The battlefield is a scene of

constant chaos. The winner will

be the one who controls that
chaos, both his own and the
enemies.

NAPOLEON BONAPARTE

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Hi! My name is Michael Comeau and Im

the executive editor of T3 Live.
I run T3 Lives Buzz & Banter real-time
market intelligence service and help
manage our other premium subscription
services.
I studied business, finance, accounting,
and economics in college. Translation:
I learned boring formulas and theories
from overpriced textbooks.
My real financial education started
when I was thrown in front of a trading
platform and told to make sense of
it. In the real world, stocks and bonds
and options and commodities do crazy
things.
Take Shake Shack (SHAK).
On conventional valuation measures
like P/E and EV/EBITDA ratios, it was
definitely expensive when it came
public in early 2015 at $21 per share
-- my finance professors would not have
approved!
But what happened next?
Well, it opened for trading at $47... and
then it went to $96.75 in less than 4
months.

gurus called China a bubble because

of its slowing economy and overheated
stock markets.
Was China a bubble? Yes. But that
bubble got bigger.
The Shanghai Composite went up 50%
and the Shenzen rose 100%.
Financial markets are chaos come to life.
So if you want to succeed, youve got to
think outside the box.
Ive read a lot of What Id Tell My 22Year Old Self articles lately. 22 was an
important age for me. I was in my first
senior year of college -- I was on a fiveyear plan.
And I knew everything about what
markets were supposed to do but
nothing about how markets actually
worked.
In this report, Im going to tell you
exactly what I would have told my 22year old self about investing.
Im going to show you why Bruce Lee
can teach you as much about investing
as Warren Buffett.

Wow.

Ill share tricks for sniffing out hucksters.

And most importantly, Ill explain why
brainpower is vastly overrated.

And in late 2014, countless financial

Lets go.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Emotional Intelligence Is
the Only Kind That Matters

Your biggest enemy isnt high-frequent

traders, evil phantom hedge funds, or
even the Fed.
Its you.
Just like my biggest enemy is me.
I can trace all of my worst investment
decisions to acting emotionally instead
of rationally.
In early November 2014, I sold a long
position in Disney (DIS) at $91 because
I was worried about its next earnings
report.
I originally bought the stock because I
was bullish on the companys 2015 movie
release slate including the next Avengers
and Star Wars films which had exactly
nothing to do with that particular
earnings report.
By acting emotionally, I cost myself a
great deal of money -- Disney hit $113 in
May 2015!
You dont need to be a rocket scientist to
be a great trader.
However, you must develop high
emotional intelligence.

Top performers have the ability to

identify and manage their emotions.
They dont let winning trades inflate their
egos and they dont let losing trades
depress them.
They look at every day as a fresh start.
Yesterdays baggage always gets tossed
aside.
And most importantly, the best of the
best dont fight the market.
They understand that being wrong is part
of trading and that perfection is not a
requirement for success.
Basketball legend Michael Jordan missed
over 9,000 shots in his career and blew
the game-winning basket 26 times.
He also led the Chicago Bulls to 6 NBA
championships and was voted Most
Valuable Player 5 times.
We all fall down from time to time. Our
results are based on how well we bounce
back from our errors.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Be Like Bruce Lee

As active investors, we hear nonstop

about what financial icons like Warren
Buffett, Carl Icahn, and Jeff Gundlach are
doing.
But you know what?

You put water into a bottle and it

becomes the bottle.You put it in
a teapot, it becomes the teapot.
Now, water can flow or it can
crash. Be water, my friend.

I want to be like Bruce Lee.

To me, being water means being flexible

and going with the flow -- not fighting it.

I think his philosophy is infinitely more

valuable than Wall Street clichs like
buy low, sell high and diversify your
portfolio.

Do you know what happens to investors

that dig in their heels insist the price
action is somehow wrong?

He can teach us a lot about investing.

Lets go through some of Bruce Lees
most famous quotes:

like water making its

wayBethrough
cracks. Do not be
assertive, but adjust to the object,
and you shall find a way around
or through it. If nothing within you
stays rigid, outward things will
disclose themselves.
Empty your mind, be formless.
Shapeless, like water. If you put
water into a cup, it becomes the
cup.
3

They go broke!
Bruce also said:

It is not a shame to be knocked

down
by other people. The
important thing is to ask when
youre being knocked down,
Why am I being knocked down?
If a person can reflect in this
way, then there is hope for this
person..

Glorifying victories and ignoring losses is

an easy route to a big ego.
Big egos dont last.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

So we should pay extra attention to

trades that dont work out we can avoid
similar mistakes in the future.
Did I fail to properly gauge a stocks
reaction to a specific event?
Did I make an incorrect forecast?
Or did an unforeseen event occur?
Even if we cant always perfectly explain
our investing mistakes, we must ask
ourselves these questions.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

If Youre Going to Lose,

Lose Small

Since were on the topic of losing,

we should go through a rare piece of
conventional Wall Street wisdom that is
actually true!
Theres a basic problem with big
investing losses.
They require even bigger gains to make
up for them.

or you could become gun shy precisely

when its time to embrace risk.
Therefore, you must have a plan to
prevent small losers from turning into
major losers.
The simplest solution is to institute stop
losses.

