Time tested rules of investing and trading

Although we are likely still in the market Melt-Up phase for the near future, we are approaching fast the next bear market cycle that will be doomed to come after the Melp-Up bubble is burst. It is just when, not if, the time will come. With this in mind, the following investing/trading rules that have been tested times and again are worth noting. 

Doug Kass' 50-Laws Of Investing

The Rules 1-10

• Common sense is not so common.
• Greed often overcomes common sense.
• Greed kills.
• Fear and greed are stronger than long-term resolve.
• There is no vaccine for being overleveraged.
• When you combine ignorance and leverage – you usually get some pretty scary results.
• Operate only in your area of competence.
• There is always more than one cockroach.
• Stocks have a gravitational pull higher – over long periods of time equities will rise in value.
• Long investing generates wealth.

The Rules 11-20

• Short selling protects wealth.
• Be patient and learn how to sit on your hands.
• Try to get a little smarter every day and read as much as humanly possible – an investment in knowledge pays the best dividends.
• Investors sometimes think too little and calculate too much.
•  Read and reread Security Analysis (1934) by Graham and Dodd – it is the most important book on investing ever published.
• History is a great teacher.
• History rhymes.
• What we have learned from history is that we haven't learned from history.
• Investment wisdom is always 20/20 when viewed in the rearview mirror.
• Avoid "first-level thinking" and embrace "second-level thinking."

The Rules 21-30

• Think for yourself – those who can make you believe absurdities can make you commit atrocities.
• In investing, that what is comfortable – especially at the beginning – is most often not exceedingly profitable at the end.
• Avoid the odor of "group stink" – mimicking the herd and the crowd's folly invite mediocrity.
• The more often a stupidity is repeated, the more it gets the appearance of wisdom.
• Always have more questions than answers.
• To be a successful investor you must have accounting/finance knowledge, you must work hard and you have to be keenly competitive.
• The stock market is filled with individuals who know the price of everything but the value of nothing.
• Directional call buying, when consumed as a steady appetite, is a "mug's game" and is often a path to the poorhouse.
• Never buy the stock of a company whose CEO wears more jewelry than your mother, wife, girlfriend or sister.
• Avoid "the noise."

Rules 31-40

• Directional call buying, when consumed as a steady appetite, is a "mug's game" and is often a path to the poorhouse.
• Never buy the stock of a company whose CEO wears more jewelry than your mother, wife, girlfriend or sister.
• Avoid "the noise."
• Reversion to the mean is a strong market influence.
• On markets and individual equities… when you reach "station success," get off!
• Low stock prices are the ally of the rational buyer – high stock prices are the enemy of the rational buyer.
• Being right or wrong is not as important as how much you make when you are right and how much you lose when you are wrong.
• Too much of a good thing can be wonderful – look for compelling ideas and when you have conviction go ahead and overweight "bigly."
• New paradigms are a rare occurrence.
• Pride goes before fall.

Rules 41-50

• Consider opposing investment views and cultivate curiosity.
• Maintain a healthy level of skepticism as you never know when the Cossacks might be approaching.
• Though doubt is uncomfortable, certainty is ridiculous and sometimes dangerous.
• When investing and trading, never let your mind dwell on personal problems and always control your emotions.
• 'Rate of change' is the most important statistic in investing.
• In evaluating the attractiveness of a company always consider upside reward vs. downside risk and 'margin of safety.'
• Don't stray from your investing and trading methodologies and timeframes.
• "Know" what you own.
• Immediately sell a stock on the announcement or discovery of an accounting irregularity.
• Always follow the cash (flow).
• When new ways of earnings are developed – like EBITDA (and before stock-based compensation) – substitute them with the word… "bullshit."

2-Bonus Rules

• Favor pouring over balance sheets and income statements than spending time on Twitter and r/wallstreetbets.
• Always pay attention to what David Tepper and Stanley Druckenmiller are thinking/doing. (Trade/invest against them, at your own risk).