Baseball, Gin and Technology by Steve Abramowitz

Losing money was a great shame in my family, worse than not making any money at all. It was a shanda, Yiddish for disgrace. It didn’t take me long to learn the program. I’ve spent a lifetime trying not to be someone’s financial embarrassment, which includes managing money in my own family. I suffer from FOLM, or fear of losing money, not to be confused with FOMO, shorthand for the daredevils of the investment world afflicted with the fear of missing out on stocks hurtling toward glory.

What were the early symptoms that exposed the FOLM that would haunt my investment future? It started with flipping baseball cards. When I was around eight, my friends and I would play against-the-wall. One of us would lean cards on the rug against the wall and the other would try to knock them down by flinging a card toward the row of his opponent’s cards. My friend would routinely direct his cards at either end of the row, which was worth the most points. Fearing I would miss the entire array, I invariably aimed for the card in the middle. I knocked down as many as my friend, but lost on points and had to give up my best cards, the currency of a boy’s childhood.

My next symptom showed up a couple of years later, when I began to collect stamps. I was enamored with a set known as the U.S. 1938 Presidential Series. With a little help from grandma, I slowly collected the set from ½ a cent to $2, but never could bring myself to buy the prize $5 stamp.  Especially in those days, five dollars was high-finance for an 11-year-old stricken with FOLM.  I was afraid I’d be taken advantage of by the dealer and be a shanda to my family.

As a teenager, I was a fish at playing a hand of gin, once again care of my heightened fear-of-losing-money. I only figured out just how bad a player I was when in college I read Edward Thorp’s Beat the Dealer. In the interest of protecting myself from loss, I managed to increase it by picking up a card only marginally related to a set rather than taking one from the pack. Unburdened by FOLM, my friends were willing to risk getting an unrelated card by choosing from the deck to fill a set, which had a higher probability of winning than my safety-first methodology.

I realize now one of the reasons I rooted passionately for the Brooklyn Dodgers was to assuage my fear of losing face, a close cousin of FOLM. Dem Bums, as they were affectionately called, were an outstanding team destined to drop playoff games and the World Series. If they lost, you could still be a cool guy and even evoke some sympathy. If the Yankees, perennial champs, lost a big one, you were humiliated.

I have written previously in Humble Dollar about my terror of technology stocks, the sector most susceptible to precipitous declines. I have obeyed my fear of hitting an air pocket by alternately underrepresenting the group in my portfolios, using technology funds partly protected by short options and currently avoiding the artificial intelligence mania. Overweights in consumer products and utilities have allowed me to stay invested, but at the cost of long-term performance.

How could someone so steeped in the fear-of-losing-money ever have been an options trader in a former life? Instead of leveraging IBM, I sold (shorted) options against stock positions and put on spreads that mitigated downside risk and generated excessive commissions.

I even became symptomatic competing in a stock investing contest advertised in Barron’s in the 1980s by a clever entrepreneur. Participants put up a modest entry fee and drooled over the prospect of being named as one of the five best “investors” in a follow-up ad. Wanting to ensure my name appear in Barron’s more than actually winning, I chose a steady-Eddie mutual fund that would have a good chance of placing. Depending on the number of participants enrolled, that strategy reduced the risk of putting it all on a volatile stock that might fall victim to a negative news event to take me out of the running. For you wise guys out there, I do not know whether there were more contestants than the five who prevailed.

The fear-of-losing plan worked like a charm. I took second place and cut out the follow-up ad that appeared in the magazine. Then, miraculously, a few weeks ago my genuine letter to the editor was published in Barron’s. On Saturday, in the process of cleaning out my office closet, I came across the follow-up ad shouting out my name from the pages of Barron’s. Sunday my wife Alberta framed it and the page of my letter to the editor and, together, we hung it on the wall.