Lets say you start off with $10,000.

For example, you could sell a stock when

it loses 7% or 10%.

If you lose 50% of that money, youre

down to $5,000.

Or, you could do what I do, and take a

mental gut check.

To get back up to $10,000, you need

to make another $5,000. Thats a 100%
gain, or double your money.

If a trade is going against me, I sit back,

take a deep breath, and think about
whether Id put it on again right then and
there.

But aside from the mathematics, theres

a second and bigger factor at play -- big
losses will frustrate you to no end.
Its much easier to move on from a 10%
loss than a 50% loss.
Remember what I said about emotional
intelligence?
Big losses put you at risk of mismanaging
your emotions. You could swing for the
fences a little too hard on the next trade,
5

In the past, Ive had a tendency to get

stopped out of trades on the lows, so I
find it best to not rush to the exits too
quickly.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Your Memory Stinks,

So Start a Diary

Albert Einstein said

If you cant explain it to a six

year
old, you dont understand it
yourself.

If you have a compelling trading or

investment thesis, you should be
able to get your point across in a few
sentences that the average investor can
understand.
You can spend days or even months
cranking through complex spreadsheets
and industry data, but if you cant boil
your research down to a few paragraphs,
you dont have an idea.
So test yourself.
Take your biggest stock position.

And if you do this on a consistent basis,

youll have a trading diary to which you
can refer in the future.
Having a diary is important because it
will keep you accountable. Investors
tend to have very selective and very
inaccurate memories.
If you think a stock looks okay at $50
and it goes to $100, odds are youll
remember yourself thinking I was
pounding the table on that as a strong
buy!
Writing is the best way to keep those
false memories in check.
So do yourself a favor and start a diary in
Google Docs today.

Even if youre just sketching down bullet

Now imagine you have a school
points, youll be surprised at how much
assignment to write 400 words explaining you learn about your process once you
why that stock is worth owning.
start recording it.
If you cant do that why do you own it?
You dont have to be Ernest Hemingway,
but writing about your ideas will force
you to organize your thoughts and
present them in an organized way.
6

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

You Must Know

the Serenity Prayer

Every investor must learn the serenity

prayer.

Or looking at your last 3 losing trades to

see what went wrong.

It doesnt matter what religion you are.

You could even be an atheist.

Or examining your risk management

strategy.

But say these words out loud right now:

Theres nothing wrong with having

opinions on the world. We all have them.

God, grant me the serenity to accept the

things I cannot change;
Courage to change the things I can;
And wisdom to know the difference.

But we only have so much time and

energy, and we ought to use it in
productive ways.

Bad investors are obsessed with things

they cant control.

We cant control the Fed, the economy,

or the White House.

Lets say you hate the Fed.

So we should focus our efforts on

improving how we approach the market
and manage risk.

You think theyve built a bond bubble

that will implode and take the world
economy down with it.
What should you do with your next hour
of free time?
Should you read 5 more anti-Fed articles
that reinforce what you already believe?
Maybe.
But youd probably be better off learning
a new options strategy.

Thats what matters -- not our opinions

on how the world should be.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Beware of Permabears,
Permabulls, and Twitter
Superstars

Permabulls always say everything is great

and that everyone else is bearish.
And permabears always say everything
is awful and that everyone else is too
bullish.
Theyre easy to spot -- they paint
melodramatic pictures of fortune or
doom based on incredibly simple
reasoning, like a single valuation metric
or economic statistic.
And with the advent of Twitter, weve
created a whole new generation of
charismatic Internet finance celebrities
with varying levels of expertise.
Like the permabulls and permabears,
you dont have to work hard to find the
bad apples.
The giveaway is that they tend to drone
on endlessly about their huge trading
wins and perfect economic forecasts.
Ive been around Wall Street people for
over a decade.

If someone is trying to prove to you that

theyre smart, rich, or successful, odds
are theyre not.
All these folks have a big thing in
common: when you press them for
details, they go silent.
On the flip side, Ive found that
genuinely smart and successful people
like to share research, spreadsheets, and
other information.
They dont have anything to hide
because theyre not insecure about what
they do.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Take Fear-Mongering
Headlines With a Grain of Salt

I have no problem with headlines like

This Chart Proves Were About to
Crash and The US Economy Is in a
Tailspin.
But I do have a problem when those
headlines arent backed up with real
meat.
Scary headlines generate clicks and
social media shares, so scary headlines
are what we get.
Remember, market crashes are extremely
rare and over the long-term, the market
tends to go up.
Think about all the media-created
financial emergencies over the past
few years that turned out to be mere
blips on the radar: ebola, sequestration,
the end of QE, Cyprus, Russia, Greece,
etc.
So take scary headlines with a grain of
salt.
Most supposedly important events rock
the boat just a little.
We very rarely actually sink.

