Now that the weather has begun its turn towards the inevitable all around crappieness of winter and already I see Christmas stuff everywhere, the weekends become much harder to plan and predict. Primarily they have revolved around daytime reading and football and drinks/dinner/whatever in the evenings. So as I found myself sitting on the couch the other night, half reading making notes for my latest project while half way watching House on the idiot box, all the while simultaneously exchanging text messages with a certain young lady form the Great State of Kentucky with the most incredible eyes and irresistible little Kentucky draw to her voice (the after dark bunch have met her on our degenerate bourbon fueled gambling trips to the Keeneland Horse Park), the subject of what’s up for the weekend arose. About half kidding I suggested I would drive down there if she could get out for the evening. She could. So I did.
Unable to find a flight, I checked Yahoo maps. Piece of cake, 450 miles, they estimated 7 hours, I figured six tops. So after delivering some crucial documents on a trust account I manage to our Silver Spring, Maryland office, I ht 7-11 for the mandatory large coffee, two packs of cigarettes with a diet Dr. Pepper in reserve and set my sights up 270 towards Frederick and the mountains beyond.
Some observations from my journey:
I love to drive fast. I know its against the law and unsafe and all that other ca-ca, but I love it. I was managing a steady 80 through the mountains all the way to Morgantown, WV, and then had a pack of cars flash by doing an easy 100 mph..Nothing else to do. Swig down the coffee, put out the cigarette, get up on the wheel and join them. I got in the middle of the pack and we ran single file all 150 miles to Charleston without ever really slowing. I have written of this automotive phenomenon before as it always occurs on Interstate 95 allowing one to blast through the Deep South at Nascar type speeds. I did not expect, however, to be so blessed on this trip. But there it was. Foot on the accelerator, up tight on the wheel through the Mountains, the switchbacks and turns up and down the hills. To put it simply, it was a blast. I t always amazes me how these breakaway packs of gonzoid drivers seem to instinctively act and react, with an established order of progression for changing lanes and protecting each others space on the road. More interesting, in an early pass I determined one of the other drivers was a genuine NFE. In way of explanation the term was coined on a drive back from Myrtle beach when our breakaway was led by a beautiful blonde in a convertible, pony tail flying, chain smoking while blasting up 95 at 100+mph. I remarked to my traveling companion that was my kind of a woman, a real girl, the epitome of the perfect woman, nothing fake, no façade to her if she could hang with the big boys at these speeds. He concurred dubbing her the original Non-Facadel Epitome. Dana Patrick for example is a perfect example of a true NFE. Fridays NFE was a brunette in a trans am with long wavy locks and a pack of marlboros on the dash.But I digress. Of course I usually do.
The Interstate Highway System in this country is an under appreciated marvel and a true testament to the ingenuity, determination and engineering capability of the United States. It is a wondrous enough accomplishment to just consider the roads that run along the coasts or through the plains. But my journey from the point of Frederick on into Ashland Kentucky was a series of climbs and descents of mountains form 1 to almost 4000 feet, with grades ranging from 3 to 6 %. At some point during the original construction the equipment must have been almost vertical on the mountainside. The roads have been chopped and blasted and simply willed out of the terrain. They are well-maintained and safe to drive. Even by idiots like me.
The area around Morgantown, West Virginia is booming with technology projects. There are technology parks and new construction everywhere. Rt 79 through the area is referred to as the High Tech parkway. This is of course fueled by the proximity of WVU but it is good to see the expansion of the tech industry somewhere away from the coast.
West Virginia is an amazing state. Parts of it appear to be have been simply hacked out of slate gray hillside by an angry deity with a blunt ax. Run down shacks and the ubiquitous doublewide hunker down in the little hollows and clutch almost desperately to hillsides. Other parts are simply awe inspiringly beautiful with although I am loath to use clichés, awe inspiring vistas and sweeping mountain grandeur. If it this wondrous at 90+ mph I wonder what it looks like at lesser speeds.
I am aware that some statistics show a weakening in the economy. It is hard to believe when you are on the interstate and see the US GDP rolling by 18 wheels at a time. Wal-mart, Food Lion, Dixie Trucking, trans-am trucking. The roadways are packed with Commerce on the move headed to various distribution and retail centers. Unless there is a hideous inventory buildup somewhere that I am unaware of, we are still buying and selling an enormous amount of goods in this here great country of ours.
Anecdotally, West Virginia is very religious state. On my drive back Sunday there were very few cars on the road in the early part of Sunday afternoon. Most of these had out of state plates. I hypothesize that they were all at church. No state troopers either. No a one for 200 miles. So I suspect even the gendarmes of the highways were busy praying singing and snake handling at Little Holler Baptist and Stinking Creek Church of God on Sunday. Much like the deep south it is on of the few states where you see a billboard urging you read your bible on the opposite side of the road from one advertising the twin pleasures of an Adult Superstore and Oriental massage parlor. Very open-minded. All types of spirituality embraced apparently.
Charleston West Virginia seems to be having some sort of renaissance. The skyline shows sleek mini-scapers and large corporate campuses. The train yards were full and the city from the interstate (from a more sedate 60mph) seemed to be bustling. There was even a little rush hour back up at 5:30 on Friday. Huntingdon, WV where I stayed also seems to be growing on the back of Marshall University with shopping and retail complexes being developed downtown.
It was so tempting to stop a throw rocks at the international coal building. ICO (NYSE 4.74) is easily my worst stock of the year. Not, of course as bad as that unmentionable donut stock a few years back but still a stinker so far. Of course, this would lead to broken windows and another asset write down in the next quarterly. So I abstained form this cheap juvenile show of frustration. But it was tempting.
Arriving in Huntington on Friday I anticipated checking into the downtown Radisson and finding some food and a bar in which to watch the terps on ESPN2 play in the final of the Coaches against cancer basketball tournament. They were playing a Michigan State Squad who upset #3 Texas the night before. To my surprise, she of the ever-amazing eyes asked of I wanted her to join me. For those who knew me well, this is a seriously silly question. She suggested a place for dinner. Leading us to
Rocco’s in Ceredo (http://www.roccosristorante.com/contact.html), located between Huntington And Ashland, Ky is a treasure. The food is as good as any I have had anywhere.
The University of Maryland, also known, as the beloved and much maligned Terps appear to be better than the preseason pundits thought. They beat MSU to win Friday (helped by a missed time clock violation but a win is a win) and trounced a very good St. Johns team the night before. Still not in the top 25 and the ACC is a bear as always but I look for a return to the NCAA after two years in the backwaters of the NIT.
A woman who knows and understands college BB is a treasure. Even is she has the poor taste to root for the Wildcats of Kentucky.
Driving by a coke plant at night is a lot like driving past the inner circle of hell. Belching smoke and leaping flames abound. Somewhat surreal if you asked me.
If you know of a better way to spend a Saturday afternoon than watching the #1 college football team play the number 2 while rubbing the back of a beautiful woman while she sleeps, please do not tell me. I don’t want to know. I prefer my version.
That game was everything it was built up to be. Great college football. Next up, Notre Dame-USC next Saturday with Army-navy looming on the horizon.
Jeff Shaara is as good, if not better writer than hs father. His contiunation of his fathers cvilw war work was wonderful stuff. To the last man about WWI was as good and so was the revolutionary war Glorious cause.Add the rising tide, a look at the early part of WWII. Most accurate historical fiction writer I have read in a long time. Sticks to the facts and adds dialogue appropsraite for the temperment and personalties of those involved. Highyl recomended
We are now in sports junkie paradise. College Conference title games, rivalry matches and bowl season just around the bend. The pro-game is heating up, the ravens are winning and college hoops are under way. God Bless ESPN.
Tim Wilson (http://www.cmt.com/artists/az/wilson_tim/bio.jhtml) is one seriously funny redneck comedian. Vulgar and a long way from PC (sounds a little like a certain slim Chesapeake bay are value guy doesn’t it?) but funny.
On My drive back I saw snow. I hate snow. I have friends that love snow. They talk about ski trips and such. Skiing is one of those things that make no sense to me. Strap waxed boards on your feet and slide down the mountain. Its cold and its wet. Don’t they know that the lodge has heat, a fireplace AND a bar? Or that for about the same money they could fly to Aruba and spend the day on the nice warm beach and the nights frolicking and gambling in the casino? I refer you to my earlier comments on snow from this time last year.
About 11 I decided that a nightcap was the just the thing and off to bed. Pouring a tumbler of Irelands finest single malt I stepped out on the deck to see what changes the weather had wrought. The snow was falling fast and furious, racing through the lights on the edge of the grounds, dashing to and fro in a jumble of flakes, the flaky confusion resembling an airborne version of the original mosh pit at a grateful dead concert. The ground now was covered, each fallen morsel piling on the other, flake by flake, stitch by stitch, weaving a soft white blanket over the earth, the mundane parking spaces now a snow covered playground. The trees off in the distance, those stark, bare branches that usually cut the sky with slashes of winter grey ugliness, now almost majestic in appearance, branches bending into intricate patterns, ice sculptures carved by a maniac snow queen for a winter celebration. Over the frozen waters of the creek off to my right, the snow continued to fall, swirling patterns of ice shaved off some celestial diamond bouncing and skipping with the wind as they covered the icy layers of Thompson creek. The watermans work boats, usually hulking industrial looking crafts covered in netting and cages, now rose like snow covered hills off some surrealistic arctic landscape, these white masses rising from the ice, the harsh workday edges rounded off by the falling snow.The piers extended over the water ways of ice, fingers of whiteness untouched as yet by footprints, just suspension bridges of snowy symmetry and perfection over the ice.
I paused and sipped my glass looking at the newly formed wonderland of wintry excellence, listened to that unique lack of sound that comes on snowy evenings, as the snow covers and muffles the earth and the clouds hang low to earth, disgorging sound baffling clouds of wintry wetness over the earth.
As I stood there, beholding the changes upon the earth, the mundane everyday turned into a painting by some heavenly currier and ives, breathing in the quiet and dampness quality of suspended noise from the world, regarding all that had happened to the world with just the arrival of one small winter storm, I had but one thought at regarding such sights
MAN, I HATE THE FREAKING SNOW.......I GOTTA MOVE SOUTH
The drive home took a little longer as there was no breakaway, but six houras dootr to door wasn’t bad.Lots of times to ruminate on the great questions of life, value versus growth, men versus women, loves lost, loves still to come and all the other eternal and unsolvable, and of course essentially meaningless drivel one tends to reflect upon whilst driving. While listening to the ravens beat up Atlanta on the Morgantown radio station I luckily found at game time. I arrived in time to see the Cowboys upset the Colts and catch up on the island goings on of the weekend. Glad I went away after the update.
At last!!!..a new liquidation on the tape..back to work.
Monday, November 20, 2006
Wednesday, October 18, 2006
what works
We re always looking for that new fancy way to beat the stock market, running reams of spreadsheet data, looking for new ways to pick stocks etc,et all forever and ever amen.Looking for that new edge. I am the worst of the bunch in all likelihood. The worst part here is I know better, Ive written about what does work in the market extensively and sat at the big table with the grownups who practice this method all the time. What wonderous thing is it that I refer to? Buying stocks below book value in companies with little or no debt or strong credit ratings on small amount of debt..a debt to equity ratio less than .5 lets say. The best stocks I have ever bought in my life have been those that met these criteria. Yet I continue to look for new methods and date blondes. Neither has worked out so good for me.
The track records of the big guys who practice book value investing, seth klarman and Marty Whitman come to mind, have long term track records that are beat even most of the big time hedge funds. I look at guys like tudor jones, simon and the ilk and realize that buying stocks below book cannot compete with their sophisticated methods. Unless of course we applied the same 8 to 1 leverage these guys ue. Then Martys unlevered 17% a year for 20 yrs and seths 20%..or the schloss brothers 22%.. and they are right there in the league.
All my own testing has confirmed it. Stocks below book value with good balance sheets outperform.Net-nets and liquidations may be hard to find but they average something on the order of 40% a year return. Combine below book with the occasional net-net and you should beat just about everybody out there.No rocket science here, just a little basic accounting. The academics have proved the point over and over. No need to figure out which new super widget is the best. Just buy assets cheap. From now on, I buy assets and date brunettes that wear glasses exclusively.With a little common sense market timing and using options in some cases to enter,exit and protect positions and there is a built in edge.When you find one of these names that has other smart guys in it like klarman, brnades, Whitman et all(in truth I often steal the ideas from their filings) or an activist such as shamrock, pirate or barrington involved I am even more confident about putting the trade on.Insider buying is another great confirmation tool.
Some of the things I am looking at now include jakk pacific the game maker trading below book with 20% of the stock price in cash, CALL, a small telecom vendor with a stock price of 2.60 and almost 3 a share in cash net of debt, the reinsurance company PAMCA, a 9.65 stock at .8 of book and 3 a share in cash,WON, the radio empire at 7.54 stock with a 5%+ dividend yield trading at .95 of book,electonic payment processor OPMR, hard hit by the internet gaming bill trading now at 9 with 7 in cash and still capable of generating a fair amount of free cash from non gaming business’. I also like TSCC, the it consulting firm trading at 8 with 5 in cash.The larger names include such gems as insuresr ANAT,KCLI, department stores DDS and telephone company S.
I still think the market is heavy after the extended run so I am not in a hurry to throw the positions on. In the case of opmr,dds,s ,jakk and won, they are optionable so I like selling oct and nov puts one strike down to gain my entry.With CALL, the net, net, I am just in the stock. Net-netds are rare and should be bought when discovered.
The track records of the big guys who practice book value investing, seth klarman and Marty Whitman come to mind, have long term track records that are beat even most of the big time hedge funds. I look at guys like tudor jones, simon and the ilk and realize that buying stocks below book cannot compete with their sophisticated methods. Unless of course we applied the same 8 to 1 leverage these guys ue. Then Martys unlevered 17% a year for 20 yrs and seths 20%..or the schloss brothers 22%.. and they are right there in the league.
All my own testing has confirmed it. Stocks below book value with good balance sheets outperform.Net-nets and liquidations may be hard to find but they average something on the order of 40% a year return. Combine below book with the occasional net-net and you should beat just about everybody out there.No rocket science here, just a little basic accounting. The academics have proved the point over and over. No need to figure out which new super widget is the best. Just buy assets cheap. From now on, I buy assets and date brunettes that wear glasses exclusively.With a little common sense market timing and using options in some cases to enter,exit and protect positions and there is a built in edge.When you find one of these names that has other smart guys in it like klarman, brnades, Whitman et all(in truth I often steal the ideas from their filings) or an activist such as shamrock, pirate or barrington involved I am even more confident about putting the trade on.Insider buying is another great confirmation tool.
Some of the things I am looking at now include jakk pacific the game maker trading below book with 20% of the stock price in cash, CALL, a small telecom vendor with a stock price of 2.60 and almost 3 a share in cash net of debt, the reinsurance company PAMCA, a 9.65 stock at .8 of book and 3 a share in cash,WON, the radio empire at 7.54 stock with a 5%+ dividend yield trading at .95 of book,electonic payment processor OPMR, hard hit by the internet gaming bill trading now at 9 with 7 in cash and still capable of generating a fair amount of free cash from non gaming business’. I also like TSCC, the it consulting firm trading at 8 with 5 in cash.The larger names include such gems as insuresr ANAT,KCLI, department stores DDS and telephone company S.
I still think the market is heavy after the extended run so I am not in a hurry to throw the positions on. In the case of opmr,dds,s ,jakk and won, they are optionable so I like selling oct and nov puts one strike down to gain my entry.With CALL, the net, net, I am just in the stock. Net-netds are rare and should be bought when discovered.
