Trade Like Dan Marino
“But the kick was never needed. The fake spike proved Marino was most lethal as soon as the defense dropped its guard” — NFL Films
Drew Brees set the NFL record for single season passing yardage last night which now stands at 5087 yards. It was rather thrilling and you couldn’t have drawn it up any better for the guy — Monday Night Football on National TV, final play of his final drive of the night, and breaking the record on a touchdown throw at home in the Superdome. He now has thrown for three yards more than Dan Marino did back in his rookie season in 1984 (which incidentally, is also the season in which Eric Dickerson set the record for most rushing yards and which still stands today).
I bring all this up for several reasons in regards to investing and trading and portfolio management in general because there are several interesting lessons/parallels for us as our markets close out another year far away from their all-time highs of years past.
NFL Record Setting Investing Point #1: It’s a game of inches. 36 inches in this case. Yes, Drew now owns the record for single season passing yardage because he threw for 36 inches more than Dan Marino did. On a 5000 yard base, that’s less than 1/15,000th of a percentage point. Even if you do hundreds or even thousands of trades in a given year, every little cent and every little basis point you can fight for adds up. Indeed, that’s exactly why high-speed trading is so important to the Goldmans and JP Morgans of today — they’re trying to skim inches to add up to another record-setting season of trading of their own.
NFL Record Setting Investing Point #2) Accurate pricing is crucial. I saw a play out in the Saints game last night when Darren Sproles ran a kickoff back 98 yards before being pushed out of bounds at the 12 yardline, but the officials spotted it at the 14 instead of the 12, so Sproles only got credit for 96 yards on that play. 24 inches of an official’s spotting error on one play. Meanwhile, Brees’ record stands by 36 inches? I wonder how many times Dan Marino’s spots were off back in 1984 and how many Drew Brees’ spots were off in 2011. I guarantee there’s more than 1/15,000th of a percentage point in plus/minus on that spotting accuracy over a season’s 16 games with 40-50 pass plays per game. Make sure you have a good sense of what your assets, including those illiquid assets like real estate, are really worth, because if you’re not accurate in gauging their value, you’re likely to over or under estimate how safe/wealthy you really are. And if you’re investing in a big bank like JPM or Wells Fargo, you better be comfortable with where they are spotting their own balls on the field. Because if I were a bank investor, I’d be throwing a red flag and asking for an instant-replay.
NFL Record Setting Investing Point #3) Don’t count your chickens before they hatch. I remember when I was a kid I watched some NFL running back set a team-record for rushing yards in a single season as he ran for a three or four yard gain late in a game late in the season. The team stopped play, did a quick acknowledgement and honoring of the breaking of the record and then got back on the field to run the next play. The running back lost five yards on the next play as he was tackled in the backfield and suddenly the record that was just his was no longer his. The team turned the ball over and the game and the season ended and the guy never got the record back. Sort of like all the people who have made fortunes on paper in their stock portfolios only to see the markets take it all back the next year. Don’t give your records back to the markets.
As we head into the new year, make sure you’re investing like a pro — a pro football player that is!
