Investment lessons from the White House ... sort of

Investment lessons from the White House ... sort of

Investment lessons from the White House ... sort of

Life lessons from Anthony Scaramucci, I'm guessing, do not come around often. But during the recent Toronto leg of his “I Now Hate Trump” tour, the hedge fund manager turned failed White House communications director offered glimpses of self-reflection.

It was clear from his appearance at the Toronto Global Forum that he has fully dusted himself down from the “humiliating” 11 days he spent working for a man he now says is “nuts” and “in severe mental decline”.

Whichever side you want to take – and it’s kind of like choosing between malaria and Lyme disease – the most illuminating parts of his Q&A came when he showed humility in recognised his own failings.

They read as a cautionary tale against hubris and self-importance and, surprisingly given how “The Mooch” made his money, how not to approaching investing.

The latter wasn’t the message he was trying to convey, of course – that was trying to destroy the Trump “virus” – but as I sat there with my WP hat on, I couldn’t help but draw my own analogy.

The first lesson was: don’t believe the hype. The "financier" admitted he bought into the Trump campaign and the property developer’s swagger. Given his relatively modest beginnings, he insisted that the offer to work at the White House in 2017 was, for him, simply too good to turn down.

Already this sounds familiar and I’m thinking dot-com bubble, the Great Recession and, dare I say it, cryptocurrencies. Investing in Bitcoin, by the way, is like handing over money to your gambling buddies – they say they’re winning thousands but you never actually see it happen.

The second lesson gleamed from Scaramucci was: don’t follow the crowd. He conceded he got it wrong backing the President but added that so did nearly 63 million other folk. Incidentally, he now believes he is definitely right and predicted Trump will be out of the election race by March. He also said you can’t underestimate the President and that he has great political instincts. Go figure.

The way he followed the Trump herd reminded me of contrarian investors and the ability to exploit mispricing, and also of the discipline required to sell high and buy low. Overly simplistic, maybe, but I doubt riding a stock until it implodes, like Scaramucci did, is in the Warren Buffet Guide to Investing.

Speaking of money management 101, if I had a dollar for every time someone told me you have to take the emotion out of investing, I still couldn’t invest with his SkyBridge firm … but I would be significantly better off. Lesson number three: don’t let pride and ego affect your decision-making.

Scaramucci’s falling out with former chief of staff Reince Priebus and ex-Trump-whisperer Steve Bannon came about because he was too proud and stubborn to back down.

Accepting when you’ve got it wrong with an investment can save you money and a whole lot of pain. How many people have stuck with a sector, asset class or stock because they’re convinced they are right and the numbers will turn around? Most of us, probably. It’s one thing refusing to drop your favourite player in fantasy football but it’s quite another to stay invested when you really should be heading for the nearest exit.

These are all what Scaramucci called “colossal mistakes” but they happened and, similarly, they’ll keep happening in the world of investing.

I’d be interested to hear from advisors on how they avoid falling into these traps and, particularly, from those who have made mistakes but shown the fortitude to bounce back, learn the lessons and last longer in their than 11 days.

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