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Post by UNEEK Wed May 15, 2013 9:29 am

Poor Henry: One Man's
Devastating Loss… and How to Avoid It Yourself

By Dan Ferris, editor, Extreme Value Wednesday, May 8, 2013

Tubs of Fun is a simple carnival game.

You throw a softball into a plastic tub from a few feet
away. The object is to make the ball stay in the tub.

It sounds easy, but it's not. The ball is too bouncy, and
the tub is too hard. It's difficult to keep the ball from bouncing out of the
tub. The player has the illusion he's throwing a ball into a container. But
he's really just throwing it at a solid wall.

To make it worse, the worker running the game lets you take
a practice throw. First he drops a softball in the tub, and it stays, because
he's standing right next to the tub. Then you throw a softball, and the ball he
dropped in absorbs the energy from the one you threw, and your ball stays, too.
But when you play for real money, you can only throw the ball into an empty

If you're not the sharpest tool in the shed, you won't
figure this trick out.

But hey, it's a carnival game. Everybody knows you're not
supposed to win. Right? Well, no. Not everybody…

Enter 30-year-old Henry Gribbohm, a tough-looking, tattooed
young man with a toddler to care for and $2,600 in cash burning holes in the
pockets of his dusty work pants.

On a recent spring day, Gribbohm walked into the Fiesta
Shows traveling carnival in Epsom, New Hampshire. He walked out shortly after,
his pockets empty, with a large stuffed banana toy with a smiley face and a
dreadlocks haircut draped across the top of his toddler's stroller. A news
reporter said the funky banana toy was worth $149.

Gribbohm watched the worker do his little practice throw
routine and didn't figure out the ruse. So Gribbohm played and played… He lost
$300 within minutes, all he had in his pockets. He went home and fetched
another $2,300, all that remained of his life savings. He returned to the game
and lost all that, too.

He admitted on camera, "You get caught up in the whole

The thing is… many investors are walking in Gribbohm's
shoes… They're making exactly the same mistakes…

Gribbohm's first
mistake was ignorance of the game he was playing.

Gribbohm was on a financial mission. He started playing Tubs
of Fun to win a Microsoft Xbox Kinect video game device (valued at $100). When
his first attempts were unsuccessful, he ran home, got more money, and kept at

Gribbohm later filed charges against the game owner,
alleging fraud.

Yes, Henry Gribbohm thinks alleging a carnival game was
fixed is a plausible defense for being clueless enough to give $2,600 away
voluntarily. He kept plowing money into a carnival game… while being totally
ignorant of the fact that carnival games are rigged.

You might think Gribbohm is uniquely naive. But millions of
investors are just as bad as he is. They have no idea that Wall Street is often
about the same as a carnival.

Wall Street is in the business of selling stocks and bonds.
This business generates billions of dollars in fees. It's a business that
allows bankers to drive around in $300,000 cars… afford $10 million homes in
the Hamptons… and collect absurd bonuses. That money comes from customers who
are encouraged to buy every piece-of-crap security the bankers can come up

Think about the brokers, lawyers, accountants, and other
people you do business with. Always ask what they get out of it. Ask what has
to happen for them to make money. When you buy stocks, ask who's selling them,
or who has sold you on the idea of buying them. Know the business you're in,
and know the businesses you deal with.

Gribbohm's second
mistake was pursuing easy financial gain.

Most people don't understand that easy financial gain is one
of the worst things that can happen to them. Ask a lottery winner. According to
author Don McNay's book, Life Lessons from the Lottery, the lives of lottery
winners are usually a wreck within about five years of winning.

Lottery winners get a ton of money they didn't earn without
any practice at hanging onto large sums of money. It's really, really hard to
do that. It's like ordering a drink at your favorite watering hole and being
dropped into a giant vat of beer.

Technically speaking, you got what you asked for… just more.
More is bad when you're not prepared for it… when you didn't do more to earn

Aspiring to easy financial gain might be normal, but it's
also self-destructive. Gribbohm was trying to win a $100 prize by playing a $2
carnival game. His results speak for themselves.

Investors make this same mistake as well. They buy risky
options and hot tips from friends in the pursuit of fast, easy gains. They see
the stock market as a lottery… rather than a place where one can buy pieces of
world-class businesses that they can hold for decades.

Gribbohm's next big
mistake was giving in to a bias toward action.

Nobody likes to sit still. And that's too bad.

Famous 17th-century French mathematician and scientist
Blaise Pascal said, "All men's miseries derive from not being able to sit
in a quiet room alone."

If you search for Gribbohm's picture on Google, you'll see
that he's a tough-looking guy. You can imagine him giving in to pressure to
"act like a man." Men don't refrain from action. Men act. They take
dramatic and constant action. When the going gets tough, the tough get – you
get the picture.

People think "doing something" is always the
answer. Nobody thinks doing nothing is the answer.

On the flip side, the actions that keep you from losing your
tailend at the carnival and in the market will certainly not impress other tough
guys, nor attract women looking for tough guys.

Taking big risks is more likely to make you feel like a
swaggering gambler, someone who's "not afraid to risk it all on a roll of
the dice." It'll at least attract a fair amount of attention. Henry
Gribbohm got plenty of attention!

I've said before that fear is the dominant emotion in the
market at all times. When it appears greed has taken over, it's really just the
fear of being left out. That fear drives people to constantly seek action.

The final mistake
Gribbohm made was not knowing how far he was going to go.

Gribbohm's story shows you how crazy financial decisions can
get, especially when speculating on great financial gain. He lost because he
couldn't trust himself. He didn't decide beforehand how he'd behave if
presented with a game like Tubs of Fun.

What will you do if the stock market falls? What are your
goals? I can't really answer any of those questions, but I can tell you what
I'll do. I'm a dedicated lifetime buyer of equities. I do what I believe is
enough homework to know which stocks to buy and which ones to avoid.

Other things being equal, when the market falls, I buy more
of what I like, same as I do when chocolate-chip cookies go on sale at the
grocery store. I want more cookies, so I like it when my money buys more of
them. I like equity returns, too, so I really like it when my dollar buys
bigger ones.

Every stock investor faces a list of huge unknowns. You're
not in control of stock prices or interest rates or tomorrow's headlines. You
must make your own behavior in the stock market the most solid, reliable of
known entities. You must be in control of yourself.

At any point during his incredible losing streak, Gribbohm
could have wised up and walked away… but he didn't.

Many investors are making the same mistakes he did. If you're
one of them, wise up and walk away. And before you come back, make sure you
learn the game you're playing.

Good investing, Dan

From Dr. Steve Sjuggerud's Daily Wealth


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