Wednesday, October 11, 2006
hunter thompson,stock markets and net-net stocks
I just finished reading Ralph Steadmans, The Joke is Over a great telling of his many year friendship with the good and great D gonzo, the late Hunter S Thompson. It should come as no surprise to those that know me that I am a huge Thompson fan sharing his love of sports, anything and everything political, writing and of course imbibing. I shall never be at his level without dying an ugly twisted death of regurgitated liver tissue and copious internal bleeding and leakage by mid afternoon, but I am a fan none the less. So with an effort to channel the good Doctors spirit , a look at where we are…
Lets review shall we? The most irresponsible dictator in the world is testing nuclear bombs. With what degree of success it is uncertain but the twisted bastard blew something up the other day. Home prices continue to fall, and the National Association of Realtors estimates that home sales will fall by close to 10% in 2006. However, in yet another sign that he became closely acquainted with a crack pipe since retirement, our good friend the BIG G insists that the worst is over for US housing markets. So, a bear mkt in housing lasts about 6 months and declines about 3% after a multi year run up with average gains in of 20% a year. Damn it, I knew I should have joined the Kiwanis and gone into Real Estate. Some alarming percentage of outstanding mortgages is at low or no interest rates and due to adjust to the norm over the next 12 months. Countrywide tells us today that their mortgage fundings dropped by over 30% in the third quarter. This of course had a huge impact on their stock price. It dropped 37 cents. The dollar is up, the bond market is up as those bottom feeding pain eaters over there seem to think that the world is indeed ending soon and it will be a profitable trade. The two best looking trades on the planet are long vol and the curve steepening trade. This has however been true for months and those that put it on early are now reading their car salesman manuals or serving drinks in some seedy roadside gin joint to dubious characters of questionable moral fortitude and their haggard desperate eyed companions. Consumer credit and confidence are both rising along at a merry little clip. The war in Iraq continues to be an absolute nightmare at best, quagmire II the sandy sequel at worst, Iran continues to posture. There are signs of the economy picking up slowing down, inflation, deflation and talk of stagflation. Our first peek at third qtr earnings is not that pretty. This of course is a lot like saying Paris Hilton is not a good model for temperance and virginity..or much a role model for decent television Alcoa missed, as did Legg and gannet. So in these times of general economic uncertainty and geo political unrest…it is only natural that .So stock prices are of course going higher, volatility is going down faster than a congressional intern and the curve remains inverted. Apparently the market mistress is on a screaming acid trip and ignores reality in favor of savage hallucinations of the mid 90s. That is the only explanation I can come with for the current ridiculous price of risk. There doesn’t have to be a crash but as it was pointed out to me the other day it has been over 60 days without a 1% decline in the Spooz and I m pretty sure Howard Stern was still spouting his perverse rants on free radio the last time we had a 10% monthly decline. Bad it seems, is the new good. And good is even better.
I see a few things around worth buying but I am VERY hesitant to make a large commitment. Buying large here feels like it has the potential to empty pockets quicker than a snarling cadre of ex-wives with a fierce alimony jones. I am going to go ahead and just buy some CALL. I find a 2.92 a share stock with over 3 dollars a share in net cash impossible not to buy. Net-nets are rare as hell these days so I just buy them when I find them. Of course, Ive gotten married that way a few times as well with shall we say mixed results? HAMP, the largest sweater manufacturer in the country has a share price that is almost entirely backed by cash as well, but there are some SEC issues and CEO theft that need to be dealt with so its doubtful the stock moves higher too soon so I can wait for a good general pullback. OPMR is tantalizing as well after crashing the wake of the misguided anti internet gambling legislation caused them to tumble over 50%. Even there it trades below book and at an 8 multiple of the slashed earnings estimates, and a lot of the share price backed by cold hard cash. I’m sure we all feel safer knowing that American ports are now protected by the lack of online poker. One can only hope that Bill Frist is soon discovered in the Senate men’s room with assorted underage naked pages and two shaved goats drawing dead to the goats aces full of kings. I am tempted to load up on this one but really need a down day to do so.
This stoned, evil and twisted market bitch continues to remain smiling and optimistic now matter what occurs here in the real world, the colorful drug induced visions of low rates high profits and free wheeling consumer spending erasing net worth from rational traders at an alarming pace. Meanwhile the cash flows freely to the buy today, everyday,the trend is your friend crowd and their champagne is served by out of work value guys and pattern traders. Hopefully this reverses at some point and returns us to more rational levels of pricing, pricing not only of equities themselves but the price of risk itself. Then these buy high sell higher geeks will get the thorough ass ripping that is justifiably theirs and go back into the filthy caves and sordid grottos of outer suburbia where they belong.
Lets review shall we? The most irresponsible dictator in the world is testing nuclear bombs. With what degree of success it is uncertain but the twisted bastard blew something up the other day. Home prices continue to fall, and the National Association of Realtors estimates that home sales will fall by close to 10% in 2006. However, in yet another sign that he became closely acquainted with a crack pipe since retirement, our good friend the BIG G insists that the worst is over for US housing markets. So, a bear mkt in housing lasts about 6 months and declines about 3% after a multi year run up with average gains in of 20% a year. Damn it, I knew I should have joined the Kiwanis and gone into Real Estate. Some alarming percentage of outstanding mortgages is at low or no interest rates and due to adjust to the norm over the next 12 months. Countrywide tells us today that their mortgage fundings dropped by over 30% in the third quarter. This of course had a huge impact on their stock price. It dropped 37 cents. The dollar is up, the bond market is up as those bottom feeding pain eaters over there seem to think that the world is indeed ending soon and it will be a profitable trade. The two best looking trades on the planet are long vol and the curve steepening trade. This has however been true for months and those that put it on early are now reading their car salesman manuals or serving drinks in some seedy roadside gin joint to dubious characters of questionable moral fortitude and their haggard desperate eyed companions. Consumer credit and confidence are both rising along at a merry little clip. The war in Iraq continues to be an absolute nightmare at best, quagmire II the sandy sequel at worst, Iran continues to posture. There are signs of the economy picking up slowing down, inflation, deflation and talk of stagflation. Our first peek at third qtr earnings is not that pretty. This of course is a lot like saying Paris Hilton is not a good model for temperance and virginity..or much a role model for decent television Alcoa missed, as did Legg and gannet. So in these times of general economic uncertainty and geo political unrest…it is only natural that .So stock prices are of course going higher, volatility is going down faster than a congressional intern and the curve remains inverted. Apparently the market mistress is on a screaming acid trip and ignores reality in favor of savage hallucinations of the mid 90s. That is the only explanation I can come with for the current ridiculous price of risk. There doesn’t have to be a crash but as it was pointed out to me the other day it has been over 60 days without a 1% decline in the Spooz and I m pretty sure Howard Stern was still spouting his perverse rants on free radio the last time we had a 10% monthly decline. Bad it seems, is the new good. And good is even better.
I see a few things around worth buying but I am VERY hesitant to make a large commitment. Buying large here feels like it has the potential to empty pockets quicker than a snarling cadre of ex-wives with a fierce alimony jones. I am going to go ahead and just buy some CALL. I find a 2.92 a share stock with over 3 dollars a share in net cash impossible not to buy. Net-nets are rare as hell these days so I just buy them when I find them. Of course, Ive gotten married that way a few times as well with shall we say mixed results? HAMP, the largest sweater manufacturer in the country has a share price that is almost entirely backed by cash as well, but there are some SEC issues and CEO theft that need to be dealt with so its doubtful the stock moves higher too soon so I can wait for a good general pullback. OPMR is tantalizing as well after crashing the wake of the misguided anti internet gambling legislation caused them to tumble over 50%. Even there it trades below book and at an 8 multiple of the slashed earnings estimates, and a lot of the share price backed by cold hard cash. I’m sure we all feel safer knowing that American ports are now protected by the lack of online poker. One can only hope that Bill Frist is soon discovered in the Senate men’s room with assorted underage naked pages and two shaved goats drawing dead to the goats aces full of kings. I am tempted to load up on this one but really need a down day to do so.
This stoned, evil and twisted market bitch continues to remain smiling and optimistic now matter what occurs here in the real world, the colorful drug induced visions of low rates high profits and free wheeling consumer spending erasing net worth from rational traders at an alarming pace. Meanwhile the cash flows freely to the buy today, everyday,the trend is your friend crowd and their champagne is served by out of work value guys and pattern traders. Hopefully this reverses at some point and returns us to more rational levels of pricing, pricing not only of equities themselves but the price of risk itself. Then these buy high sell higher geeks will get the thorough ass ripping that is justifiably theirs and go back into the filthy caves and sordid grottos of outer suburbia where they belong.
Tuesday, September 19, 2006
whither goest the market?
Damned if I know. A look around shows me that stocks, although off slightly today, have been moving up continuously since July, oil is down well of its highs, gold has started moving down, bonds are up, the economy show signs of weakening (which according to the sadistic bastards in the now imaginary bond pit is a GOOD thing), the dollar is flat, the times predicts strong retail sales ahead, while the journal predicts weak, there is a coup in Thailand, Iraq continues to be the same type of raging success experienced in Indochina while North Korea and Iran make nuclear postures. All this of course is reflected in the VIX which even after a 6%+ move today stands at the ridiculously low level of 12.Having thoroughly tapped out his home equity the consumer seems to be relying on the change found in his couch to drive spending. The SP 500 is only at 16 times earning points out pundit a. Ah-ha retorts pundit B, but profit margins are twice the historical norm. So it we revert to the mean, we are at 32 times actual earnings potential. Unless of course the shift to less capital-intensive technology and service industries away from heavy industry means the profit margin metric is changed forever. Confusing times at best. My best guess is that with signs of the economy slowing and a market that hasn’t had a 10% decline since Maryland had a good football team, there is more risk to the downside that opportunity to the upside in the broad market.I of course don’t trade the broad market but spend most of my time looking for bargain stocks ala Ben graham and his ilk. Ordinarily the only Buffet I pay attention to is Jimmy as I am more in agreement with the concepts of life is just a tire swing and ousters and beer for supper every night of the year than those espoused by the super lefty from Omaha, but cousin Warren was quite correct when he said those running something less than 50 billion could be doing very well with the type of bargain stocks he was seeing but couldn’t buy. The more people buy into indexing, and the semi indexing of the mutual fund industry, the more opportunities are created for vultures and special situation guys like myself. Right now the coal industry for example seems to be stupidly priced. It is true that right at the moment we are producing more coal than we burn but as the drop in prices to a multi year low forces marginal mines to shut down, this situation could change quickly. This along with a more normal northeastern winter and the potential for goal to liquid and coal to gas projects create a more promising long-term picture for coal producers. We re seeing single digit multiples here, cash flow generation that has slowed but not stopped, stock buybacks, insider buying and private equity and activist hedge fund industry in the group. As a falling ship could well sink all boats including my coal barge, I prefer selling slightly out of the money puts a month out on these names. The fact that the current weak outlook from the street has pumped vol in these names helps. I like ICO, JRCC, MEE and CNX in here as candidates for cash secured put writing.Speaking of barges a name that really catches my eye is Aldabra Acquisition. ALBA is a SPAC, a blank check deal. Routinely in these deals management has somewhere around a 20% interest in the form of warrants which are virtually free. Why would insiders be buying shares in the company for cash money? This is real money not options and could be spent on more meaningful stuff like bar tabs, green fees or gas for the boat, important stuff. So when the company showed up my insiders list I got real interested. Heres what I found. They are reverse merging into Great Lakes dredging. There will be about 37 million shares out when the deal is done and ALBA holders will have about 27% of the deal. The rest belongs to PE firm Madison Dearborn. Great Lakes as restructured will have an enterprise value of about 450 million. They will do in the area of 60 million ebidta. The fleet of dredging ships has a replacement value of a billion bucks. They have a40% market share and are the largest dredging firm in the country. While they have overseas work including Bahrain’s enormous projects, US dredging markets are protected from foreign competitors. I come up with at the 500 million mark, a little over enterprise value and about 8.5 times ebidta and 38 million shares outstanding, a value of about 13 bucks. The stock is 5.55 giving me an enormous margin of error. More interesting, the warrants sell for 76 cents, are due in 09 and .55 since in the money with 3 and ½ years to run. There are no guarantees and I may well be missing something but the insider and hedge fund activity in this stock make me think not. There is a pretty good market in the warrants.Two other stocks that are cheap and have strong activist funds pushing for action, including the possible sale of the company are athletic footwear retailer FINL and family restaurant FRN. My guess that both are worth picking up a pullback of any sort. FRN does not have options but FINL does and again, Volatility is up after recent weakness.It was trader extraordinaire and wife lottery winner Jason Thompson who last month firmly declared that being long volatility was the way to go. Given the state of the world, more than a touch of economic uncertainty and very low volatility markets I tend to agree. I have been trying to construct the trade by buying long dated very cheap puts on etfs such as xly, consumer discretionary and xlp, the financials spdr and selling short dated high volatility put premium in the value and special situation stock I like. In addition to the coal stocks I have been using names like SIX, TRN, MIR,CHk,S,WON and NYT to stitch the trade together. We ve been fighting the tape a little bit with the long puts but the premium taken in on the value names keeps us well in the game. The only downside that I see here is being out shares of stocks we don’t min owning in the first palce. Of course the market could keep going up between now and next march with no rise in volatility or significant declines. I ll put that right up there with a Green Bay vs. Houston super bowl in probability.The world turns on. Navy is winning, Notre Dame is more vulnerable than we thought, and the Ravens defense is off the chart again this year. Summer is over and we are headed into fall, that glorious season of football, the world series with the biggest drawback being the women go back to slacks and sweater packing up the halter tops and shorts for another year. Leaves fall, boats come out and we settle in anticipation of the winter ahead. The market is calm and unafraid; no one is worried which of course worries the hell out of me.
nascar in the market
I have had occasion over the past few weeks to spend much time thinking on models of success in life as well as markets. As I continue my voyage into the 4th decade of life, my original plan of marching to the sounds of a swing band playing in the mood straight from adolescence into retirement seems to need some minor modifications...dont get me wrong, I ll keep the band playing and the day the dancing stops so do I, but some of the things I planned out a few years now need some tweaking. I had ample opportunity for reflecting, first driving to NYC for the junto and back, a long walk along the backroads of CT with a wise friend and advisor, all in the past week. After a long weekend back home, I hit the couch on a dreary Sunday, grey, overcast and nothing much to do kind of day. True to my quasi, urban yuppie redneck roots, I flipped the channels around until I heard the familiar tones of good old darrell waltrip,”boogity, boogity , boogity, lets go racing.....and therein I found a model for much of what it takes to succeed in life and in markets.....
Full out competition......a constant effort, all the time with everything on the line the whole race. There are no 3 martini lunches at 200 mph. Drivers on a nascar track run pedal to the metal for the full 4 or 500 miles every Sunday. Brakes are applied only for throwing the car through the corners and to avoid accidents. The engines are designed and built to withstand the constant high rpm running and to win, you must extract every ounce of horsepower not just for a qtr mile but for hours of continued running...focus is everything. Barreling into a turn at 190mph with 42 other cars around you, and the guy next to you close enough that you re sharing paint, its no time to be wondering whats on the happy hour menu at the dew drop inn. We all have day to day concerns but when the market opens or your daughter has her first broken heart its no time to dwell on them. When something goes wrong and you find yourself going backwards at incredible speeds or you SO wants to know how come you dont talk anymore its probably not the time to be wondering what time the orioles game starts tonight.....
Constant adjustment...its not enough to just to build a great car and throw it on the track. During the day the suspension is going to change, the track is going to heat up, tire pressure will change, annoying little stuff will go wrong....an understanding of whats changing(the switches) and the ability to change it in less than 15 seconds in the pits is critical to winning. We can all build decent models that trade great on paper and even run well for the first few laps around the market track. Or start relationships that in the first bloom of like and lust run like JR in the last 10 laps at talledega , but everything life changes. Pressures build up, assumptions are challenged and sometimes in life and markets we cut a tire in turn 3. The ability to adjust, refine and get back on the track is critical to winning. And note that without a pit crew, the average stop would take an hour or so instead of 15 seconds...the support people, friends, assistants, relatives etc who surround us and help keep us on the track are critical to success in any venture. And choose them wisely..like a tire changer who cant figure out how to turn on an air wrench, the wrong people around us can cause up to lose a wheel at 200 mph.......select the support people wisely because in the heat of the moment, you will have to depend on them.
Testing on Friday wins on Sunday..how many times on the list have we heard test and count? Far from being just a bunch of unenlightened rednecks with souped up chevrolets, the drivers today spend a lot of time in wind tunnels and on test tracks with sophisticated monitoring equipment testing their ideas, their cars and themselves long before they take the green flag at Daytona to start the season. Every spare moment is spent testing and refining new set ups and combinations to wring extra speed out of the motor. Everything is measured and tested to the finest possible degree to give the greatest chance to win.The chair and others exhort us to test and count, not just once but always. If you can it,think you can test it.
