (CROX), Whole Foods (WMFI), Goldcorp (GG), and Fannie Mae (FNM).  The vulture was very recently seen perched on a branch, licking his lips and preparing "malocchio" again for Mastercard (MA).



The flounder is a bottom dweller, who after waiting quite awhile, often comes out to feed on the remains of the vulture's tasty meal.  The flounder is the guy who bought Priceline.com (PCLN) for two bucks a share in 2002.  Most recently been seen nibbling on cheap stocks like Ford (F), Washington Mutual (WM), and Circuit City (CC).  Sometimes the flounder catches a nice tasty shrimp, but just as often he snags a lowly worm for all of his trouble. 



Also known under the generic name as the "JohnEdwardsasaurus", the cheetah is the fastest animal in the jungle.  Technical analysis is the cheetah's forte.  Loves to day trade, and occasionally swing trade.  The cheetah has never heard of a long term capital gain, or a P/E ratio.  Once traded an Albert Pujols rookie baseball card for an autographed picture of Gerald Appel.  Often lies on the sunny beach and daydreams about catching the perfect stochastic wave...



Mr. Tortoise is the slow and steady type, quite the opposite of the cheetah.  He invests all of his extra money into index mutual funds, a couple of bucks each week, starting at an early age.  When people make fun of him, he just reminds them that the tortoise outran the hare in the Aesop's fable, and brags that he will also outperform the hare in the long run.  And yes, it's true; the tortoise does carry a picture of Warren Buffett around in his wallet. 



The lion is truly the king of the jungle.  He often holds both bullish and bearish positions in his portfolio simultaneously.  He keeps his portfolio diversified.  He always has some money on the sidelines for scooping up bargains.  His investment decisions are based on well thought out logic and research, not hasty emotional decisions.  He does not care for hot tips.  He seeks to minimize risk, but is not afraid to pull the trigger on a trade when the odds are heavily stacked in his favor.  He prefers to buy stocks with strong relative strength, and likes to employ BPI and Point and Figure charts, along with three or four technical indicators.  He became a Lion over the years by reading The Tycoon Report each and every day!



The Jackass is what I call myself from time to time when I make a stupid mistake in the stock market, such as selling a big winner too soon, missing out on a nice profit by emulating the chicken, or by acting like a pig.  Oh, how painful!  But who among us has not done some of these things at one time or another?  Yet on a positive note,  I am happy to report that I used to be a much bigger Jackass than I am now, because I have learned most of the aforementioned lessons the hard way, and try not to repeat them anymore.  Only by learning from one's own inevitable mistakes, does the Jackass eventually overcome their chicken, turkey, or piggish tendencies, and become a roaring lion.  And once you are a lion, you will roar like a king forever!



Speaking of roaring lions, this is my cat, Mr. Jingles.  Roars like a lion at me when he's hungry.  He has nothing to do with the stock market per se, but the way he eats, I have to up my game and make some winning stock trades!  However, he keeps insisting that I can make all my money back if I buy stock in Nestle (NSRGY), now that it has acquired pet food company, Ralston-Purina. 

Purr-fect logic, Jingles old boy!

So now that I have identified the various species of Stock market animals, it's your turn.  Did I forget any?  How do you see yourself in most of your investment decisions?  Are you the cheetah...bull... tortoise...flounder...combination of a few, or perhaps already the lion?  I'd love to hear readers share their own self-analysis.

See you next week!




Ethan Roberts
Contributing Editor
The Tycoon Report