A Wall Street Genius's Final Investment Playbook-Chapter 41

“What kind of nonsense is that? Even Buffett says…”

“Did Buffett ever say to sell at the peak?”

“……”

Jim falls silent.

Buffett’s most famous advice is actually something else.

“Buffett said, ‘Only invest in stocks you’re willing to hold for a lifetime.’”

“… …”

The most important thing in investing is the exit strategy. But calculating this is incredibly tricky.

So, Buffett offered a simple solution: choose companies that don’t require an exit strategy.

Companies that consistently grow, increase in value, and provide dividends regardless of the environment.

If you invest in such companies, there’s no need to rack your brain over when to sell.

“That’s just idealism. In reality, even Buffett sells sometimes.”

“True. But when does he sell?”

“……”

Jim falls silent again.

It seems he doesn’t remember Buffett’s advice on exits.

People seeking advice are often like this.

Even if it’s legendary advice, they don’t take in everything.

They selectively accept what they want and completely forget the rest.

“If you look it up, you’ll find it right away.”

I quickly searched and held the result screen in front of Jim.

Buffett’s exit points are threefold:

When a better opportunity arises.

When market or company conditions deteriorate and harm the value.

When a particular stock takes up too much of the portfolio.

“Nowhere in there does it say to sell at the peak.”

“But… isn’t the idea to invest in undervalued stocks and sell when they rise?”

“That’s not exactly ‘buy low, sell high.’ Buffett doesn’t base his decisions on stock prices. He’s a value investor.”

A value investor is someone who invests based on a company’s intrinsic value.

Intrinsic value is the calculated worth of a company, derived from analyzing factors like assets, financial health, cash flow, and potential growth.

In simple terms, it’s the ‘real value’ of a company.

Value investors look for moments when the market doesn’t reflect a company’s real value.

They buy stocks whose prices fall short of intrinsic value and wait for the stock price to catch up.

Buying undervalued stocks and waiting for them to rise.

If this is your interpretation, you’re missing the point.

Buffett’s real strategy is this:

First, determine the price you’re willing to pay.

If it’s cheaper, buy. If it’s pricier, sell.

The essence of this strategy lies in the calculation of intrinsic value.

However, not many individual investors follow this advice.

Beginners in the stock market want to make quick money.

Analyzing company values one by one is tedious, so they skim through stock charts looking for peaks and dips.

“It used to be expensive, but now it’s down? That must mean it’s undervalued. I’ll sell when it goes up again.”

But taking shortcuts like this often leads to missing the right time to sell.

This is why people vaguely try to spot the peak.

Frustrated, Buffett once clarified:

Our game is not ‘spotting the bottom,’ but ‘pricing.’

Identifying the bottom is nearly impossible.

Instead of finding the bottom, calculate the intrinsic value.

This is a critical piece of advice, as it replaces the nebulous concept of peaks with a clear selling criterion.

In simple terms, Buffett’s ‘sell timing’ is when a stock price exceeds the company’s intrinsic value.

If the price becomes overvalued compared to the real value, a bubble is bound to burst eventually.

Yet, people still fail to grasp this.

-So, should we buy or sell?

That’s all people want to know.

But that’s not what’s important here.

Might as well borrow some of Buffett’s reputation while I’m at it.

“My approach is fundamentally the same as Buffett’s value investing. I calculate intrinsic value based on industry trends and the marketability of a product. My suggested exit point is when the stock price reaches that intrinsic value.”

“But it keeps going up after that, doesn’t it?”

“Then it’s overvalued. That’s unrelated to value—it’s a bubble, and bubbles always burst eventually.”

“What I’m saying is, shouldn’t you be skilled enough to ride the bubble too?”

“That’s momentum trading.”

Momentum trading is a strategy that capitalizes on trends.

It’s about predicting sharp rises and falls to secure profits.

“You’re asking me to use two completely opposite techniques simultaneously to make money.”

“……”

Momentum investing and value investing are based on opposing philosophies.

Asking a value investor like me to predict bubbles is absurd.

Jim seemed momentarily speechless at my rebuttal but soon regained his composure, wearing a triumphant smirk.

“Fine, momentum trading! That’s about buying low and selling high, right?”

He looked like he’d caught me in a trap.

“You said earlier that pros don’t invest that way. There are some who do, but maybe you just can’t.”

“Sigh….”

He’s spouting nonsense again.

I considered letting it slide, but I felt Gerard and Judy’s eyes on me.

“Even momentum traders don’t make decisions based solely on stock prices. What matters is the sustainability of the momentum.”

Momentum refers to acceleration, elasticity, inertia, and movement.