You must adapt. Every day will not be the same, and all the tracks are different. There are superspeedways, short tracks,road courses,flat tracks, banked tracks. Rockingham chews up tires, California has no banking, dover is concrete, richmond is asphalt, bristol has difficult pits, pocono looks like a 4 lane highway coming down the lane. You have to have a book on each track each week because conditions will be different.markets, marriages, careers, kids, there are cycles to it all. The tracks will be different every week,every month every year. I f all you know how to do is day trade tech stocks or drive superspeedways, you ll spend a lot more time, you ll spend a lot of time driving around At the back of the pack when conditions dont suit you.If all you know how to do is drive left or you re only good at the pickup stage of a relationship, road courses and day to day life will spin you off into the sand pits
You will make both friends and enemies. Friends are more important.Your enemies may not like you or speak highly of you..there is really very little they can do to hurt you without damaging themselves. Feuds between nascar drivers are legendary ..waltrip and earnhardt, gordon and wallace,pearson and petty. These guys have tangled up on the track and are really not that fond of each other but theres no way to take vengeance in a meaningful way without wrecking your car as well or suffering a stiff penalty from the regulators
Full out competition......a constant effort, all the time with everything on the line the whole race. There are no 3 martini lunches at 200 mph. Drivers on a nascar track run pedal to the metal for the full 4 or 500 miles every Sunday. Brakes are applied only for throwing the car through the corners and to avoid accidents. The engines are designed and built to withstand the constant high rpm running and to win, you must extract every ounce of horsepower not just for a qtr mile but for hours of continued running...focus is everything. Barreling into a turn at 190mph with 42 other cars around you, and the guy next to you close enough that you re sharing paint, its no time to be wondering whats on the happy hour menu at the dew drop inn. We all have day to day concerns but when the market opens or your daughter has her first broken heart its no time to dwell on them. When something goes wrong and you find yourself going backwards at incredible speeds or you SO wants to know how come you dont talk anymore its probably not the time to be wondering what time the orioles game starts tonight.....
Constant adjustment...its not enough to just to build a great car and throw it on the track. During the day the suspension is going to change, the track is going to heat up, tire pressure will change, annoying little stuff will go wrong....an understanding of whats changing(the switches) and the ability to change it in less than 15 seconds in the pits is critical to winning. We can all build decent models that trade great on paper and even run well for the first few laps around the market track. Or start relationships that in the first bloom of like and lust run like JR in the last 10 laps at talledega , but everything life changes. Pressures build up, assumptions are challenged and sometimes in life and markets we cut a tire in turn 3. The ability to adjust, refine and get back on the track is critical to winning. And note that without a pit crew, the average stop would take an hour or so instead of 15 seconds...the support people, friends, assistants, relatives etc who surround us and help keep us on the track are critical to success in any venture. And choose them wisely..like a tire changer who cant figure out how to turn on an air wrench, the wrong people around us can cause up to lose a wheel at 200 mph.......select the support people wisely because in the heat of the moment, you will have to depend on them.
Testing on Friday wins on Sunday..how many times on the list have we heard test and count? Far from being just a bunch of unenlightened rednecks with souped up chevrolets, the drivers today spend a lot of time in wind tunnels and on test tracks with sophisticated monitoring equipment testing their ideas, their cars and themselves long before they take the green flag at Daytona to start the season. Every spare moment is spent testing and refining new set ups and combinations to wring extra speed out of the motor. Everything is measured and tested to the finest possible degree to give the greatest chance to win.The chair and others exhort us to test and count, not just once but always. If you can it,think you can test it.
You must adapt. Every day will not be the same, and all the tracks are different. There are superspeedways, short tracks,road courses,flat tracks, banked tracks. Rockingham chews up tires, California has no banking, dover is concrete, richmond is asphalt, bristol has difficult pits, pocono looks like a 4 lane highway coming down the lane. You have to have a book on each track each week because conditions will be different.markets, marriages, careers, kids, there are cycles to it all. The tracks will be different every week,every month every year. I f all you know how to do is day trade tech stocks or drive superspeedways, you ll spend a lot more time, you ll spend a lot of time driving around At the back of the pack when conditions dont suit you.If all you know how to do is drive left or you re only good at the pickup stage of a relationship, road courses and day to day life will spin you off into the sand pits
You will make both friends and enemies. Friends are more important.Your enemies may not like you or speak highly of you..there is really very little they can do to hurt you without damaging themselves. Feuds between nascar drivers are legendary ..waltrip and earnhardt, gordon and wallace,pearson and petty. These guys have tangled up on the track and are really not that fond of each other but theres no way to take vengeance in a meaningful way without wrecking your car as well or suffering a stiff penalty from the regulators
life is a gamble
Life is a gamble. I d like to take credit for that statement, but its been said many times by many much brighter and articulate than I.As far back as 1780. Edmund burke in a speech before the house of commons states "Gambling is a principle inherent in nature”. It does seem that the taking of risks in order to reap rewards is not only inherent to mans nature, but the source of much f human progress over the years. My handy websters defines gambling as betting on the outcome of an uncertain contest, to expose to risk or venture. I would propose that the earliest life forms crawling from the primordial ooze were in fact betting that there was a better life, richer food beyond the ooze..and that they could actually breathe away from the slimy pool that gave festering birth to them. Columbus setting sail for what many believed was the edge of the world, cortez burning his ships on the beaches of mexico,Marco Polo setting forth for the unknown eat were basically betting on themselves and their compnaions in a quest for fortune and glory.Edison bet his future and reputation on the success of his lab tinkerings, leading to television,,light bulbs,henry ford’s bet on himself in auto race was the foundation of the ford motor company and the modern amercian automotive indistry. The list in intelligent,spectacular bets of not only money but minds and reputations is too lengthy to attempt and list them all...but they form the cornerstone of much of human progress.Indeed the author Mario puze said it best” It can be argued that man's instinct to gamble is the only reason he is still not a monkey up in the trees”
Military history is filled with dramatic gambles by great leaders..some such as D-Day and farragutt at new orleans paid off leading to great victories, others such as napoleins ill fated invasion of russia or picketts charge lead to equaly spectacular defeats.The history of warfare is filled with examples of commanders taking calculated risks to advance their position ,win battles and wars.The daring raid on trenton by an ourmanned our gunned and underfed infant american army under george washington did much to boost the sagging morlae of our fledgling nation and aloow tht e fight to continue on the road to eventual independence.george apttons mad dash across europe to reinforce the 101st airborne at the battle of the bulge pushed back the last germna attack of the war and shortened the war in europe by some many months.Erwin rommels calculated mad dashes across the desert earned respect as a military genius and the title odf desert fox.Rommell addressed the issue thusly in his writings “A gamble, on the other hand, is an operation which lead either to victory or to the complete destruction of one's force. Situations can arise where even a gamble may be justified ..."
Gambling is part of our history, or heritage., there is something about gambling in general and poker in patricular that fascinates us..Gambling and poker show in our culture as well, with such film classics as the hustler, cool hand luke,californai split, the sting, rounders,oceans 11,casiono and the cinncinati kid. Many of the James Bond movies have at least a portion of the film set in a csino as the suave mr bond sip martinis and indulges in games of chance and romance.Songs as well with segers ramblin gamblin man, kenny rodgers(of course) the gambler, lint balck and good run of bad luck,sinatras luck be a lady,merle haggarsds kentucky gambler/..the list of songs associated with gambling cards is extensive.Two of the greatest broadways plays of all it me, showboat and guys and dolls feature gambling as the center of the story. L:iterature as well is filled with gambling stories including the classicThe Gambler by Fyoder dostoyevsky , as well as countless popular novels by such as jackie collins, harold robbins and mario puzo. Many of american historian and wit, mark twains novels and short stories featured gambling as well.
Poker images, from the card rooms of the wild west, wild bill hickocks aces and 8’s deadmand s hand, a host of riverboat gamblers and roving card sharks, the best known being doc holliday with a deck of cards and six gun at the ready, harry truman playing poker with reporters while making the decision of the useof the atom bomb, Richard nixon earning a stake playing cards in the service, the games of poker and its variations show up throughour our history and our legends. There is something about betting your stake on the cards and your ability to read and out fox the others at the table that captures our imagination.Poker is played in sparkling new casinos, grungy roadside cardrooms, living rooms ,barrooms and everywhere in between across the unite states and indeed the world.
The fascination with poker continues to grow. The recent advent of the world poker tour televison series on the travel channel has been a huge success and interest in the annual world series of poker continues to grow with more entries into the main event each year.Recent books such as positively 4th street by mcmanus have made the new york times beastseler list. Entering the word poker into the yahoo internet serch engine returns over 6,2000,000 hits.Searching amzon.com for poker books returns a list of over 350 titles in stock and ready to ship.Poker has spread into the electronic age with card rooms online, and indeed an online player just beat some of the worlds best to become the world series of poker champion for 2003.
All games have rules. Some are complex, such as risk or dungeons and dragons. Most, like checkers, candyland, even chess and poker have fairly basic, simple rules. The very simplicity of the rules (candyland excepted..the basic rule of thumb here is that it is virtually impossible for anyone over the age of 6 to win this game., I have many memories of my daughter as a little girl with that viscous mischievous grin taunting” I win again daddy..I guess you re just not very good at this”) allow for extremely complex strategies. even chess, widely considered to be the most complex challenging games in the history of the world has a fairly basic set of rules governing how pieces may be moved and how victory is achieved or lost.Im sure some of you think perhaps checkers belong on the candyland list(you re probably the same ones who buy mutual funds because you think stocks are too risky). I suggest you read the immortal tom wisewells Science of Checkers or Draughts or walk into one of the old fashioned barber shops where old men still play and offer to play for cash. the rules of texas hold em for instance are very simple:
The basic principle behind Texas Hold'em Poker is that each player gets only two cards (which only he can see). The winner is the one of the remaining players at the end who can put together the best five-card poker hand as a combination of his two cards and five open cards (so-called "community cards") on the table.
The rules of trading markets are also very simple. You can buy. You can sell. You can sell short. You can trade, stocks, bonds , futures options.The mechanics of opening accounts and entering orders is fairly simple and straightforward. Any idiot can do it and indeed as we saw in the late 1990s, many of them already have.
Most of these games, simple as the rules my be, have also developed complex playing strategies as well as proverbs and cautionary tales that govern the game and distinguish the weak and the strong players. Walk into the average book store and look in the games and gambling section. There are dozens of books on chess, poker,backgammon and virtually any other game you can think. Different authors suggest different strategies and tell different stories of famous games and the players therein. Now walk over to the investing section. Here we have hit the jackpot of contradictory opinion. There are thousands of books, each espousing a different method of playing a simple game. Everyone has an opinion, and they all seem to be different. Graham doesn’t agree with prechter who doesn’t agree with buffet who doesn’t agree with elder and Niederhoffer doesn’t agree with any of them.
Both poker and investing share some maxims in common and we think its important to delve into a few of these shared concepts and proverbs. First however I want to make clear as we move along that neither of the authors feel that trading and investing is gambling when defined as most do. When we sit down to play we are not betting on outcomes we believe to be uncertain or strictly up to the fates. Drawing heavily on theories of probabilities, the use of statistics and practical experience whether playing at the 10-20 table at the mirage or entering orders for S&P futures or small cap stocks, we expect to win over time. When walking into a casino,most of the games are stacked against the player and it is virtually y impossible to beat over time the games of craps, roulette, keno or baccarat over time. They are games of pure chance with a mathematical edge for the house. The edge,even when small will grind you into dust..dust with no cash at that, over time.It is amazing to me that books are sold on how to win a t roulette, at craps,(ever want a free room in Vegas, just tell them you re there to play your new roulette or crap system)even at such statistically challenged cash killers as keno(know the safest place to stand if a casino roof ever collapses while you re there? The keno parlor, nothing ever hits there).,slots(friendly slots only pay back 98 cents of every dollar bet..you do the math) and lotto when from a pure math point of view, all you can ever hope to do over time is minimize the bleeding. Only poker and blackjack create the possibility of an edge over time for the player. As one of us is barred from damn near every casino on the planet for counting cards and the other is too lazy to memorize all the possible card combinations and track the count, finding memorizing the top 10 or 15 hold em hands to be easier, we shall concentrate on poker.it is our firmly held belief..and we bet our livelihood and our lives on it pretty much on a daily basis that both poker and markets can be beaten consistently by a combination of math and psychology. Further we believe that with study and practice the skills needed can be learned and mastered, As much as this book is an attempt to educate you, the reader on some of the things we have discovered in card rooms and trading floors, it is also a continuing step in our educational process and continuing effort to improve our game.It is no accident that great traders and investors such as buffet ( simple homespun image be damned, the man is a mathematical genius and heavy trader of distressed and arbitrage situations. Apparently his 20 punch card for a lifetime homily doesn’t apply to him), soros,druckenmiller, both the niederhoffers, roy and victor,tudor jones, brett hull have much in common with great poker traders such as doyle brunson,david slansky,phil hellmuth,johhny moss,andAmarillo slim. It is a thorough understanding of the odds and how other participants in the game perceive the odds that has made them succesful.We are always aware that like tax laws, the laws of probability are very bendable and we will experience streaks that defy the numbers. There will be bad beats ,poor players will fill an impossible gut shot draw on the river, someone will hold pocket aces to our pocket kings, treasury secretaries will say regrettably and fed chairman will mention irrational exuberance and the Enron’s of the world will trap us at times. But we play with faith in our research and the basic concept of reversion to the mean, knowing that in the end knowing the game and the players, the odds will be in our favor.
The first maxim we want to look at it as it applies to trading and poker is one of the most important. NEVER GAMBLE THE RENT MONEY. This should be self explanatory. The only thing harder than dragging home at 2 am and explaining to the wife you lost the rent money or mortgage payment playing cards would be explaining that your brilliant combination of Enron, WorldCom and the internet fund has lost the kids college fund and most of your retirement as well(you might as well do this one at 2am as well. When she finds out she’s working the late shift at Denny until she’s 73 to pay tuition, you re a dead man anyway. Stopping at the bar for some liquid courage and preventative pain killers would be the only right choice here).It is highly suggested that some basic planning be done before trading or playing cards as a for profit enterprise.
Some will try to try to convince you that you need..drum roll please...a financial plan. Merrill Lynch, American express. Morgan Stanley and most other firms will be happy to sell you for 300 or so bucks a nice plan with charts,graphs, projections and strategies. Just because yours looks just like the family next doors and all the suggestion involve products manufactured and sold by the firm in question makes them, in their mind, no less valuable. I might however, beg to differ. 15 years experience on the sell side of the investment industry, including a stint as a financial planner in my misspent and uneducated youth,have taught me one universal truth about financial plans. They are sales tool, designed to relax the buyer, create an atmosphere of trust and gain access to complete information about where your money is so it can be relocated. One of the best defintiotn of the process I have ever seen was in aols dilbert crtoon in which ratbert describes financial planning as the transfer of useless assets to valuable commission dollars .The last few years should have taught us all that most projections based on current conditions are worthless and the long term future is unknowable.There are exceptions to this statement of course, but as a rule it holds up more often than not. We hate to be general in nature, but for most of us a good plan comes down to a few simple steps:
if you have a spouse, kids and a mortgage, for gods sake..or more accurately for theirs, but life insurance, lots of it. Enough to pay for college,pay off the house and replace your income at 5% interest. Its hard enough to loose a loved one and have to raise children alone in the world without worrying about how you re going to pay for it all. I f your divorced, have enough to give your kids the life they deserve even if you should pass early. It would be nice to deprive the ex of the income and support money but its not fair to the kids. Term Insurance is cheap so you buy lots of it.
I f you have kids, set aside a college fund and put money into it every month, There are many options for doing this on a tax favored basis. Don’t pay someone 100 bucks an hour to review them,. The internet is a wonderful place and has all the answers you need. You use low rate of return assumptions and invest them money religiously.
Have a budget. Keep in track of the money flowing in and out of the household. Your not always going to stick to it but be aware of where and why you deviate from. Keeping track of how much you spend and where, finding and eliminating wasteful spending is critical to long term financial success for most of us. Bill gates might not need a household budget, you do.
I f you have a 401k at work, put in the max allowed pre tax, This helps meet two major goals..lowering taxes and funding retirement. If you don’t, put as much into Roth IRAs and IRAs as you can afford. Retirement will happen some day, or at least we hope it will. The federal government has generously provided several tax favored way to save for this event. Use them
Also make use of any benefits offered by your employer for paying medical insurance, daycare and other expense on a pretax basis. Read the tax booklet they send you every January and take every deduction and credit you are eligible to take. Less tax is better, Always.
