Wednesday, May 27, 2015

Bill Gross needs "Mental Game"


I know what you are thinking: it's incredibly presumptuous and cocky of me to even suggest that I can offer something to Bill Gross, particularly something in the "trading skills/attributes" category. After all, Gross is a billionaire, I am not. He founded, built and then ran, for a long time, the largest bond mutual fund in the world. I did not.

Yet, in the past few years we have seen him falter. We saw the bizarre, "Who's gonna buy them now?" tweet back in 2011 where he fretted publicly, on Twitter, that there'd be no buyers for Treasuries when the Fed stopped it's QE program at the time. Matt Franko and I started to think he was losing it. We referenced Gross's comments many times here on MNE.

Then we watched his losses and client defections mount while at Pimco. FYI that, too, was predicted here before it ever happened. After that the messy breakup with Mohamed El-Erian (who is no particular trading prodigy himself--"new normal?" Seriously?) and finally, the move to Jeffries (of all places) where he got an account to manage, which was about 1/200th the size of the one he was managing at Pimco.

Personally, I think Gross should have retired; stepped out of the game while still on top, maybe not performance-wise, but reputationally.

So in the past month or two he's made some calls: "Short the dollar is the best trade all year" and "Short the German bund is the best trade of a lifetime."

On both of these his timing was pretty good. He could have made some money. On the bund trade it was excellent: the moment after he said it there was a meltdown.

Now it turns out he lost money. He got the calls right (at least for a trade), but lost money.

You know what that is? That's mental game that just is not there. How do I know? Because I used to do it all the time early on in my trading career. I was always a great analyst, but never really made any money. I got the market direction right, the timing right...everything right, then ended up making nothing or worse, losing.

That's where Gross is right now. He's burnt. His mental game is nowhere to be found. It sounds like the height of arrogance and cockiness when I say that if Gross wants to stay in the game he has to re-sharpen his mental game. Who am I? I'll tell you who I am; I am a guy who's been through it, only on a smaller scale.

If Gross does not get his mental game back he will lose, lose, lose and suffer a really ignominious end. Trust me when I say this.

I teach mental game in my course. I have said to students that you can be the best analyst in the world, have all the best information, indeed...even have inside information, but if your mental game is not right then you won't make any money at all. You will fail as a trader.

On the other hand if you have the right mental game you can throw money at a dartboard and make money. I am being absolutely serious.

I've had fun making jokes about Gross, but now I am really sad for him. The guy had stature and he really made it big. He's not going to listen to what I say, that's obvious, but I wish him the best. If he doesn't get his mental game back  he's really going to go down in flames.

Let it be a lesson to all. No matter how big or successful you are or once were, the big guys can fail, too. And it's not that the markets are great humblers. The markets couldn't give two shits about you; they're not alive, they have no feelings or soul.

In the end, success or failure, we make it ourselves.

2 comments:

Tom Hickey said...

Good one, Mike. Needs saying.

I feel sorry for him, too.

As you said, he should have retired at the top. Now he is a face-saving position of doubling down on losses. Bad place to end up.

Michael Norman said...

It's a great lesson, Tom. Anyone can destroy themselves and the markets will always a willing sponsor to that end. Gross was mighty.