Lessons From Irwin T. Yamamoto

3 10 2011

Irwin T. Yamamoto

One of the greatest privileges of my life was my friendship with Irwin T. Yamamoto who passed away two years ago today on July 15, 2009 at the age of 54.

Our friendship began eight years ago after I wrote something that discussed The Yamamoto Forecast and his excellent track record. Following that Irwin contacted me by email and our friendship flourished in all of the years that followed.

We would talk at least once per month about the market and I could always count on him offering a different perspective. In fact, in 2008 my wife and I traveled to Maui with the goal of meeting and spending time with the man who will always be known as “The Maui Contrarian.”

As with all great friendships, I learned a lot from Irwin and I’m better at what I do because of him. While our strategies were very different, it was also these differences that I believe also made us so interested in one another. They say that opposites attract and that you frequently learn from people who are the most unlike you. This was especially true with us. In my case, I really wanted to learn how Irwin was able to achieve the level of success he had for so many years and at the same time make it look so darn easy. What I ultimately discovered was a man who possessed simply all of the right characteristics, strategies, and the ideal mind set to succeed in the market over the long-term.

It is a tragedy that Irwin is no longer around to share and help investors around the world with his contrarian perspectives. This post is dedicated to Irwin’s memory and, to honor him, I would like to share some of the many lessons I learned in the sincere hope that it may benefit you as well.

