Postcards: A New Rule in the Republic

When you're doing this... it's time to sell. Learn it. Know it. Live it. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: A New Rule in the Republic]( When you're doing this... it's time to sell. Learn it. Know it. Live it. [Garrett {NAME}](floridarepublic) Aug 14 floridarepublic   [READ IN APP](   Dear Fellow Expat: Good grief, man. We aren’t savages. No. You don’t need to use a fork when having dinner here in the Republic. But you must keep the chicken grease off your sports jacket. There are rules in this establishment. Whether you’ve been with us long… or just learning about The Republic, [it’s always good to refresh yourself with our rules.]( Rule One: “Mind your own business… and keep your hands to yourself.” It's a rule we all follow here… a good rule for life. Here, we focus on mastering the present… embracing financial independence… and challenging comfort zones. These are all critical to a more stress-free life. Regarding trading and investing, we also follow strict rules regarding the markets. We stick religiously to insider buying. We focus on momentum. We look at liquidity to guide us. We don’t pay for things that don’t make intrinsic sense. And this allows us to focus elsewhere in our lives - on our health, our wealth, and self. Today, we have a new rule… and it’s an important one. Let’s Not Text and Trade A week ago, I messaged my friend in New York about the huge swing in the S&P 500 Volatility Index on August 5. After we witnessed the largest spike in volatility in years - one that rivaled the 1987 crash and the worst events of the last decade, central banks were on the brink of something horrible for basic financial stability. The Bank of Japan needs to hike rates, which caused a once-in-a-decade panic that sent retail investors fleeing. But then, the Bank of Japan showed its hand, saying it wouldn’t take action that would impact the massive carry trade until markets were calm. Institutions started buying all over again. This is a somewhat predictable pattern, especially during oversold conditions. Central banks have caused roughly every crisis for the last 30 years, so it was fair to start assuming they’d do their best to instill confidence and ensure the markets were safe… for now. To reduce volatility. After the Bank of Japan statement to reduce panic, I asked my friend: Doesn’t this feel like a once-every-few-years opportunity to short (or bet against) any additional increase in volatility by buying the SVIX? The SVIX is the -1x Short VIX Futures ETF (SVIX). This is an inverse ETF that’s based on short-term futures around volatility. As volatility drops in the short term, the SVIX will rise. He looked at his charts and texted me back. “Absolutely.” I didn’t talk to him for a week. Then, yesterday, he texted me: “This was an elite call. Been straight up almost 50%.” Today, I texted him again that it had reached that 50% level… going from about $19 to $30 in eight trading days. So, I was checking in on the trade. I casually mentioned this to Scott here in the Republic. And he reminded me of something really important to hear. Scott said… “It’s time to sell.” Here’s why. If You’re Texting, Start Selling As Scott noted, when you’re texting someone about a winning position. The moment that you’re bragging and sending a chart. It’s time to sell. “When you send a text or pull out your phone… that’s the top,” Scott said. “I’ve seen this happen too much to think otherwise.” With that, a new Republic Rule was born. “The moment you start bragging, it’s time to take your gains.” It’s a brilliant rule. Because it’s very easy to let something ride because you’re ahead. When you’re winning, you’re less loss-averse. You’re not thinking clearly. It’s always smart to let winners ride, but the problem is that it’s very easy to turn a 40% gain into a 20% loss with too much hubris. Selecting an exit point can be tricky. If you’re up 50% on a position, perhaps you say that you’re okay with a 25% exit. But then it becomes REALLY hard to walk away when the market bounces around. Humans feel a massive psychological impact when they lose $10. They generate the same emotional output, losing $10 as they do, WINNING $20. So, your pain from losing is two times greater than your joy from winning, even at the same nominal amount. This can create an ugly feedback look. It becomes tempting to buy again… and again… Our brains are just wired this way. But what about something a little easier? If you’re up, consider using a moving average like the 20-day SMA. Or think about hard stops that cannot be adjusted. The point is to walk away a winner and not return to the poker table thinking you’re playing with the house’s money. There is no such thing as House Money in the Republic. Keep and protect what’s yours. Come check us out for a month for more on portfolio trades and different exit strategies (we use the 20-day SMA on momentum). [Upgrade to paid]( Stay positive, Garrett {NAME} Secretary of Finance Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()