Establish a reserve fund.A few months expenses in the bank makes a good shield against the unexpected. Layoffs happen, roofs leak, cars breakdown, and medical emergencies may occur. Even worse they my happen to your spouse favorite siblings obnoxious spouse. Better you have few extra bucks to send them than they come live with you until the storm blows over..which of course is two days short of never. Save some money, put in a bank, get the best available but dont obsess about it. The goal here is liquidity and security.
.Tim’s immutable law of personal finance..Life is short. When doing your budget, overestimate leisure expense and include a line item for vacations every year, especially if you’re married.NO date nights, time together and no fun makes live a rather boring, dull affair..somehow I doubt the point of our existence.We need time to enjoy life and quality time with those we love To save like a squirrel and then drop dead before you can enjoy it is pointless.your widower or widower should not have more fun after you die than you did before. This happens to more of us than we like to think If you re single include money for dates. The month you do not include money for dates you will meet the person of your dreams and not have enough money to buy him or her a drink and she ll leave with the muscle bound with capped teeth, or the buxom blonde with too tight jeans and an extra twenty to spend .
There will be exceptions to the above. If you have inheritance issues, property transfer concerns, a large percentage of your net worth in a closely held business there are issues where you are going to need professional help. If the issue is too complex to understand, get help. If you re losing sleep over whether or not you ve done it right, get help. Interview the professionals you need, attorneys accountants, financial services providers, maybe even a life insurance agent. Just make sure the person on commission ( I can say this, I earn my living from commission. The salesperson should not drive the process) does not lead the process or formulate the plan. You my need their products or expertise to implement your plan but let the lawyers and accountants ..the hourly or flat rate guys...formulate the strategy.
2. ne The author nelson Algren penned the saying as one of his original rules for life... Never play cards with a man called Doc. Never eat at a place called Mom's. Never sleep with a woman whose troubles are worse than your own. It seems that in days of yore, the good doc always had a card or two up his sleeve or some other trick to separate you from your cash by less than totally honest means. The other axioms we shall leave alone for now, except to verify that the gastronomic damage done in a road side joint named Moms is the blue light special of stomach disorders. And as all the authors problems are usually generated by the fairer sex, we have never found one who has less troubles than ourslelves..not being infatuated by the celibate life, we choose to ignore that particular rule.
It will shock you to find out that their are people out there who want your money. They dont want to work for it, trade for it, or even gamble for it. They just want to take it by whatever means necessary. They will cheat, they will lie, they will withhold information, feed your greed, exploit your fear, and in the end they will steal your money if you are not ever vigilant.
For some reason, involving I am sure some strange twist of the american psyche, we tend to glamorize con artists. Films such as The Sting,catch me if you can, paper moon, the Hustler, and color of money show us the fast talking but basically good hearted operator. In the Music man, we celebrate the con artist who reforms in the name of love.there is something about the living by your wits, outsmarting the world character that appeals to us. It is however a lot less appealing when it is your money that disappears and skips out of town.
Federal and local government spend millions of hours and dollars trying to educate the public and track down fraudulent operators. Yet, year in and year out billions re pilfered by tricksters who separate us from our cash with promises of high yields and fast profits. Its not trouble with a capital T that rhymes for P which stands for pool that they warn us of but coming global economic collapse and the need for precious metals, low bank yields when by using little known techniques of the rothschilds and Rockefellers we can get prime bank notes yielding 18%...sometimes a month. The claims are ludicrous and rarely hold up to investigation but the old twins of human psychology, fear and greed suspend our disbelief and send us to the mailbox checkbook in hand.For some reason, no matter how many articles are printed or how often the sixty minutes people show us the ins and outs of cons, investors still send their checks to modern day versions of Professor Harold Hill.
There are some basic things you can and should do to prevent being taken in by the professor and his friends...after all you cant count on Shirley Jones to always save us from our baser instincts. For starters..if it is too good to be true, its too good to be true. There is no free lunch, There is no super secret investment plan used by the rothschilds that is available to you for a low-low price. There is no trading methodology beyond blind luck that can turn your 2000 into 2 million in two weeks or less. The Us treasury does not have a secret trading room now magically available to you and your 3 grand. No one in Nigerai is going to share their 33 million dollars of oil money stolen form a corrupt and evil dictator with you. Its not going to happen and after you send in the money, robert redford going to clean up the fake blood and he and Paul newman are leaving town with your dough never to be heard from again..until the sequel in anew town with a new name.
The internet is the source and home of a lot of todays new scams. Using the anonymity of message boards and email, worthless shares are touted as the next microsoft.every day it seems I get several offers to teach me the secrets of investing, build unlimited wealth and increase my penis size overnight. One is as likely as the other to be a successful venture.
Use your common sense and do your homework. Investigate before you invest. Realize that you probably do not need to invest in cattle breeding, Guatemalan llama farms or secret energy sources.The SEC suggest that if you see an offer on the internet, it is best to assume it is a fraud..their guidelines reproduced here give excellent suggestions for avoiding high tech modern fraud:
Avoiding Internet Investment Scams: Tips for Investors
You should be skeptical of investment opportunities you learn about through the Internet. When you see an offering on the Internet – whether it's on a company's website, in an online newsletter, on a message board, or in a chat room – you should assume it's a scam until you've done your homework and proven otherwise.
Get the facts before you invest, and only invest money you can afford to lose. You can avoid online investment scams by asking – and getting answers to – these three simple questions:
Is the investment registered?
To find out, check the SEC's EDGAR database. Some smaller companies don't have to register their securities offerings with the SEC, so always check with your state securities regulator. You'll find that number in the government section of your phone book. Or call the North American Securities Administrators Association (NASAA) at (202) 737-0900 or visit NASAA's website.
Many online investment scams involve unregistered securities. But the fact that a company has registered and files reports with the SEC doesn't guarantee that the company will be a good investment. Likewise, the fact that a company hasn't registered and doesn't file reports with us doesn't mean the company is a fraud. You may be asking for serious losses if you invest in a small, thinly traded company that isn't widely known solely on the basis of what you read on a bulletin board posting or saw in an online newsletter. One simple phone call o your state regulator could prevent you from squandering your money on a scam.
Is the person licensed and law-abiding?
Find out if the person or firm selling the investment needs to be licensed. Call your state securities regulator and ask whether the person or firm is licensed to do business in your state and whether they have a record of complaints or fraud. You can also get this information by calling NASD's public disclosure hotline at (800) 289-9999 or visiting their website.
Does the investment sound too good to be true?
If it does, it probably is. High-yield investments tend to involve extremely high risk. Never invest in an opportunity that promises "guaranteed" or "risk-free" returns. Watch out for claims of astronomical yields in a short period of time. Be skeptical of "off-shore" or foreign investments. And beware of exotic or unusual sounding investments, especially those involving so-called "prime bank" securities. To learn more about "prime bank" securities, visit the Division of Enforcement's Prime Bank Fraud Information Center on our website.
Make sure you fully understand the investment before you part with your hard-earned money. Always ask for – and carefully read – the company's prospectus and latest financial statements.
In addition to the outright con, one must be ever diligent to avoid what I call the soft con. The legions of newsletter writers, gurus prophets and pundits who for 299 dollars a year will give you he secrets to investing as handed down by either WD gann or god his own self, use the stars to predict the paths of the markets or have some super successful technical approach with a 98% win rate..and if you subscribe now they ll throw in bonus volumes. Heroes a hint...if you posses a true edge in the markets you would never share it with anyone, much less at the bargain price of 299 a year. Just as Ed will never tell anyone where a table of full of rich fish play lest the table become full of well off card sharps thereby ruining the game offering widespread dissemination of a market edge would eliminate the edge.James Simon, George Soros, Luis bacon, Paul tudor Jones...they dont write newsletters, they dont advetrise and they wont tell you how they trade. The really good ones don’t.
Another soft con cons from the main say and white shoe houses of the street. No direct commission.trust me on this one, I ve worked as a broker for 14 years now. There is always a fee. It may be well hidden..and the deeper its hidden, the higher it is. Back end loaded mutual funds, or better yet annuities that require a doctorate in finance to figure out how much all those bells and whistles are costing to you, special reofferings of stock. They are not free. None of us on the street will come to work for free, Some of us are nice guys but we are not benevolent institutions. There is a commission. You just have to find it..or better yet if you hear the no direct fee claim..hang up, walk away and forget the whole deal.
Bot the Sec and US treasury department have excellent web sites full of thoughts and ideas for avoiding fraud. The treasury’s section on Prime bank Loans should be read by anyone whoever invests for income and is getting frustrated by todays low rates. Read the information on these sites carefully. But, in reality it comes down to common sense.
Investing on the ground floor with someone you ve never met is almost always a quick trip to the financial basement.
Nothing is guaranteed.
There is always a fee.
No one who really knows of an easy poker game or successful market trading technique is going to tell you for any amount of money
There is no safe way to earn 20% a year.
Banks that pay everyone else 3% a year are not going to pay you 15% in a special deal engineered by the trilateral commission or anyone else.
You probably cant quit your job and become an instant day trading millionaire.
There is no free Lunch...and never play poker with a man named doc.
never Play poker with a man named Doc
3. Have an Edge
Any time you sit down a t a poker table or put on a trade, you need to do so with a strong indication that you will come away with more money that you used to buy in. We re not talking about a gut feel that you re really gonna get them this time, but a practical well thought out advantaged, one developed by testing and by experience that you can beat this game, or that this trade has a high probability of success. There are a lot of traders and card players we have met over the years who trade and play on what they call instinct or gut feel. Most of them are broke.
You need to have a testable tradable edge to persevere in the markets over long periods of time. You need to be one of the best players at a poker table...and know it before you sit down and post a blind or ante...to win over time. It is worth keeping in mind that you probably cant beat every game or trade every market.We hear tales of the great macro traders and think we should be able to trade all markets all the time and win. The stories of soros,druckenmiller, robertson, et al leave out the fact that they have 50 to 100 people on staff to help with the voluminous analysis that goes into shaping their success. One of the best S&P traders we know will not go near the bond or currency markets. A good friend is an extraordinary trader of small illiquid bank stocks. He cant value or trade an option if his life depends on it. A couple of good nights at the local game playing follow the queen and stud with 2s and one eyed jacks wild is not the basis for entering the World series of Poker. A good hold em player may not the best choice to win at Omaha eight or better.
Deciding which markets to trade and how you are going to trade them, or which games you are going to play and in what style, are the biggest decisions one must make in developing a playable edge.The skill set to trade indexes interday is completely different from that to trade liquidation arbitrage. The education needed to trade currencies is not the same as needed to trade equities. Traders who use technical analysis need to concentrate their attentions on studies a world apart from the fundamental investor. Quantitative analysts need to stay up the latest mathematical approaches and be ever aware of disappearing anomalies. In poker, winning at limit games does not automatically make you a no limit champion. Stud and Omaha with their community cards are a different animal than stud and low ball. To have an edge, one must specialize. One must study. One must practice and be ever alert for the developing overlay.
There will be times when markets give you and edge. Or a particular poker game is so inviting you must play. Last June, Ed described in detail the concept of finding and playing the edge, or overlay as he prefers to call it:
Normally don't like to announce victories, at the risk of coming across as a bragger, but I just beat the biggest game at the biggest poker room in the world this weekend, at my best poker game, Texas Hold'em, limit, so I thought I'd share part of the lesson that I think got me there, as it applies to trading.
Overlay, play, no overlay, well....
To win it can help to have lost, and then to despise the feeling. I played in the big game before and lost. Why talk of poker overlay, and how does it apply to trading????
Well, when I used to trade stock options, there where times when the action was well almost gluttonously scrumptious, and then often these times would be followed by a painful drought. Some traders stood with strong resolve, adjusting the interest rates in their models, fine-tuning their assumptions on volatility in their model, and then on a dragging slow day might even whip out their sheets and double-check trades and position inputs.
Other traders chose to laugh and giggle, or play distracting games and pranks, some even said that they'd buy some of this option or that, or maybe even put on a “delta’ or a sports bet with a buddy to entertain themselves, heck some went and had a puff of cannabis or a drink.
I bet you can guess which traders stayed in business and which traders lost. Why? They chose to just play, didn't want or have the patience to wait for an overlay.
So, I recall the pro who asked me a couple weeks ago if I had a twin high-stakes brother, when he saw me at the smaller stakes table, and I just laughed and said how ya doin’??
That weekend I made the same amount that I did this weekend, why, because the overlay was huge in the smaller game that weekend, and I was close to break-even in the big game, maybe a slight favorite, but just as likely a slight dog, so I chose not to play. Edge times volume equals profit. It feels good to be the winner at the biggest stakes table, it even cheered me up (had a rough personal week) when strangers came up to me and said what a big game you guys are playing, wow! And, seeing people looking at the stack of chips that I had felt as I imagine a little Prozac might too, but next week if the top players in the world decide to join the big game you won't see me there, if the overlay is in the 5/10 table that's where I'll be, laugh if you want, but I am happy playing my way, if others wish to take a "stab at the moon," or “play ‘just for fun,’” that's their prerogative, and it is fun when a beautiful lady looks at you in amazement when you’re playing in the big game with the most chips at the table in front of you, but I am fine playing the way I like to play, heck, the shirt I am wearing that I bought from making a few small profits
feels good overlaying me and well after last weekend the shirt isn't the only thing that will subside the laughter, I think next time I might get a few more respectful nods even if I do chose to play in a smaller game.
Back to trading. There were times when there were only a few small trades that I knew had edge, and so I played, but then people laughed when sometimes I would pass on the biggest trade of the day. They'd even look at me as if to say, how much did you make last month, and since I know you did why the heck are you “pussin’ out” on this trade?? Well, I left with the chips that year, and when no one was looking, I thanked god for the strength to fight victoriously as I looked at the Statue of Liberty by the then-still-standing-triumphantly World Trade Center, thinking back on the moment it felt how I imagine scoring a big goal in a big soccer match might feel, and makes me want to scream O' LAY!!!!!
Developing an edge takes time and effort. You are not going to be able to watch a couple of episodes of World Poker Tour and use your knowledge base to turn pro. Nor can you check out mass market books by self proclaimed trading experts from the local library and trade your way to millions over the next couple of weeks.Nor is a quick perusal of Buffetology going to make you a corn pone overfed liberal billionaire before your 40th birthday. Both of us spend hours per week after working studying our games. Tim reads dozens of corporate documents and runs countless simulations and tests of market conditions and reactions every day of every week. He also plays a few hours of poker a week and reads a book or two a month on the subject. Ed’s primary game is poker. He plays 25 to 30 hours a week and spends twice that much time studying and reviewing the game. He also works in time to study and review the equity and options market.The top traders we know, many of them successful beyond most peoples wildest dreams still take the time to read any new academic reports that are published, they update, review and rigorously test and retest their assumptions and beliefs. Developing an edge that allows one to play consistently well, to win more than you lose, requires commitment and effort. Those not willing to put in the time, to do the homework and testing should probably stick to mutual funds and neighborhood wild card games for penny stakes.
Military history is filled with dramatic gambles by great leaders..some such as D-Day and farragutt at new orleans paid off leading to great victories, others such as napoleins ill fated invasion of russia or picketts charge lead to equaly spectacular defeats.The history of warfare is filled with examples of commanders taking calculated risks to advance their position ,win battles and wars.The daring raid on trenton by an ourmanned our gunned and underfed infant american army under george washington did much to boost the sagging morlae of our fledgling nation and aloow tht e fight to continue on the road to eventual independence.george apttons mad dash across europe to reinforce the 101st airborne at the battle of the bulge pushed back the last germna attack of the war and shortened the war in europe by some many months.Erwin rommels calculated mad dashes across the desert earned respect as a military genius and the title odf desert fox.Rommell addressed the issue thusly in his writings “A gamble, on the other hand, is an operation which lead either to victory or to the complete destruction of one's force. Situations can arise where even a gamble may be justified ..."
Gambling is part of our history, or heritage., there is something about gambling in general and poker in patricular that fascinates us..Gambling and poker show in our culture as well, with such film classics as the hustler, cool hand luke,californai split, the sting, rounders,oceans 11,casiono and the cinncinati kid. Many of the James Bond movies have at least a portion of the film set in a csino as the suave mr bond sip martinis and indulges in games of chance and romance.Songs as well with segers ramblin gamblin man, kenny rodgers(of course) the gambler, lint balck and good run of bad luck,sinatras luck be a lady,merle haggarsds kentucky gambler/..the list of songs associated with gambling cards is extensive.Two of the greatest broadways plays of all it me, showboat and guys and dolls feature gambling as the center of the story. L:iterature as well is filled with gambling stories including the classicThe Gambler by Fyoder dostoyevsky , as well as countless popular novels by such as jackie collins, harold robbins and mario puzo. Many of american historian and wit, mark twains novels and short stories featured gambling as well.