Lessons From Irwin T. Yamamoto

  • Be a consistent contrarian:  Being contrarian was Irwin’s nature. Whenever possible he took the unpopular view and found ways to make money from it. While some people love to think they are a contrarian as far as the market is concerned, when the heat is on and everyone (including the market itself) thinks you are dead wrong, they always run back to the herd. Irwin never did. Not once. No matter what. And, trust me, he was tested many times throughout his career.
  • Have courage:  Every call Irwin made was a bold call. If it wasn’t bold, he simply didn’t make it. He refused to hedge his bets by trying to take the middle road or offering up so many contradicting opinions so he could later say he was right no matter what happened as so many experts do. To do well in the market, we all have to have the courage to make and stick with our convictions. Often the investment decisions that will work out the best are the ones that simply require the most courage to make.
  • Believe in yourself:  Irwin had an unshakable belief in himself. That’s so very important when you have your hard-earned money in the market. Through thick and thin, Irwin always expected to win and he did more than most. Every winner I’ve met has possessed this important characteristic. However, what made Irwin truly special was that he also had the humility to keep his confidence in check.
  • Focus on quality not quantity:  Irwin told me often that he was a happy man if he could just have one good opportunity in the market every year. Yes, that’s right – just one opportunity. In fact, subscribers to his newsletter will testify to the fact that Irwin rarely had more than just a handful of positions on at any given time and was not afraid to be in cash for extremely long periods when he found no excellent opportunities to share.
  • Patience:  When taking the unpopular and contrarian view, Irwin understood that time was on his side. Although he would admit that it was “not easy to be alone in the crowd and swim continuously against the tide,” by maintaining a long-term perspective, Irwin was not tempted by the seduction of the short-term market swings. His focus was instead to concentrate on the big picture trends and profiting from them.
  • Ignore short-term noise:  Irwin had the ability to ignore the short-term noise and concentrate on what really matters over the long haul. Yamamoto believed that the real-time coverage of the markets were severely detrimental to investors and he refused to watch the market during the day. Irwin told me that he would stay up late enough (Hawaiian time) to watch the premarket futures and premarket headlines, but then would go to bed once the market opened no matter what was going on. By doing this, the daily ups and downs didn’t phase him which is why he was able to be so consistent in his approach. In a day and age where everything is coming at us fast and in real-time, this was Yamamoto’s edge and he used it well.
  • Let your track record speak for itself:  There’s a lot of puffery out there in the investment world as people try to sell newsletters, tips, advice and tools on the backs of people’s hopes and fears. Irwin never did. He simply did his job, produced the best results he could, and let the cards fall where they may. In both good times and bad, he never sought out public exposure or engaged in aggressive marketing techniques that is so very common today. Yamamoto was successful because he simply produced excellent results. He didn’t waste time creating hype or seeking attention by telling others how right he has been in the past. Instead his focus was on finding the next opportunity. Always.
  • Be in control of your destiny:  Irwin understood both his strengths and weaknesses and created a business model that he loved. He started his newsletter back in 1977, found a format he liked (a typed newsletter usually no greater than a couple of pages sent out once per month) and he stuck with it all of those years. Although he was under pressure by his subscribers to make more frequent updates, go online, etc., he never did because he saw it as overkill and unhelpful to his clients. Say what you want, his outperformance among his peers over a long period of time shows he was ultimately right.
  • Know yourself:  Irwin’s strategy was reflective of who he was and took advantage of his unique skills and personality. Irwin didn’t use indicators, sophisticated timing strategies or mess around with investments he didn’t know much about. Rest assure he never even considered daytrading stocks or adopting strategies of others that didn’t match his own personality. He knew who he was and aligned his strategy accordingly.
  • Be happy:  The market and the performance of his investments never impacted his mood. In fact, some of the happiest conversations I had with Yamamoto was when he should have been the most frustrated and disappointed in his recent performance. When times were bad, he simply kept doing what he always had been doing and refused to let the market get the upper hand over his emotions. A skill many of us so desperately need.
  • Keep learning:  Yamamoto was always in a learning mode and displayed a child-like enthusiasm for learning new things. It was my impression based on our conversations that he never felt like he knew everything or that there wasn’t so much more to learn. He was an avid reader and spent the vast majority of his free time reading and, more importantly, thinking about the market. Like many great students, Irwin sought out the ideas from people who he disagreed with the most so that he could “know his enemy.”
  • Think like a businessman:  He told me often that he viewed himself as a businessman. A successful one “simply looks to purchase wholesale and sell retail.” His goal was to know the worth of a company and then acquire it below its true value. After finding an interesting opportunity, he would then scour the balance sheet and read all of the footnotes focusing primarily on the company’s cash position and relative cash flow. If those things looked good, he was especially encouraged if he saw insider buying. A simple, but effective strategy. To my knowledge, Irwin had only one stock screen in his toolbox – the new 52-week low list.
  • Play make believe:  Irwin was insistent that most people shouldn’t be in the market until after they acquired the skills and strategies to consistently succeed. He often urged people to play “make believe” by mentally selecting a few stocks and tracking them for some time to see how they react to news and events. Only after doing that for long periods of time and after showing success should a person ever be in the market with their own money.
  • Don’t lose your values:  We would often talk about how subscribers often wanted us to sway bullish or bearish, especially at the sentiment extremes. Like offering short sells after a major correction or buys after a rally, versus the exact opposite and how that often was the wrong approach. Irwin would often lose subscribers because of it, but he didn’t care. He stayed true to his own views through thick or thin even if it cost him money and lost subscription revenue.

In the end, it was a true honor to have Irwin Yamamoto as dear and loyal friend and so much wish he was still around so that we could discuss and debate the issues and opportunities that face the markets today!




6 responses

15 08 2011
doon po sa amin

hello, haribon. babalik ako para sa seryosong comment. 🙂

16 08 2011
Haring Ibon

thanks in advance, will be waiting for that 😉 …. feel ko exciting conversation up and coming 🙂

25 08 2011
doon po sa amin

hello, haribon. musta?

should have come back here way earlier. been a bit busy, though.

anyway, ask ko sana if i may, what do you do, er, this side of town? short-term investing? tipong risk arbitrage ba?

btw, is tsupitero the tagalog term for arbitrage? or do tsupitero activities refer only to those who favor and use the technical approach in investing?

how long have you been playing and is your exposure, er, big enough or serious already? or, pakonti-konti pa rin lang? i initially thought it’s just something you do on the sideline. but after reading this post, i had a change of mind. pls. enlighten, thanks.

like ko yong paniniwala ni yamamotong ignore the short-term noise. one has to be tough and secure to be able to do that, hehe…. most people i know can’t keep from tossing and turning, browsing and scanning (using hand-held gadgets) the minute the market opens.