Momentum traders analyze indicators like trading volume, price volatility, and support and resistance levels.

“Momentum traders don’t jump in at the bottom. Their motto is: ‘Buy high, sell higher.’”

Momentum is often compared to a speeding train.

It starts slowly, gains maximum speed mid-journey, and then decelerates toward the end.

Momentum traders don’t board the train while it’s stationary—because they don’t know if it will start moving.

Thus, they don’t buy at the bottom.

“Their exit timing isn’t tied to the peak either. They get out when the momentum slows.”

What they target is the period of maximum speed.

They jump off the train the moment it begins to decelerate.

That might coincide with the stock’s peak—or it might not.

“But… in the end, they sell close to the peak, right?”

“If they’re lucky.”

Whether they’re value investors or momentum traders, sometimes they do manage to buy low and sell high.

But it’s never intentional.

It just happens that their criteria coincided with the actual bottom or peak.

Bottoms and peaks are retrospective indicators.

It’s impossible to identify them beforehand.

Anyone claiming otherwise is a fraud.

Experts focus on securing reliable profits rather than chasing luck.

Of course… I’m an exception, being a bit of a cheat-code player.

“Only amateurs obsess over market bottoms and tops. Blindly trusting in those unpredictable points isn’t investing—it’s gambling.”

Jim fell silent again, and a brief pause filled the room.

The voice that broke the silence belonged to a middle-aged woman.

“Still, wouldn’t it be better to aim for the bubble?”

It was Rachel’s mother, Judy.

She smiled faintly at Jim before turning back to me.

“I don’t think he was suggesting you predict the peak. Wasn’t his point more that if you’ve already chosen a stock, you might as well take advantage of the bubble?”

This is how most people think.

They find it unbearable not to capitalize on a bubble.

-So when you say, "It's a bubble, sell now," people don’t follow that advice.

"I don’t have the skill to read momentum. Trying to learn now would be inefficient for the time and effort required.”

“Giving up from the start? You don’t seem very ambitious.”

Judy’s smile is peculiar, as if she thinks I’m playing it safe.

“Buffett once said, ‘Be fearful when others are greedy, and greedy when others are fearful.’”

“Then, are you being fearful now?”

“No, I’m being greedy.”

“What?”

“Chasing bubbles is, in fact, an act of fear.”

The urge to capture even the bubble, obsessing over the peak—that’s not greed.

“The most dangerous emotion in investing is FOMO: Fear of Missing Out. It’s the anxiety that you might miss an opportunity. Think carefully—is chasing a bubble truly an act of greed?”

Judy rested her chin on her hand, reflecting for a moment, then spoke again.

“But isn’t it still greed if you persist despite the fear?”

“Are you certain about that?”

“Well… no, I’m not certain. But I feel it might depend on one’s personal values…”

In investing, fear and greed are closely related.

At first glance, it’s like the classic chicken-and-egg dilemma.

If you can learn to distinguish between the two, you can succeed.

Most people fail because they can’t.

Maybe I should throw her a tip.

“There’s a way to distinguish between fear and greed.”

“What is it?”

“Fear is abstract, but greed is specific.”

If you’re waiting indefinitely, unsure how much money is at stake or when it might arrive—that’s fear.

“A truly greedy person pursues maximum profit. In that case, they’d calculate the bubble’s limits first. For example, if a stock is expected to double and yield $10 million, they’d look across the market for an investment that offers more than $10 million. If they find a certain $15 million opportunity, they’ll switch without hesitation. That’s why they exit and redirect their funds.”

“……!”

This is why value investors often disregard bubbles.

It’s not merely because they prioritize safety.

It’s because they’re hunting for more profitable, reliable opportunities elsewhere.

Incidentally, this aligns with Buffett’s first rule for selling: Switch when a better opportunity arises.

“‘Be greedy when others are fearful.’ This means don’t be swayed by false expectations; pursue tangible profits instead. To act on this, you must be able to calculate and compare bubbles accurately. It’s a highly technical skill, making it difficult for ordinary investors to execute.”

I shifted my gaze to Gerard.

It was time to circle back to his earlier question.

“This is why I need to manage the funds. Even if I tell you which stocks to pick, you’ll likely get caught up in the bubble and stray from the strategy, ending up with losses. The person confident in the strategy must be the one holding the purse strings.”

Gerard’s lips curled into a smile, his gaze now markedly different.

“Confident, are you…? Isn’t there too little evidence for that confidence? From what I know, the algorithm has only been tested twice so far. You can’t be certain it works properly.”

“That’s correct. We’re still in the testing phase.”

“And yet, you’re managing not only your entire fortune but also external investments? You’ve essentially leveraged during a trial run—I can’t quite understand that.”