Poker images, from the card rooms of the wild west, wild bill hickocks aces and 8’s deadmand s hand, a host of riverboat gamblers and roving card sharks, the best known being doc holliday with a deck of cards and six gun at the ready, harry truman playing poker with reporters while making the decision of the useof the atom bomb, Richard nixon earning a stake playing cards in the service, the games of poker and its variations show up throughour our history and our legends. There is something about betting your stake on the cards and your ability to read and out fox the others at the table that captures our imagination.Poker is played in sparkling new casinos, grungy roadside cardrooms, living rooms ,barrooms and everywhere in between across the unite states and indeed the world.
The fascination with poker continues to grow. The recent advent of the world poker tour televison series on the travel channel has been a huge success and interest in the annual world series of poker continues to grow with more entries into the main event each year.Recent books such as positively 4th street by mcmanus have made the new york times beastseler list. Entering the word poker into the yahoo internet serch engine returns over 6,2000,000 hits.Searching amzon.com for poker books returns a list of over 350 titles in stock and ready to ship.Poker has spread into the electronic age with card rooms online, and indeed an online player just beat some of the worlds best to become the world series of poker champion for 2003.
All games have rules. Some are complex, such as risk or dungeons and dragons. Most, like checkers, candyland, even chess and poker have fairly basic, simple rules. The very simplicity of the rules (candyland excepted..the basic rule of thumb here is that it is virtually impossible for anyone over the age of 6 to win this game., I have many memories of my daughter as a little girl with that viscous mischievous grin taunting” I win again daddy..I guess you re just not very good at this”) allow for extremely complex strategies. even chess, widely considered to be the most complex challenging games in the history of the world has a fairly basic set of rules governing how pieces may be moved and how victory is achieved or lost.Im sure some of you think perhaps checkers belong on the candyland list(you re probably the same ones who buy mutual funds because you think stocks are too risky). I suggest you read the immortal tom wisewells Science of Checkers or Draughts or walk into one of the old fashioned barber shops where old men still play and offer to play for cash. the rules of texas hold em for instance are very simple:
The basic principle behind Texas Hold'em Poker is that each player gets only two cards (which only he can see). The winner is the one of the remaining players at the end who can put together the best five-card poker hand as a combination of his two cards and five open cards (so-called "community cards") on the table.
The rules of trading markets are also very simple. You can buy. You can sell. You can sell short. You can trade, stocks, bonds , futures options.The mechanics of opening accounts and entering orders is fairly simple and straightforward. Any idiot can do it and indeed as we saw in the late 1990s, many of them already have.
Most of these games, simple as the rules my be, have also developed complex playing strategies as well as proverbs and cautionary tales that govern the game and distinguish the weak and the strong players. Walk into the average book store and look in the games and gambling section. There are dozens of books on chess, poker,backgammon and virtually any other game you can think. Different authors suggest different strategies and tell different stories of famous games and the players therein. Now walk over to the investing section. Here we have hit the jackpot of contradictory opinion. There are thousands of books, each espousing a different method of playing a simple game. Everyone has an opinion, and they all seem to be different. Graham doesn’t agree with prechter who doesn’t agree with buffet who doesn’t agree with elder and Niederhoffer doesn’t agree with any of them.
Both poker and investing share some maxims in common and we think its important to delve into a few of these shared concepts and proverbs. First however I want to make clear as we move along that neither of the authors feel that trading and investing is gambling when defined as most do. When we sit down to play we are not betting on outcomes we believe to be uncertain or strictly up to the fates. Drawing heavily on theories of probabilities, the use of statistics and practical experience whether playing at the 10-20 table at the mirage or entering orders for S&P futures or small cap stocks, we expect to win over time. When walking into a casino,most of the games are stacked against the player and it is virtually y impossible to beat over time the games of craps, roulette, keno or baccarat over time. They are games of pure chance with a mathematical edge for the house. The edge,even when small will grind you into dust..dust with no cash at that, over time.It is amazing to me that books are sold on how to win a t roulette, at craps,(ever want a free room in Vegas, just tell them you re there to play your new roulette or crap system)even at such statistically challenged cash killers as keno(know the safest place to stand if a casino roof ever collapses while you re there? The keno parlor, nothing ever hits there).,slots(friendly slots only pay back 98 cents of every dollar bet..you do the math) and lotto when from a pure math point of view, all you can ever hope to do over time is minimize the bleeding. Only poker and blackjack create the possibility of an edge over time for the player. As one of us is barred from damn near every casino on the planet for counting cards and the other is too lazy to memorize all the possible card combinations and track the count, finding memorizing the top 10 or 15 hold em hands to be easier, we shall concentrate on poker.it is our firmly held belief..and we bet our livelihood and our lives on it pretty much on a daily basis that both poker and markets can be beaten consistently by a combination of math and psychology. Further we believe that with study and practice the skills needed can be learned and mastered, As much as this book is an attempt to educate you, the reader on some of the things we have discovered in card rooms and trading floors, it is also a continuing step in our educational process and continuing effort to improve our game.It is no accident that great traders and investors such as buffet ( simple homespun image be damned, the man is a mathematical genius and heavy trader of distressed and arbitrage situations. Apparently his 20 punch card for a lifetime homily doesn’t apply to him), soros,druckenmiller, both the niederhoffers, roy and victor,tudor jones, brett hull have much in common with great poker traders such as doyle brunson,david slansky,phil hellmuth,johhny moss,andAmarillo slim. It is a thorough understanding of the odds and how other participants in the game perceive the odds that has made them succesful.We are always aware that like tax laws, the laws of probability are very bendable and we will experience streaks that defy the numbers. There will be bad beats ,poor players will fill an impossible gut shot draw on the river, someone will hold pocket aces to our pocket kings, treasury secretaries will say regrettably and fed chairman will mention irrational exuberance and the Enron’s of the world will trap us at times. But we play with faith in our research and the basic concept of reversion to the mean, knowing that in the end knowing the game and the players, the odds will be in our favor.
The first maxim we want to look at it as it applies to trading and poker is one of the most important. NEVER GAMBLE THE RENT MONEY. This should be self explanatory. The only thing harder than dragging home at 2 am and explaining to the wife you lost the rent money or mortgage payment playing cards would be explaining that your brilliant combination of Enron, WorldCom and the internet fund has lost the kids college fund and most of your retirement as well(you might as well do this one at 2am as well. When she finds out she’s working the late shift at Denny until she’s 73 to pay tuition, you re a dead man anyway. Stopping at the bar for some liquid courage and preventative pain killers would be the only right choice here).It is highly suggested that some basic planning be done before trading or playing cards as a for profit enterprise.
Some will try to try to convince you that you need..drum roll please...a financial plan. Merrill Lynch, American express. Morgan Stanley and most other firms will be happy to sell you for 300 or so bucks a nice plan with charts,graphs, projections and strategies. Just because yours looks just like the family next doors and all the suggestion involve products manufactured and sold by the firm in question makes them, in their mind, no less valuable. I might however, beg to differ. 15 years experience on the sell side of the investment industry, including a stint as a financial planner in my misspent and uneducated youth,have taught me one universal truth about financial plans. They are sales tool, designed to relax the buyer, create an atmosphere of trust and gain access to complete information about where your money is so it can be relocated. One of the best defintiotn of the process I have ever seen was in aols dilbert crtoon in which ratbert describes financial planning as the transfer of useless assets to valuable commission dollars .The last few years should have taught us all that most projections based on current conditions are worthless and the long term future is unknowable.There are exceptions to this statement of course, but as a rule it holds up more often than not. We hate to be general in nature, but for most of us a good plan comes down to a few simple steps:
if you have a spouse, kids and a mortgage, for gods sake..or more accurately for theirs, but life insurance, lots of it. Enough to pay for college,pay off the house and replace your income at 5% interest. Its hard enough to loose a loved one and have to raise children alone in the world without worrying about how you re going to pay for it all. I f your divorced, have enough to give your kids the life they deserve even if you should pass early. It would be nice to deprive the ex of the income and support money but its not fair to the kids. Term Insurance is cheap so you buy lots of it.
I f you have kids, set aside a college fund and put money into it every month, There are many options for doing this on a tax favored basis. Don’t pay someone 100 bucks an hour to review them,. The internet is a wonderful place and has all the answers you need. You use low rate of return assumptions and invest them money religiously.
Have a budget. Keep in track of the money flowing in and out of the household. Your not always going to stick to it but be aware of where and why you deviate from. Keeping track of how much you spend and where, finding and eliminating wasteful spending is critical to long term financial success for most of us. Bill gates might not need a household budget, you do.
I f you have a 401k at work, put in the max allowed pre tax, This helps meet two major goals..lowering taxes and funding retirement. If you don’t, put as much into Roth IRAs and IRAs as you can afford. Retirement will happen some day, or at least we hope it will. The federal government has generously provided several tax favored way to save for this event. Use them
Also make use of any benefits offered by your employer for paying medical insurance, daycare and other expense on a pretax basis. Read the tax booklet they send you every January and take every deduction and credit you are eligible to take. Less tax is better, Always.
Establish a reserve fund.A few months expenses in the bank makes a good shield against the unexpected. Layoffs happen, roofs leak, cars breakdown, and medical emergencies may occur. Even worse they my happen to your spouse favorite siblings obnoxious spouse. Better you have few extra bucks to send them than they come live with you until the storm blows over..which of course is two days short of never. Save some money, put in a bank, get the best available but dont obsess about it. The goal here is liquidity and security.
.Tim’s immutable law of personal finance..Life is short. When doing your budget, overestimate leisure expense and include a line item for vacations every year, especially if you’re married.NO date nights, time together and no fun makes live a rather boring, dull affair..somehow I doubt the point of our existence.We need time to enjoy life and quality time with those we love To save like a squirrel and then drop dead before you can enjoy it is pointless.your widower or widower should not have more fun after you die than you did before. This happens to more of us than we like to think If you re single include money for dates. The month you do not include money for dates you will meet the person of your dreams and not have enough money to buy him or her a drink and she ll leave with the muscle bound with capped teeth, or the buxom blonde with too tight jeans and an extra twenty to spend .
There will be exceptions to the above. If you have inheritance issues, property transfer concerns, a large percentage of your net worth in a closely held business there are issues where you are going to need professional help. If the issue is too complex to understand, get help. If you re losing sleep over whether or not you ve done it right, get help. Interview the professionals you need, attorneys accountants, financial services providers, maybe even a life insurance agent. Just make sure the person on commission ( I can say this, I earn my living from commission. The salesperson should not drive the process) does not lead the process or formulate the plan. You my need their products or expertise to implement your plan but let the lawyers and accountants ..the hourly or flat rate guys...formulate the strategy.
2. ne The author nelson Algren penned the saying as one of his original rules for life... Never play cards with a man called Doc. Never eat at a place called Mom's. Never sleep with a woman whose troubles are worse than your own. It seems that in days of yore, the good doc always had a card or two up his sleeve or some other trick to separate you from your cash by less than totally honest means. The other axioms we shall leave alone for now, except to verify that the gastronomic damage done in a road side joint named Moms is the blue light special of stomach disorders. And as all the authors problems are usually generated by the fairer sex, we have never found one who has less troubles than ourslelves..not being infatuated by the celibate life, we choose to ignore that particular rule.
It will shock you to find out that their are people out there who want your money. They dont want to work for it, trade for it, or even gamble for it. They just want to take it by whatever means necessary. They will cheat, they will lie, they will withhold information, feed your greed, exploit your fear, and in the end they will steal your money if you are not ever vigilant.
For some reason, involving I am sure some strange twist of the american psyche, we tend to glamorize con artists. Films such as The Sting,catch me if you can, paper moon, the Hustler, and color of money show us the fast talking but basically good hearted operator. In the Music man, we celebrate the con artist who reforms in the name of love.there is something about the living by your wits, outsmarting the world character that appeals to us. It is however a lot less appealing when it is your money that disappears and skips out of town.
Federal and local government spend millions of hours and dollars trying to educate the public and track down fraudulent operators. Yet, year in and year out billions re pilfered by tricksters who separate us from our cash with promises of high yields and fast profits. Its not trouble with a capital T that rhymes for P which stands for pool that they warn us of but coming global economic collapse and the need for precious metals, low bank yields when by using little known techniques of the rothschilds and Rockefellers we can get prime bank notes yielding 18%...sometimes a month. The claims are ludicrous and rarely hold up to investigation but the old twins of human psychology, fear and greed suspend our disbelief and send us to the mailbox checkbook in hand.For some reason, no matter how many articles are printed or how often the sixty minutes people show us the ins and outs of cons, investors still send their checks to modern day versions of Professor Harold Hill.
There are some basic things you can and should do to prevent being taken in by the professor and his friends...after all you cant count on Shirley Jones to always save us from our baser instincts. For starters..if it is too good to be true, its too good to be true. There is no free lunch, There is no super secret investment plan used by the rothschilds that is available to you for a low-low price. There is no trading methodology beyond blind luck that can turn your 2000 into 2 million in two weeks or less. The Us treasury does not have a secret trading room now magically available to you and your 3 grand. No one in Nigerai is going to share their 33 million dollars of oil money stolen form a corrupt and evil dictator with you. Its not going to happen and after you send in the money, robert redford going to clean up the fake blood and he and Paul newman are leaving town with your dough never to be heard from again..until the sequel in anew town with a new name.
The internet is the source and home of a lot of todays new scams. Using the anonymity of message boards and email, worthless shares are touted as the next microsoft.every day it seems I get several offers to teach me the secrets of investing, build unlimited wealth and increase my penis size overnight. One is as likely as the other to be a successful venture.
Use your common sense and do your homework. Investigate before you invest. Realize that you probably do not need to invest in cattle breeding, Guatemalan llama farms or secret energy sources.The SEC suggest that if you see an offer on the internet, it is best to assume it is a fraud..their guidelines reproduced here give excellent suggestions for avoiding high tech modern fraud:
Avoiding Internet Investment Scams: Tips for Investors
You should be skeptical of investment opportunities you learn about through the Internet. When you see an offering on the Internet – whether it's on a company's website, in an online newsletter, on a message board, or in a chat room – you should assume it's a scam until you've done your homework and proven otherwise.
Get the facts before you invest, and only invest money you can afford to lose. You can avoid online investment scams by asking – and getting answers to – these three simple questions:
Is the investment registered?
To find out, check the SEC's EDGAR database. Some smaller companies don't have to register their securities offerings with the SEC, so always check with your state securities regulator. You'll find that number in the government section of your phone book. Or call the North American Securities Administrators Association (NASAA) at (202) 737-0900 or visit NASAA's website.
Many online investment scams involve unregistered securities. But the fact that a company has registered and files reports with the SEC doesn't guarantee that the company will be a good investment. Likewise, the fact that a company hasn't registered and doesn't file reports with us doesn't mean the company is a fraud. You may be asking for serious losses if you invest in a small, thinly traded company that isn't widely known solely on the basis of what you read on a bulletin board posting or saw in an online newsletter. One simple phone call o your state regulator could prevent you from squandering your money on a scam.
Is the person licensed and law-abiding?
Find out if the person or firm selling the investment needs to be licensed. Call your state securities regulator and ask whether the person or firm is licensed to do business in your state and whether they have a record of complaints or fraud. You can also get this information by calling NASD's public disclosure hotline at (800) 289-9999 or visiting their website.
Does the investment sound too good to be true?
If it does, it probably is. High-yield investments tend to involve extremely high risk. Never invest in an opportunity that promises "guaranteed" or "risk-free" returns. Watch out for claims of astronomical yields in a short period of time. Be skeptical of "off-shore" or foreign investments. And beware of exotic or unusual sounding investments, especially those involving so-called "prime bank" securities. To learn more about "prime bank" securities, visit the Division of Enforcement's Prime Bank Fraud Information Center on our website.
Make sure you fully understand the investment before you part with your hard-earned money. Always ask for – and carefully read – the company's prospectus and latest financial statements.