And you know what I never see in these

articles?
A disclosure showing that the author has
a massive short position.
Why do we excuse fear-mongering
permabears when they fail to put their
money where their mouths are?
If you can accurately predict a market
crash, you can retire on a single trade.
Say what you want about permabulls, but
theyre usually invested in the market.
So why arent these superbears doing it?

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Understand That Timing Is

Everything

Good investing isnt about putting down

the right chips.
It about when you put those chips down.
Let me tell you a story.
I once interviewed for a job at a hedge
fund that made a major bet that the
housing bubble would implode.
Smart money, right?
Yes, they were smart.
They showed me a 200+ page report
full of statistics, specially commissioned
studies, and in-depth analysis of regional
housing markets.
In fact, they predicted the 2008-2009
housing meltdown to a T.
But they did it too early.
That interview took place in early 2003...
right before the Housing Index (HGX)
doubled.
They got crushed and went out of
business years before their predictions
come true.

10

If you have an investment thesis in your

mind, ask yourself, What makes now the
right time to bet on this?
Thats the toughest question youll ever
come up against, and thats how you
know its the most important.
Heres a quick rule of thumb to live
by: you cant always fight the broader
averages.
If the S&P 500 is skyrocketing, even
junky stocks can go up.
Likewise, if the markets in meltdown
mode, even the best of the best can get
smashed.
Apple (AAPL) closed out 2007 -- the year
it launched the iPhone -- at $198.08. And
many smart traders accurately predicted
that the iPhone would be a huge seller.
They were right. iPhone sales grew from
1.4 million in 2007 to 11.6 million in
2008.
But in 2008, Apple stock fell 57% to
$85.35.

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

So you could have been correct on the

underlying thesis -- huge iPhone growth
-- but completely wrong on the stock
price.
You can understand the who?, what?,
where?, and why? of a story.
But if you cant answer when?, you have
nothing.

11

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

Valuation Ratios Are

Useless in Isolation

The biggest mistake in fundamental

analysis is looking at a stocks P/E ratio
and declaring it cheap or expensive.
But you know what?
Cheap can be bad.
And expensive can be good.
Remember Shake Shack (SHAK)?
On its first day of trading, it was going
for 600 times earnings, which was
obviously crazy.
Right?
Of course just not at as crazy as when
the stock doubled and it went to 1200
times earnings.
There are countless other examples of
expensive stocks that just keep on going
up: Netflix (NFLX), Salesforce.com
(CRM), Tesla (TSLA), etc.
The list goes on and on.
A high-priced momentum stock can
suddenly look cheap if earnings are
strong and earnings expectations rise.

12

A P/E ratio, like every other valuation

metric, is 100% meaningless in isolation.
Rather, it is far more important to
examine how the E part of the
equation is changing.
Look at how fundamentals are trending
-- not where they are right now.
Any old fool can tell you a stocks trading
at 10 times earnings.
Your mission is to figure out if that
number is going to 8 or 12!

10 GOLDEN INVESTING RULES THAT BUSINESS SCHOOLS WILL NEVER TEACH YOUR KIDS BY MICHAEL COMEAU

10

Confirmation Bias Can Kill

The Oxford Dictionaries defines

confirmation bias as the tendency to
interpret new evidence as confirmation
of ones existing beliefs or theories.

right track -- a massive barrel of stupidity

that resulted in me watching Rackable
crash from $56 to under $10.
It is impossible to stay perfectly objective
when performing research.

So if youre bullish on Gold (GLD), youll

interpret everything you see as bullish for
gold.
However, you can stay one step ahead
of your own bias by regularly asking the
In fact, during your so-called research
question, Am I just telling myself what I
time, youll just hunt around for more
want to hear?
reasons to be bullish for gold.
Thank you!
I know the power of confirmation bias
from a horrible experience with a former Id like to take a minute to thank you
for joining the T3 Live community and
tech highflier called Rackable Systems,
reading this report.
which changed its name to SGI (SGI)
after it acquired Silicon Graphics in 2009.
If youve got any questions, comments,
or complaints about it, please contact
Back in 2006, Rackable Systems was
me directly at michael@t3live.com.
pulling in boatloads of money selling
energy-efficient servers to major datacenter operators like Microsoft (MSFT),
Amazon, and Yahoo (YHOO).
And then -- let me point out that I
had complete knowledge of this -competitors like Hewlett-Packard (HPQ)
decided they wanted to get a whole lot
more of those data-center dollars.
I viewed the new competition a complete
confirmation that Rackable was on the
13