Hidden Cost of Trading

The small print: this newsletter is mostly stories, pop-psychology, and half-baked trading ideas. This is NOT financial advice. Best to think of this as a community of like-minded gamblers. If you are having a punt, make sure you restrict your trade size to whatever change you can find down the back of the couch.

In 1990, McDonald’s sued a gardener and a postman.

It should have been straightforward.

But it turned into a nightmare.

Because part-time gardener Helen Steel and unemployed postman David Morris refused to roll over. They fought.

This was the start of the McLibel Case.

And it was to become the longest running case in the history of the UK, costing McDonald’s millions of pounds.

The case was about a leaflet that Steel and Morris had distributed in London. It criticised McDonald’s on everything from animal welfare to low wages.

So McDonald’s sued them for libel.

But what followed was years of negative headlines. Millions of pounds. Global attention - a PR nightmare.

In the end, McDonald’s was awarded damages of £60,000.

Which was technically a win.

But a colossal loss in reality.

It was a pyrrhic victory: a win that cost so much, it seemed more like a loss.

Now, usually, these are easy to spot in the wild.

But when we trade and invest, we get weirdly blind to them…

Let me explain…

Traders and investors get caught by pyrrhic victories all the time:

Let’s say you buy a stock. And it falls 30%.

So you start getting nervous. You check your brokerage app every 20 minutes. You read every headline. You try to draw meaning from the CEO’s body language on earnings calls.

But then, eventually… the stock rallies.

And you end up selling for a 15% gain.

You’re in the green. A win!

But was it worth it? What was the cost?

The stress, the time, the attention, the sleep loss. The mental and emotional tax you paid to get that W.

That’s the hidden cost of trading.

The Big Short is a good example. Michael Burry sat through years of pressure, premiums, and angry investors. Then the trade finally worked.

So the question is not just: “Can this trade make money?”

It’s also: “Can I actually live with this trade while it plays out?”

Conviction helps. If you understand the trade deeply, bad headlines are less likely to knock you off course. But conviction also has a price: research, patience, and actually knowing what you own.

So before entering a trade, ask yourself:

Have I factored in my risk tolerance? The emotional cost?

Because sometimes you make money. But somehow, you still feel poorer.

It’s a common theme lately, but we’ll say it again: things are pretty uncertain out there right now.

Tech stumbled this week, but at least the Chip Wreck’s been postponed by Micron’s blowout earnings. Doesn’t really solve the wider problem of insane AI capex spend, or the fact that semis are priced at infinity times sales…

And Warsh’s Fed sounded hawkish last week, but hard to know if that’s a sign of a new regime, or just more Fed theatre.

In times like these, we keep it simple, so we can sleep at night.

Vanguard S&P 500 ETF (NYSE Arca: VOO)

Yep, an S&P ETF. No dopamine hit here.

At Market PSYOPs, we don’t often go the sensible route. But this week the theme is peace of mind.

So, VOO it is.

It’s not exciting, but it’ll keep the heart palpitations at bay. It also acts as a long-term currency debasement trade and inflation hedge.

High Blood Pressure

It wouldn’t be right if we didn’t throw in at least one high-blood-pressure trade. So get the beta blockers out, because now we’re looking at:

iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT)

The thesis here is simple:

The Fed seemed hawkish. The market reacted.

But what if it overreacted? What if Warsh was just spinning a narrative?

Maybe inflation slows a little. Maybe Warsh tries to help out Donald coming up to midterms. Maybe rate cuts come back into view.

Maybe then TLT catches a bid…

I’m buying: TLT November 20 $91 calls.

Needless to say, there’s lots of risk here. It’s a great way to put your body into fight or flight. We’ve no more than some lunch money on this one.

There’s psychological traps everywhere in life. They shape how we think, how we make decisions, and spend money.

But that’s enough word salad for one day - let’s gamify this:

💲💲Let’s say you’ve been watching Bitcoin for a while.

The chart seems too obvious to be true. Four year cycles. Simple.

With Bitcoin hovering at around $60,000, you seem to be staring at a great time to buy in…

The answer - and the psychology behind it - will be revealed in the next edition.

Last Week’s Answer:

Last week was all about the hidden cost of trading. Sure, a 25% gain sounds good. Until you remember the months of stress, account-checking, and general psychological decay. Suddenly the trade’s real return seems a bit lower.