In addition to the outright con, one must be ever diligent to avoid what I call the soft con. The legions of newsletter writers, gurus prophets and pundits who for 299 dollars a year will give you he secrets to investing as handed down by either WD gann or god his own self, use the stars to predict the paths of the markets or have some super successful technical approach with a 98% win rate..and if you subscribe now they ll throw in bonus volumes. Heroes a hint...if you posses a true edge in the markets you would never share it with anyone, much less at the bargain price of 299 a year. Just as Ed will never tell anyone where a table of full of rich fish play lest the table become full of well off card sharps thereby ruining the game offering widespread dissemination of a market edge would eliminate the edge.James Simon, George Soros, Luis bacon, Paul tudor Jones...they dont write newsletters, they dont advetrise and they wont tell you how they trade. The really good ones don’t.
Another soft con cons from the main say and white shoe houses of the street. No direct commission.trust me on this one, I ve worked as a broker for 14 years now. There is always a fee. It may be well hidden..and the deeper its hidden, the higher it is. Back end loaded mutual funds, or better yet annuities that require a doctorate in finance to figure out how much all those bells and whistles are costing to you, special reofferings of stock. They are not free. None of us on the street will come to work for free, Some of us are nice guys but we are not benevolent institutions. There is a commission. You just have to find it..or better yet if you hear the no direct fee claim..hang up, walk away and forget the whole deal.
Bot the Sec and US treasury department have excellent web sites full of thoughts and ideas for avoiding fraud. The treasury’s section on Prime bank Loans should be read by anyone whoever invests for income and is getting frustrated by todays low rates. Read the information on these sites carefully. But, in reality it comes down to common sense.
Investing on the ground floor with someone you ve never met is almost always a quick trip to the financial basement.
Nothing is guaranteed.
There is always a fee.
No one who really knows of an easy poker game or successful market trading technique is going to tell you for any amount of money
There is no safe way to earn 20% a year.
Banks that pay everyone else 3% a year are not going to pay you 15% in a special deal engineered by the trilateral commission or anyone else.
You probably cant quit your job and become an instant day trading millionaire.
There is no free Lunch...and never play poker with a man named doc.
never Play poker with a man named Doc
3. Have an Edge
Any time you sit down a t a poker table or put on a trade, you need to do so with a strong indication that you will come away with more money that you used to buy in. We re not talking about a gut feel that you re really gonna get them this time, but a practical well thought out advantaged, one developed by testing and by experience that you can beat this game, or that this trade has a high probability of success. There are a lot of traders and card players we have met over the years who trade and play on what they call instinct or gut feel. Most of them are broke.
You need to have a testable tradable edge to persevere in the markets over long periods of time. You need to be one of the best players at a poker table...and know it before you sit down and post a blind or ante...to win over time. It is worth keeping in mind that you probably cant beat every game or trade every market.We hear tales of the great macro traders and think we should be able to trade all markets all the time and win. The stories of soros,druckenmiller, robertson, et al leave out the fact that they have 50 to 100 people on staff to help with the voluminous analysis that goes into shaping their success. One of the best S&P traders we know will not go near the bond or currency markets. A good friend is an extraordinary trader of small illiquid bank stocks. He cant value or trade an option if his life depends on it. A couple of good nights at the local game playing follow the queen and stud with 2s and one eyed jacks wild is not the basis for entering the World series of Poker. A good hold em player may not the best choice to win at Omaha eight or better.
Deciding which markets to trade and how you are going to trade them, or which games you are going to play and in what style, are the biggest decisions one must make in developing a playable edge.The skill set to trade indexes interday is completely different from that to trade liquidation arbitrage. The education needed to trade currencies is not the same as needed to trade equities. Traders who use technical analysis need to concentrate their attentions on studies a world apart from the fundamental investor. Quantitative analysts need to stay up the latest mathematical approaches and be ever aware of disappearing anomalies. In poker, winning at limit games does not automatically make you a no limit champion. Stud and Omaha with their community cards are a different animal than stud and low ball. To have an edge, one must specialize. One must study. One must practice and be ever alert for the developing overlay.
There will be times when markets give you and edge. Or a particular poker game is so inviting you must play. Last June, Ed described in detail the concept of finding and playing the edge, or overlay as he prefers to call it:
Normally don't like to announce victories, at the risk of coming across as a bragger, but I just beat the biggest game at the biggest poker room in the world this weekend, at my best poker game, Texas Hold'em, limit, so I thought I'd share part of the lesson that I think got me there, as it applies to trading.
Overlay, play, no overlay, well....
To win it can help to have lost, and then to despise the feeling. I played in the big game before and lost. Why talk of poker overlay, and how does it apply to trading????
Well, when I used to trade stock options, there where times when the action was well almost gluttonously scrumptious, and then often these times would be followed by a painful drought. Some traders stood with strong resolve, adjusting the interest rates in their models, fine-tuning their assumptions on volatility in their model, and then on a dragging slow day might even whip out their sheets and double-check trades and position inputs.
Other traders chose to laugh and giggle, or play distracting games and pranks, some even said that they'd buy some of this option or that, or maybe even put on a “delta’ or a sports bet with a buddy to entertain themselves, heck some went and had a puff of cannabis or a drink.
I bet you can guess which traders stayed in business and which traders lost. Why? They chose to just play, didn't want or have the patience to wait for an overlay.
So, I recall the pro who asked me a couple weeks ago if I had a twin high-stakes brother, when he saw me at the smaller stakes table, and I just laughed and said how ya doin’??
That weekend I made the same amount that I did this weekend, why, because the overlay was huge in the smaller game that weekend, and I was close to break-even in the big game, maybe a slight favorite, but just as likely a slight dog, so I chose not to play. Edge times volume equals profit. It feels good to be the winner at the biggest stakes table, it even cheered me up (had a rough personal week) when strangers came up to me and said what a big game you guys are playing, wow! And, seeing people looking at the stack of chips that I had felt as I imagine a little Prozac might too, but next week if the top players in the world decide to join the big game you won't see me there, if the overlay is in the 5/10 table that's where I'll be, laugh if you want, but I am happy playing my way, if others wish to take a "stab at the moon," or “play ‘just for fun,’” that's their prerogative, and it is fun when a beautiful lady looks at you in amazement when you’re playing in the big game with the most chips at the table in front of you, but I am fine playing the way I like to play, heck, the shirt I am wearing that I bought from making a few small profits
feels good overlaying me and well after last weekend the shirt isn't the only thing that will subside the laughter, I think next time I might get a few more respectful nods even if I do chose to play in a smaller game.
Back to trading. There were times when there were only a few small trades that I knew had edge, and so I played, but then people laughed when sometimes I would pass on the biggest trade of the day. They'd even look at me as if to say, how much did you make last month, and since I know you did why the heck are you “pussin’ out” on this trade?? Well, I left with the chips that year, and when no one was looking, I thanked god for the strength to fight victoriously as I looked at the Statue of Liberty by the then-still-standing-triumphantly World Trade Center, thinking back on the moment it felt how I imagine scoring a big goal in a big soccer match might feel, and makes me want to scream O' LAY!!!!!
Developing an edge takes time and effort. You are not going to be able to watch a couple of episodes of World Poker Tour and use your knowledge base to turn pro. Nor can you check out mass market books by self proclaimed trading experts from the local library and trade your way to millions over the next couple of weeks.Nor is a quick perusal of Buffetology going to make you a corn pone overfed liberal billionaire before your 40th birthday. Both of us spend hours per week after working studying our games. Tim reads dozens of corporate documents and runs countless simulations and tests of market conditions and reactions every day of every week. He also plays a few hours of poker a week and reads a book or two a month on the subject. Ed’s primary game is poker. He plays 25 to 30 hours a week and spends twice that much time studying and reviewing the game. He also works in time to study and review the equity and options market.The top traders we know, many of them successful beyond most peoples wildest dreams still take the time to read any new academic reports that are published, they update, review and rigorously test and retest their assumptions and beliefs. Developing an edge that allows one to play consistently well, to win more than you lose, requires commitment and effort. Those not willing to put in the time, to do the homework and testing should probably stick to mutual funds and neighborhood wild card games for penny stakes.
old stuff worth saving
An interesting occurrence this weekend while sitting in a Louisville
Kentucky airport. After my mad dash through the incredibly scenic Kentucky
horse country, pushing the purple pt cruiser to the max speed so as to make
my flight..I was of course 2 hours early and had substantial time to kill
idling away in the airport. I grabbed a large coffee and sat down with my
mindless mental popcorn of a novel and settled in for the wait. Just in
front of me was an elderly couple…with apologies to friend Yale, they were
both above the 80 mark. As their conversation drifted back to me, I
carefully marked my place in the book and set back to observe. It was like
watching On Golden Pond with a Kentucky draw. Who had the tickets?.did you
remember to call Bill-uh( Im reasonably certain this is Kentuckian for
Billy) to pick us up at the airport? I f you could stay up past 8:00 we
could have visited with johnsoons( again I believe this to be Johnson)
awhile longer. It went on aim, fire, nag back and forth. It was only when
one looked closely that you realized that not only were they smiling the
whole time..they were holding hands. After a bit, she announced that some
coffee shure would take the edge of all this sittin. He snorted and informed
her that she best have a cup in her pockey book( again, loosely translated
as pocket book) cause he wasn’t dragging his old bones all the way down the
tuhminal(terminal) just to make her happy. All this said of course as he was
rising with the attendant snap crackle and pop of old bones unfolding…..I
leaned forward and asked their pardon for overhearing but as I was little
under caffeinated and empty cupped myself, I would be more than happy to
bring her back a cup. …The old gentleman smiled with dancing eyes said..well
thank you young felluh(fellow) but Im believe it ll taste better if I
git(get) if fuh(for) her myself. The look she gave him then of
absolute..adoration is the wrong word as that implies a certain level of
inequality…but fondness, dedication contained all the love and memories of
all the years together..now I could be wrong..hell he may have picked her up
in the airport bar but you got the sense that they had been together across
the decades, raising bill-uh and the other kids and came out the other side
still in love…and still friends. I saw this..I call it a phenomenon... once
before while sitting on the beach in Ocean City Maryland one summer mid
morning years ago when an elderly couple, he complete in Bermuda shorts,
black socks and open sandals, her in a purple sundress of the early American
housecoat variety and red tennis shoes, strolling down the beach..or more
accurately shuffling as they were breaking no speed records for any age
class…this was one of the spectacular summer days you occasionally get at
the eastern seaboard beaches , bright sunshine skipping across the breaking
surf like diamonds cast by the hands of a laughing god, dolphins frolicking
just past the surf line like teenage boys in the midst of a hormonal surge
trying to impress similarly surging bikini clad maidens on the shore. They
saw none of this, only each other.
Which of course brings me to the point of the post….Vic has on numerous
occasions referred to the relationships between sex, human relationships and
speculation. Dr Brett has commented on past occasions ion the impact of
domestic bliss and personal satisfaction.or the lack thereof..on performance
in other endeavors such as trading. I think that In this area, one that is a
critical component of personal happiness, we are operating on flawed
models.Look for a moment at the great examples of romance in
fiction…Cinderella, the ordinary girl transformed and running off with the
prince. Very nice idea..provided of course you have handy a fairy god mother
who can do realty creative things with pumpkins and mice( and I am prety
sure the ASPCA would have something to say about this)..and weaving a
gorgeous gown out of straw would seem to be another talent required for this
scenario to play out. I have not seen any fairy godmothers of late and I m
reasonably certain that if any exist they are in San Francisco marching in
support of same magic marriage.And Please…what were romeo and Juilet except
a couple of puppy love struck teenagers intent on defying their
parents?Prince charming perhaps, dashing in on his white steed to save the
damsel in distress? In this day of womens lib and litigation, our prince
stands a good chance of being hated and resented by the damsel, and even if
she is properly appreciative the lawsuits, in this day when malefactors may
freely sue those injure them and prevent the completion of their dastardly
deeds, would force our happy couple to hock the armor and sell the horse for
legal fees..to say nothing of the fines for befouling the streets with
animal leavings from aforementioned steed.
Being part of what is demographically called the middle aged divorce crowd,
I often see these failed models working out in the great American laboratory
known as the cocktail lounge, bar or pub. The young lady who professes to
value a sense of humor, kindness affection and romance will quite often
leave the bar with the lounge lizard who looks like Richard Gere, or the
overly muscled steroid biker freak with the long hair and willl then spend
long hours lamenting these these failed relationships over white wine and
cosmopolitans. Men are the worst here. In our desire for companionship, sex
and romance we are a sucker for the surgically enhanced temptress,long hair,
long legs and parts that do things the creator never meant parts to do…..We
forget so often that those who are appealing to the base desires, who dress
to look the part of the dream are most often looking to do exactly that…to
tempt us to do something we should not for reasons we usually would not and
its much more about their desires than ours…the muscle happy freak and larry
the lounge lizard are looking to get laid…the tight jeaned barroom queen of
our dreams, in my experience is looking for this months visa card payment
and a move up apartment. Those who initially profess interest in something
more meaningful fall into their traps and find all the attendant miseries.
Everytime I have allowed a gin soaked brain to fall for a cosmetic package
that took my breath away…my wallet usually followed my breath. While all the
while their sits a decent respectable guy out with his buddies who would
like nothing more than to fall in love with the right girl and end up in a
Louisville airport in 30 or 40 years, arthritically shuffling for his
beloveds coffee, and an attractive women sits..without the surgical
improvement, dressed in clothes that actually fit but with more flashing
behind her eyes than even she realizes who only desires the right man and
dreams of wearing purple sundress and red tennis shoes on the beaches of her
future…..
How often do we see these failed models play out in markets and trading?
Looking for a reliable, testable approach to trading and investing, we fall
instead for the sexy temptations of the market mistress with her curvaceous
breakout system, enticing us with her tightly fitting equity curves….the
soft seductive whisper of a hot tip..episodes of passionate day trading
leaving one spent..and broke? Searching for solutions and patterns that are
reliable, how often do we leave instead with larry the mkt lizard and his
sophisticated looking systems and bright repartee of research reports only
to find ourselves waking up alone yet again, another notch on the gun belt
of the go-go boys, in need of a cleansing shower and a cash infusion? We
carefully lay out our criteria, structure out systems, define what we are
looking for and in the great barroom of the market place, the mistress and
her companions induce the hormonal surge of flashy profits, instant
success,seductive hot tips, bulging muscular stocks sure to go to 100 and
split,slick sophisticated trading systems containing secrets only the pros
know?
I m reasonably sure that is the sign of unbalanced mind to be able to take
one moment of time in an airport, a moment that seemingly defines romance,
perhaps more along the tracey/ hepburn model of contentious companionship,
bright exchanges of ideas and thoughts, passion fueled by intellect not a
loin induced surge of chemicals driving our booze fueled brains to chase an
illusion, than the traditional swooning, heaving bosom variety that we have
been sold for decades..and turn it into a philosophical thought about we so
often fail in the markets..but the similarities are there. Instead of the
steady profits and high probability trades of mean reversion and
contranianism, we chase the big bang of trend following and breakouts..we
ignore the obvious in front of us because it may involve hours testing and
researching our conclusions( you know..work) in favor of gaudy packaged
approaches and wade cookish bestsellers on becoming millionaires in a few
hours of mad cap trading……the right answers are there with smiling eyes full
of promises of long term success if only we avoid the golden temptress, the
muscle bound playboy and the temptation of instant happiness for the long
term…..and perhaps someday we do shall all do the metaphorical shuffle
Kentucky airport. After my mad dash through the incredibly scenic Kentucky
horse country, pushing the purple pt cruiser to the max speed so as to make
my flight..I was of course 2 hours early and had substantial time to kill
idling away in the airport. I grabbed a large coffee and sat down with my
mindless mental popcorn of a novel and settled in for the wait. Just in
front of me was an elderly couple…with apologies to friend Yale, they were
both above the 80 mark. As their conversation drifted back to me, I
carefully marked my place in the book and set back to observe. It was like
watching On Golden Pond with a Kentucky draw. Who had the tickets?.did you
remember to call Bill-uh( Im reasonably certain this is Kentuckian for
Billy) to pick us up at the airport? I f you could stay up past 8:00 we
could have visited with johnsoons( again I believe this to be Johnson)
awhile longer. It went on aim, fire, nag back and forth. It was only when
one looked closely that you realized that not only were they smiling the
whole time..they were holding hands. After a bit, she announced that some
coffee shure would take the edge of all this sittin. He snorted and informed
her that she best have a cup in her pockey book( again, loosely translated
as pocket book) cause he wasn’t dragging his old bones all the way down the
tuhminal(terminal) just to make her happy. All this said of course as he was
rising with the attendant snap crackle and pop of old bones unfolding…..I
leaned forward and asked their pardon for overhearing but as I was little
under caffeinated and empty cupped myself, I would be more than happy to
bring her back a cup. …The old gentleman smiled with dancing eyes said..well
thank you young felluh(fellow) but Im believe it ll taste better if I
git(get) if fuh(for) her myself. The look she gave him then of
absolute..adoration is the wrong word as that implies a certain level of
inequality…but fondness, dedication contained all the love and memories of
all the years together..now I could be wrong..hell he may have picked her up
in the airport bar but you got the sense that they had been together across
the decades, raising bill-uh and the other kids and came out the other side
still in love…and still friends. I saw this..I call it a phenomenon... once
before while sitting on the beach in Ocean City Maryland one summer mid
morning years ago when an elderly couple, he complete in Bermuda shorts,
black socks and open sandals, her in a purple sundress of the early American
housecoat variety and red tennis shoes, strolling down the beach..or more
accurately shuffling as they were breaking no speed records for any age
class…this was one of the spectacular summer days you occasionally get at
the eastern seaboard beaches , bright sunshine skipping across the breaking
surf like diamonds cast by the hands of a laughing god, dolphins frolicking
just past the surf line like teenage boys in the midst of a hormonal surge
trying to impress similarly surging bikini clad maidens on the shore. They
saw none of this, only each other.
