Emotion and financial speculation go together like water and whiskey: Too little emotion, and your investments will taste joyless. Too much emotion, and the richness of your returns will be watered down. By the way, this is coming from someone who doesn’t drink whiskey. Hell, I barely drink water.
Although I try to minimize the extent to which emotion plays a role in my investing decisions, I’m not entirely naïve or arrogant. (Just a little.) I know that if I pretend that emotion has no role in what I do, then I expose myself to unacceptable risks. Instead of ignoring emotion, I try to channel it through what I think of as emotional hedging.
The Art of Emotional Hedging
Let’s say that there’s an event you actively want not to occur. To hedge emotionally in a successful way that has both nothing and everything to do with money, you have to answer two questions.
- How much would I be willing to pay for this event not to happen?
- How much would I be willing to accept for this event to take place?
If in the speculation markets you can find odds that accommodate your answers to those two questions, then you have the opportunity to hedge emotionally.
Which brings us to the main event.
“My Name is Kid … Kid Rock!”
This is the part where I’d insert a YouTube video of Kid Rock performing his 1998 hit “Bawitdaba,” but I literally can’t find a live version of the song in which there isn’t female nudity. Trust me, my research was exhaustive. At one point my wife walked into the office, saw me watching naked women dancing around Kid Rock, and said, “Ba-what da f–k are you watching?” before walking out.
I’m a lucky man.
Right now at MyBookie, Kid Rock (a.k.a. Robert Ritchie) is +20000 to win the 2020 presidential election. On the plus side, if Kid Rock were elected president there would be no more debate about whether the guy in the White House had actually hooked up with a porn star: We’d all 100 percent know that he had. On the negative side, there’s everything else.
How much money would I be willing to pay for Kid Rock not to be president? At least $20, probably more. But if someone offered me at least $4,000, would I be fine with Kid Rock being the 46th President of the United States of America?
Pour that whiskey. I once was lost, but now I’m just blind.