so, hindi hort-term but long-term investing ang kay yamamoto? or short-term din but with a view to preset long-term goals?

he, he… dami ko bang tanong? pasensya at salamat. 🙂

31 08 2011
Haring Ibon

hi DPSA, glad to see you again on the Eagles’ Nest 😉

kung ibase ko sa mga comments at querries mo, i can say na marami ka ng alam sa stock market at more or less you’re in the plays as well… are you?

to answer some of your query:
– tsupitero/s, are those traders who practice short-term trading. their time frame in each trade ranges from intra-day to only few days of holding a stock. they usually toss it around for quick gains and usually dispose positions at a loss if the chosen stock is not behaving as anticipated. i do sometimes do it but i find it too stressful and the mind must be always at heightened alertness in order to pull the trigger whenever the situation dictates. this type of trading approach is not suited for all especially newbies. Yes, knowledge of TA(Technical Analysis) are the common tools used by Tsupiteros for picking trades.

– i had been trading stocks since 2007 and also did some stints trading forex year 2008. now, i’m only trading stocks. I’m still not at the level of what we call “Trading for A living” but experience wise, gains are already considerable. Although, learning is a never ending process especially in trading. My long term goal is to develop a system, hire and teach new traders to use that system so i can eventually use my own time focusing on other matters outside trading. After all, trading is not all there is to meet both ends. Investing and passive income generation is the more preferred way to achieve financial freedom.

– I just recently am adapting Yamamoto’s Principle and finding it hard to sit tight watching a trade fully develop. As you can see, transitioning from short/mid-term trading into longer term entails different approach altogether. But the potential to learn new things during the transition is something i look very much forward to.

– i can really see a good potential in you to become a good trader.. why if you may ask? Your inquisitive stance on everything that matters in trade and in life is a great asset that you may use if and ever you decide to get your hands wet on this highly competitive world of stock trading.

– if ever you decide to do so… i’ll generously share you the experiences i had collected so far. They say, learning is better achieved thru sharing and collaboration of the minds.


1 09 2011
doon po sa amin

hello, haribon.

ah, i trained with the SEC and took the exam last 2008. i passed with the rest. they say that our batch daw had the highest percentage of passing. never really got to trade actively, though.

kasi, the custom daw is after passing the exam, one applies with a brokerage as trainee then after two to three years, that’s when they affiliate the trainee. kumbaga, saka nako-kompleto ang license to trade. i did that but it was difficult as the usual salary was minimum wage while one has to look the part of a trader. mahirap magmukhang confident with min.wage, haha.

in fairness, the short time i was there, i got more than min.wage naman. but the training was comprehensive and rigourous – all sides of the business. kumbaga, after two years ka pa talaga ilalagay sa trading floor. but i had difficulty transitioning. iba’ng iba kasi ang training and orientation ko before – mas along social science – so, i had to quit. but it was rather interesting.

anyway, i took the SEC training for inputs alone. didn’t know there’s an exam and a license at stake. kasi, i usually encounter stuffs about stock market in my writing of economic papers. so, kako, i had better learn the basics, baga… anyway, kaka-expire lang ng license/cert ko and am still thinking if i’d take the exam again.

btw, naka-subscribe ako sa site nina mark so of forex in the phils? but have never really sat down to study the nitty-gritty of pips and all that…

let’s chat about this again some other time. btw, is your e-address with yahoo.com?… hope all’s well… 🙂

1 09 2011
Haring Ibon

now it makes sense… mas malalim pala level of learning mo kumpara sa akin… ako kasi street learned and purely self study lang. lot’s of trials and errors literally.
i am now actively trading my own small account thru online broker and of course full time working. wishing to trade full time but when it is happening i can’t tell yet.

in forex i had a stint of making my $200+ capital into $2000 plus in a weeks trade… but being newbie… di ko rin napatagal sa kamay ko ang kita… nalusaw din. it was one ride to remember hehehe… yes it was possible to gain like that in forex due to high leverage but wiping out capital is equally the same.

now that you mentioned you’re here in NCR, i am too… Pasig Area ako. if time permits, why not we spend an hour or too… certainly plenty of topics we can grind with.

until then…. 😉

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