Which of course brings me to the point of the post….Vic has on numerous
occasions referred to the relationships between sex, human relationships and
speculation. Dr Brett has commented on past occasions ion the impact of
domestic bliss and personal satisfaction.or the lack thereof..on performance
in other endeavors such as trading. I think that In this area, one that is a
critical component of personal happiness, we are operating on flawed
models.Look for a moment at the great examples of romance in
fiction…Cinderella, the ordinary girl transformed and running off with the
prince. Very nice idea..provided of course you have handy a fairy god mother
who can do realty creative things with pumpkins and mice( and I am prety
sure the ASPCA would have something to say about this)..and weaving a
gorgeous gown out of straw would seem to be another talent required for this
scenario to play out. I have not seen any fairy godmothers of late and I m
reasonably certain that if any exist they are in San Francisco marching in
support of same magic marriage.And Please…what were romeo and Juilet except
a couple of puppy love struck teenagers intent on defying their
parents?Prince charming perhaps, dashing in on his white steed to save the
damsel in distress? In this day of womens lib and litigation, our prince
stands a good chance of being hated and resented by the damsel, and even if
she is properly appreciative the lawsuits, in this day when malefactors may
freely sue those injure them and prevent the completion of their dastardly
deeds, would force our happy couple to hock the armor and sell the horse for
legal fees..to say nothing of the fines for befouling the streets with
animal leavings from aforementioned steed.
Being part of what is demographically called the middle aged divorce crowd,
I often see these failed models working out in the great American laboratory
known as the cocktail lounge, bar or pub. The young lady who professes to
value a sense of humor, kindness affection and romance will quite often
leave the bar with the lounge lizard who looks like Richard Gere, or the
overly muscled steroid biker freak with the long hair and willl then spend
long hours lamenting these these failed relationships over white wine and
cosmopolitans. Men are the worst here. In our desire for companionship, sex
and romance we are a sucker for the surgically enhanced temptress,long hair,
long legs and parts that do things the creator never meant parts to do…..We
forget so often that those who are appealing to the base desires, who dress
to look the part of the dream are most often looking to do exactly that…to
tempt us to do something we should not for reasons we usually would not and
its much more about their desires than ours…the muscle happy freak and larry
the lounge lizard are looking to get laid…the tight jeaned barroom queen of
our dreams, in my experience is looking for this months visa card payment
and a move up apartment. Those who initially profess interest in something
more meaningful fall into their traps and find all the attendant miseries.
Everytime I have allowed a gin soaked brain to fall for a cosmetic package
that took my breath away…my wallet usually followed my breath. While all the
while their sits a decent respectable guy out with his buddies who would
like nothing more than to fall in love with the right girl and end up in a
Louisville airport in 30 or 40 years, arthritically shuffling for his
beloveds coffee, and an attractive women sits..without the surgical
improvement, dressed in clothes that actually fit but with more flashing
behind her eyes than even she realizes who only desires the right man and
dreams of wearing purple sundress and red tennis shoes on the beaches of her
future…..
How often do we see these failed models play out in markets and trading?
Looking for a reliable, testable approach to trading and investing, we fall
instead for the sexy temptations of the market mistress with her curvaceous
breakout system, enticing us with her tightly fitting equity curves….the
soft seductive whisper of a hot tip..episodes of passionate day trading
leaving one spent..and broke? Searching for solutions and patterns that are
reliable, how often do we leave instead with larry the mkt lizard and his
sophisticated looking systems and bright repartee of research reports only
to find ourselves waking up alone yet again, another notch on the gun belt
of the go-go boys, in need of a cleansing shower and a cash infusion? We
carefully lay out our criteria, structure out systems, define what we are
looking for and in the great barroom of the market place, the mistress and
her companions induce the hormonal surge of flashy profits, instant
success,seductive hot tips, bulging muscular stocks sure to go to 100 and
split,slick sophisticated trading systems containing secrets only the pros
know?
I m reasonably sure that is the sign of unbalanced mind to be able to take
one moment of time in an airport, a moment that seemingly defines romance,
perhaps more along the tracey/ hepburn model of contentious companionship,
bright exchanges of ideas and thoughts, passion fueled by intellect not a
loin induced surge of chemicals driving our booze fueled brains to chase an
illusion, than the traditional swooning, heaving bosom variety that we have
been sold for decades..and turn it into a philosophical thought about we so
often fail in the markets..but the similarities are there. Instead of the
steady profits and high probability trades of mean reversion and
contranianism, we chase the big bang of trend following and breakouts..we
ignore the obvious in front of us because it may involve hours testing and
researching our conclusions( you know..work) in favor of gaudy packaged
approaches and wade cookish bestsellers on becoming millionaires in a few
hours of mad cap trading……the right answers are there with smiling eyes full
of promises of long term success if only we avoid the golden temptress, the
muscle bound playboy and the temptation of instant happiness for the long
term…..and perhaps someday we do shall all do the metaphorical shuffle
Thursday, September 14, 2006
its over
As I sit here at the close of a business day with long coal stocks and short puts on same running out of my ears and splashing red all over the p&l(this of course gives me great confidence in the trade. When you buy the beat up stuff I do it always starts this way), I gaze out the window through the dreary rainy afternoon and contemplate the fast approaching end of the summer. Sunday ends the season and we move into fall. Now, I know the astronomy buffs, physicists and scientists here will attempt to patiently explain to me that summer ends with the equinox on the 21st. To which I reply firmly and with great vigor, balderdash. Any true n’er do well adventurous sort here in the mid Atlantic knows that summer ends the thirdSunday of September at around 5:00 when kirk from 98rock hip hops on to the stage and the bikini contest finals kick off at redeye’s dock bar. It will be packed as always with the bikers, the locals, the tourists and of course we dedicated locals, the few, the proud, the intoxicated. We ll raft up the go fasts off the gas dock unless you re one of the lucky ones with a slip at the marina, we’ll have one last summer time Sunday afternoon to laugh, joke, tell stories of go fast boat trips to reckless rics,nicks in Baltimore, Jellyfish Joel’s, the crab claw, Pussers in Annapolis. The smoke from the beef pit will swirl through the crowd and all afternoon the sounds of the band and the crowd will be punctuated by the roar of Harleys on the ground and cigarettes, Sonics and power plays on the water. As the bevy of barely dressed beauties dances and gyrates for the crowd and the winner is announced, summer will have officially come to a close. The sun will be setting over the narrows in a bright orange defiant manner, casting the pink orange hues across the fast moving water of the narrows and fall will be upon us.
It’s been one hell of a summer I must say. In addition to the local crowd here, a great assortment of folks, all successful at what they do and all firm believers in the work hard play hard approach to life, I have spent a lot of time with other folks from the spec list this summer. Starting all the way back in April with the Lexington trip, through the Chicago air show I ve spent a lot of time sitting around tables with luminaries such as Crossman, Jason Thompson, Ed Gross, Ryan Carlson, Tom Marks, Pam, Dr Brett, Tom Ryan, Tim Hewson, the voodoo prof and too many other to recall at the moment. Ed was able to get here to Maryland for a weekend of boating and over consumption including a trip to the legendary Tilghman island party on Labor Day weekend. Of course there was the spec party, one of the true highlights of the year for me, a chance to make new friends and catch up with the old ones. There was the special treat in chi-town of catching up with the great Cheesehead himself David Hillman to tell trading and drinking stories. We used to tell girl chasing stories as well but as the smile on his face is from wedded bliss these days, he is no long allowed to engage in such activates have .Thes conversations greatly expanded my base of trading and market knowledge and improved my life with new skills and new friends to a degree that I would not have thought possible back in the early days of newly budding trees and warming spring breezes that originally heralded winters end. One can learn more about markets in one good argument with Fred than years of reading books, and throw Jason, Ryan and Omid in the mix and information flows like wine at a wedding in Cana.
Sad to say but its over. All too soon, the rumble of boats will fade into the gray Chesapeake sky, flashy paint jobs covered in plain white shrink wrap, the docks will rock no more, oysters will take the place of crabs, the color of the day is no longer from the blazing summer sun sinking into the west filling the sky with streaks of orange, purple and pink but is now the many colored foliage that will soon line the byways and paths along the bay. A romantic evening will no longer being dining and dancing while the soft evening bay breezes and softer jazz fill the Chesapeake evening, but a roaring fire and classical music somewhere safe from the encroaching chill and harsh winds. It’s been a good one. Lots of boating, some baseball, a lot of complaining about just how bad the orioles have become, crab feasts, horse racing, a beach front wedding in of all places Naples Florida in July, dancing in a tux with my best friends new bride and full bridal party in attendance atn an out of the way dive bar at 2am, Ocean city days and Seacrets nights(www.seacrets.com), everything that makes up a mid Atlantic summer. But as markets change(anyone else recall that a few short weeks energy ,especially oil, was the absolute darling and would never go below 70?) so do seasons.
So be it. Break out the sweaters and windbreakers. Put away the beer and Gin and tonics. Step away from the chardonnay. Break out the brandy and the scotch and lay in a case of cabernet. Its fall. The regular season is over and all of New York hits the cathedrals, the churches and synagogues and prays for a subway series. So does every network executive ever born and one looks at buying a little NYT in the low 20s as such an event will surely spark readership and ad space sales. Its possible this year as the mets and yanks are two of the best teams in baseball this year. The Yankees most serious threat, the tigers of Detroit seem to have lost their fierce fangs as September approached and are in danger of falling out of their lofty perch as the winningest team in the American league. The mets my have a little tougher time of it but if Glavine and Pedro can reach deep down and pull out some post season pitching splendor, the Bronx shall duel the boys from queens for fall glory once again. No longer shall Saturdays be the roar of go fats boats, but a different roar will fill the land. In South bend, Knoxville, Austin and all over the country the roar will the student body and alumni welcoming college football back to the land. Here in Annapolis and in West Point the roar is the flyover of military jets as the brigade of midshipman and corps of cadets enter the stadium marching in military precision, taking in their schools game along the way to leadership of the military and the nation itself. It has started already of course and there have already been some great games and stories. Notre Dame, beloved of an Irish Catholic boy like me self, is back with Charlie Weiss and Brady Quinn leading the way back to glory. Ohio State proved that they are the beastly Buckeyes this year going into Austin and breaking the heart of an entire state in a few short hours. The Volunteers of Rocky Top chastised both Cal and the coaches for not ranking them higher, Blasting the 9th ranked bears back into obscurity. There’s more to come. Notre dame Michigan this Saturday, USC takes on a resurgent Nebraska. The Horned frogs and the Red raiders. The band plays. The tailgate rocks. Football of a college variety is back just in time to fill the Saturday void.
On Sundays the half dressed women won’t be on the red eye stage anymore but on the field at fed ex field and ravens stadium as the games begin again. Emperor tagliabue has stepped down but a new monarch emerges and the circus maximus that is the NFL returns. My Ravens were king of the gladiators the first weekend, slaughtering the bucs of tampa, Lord Manning of Indy vanquished the Earl Manning of ny that first night but the earl served noticed that there will be few Giant slayers this year. The high speed high impact world of the National Football league returns with high drama and much passionate and carefully directed violence.
There are I think many lessons to contemplating the changing seasons and environments. First is the obvious that change is constant and one must adapt to the changes as they occur and not as one wishes they would occur. I may wish it was summer forever and I could boat year round but should I try I will learn what wind chill factor really is and freeze off some of my very favorite parts, Instead I shall turn to other activities and wait until the summer sun returns, In the market we may wish that gold, and energy are going to the moon forever and ever amen or that big tech is ready for am imminent rally, but like the fast approaching chill of autumn, the market doesn’t give a good damn what we want.
Winning, in the market and in life is an attitude. There is a reason the Yankees are a winner. My team plays in the AL east but I am not going to fall into the “it’s the money” trap. It what they do with the money that makes the Yankees great. They do what they need to win, keep what works even at a high cost and get what they need to complete the puzzle. Other teams have the money but spend it poorly and think one high price player is all they need and spend it foolishly. Study the game, know the game, and invest the money wisely to get the things you need to win.
Setbacks can be overcome. It has taken the mets several years of painful rebuilding to get back to this level. Rather than go for a one trick pony, they got what they needed over the long term to re-achieve a high level and stay there.
No matter how much you study something there will be surprises. College football pundits spend hours poring over data to set the rankings. They wrote the Vols off and rated cal very highly. Tennessee killed them. No one thought Ohio State could beat Texas in Austin. They didn’t beat them. They manhandled them. No matter how much you study it or how specialized your knowledge base is, you will be wrong at times.
In the end it is the friends that make the experience. There was a flurry of friend posts on the list the other day but I didn’t have time to jump in and add anything meaningful. Rather out on the water or gathered around the TV watching the ravens slay a hapless foe, it is an altogether different experience when alone as opposed to the company of good friends. A good friend makes the ups and the downs smoother, the wins more enjoyable and the losses more bearable. A caveat here relevant to one of the post the other day. Never confuse stocks with a friend. A stock will never love you back and doesn’t care if you own it or not. Never lose a good friend. Make new ones as often as possible. Never hesitate to sell a bad stock. Never chase a growth stock too high. They don’t care if you own them and if they miss earnings and plummet your losses mean nothing to a stock.It is apiece of paper, an electronic blip. It will never love you back. Treasure your friends. Trade your stocks based on the conditions and circumstances that exist.
And in closing, as always, whether its red eyes dock bar, the football field or the comfortable confines of home, life is always better with half naked women in attendance.
It’s been one hell of a summer I must say. In addition to the local crowd here, a great assortment of folks, all successful at what they do and all firm believers in the work hard play hard approach to life, I have spent a lot of time with other folks from the spec list this summer. Starting all the way back in April with the Lexington trip, through the Chicago air show I ve spent a lot of time sitting around tables with luminaries such as Crossman, Jason Thompson, Ed Gross, Ryan Carlson, Tom Marks, Pam, Dr Brett, Tom Ryan, Tim Hewson, the voodoo prof and too many other to recall at the moment. Ed was able to get here to Maryland for a weekend of boating and over consumption including a trip to the legendary Tilghman island party on Labor Day weekend. Of course there was the spec party, one of the true highlights of the year for me, a chance to make new friends and catch up with the old ones. There was the special treat in chi-town of catching up with the great Cheesehead himself David Hillman to tell trading and drinking stories. We used to tell girl chasing stories as well but as the smile on his face is from wedded bliss these days, he is no long allowed to engage in such activates have .Thes conversations greatly expanded my base of trading and market knowledge and improved my life with new skills and new friends to a degree that I would not have thought possible back in the early days of newly budding trees and warming spring breezes that originally heralded winters end. One can learn more about markets in one good argument with Fred than years of reading books, and throw Jason, Ryan and Omid in the mix and information flows like wine at a wedding in Cana.