He’s sharp.

“Why are you taking such a risky approach for something you claim is a safe and reliable investment?”

He’s hit the crux of the matter.

Logically, there’s no reason to gather investors right now.

There’s only one reason I’m doing this:

I need the Russian roulette capital.

This isn’t an investor’s decision; it’s a decision driven by a ticking clock.

“To me, this looks less like a test and more like gambling in the hopes of striking it rich…”

If this becomes a logical argument, I’ll lose.

From an investment standpoint, my actions can’t be rationally explained.

That leaves only one option:

I have to play on emotions.

I need to provoke Gerard’s feelings to secure his investment.

It’s not a difficult task.

Knowing which strings to pull is half the battle.

“So, you think it looks like gambling?”

“Isn’t it?”

“You’re half right and half wrong.”

I met Gerard’s gaze directly, adding a hint of provocation.

“I want a real hunt.”

Gerard’s eyelashes trembled slightly. The word hunt had struck a nerve.

In his family, hunting wasn’t just a sport—it was a rite of passage, a tradition tied to the idea of true responsibility.

“It’s amusing to hear someone talk about hunting when they’ve never done it themselves.”

“That applies to you as well, Gerard.”

His expression turned incredulous, as if he couldn’t believe what he’d just heard.

I gave a faint, bitter smile before replying.

“It’s inevitable, isn’t it? In today’s world, we’ve removed the wild, created reserves, and designated safe hunting zones where animals are released for the game.”

“That’s not hunting?”

“It’s no different than bringing a gun to a zoo.”

“Sean! That’s—”

Rachel gasped, drawing in her breath at my harsh words.

She understood what hunting meant to Gerard and his family, which explained the sudden chill that fell over the table.

All eyes were on Gerard, waiting for his reaction. His face hardened, but a strained smile remained on his lips. His patience was admirable.

“What I want is a real hunt. A life-and-death contest where everything is on the line. Success means trophies, failure affects survival itself. In today’s world, there’s only one place where that’s possible.”

“The stock market?” ƒrēewebnoѵёl.cσm

“Exactly.”

Even that didn’t land. Time to push harder.

“People who only want meat go to the supermarket. Those who want to play hunting games go to reserves for a safe, controlled hunt. But true hunters? They stake everything. I want to prove myself with a million dollars.”

I’m the real hunter.

You’re just a kid playing hunting games.

And just in case, I threw in the "supermarket meat buyer" Gerard had so disdainfully mocked earlier.

If he didn’t bite now, he’d rank no higher than the supermarket crowd.

But… Gerard still wore his forced smile as he looked at me.

‘He’s holding it in?’

Pushing further would only backfire. It would turn into a mudslinging match, and that wouldn’t help anyone.

Time to stop.

‘Well, it can’t be helped.’

This wasn’t entirely bad.

Even if I didn’t secure extra seed money, my initial goal—testing for fraud—remained on track.

As I swallowed my frustration, Gerard finally spoke, his voice slow and deliberate.

“That’s not a real contest.”

The slight curl of his lips was unsettling.

“A true hunter pays close attention to their bullets. Every round is a matter of life and death. When a precious bullet misfires, it adds weight to the burden. That’s what it means to stake your life, isn’t it?”

I mentally clicked my tongue.

Gerard’s intention was clear—he was sharp, no doubt about it.

“You’re saying I should share the burden of losses?”

A fund manager takes a cut of the profits but walks away from the losses. Gerard had zeroed in on that contradiction.

“If your aim is a true contest, you need to feel the weight of the bullets. I think you should be ready to shoulder at least half of the losses.”

Gerard’s demand was straightforward: Take responsibility for 50% of the losses.

If I accepted, he’d invest.

“I don’t want to set a precedent for this, but…”

Gerard was logical and deliberate. Refuting him wasn’t an option.

There were only two choices: Accept the terms or be branded a fraud.

“Fair enough. It’s true that we’re still in the testing phase, and the risk distribution could be more balanced. I’ll set a rule that I’ll cover 50% of any losses.”

“Then I’ll invest. Five million dollars.”

I could guess what he was scheming, but it didn’t matter.

As long as I didn’t get caught, I’d win.

This situation was overwhelmingly favorable to me.

‘Exceeding expectations?’

I had hoped for one million dollars but ended up with five times that. My seed money had increased dramatically.

I suppressed the grin threatening to creep across my face, but just then, a middle-aged woman’s voice cut in.

“Will that much really be enough ‘ammunition’?”

Judy, who had been watching Gerard with an advisory air, turned her gaze to me.

With a gentle smile, she spoke.

“I’ll join as well. Ten million dollars.”