Sad to say but its over. All too soon, the rumble of boats will fade into the gray Chesapeake sky, flashy paint jobs covered in plain white shrink wrap, the docks will rock no more, oysters will take the place of crabs, the color of the day is no longer from the blazing summer sun sinking into the west filling the sky with streaks of orange, purple and pink but is now the many colored foliage that will soon line the byways and paths along the bay. A romantic evening will no longer being dining and dancing while the soft evening bay breezes and softer jazz fill the Chesapeake evening, but a roaring fire and classical music somewhere safe from the encroaching chill and harsh winds. It’s been a good one. Lots of boating, some baseball, a lot of complaining about just how bad the orioles have become, crab feasts, horse racing, a beach front wedding in of all places Naples Florida in July, dancing in a tux with my best friends new bride and full bridal party in attendance atn an out of the way dive bar at 2am, Ocean city days and Seacrets nights(www.seacrets.com), everything that makes up a mid Atlantic summer. But as markets change(anyone else recall that a few short weeks energy ,especially oil, was the absolute darling and would never go below 70?) so do seasons.
So be it. Break out the sweaters and windbreakers. Put away the beer and Gin and tonics. Step away from the chardonnay. Break out the brandy and the scotch and lay in a case of cabernet. Its fall. The regular season is over and all of New York hits the cathedrals, the churches and synagogues and prays for a subway series. So does every network executive ever born and one looks at buying a little NYT in the low 20s as such an event will surely spark readership and ad space sales. Its possible this year as the mets and yanks are two of the best teams in baseball this year. The Yankees most serious threat, the tigers of Detroit seem to have lost their fierce fangs as September approached and are in danger of falling out of their lofty perch as the winningest team in the American league. The mets my have a little tougher time of it but if Glavine and Pedro can reach deep down and pull out some post season pitching splendor, the Bronx shall duel the boys from queens for fall glory once again. No longer shall Saturdays be the roar of go fats boats, but a different roar will fill the land. In South bend, Knoxville, Austin and all over the country the roar will the student body and alumni welcoming college football back to the land. Here in Annapolis and in West Point the roar is the flyover of military jets as the brigade of midshipman and corps of cadets enter the stadium marching in military precision, taking in their schools game along the way to leadership of the military and the nation itself. It has started already of course and there have already been some great games and stories. Notre Dame, beloved of an Irish Catholic boy like me self, is back with Charlie Weiss and Brady Quinn leading the way back to glory. Ohio State proved that they are the beastly Buckeyes this year going into Austin and breaking the heart of an entire state in a few short hours. The Volunteers of Rocky Top chastised both Cal and the coaches for not ranking them higher, Blasting the 9th ranked bears back into obscurity. There’s more to come. Notre dame Michigan this Saturday, USC takes on a resurgent Nebraska. The Horned frogs and the Red raiders. The band plays. The tailgate rocks. Football of a college variety is back just in time to fill the Saturday void.
On Sundays the half dressed women won’t be on the red eye stage anymore but on the field at fed ex field and ravens stadium as the games begin again. Emperor tagliabue has stepped down but a new monarch emerges and the circus maximus that is the NFL returns. My Ravens were king of the gladiators the first weekend, slaughtering the bucs of tampa, Lord Manning of Indy vanquished the Earl Manning of ny that first night but the earl served noticed that there will be few Giant slayers this year. The high speed high impact world of the National Football league returns with high drama and much passionate and carefully directed violence.
There are I think many lessons to contemplating the changing seasons and environments. First is the obvious that change is constant and one must adapt to the changes as they occur and not as one wishes they would occur. I may wish it was summer forever and I could boat year round but should I try I will learn what wind chill factor really is and freeze off some of my very favorite parts, Instead I shall turn to other activities and wait until the summer sun returns, In the market we may wish that gold, and energy are going to the moon forever and ever amen or that big tech is ready for am imminent rally, but like the fast approaching chill of autumn, the market doesn’t give a good damn what we want.
Winning, in the market and in life is an attitude. There is a reason the Yankees are a winner. My team plays in the AL east but I am not going to fall into the “it’s the money” trap. It what they do with the money that makes the Yankees great. They do what they need to win, keep what works even at a high cost and get what they need to complete the puzzle. Other teams have the money but spend it poorly and think one high price player is all they need and spend it foolishly. Study the game, know the game, and invest the money wisely to get the things you need to win.
Setbacks can be overcome. It has taken the mets several years of painful rebuilding to get back to this level. Rather than go for a one trick pony, they got what they needed over the long term to re-achieve a high level and stay there.
No matter how much you study something there will be surprises. College football pundits spend hours poring over data to set the rankings. They wrote the Vols off and rated cal very highly. Tennessee killed them. No one thought Ohio State could beat Texas in Austin. They didn’t beat them. They manhandled them. No matter how much you study it or how specialized your knowledge base is, you will be wrong at times.
In the end it is the friends that make the experience. There was a flurry of friend posts on the list the other day but I didn’t have time to jump in and add anything meaningful. Rather out on the water or gathered around the TV watching the ravens slay a hapless foe, it is an altogether different experience when alone as opposed to the company of good friends. A good friend makes the ups and the downs smoother, the wins more enjoyable and the losses more bearable. A caveat here relevant to one of the post the other day. Never confuse stocks with a friend. A stock will never love you back and doesn’t care if you own it or not. Never lose a good friend. Make new ones as often as possible. Never hesitate to sell a bad stock. Never chase a growth stock too high. They don’t care if you own them and if they miss earnings and plummet your losses mean nothing to a stock.It is apiece of paper, an electronic blip. It will never love you back. Treasure your friends. Trade your stocks based on the conditions and circumstances that exist.
And in closing, as always, whether its red eyes dock bar, the football field or the comfortable confines of home, life is always better with half naked women in attendance.
Tuesday, August 22, 2006
Our journey begins, as I think all journeys should in the comfortable confines of Redeyes dock bar on a Wednesday night. I had rushed home from the office, got my bag packed and loaded to catch my early thirty am flight to the annual rendezvous of specs and friends for the Great Chicago air show and barbecue. The intent was of course to have a quick bite to eat, a drink or two and get to bed early. I am not the best of sleepers and am the worst of waking uppers. Each and every morning the alarm clock and I do fierce battle with the snooze button getting beat like Joe Frazier in the late rounds of the manila fight. As the flight schedule and new security regulations made it necessary to arise at the ungodly and seldom seen hour of 4, this seemed to be the prudent plan. Despite its reputation derived from summer weekends as a full bore, all out bacchanalian carnival, on weekdays red eyes is just a local joint with great water views and a pretty good bar menu. Good intentions of course are the paving material of choice for another well-known hot spot. My arrival was greeted by a group of friends including my coworker, running buddy and all around boon companion and an assorted group of other local acquaintances. As I settled in and got some food, the coworker urges me to try his newest drink discovery from his previous weeks adventures at the beach. So I did. A delightful, carefully concocted libation of the first class with the summertimeish name of Orange Crush. Stoli-o,triple sec, orange juice and a splash of sprite. This is seriously good summertime imbibing material. It was one of those perfect mid Atlantic summer evenings with a gentle salt laced breeze flowing along with the swift current of the narrows and the sunset painted the sky with a multi hued display that made one think of a gleeful three year old with a tube of finger-paints discovering grandma s freshly painted kitchen. The talk and the distilled spirits flowed on ward into the night. Football..Will Steve mcnair return the ravens to the holy land (the orioles are 19 games out and playing a lot like my unfortunate fantasy baseball team so we here in Maryland are forward looking when it comes to sports) Boats..fixing your drives is costing HOW much?..girls..who is dating who, divorcing who, hoping to date or divorce who and so on and so forth. A rambling conversation of pleasant topics on a splendid evening. As the night progresses, a single thought slams into my brain with alarming force. HOLY SHIT, it is ten thirty and I have to be up in a little over 5 hours to catch my plane.goodbye, go home and good night.
I of course made the plane with time to spare. That is to say as they closed the doors. I was saved only by being able to find a spot in the garage instead of the shuttle lot. Good thing I had the coupon for 5 dollars a day off the regular. Fifteen bucks a day and the ability to run like hell instead of waiting on the molasses shuttle seemed like a pretty good price all things considered. As we leveled out at 30 thousand and whatever feet, I cut a much-needed cup of coffee from the hostess and settled back in with a bizarre novel suggested by a friend who until now I thought was fairly normal. The Nymphos of Rocky Flats. A nymphomania-inducing virus (gotta get some of that). Nuclear Power. A couple of vampires and a plot even more twisted that that may sound. It was one of the funnier books I ve read in a long time. The flight was uneventful except perhaps for fellow passengers who wondered why the sleepy looking guy in the aisle ten window seat kept cracking up. I finished the book as we landed so I left in the seat pocket for the next person along. Given it garish title and lurid cover I am sorry I didn’t get to see the look on the face of the finder.
Grabbed the train into town and then a cab up to Fred “Dr. Doom” Crossmans happy be back in Chicago again. It has become my favorite city in the US by a wide and comfortable margin. I am sure there are nasty parts of the city but as I spend almost all of my time there in the gold coast or downtown I am impressed by its cleanliness and friendly tone. It has art, culture great restaurants, bars and all the amenities of a great city. The skyline and the lake are spectacular views and it has a deeply imbedded traders culture. And oh yeah. Lots of beautiful women. Fred was busy trading his positions the day before expiration and mumbling about default rates, inflation and pumped puts as I arrived. I checked my positions, we chatted about the market and stocks we liked or disliked and then headed down to the pancake house (www.originalpancakehouse.com/) off rush for a bite to eat. We were joined by Ed ‘the poker pro” gross who had recently relocated to the windy city from LA to take up full time trading again. We had a nice breakfast and talk about options trading, markets in general and what the hell is wrong with women anyway. At the conclusion we made plans to meet later for drinks and went our separate ways for the afternoon. Fred is the perfect host for these weekends because he just goes on about his daily routine and doesn’t feel the need to play host. He took off for the gym and I went walking around the city. Went down to Navy Pier and took in the sights and sounds and watched the two lead planes of the Blue Angels flight team do their acclimation flight around the lake. I walked around the lakefront, up Michigan Avenue hit a few bookstores and just generally played tourist for a few hours. The back to the condo, checked in on the market close, phoned a few orders into my assistant and settled down to read for a bit. Naturally this led to a short nap to prepare for the evening. I made the round of calls and made sure Jason “I ll trade anything” Thompson, Ryan “ nope just Eurodollars for me” Carlson and the poker Star had the where and when of the evenings plans.
At six we set out for the evening, heading as always to Melvin B’s (www.meetandpotatoes.com/melvin_bs_homepage.) Fred’s favorite spot in all of Chicago I suspect. Melvins has a great patio for people watching and enjoying a few beers and snacks..best mini burgers in Chicago as well. It ended up being a great evening with a fantastic group of specs joining us at the table In addition to Fred, Jason Ryan, the poker star and myself we were joined By Omid malekan, James the Listmaster Goldcamp, one of his associates, Ryans wonderful new girlfriend Shauna, Tom the sugarman marx and his associate the weird Biotech guy. Fred’s sister Nancy and his brother in law who was in town to attend the Democratic national Committee meeting. As pretty much everyone was short stocks perhaps the booze flowed a little faster. One of the night’s highlights was the discussion between a slightly intoxicated and very animated Poker Star and the high level communis, I mean democrat on the electability and wisdom therein of Hillary Clinton. The beers flowed intermixed with discussion on markets, politics and with Ryan there naturally travel,. He regaled the table with stories of his adventure in places such as WerethehellamIastan and Theveryairisfatalapol.After Melvin’s Fred, the communist and his sister decided to call it a night as did Jason,Ryan and Omid. Tom ,WB , the poker star and myself repaired to Dublin’s for a nightcap. I immediately spotted two pretty girls and struck up a conversation. Ed came over and joined us and at some point tom And WB slipped off into the night with WB muttering about some bar he knew full of Russian mail order brides. We sat and chatted with the two girls for an hour or so. Amy I think it was and Michel, two sisters down from Detroit for a weekend of shopping and drinking. One married, one not. I was talking to the not while poker star worked on the married. If nothing else we gave them some good laughs at our expense and a few free drinks before I had to call it a night. I was up early the next day and didn’t want to stretch it out too bad my first night in town.
The next morning Jason and Ryan had arranged tours of the two big Chicago exchanges, The cbot and the CME. Out first sop was the CBOT to watch the opening of the grain markets. We were limited to the gallery but even that was a treat as it has been closed to the public for the most part since 9-11. The floor is not the floor anymore and this was obvious from the start. The pits are far from packed. Grains recently went electronic and the pit already lost 20 percent of order flow to the electronic traders, Jason predicts it will be 80% electronic within the year. The grain traders seem to average about sixty and appeared to be guys who had always traded and never took up golf. With the alternative being retiring and moving to Florida with the wife to play shuffleboard and watch jerry Springer, they opted to trek down to the pit and sell a trade a few contracts a day. Again the very knowledgeable Jason pointed out that most of the pit trading was spread related as you could get it done there with one trade and had no leg in/out risk. It was when we walked over to the financial gallery that the impact of electronic trading has had on the open outcry pits was most obvious. The state of the art high tech bond floor was EMPTY. A few clerks and exchange employees and maybe a total of 10 trading jackets looking for the odd pick off trade were visible. The thirty-year bond pit, once the wild and wooly foreground of trading was empty. Completely empty. We saw no trades and most of the monitors were on espn instead of cnbc. It looks like an empty warehouse of high tech equipment.
Off now to the Merc were we are able to go down on the floor. Here to we saw the impact of electronic trading. There was some action in the milk and the now infamous cheese pit and the eurodollar back months and options pits were busy, again mostly in the form of spread trades it appeared to me. The SP 500 pit had less than a hundred people left and looked nothing like the shots we saw on TV back in the 90s. The SP options pit was busy as it was expiration but even that was a controlled crowd, the Nazz and Nazz option pits were empty and the TV actually WAS turned to Jerry Springer. It gave an eye opening view at the future of trading. Back to jasons office for Pizza and conversation while Ryan checked on euro dollars,sugarman checked sugar, omid looked over the spooz and I ll trade anything Thompson looked over stocks, oil, grains bonds and the level of his Jan marshmallow/June Smores spread trade. After again checking my positions and calling the office Tom Marks and I walked up Wacker Drive towards the river, him back to his hotel and me back to chez crossman. It was the first chance I had ever had to spend any time with tom and I found him to be a great guy, very knowledgeable on commodities particularly sugar of course and a damn good guy to know, he has great stories of his old pit trading days and a real delight to talk with.
After my requisite nap, Friday night shaped up as a repeat of Thursday with the same cast heading out for the evening. Melvin b’s, Jillys (www.jillyschicago.com), the Frog bar (www.hugosfrogbar.com) Pj’s (www.pjclarkeschicago.com) and tavern on Rush (www.tavernonrush.com) . We hit tem all as the night progressed. By this time Tom had been joined by the lovely Magdalena and they bailed early in search of food. It was in the tavern that the pivotal point of the evening was reached. The poker star met a gorgeous young woman who was in her second year of residency at an area hospital and they hit it off. She rejoined her friends and PS told her we would be in PJ’s. 10 minutes after we walked in PJs she and her friends appeared. She invited us to join them at an upstairs table. Fred and I went up to say hi but had no intention of joining the younger crowd. After we said our helloes and left a happy poker star in their company, DR Doom pulled a Fred classic. Spotting two attractive blondes at the next table closer to our age, Fred, motioning me to follow, went over sat down next to them and said “ Hey I’m Fred, Are you going to eat that last mini burger?” The fair Jennifer and Pegeen sat with we two intrepid invaders and talked for the next several hours. Pegeen turned out to be a very nice Irish American lass(like the name didn’t make that obvious) who worked in advertising for a leading business publication . We talked about books, poetry, our shared love of yeats, how come we could no longer recite poems we used to know like our own names, a little business, the usual where do you live where are you from etc, etc. During the course f time, we joined by Omid and a slew of Jewish Iranian cousins, the list master, Mr. Marks and the weird Biotech guy came back and the two ladies quiet little dinner before they went to a party over on Michigan had become a full out roaring spec list after dark gathering. I think they liked us and enjoyed the show but they didn’t return our call the next day so perhaps I was mistaken. By this time the Poker Star. had dumped the doctor because she couldn’t name any tracks of his favorite rap album. A typical Chicago Friday.Again as the group broke up late that night, PS and I hit a final club for a nightcap and ended up.of course talking to girls at the bar and staying later than we meant to. At the conclusion of the evening, I ended up sitting high above State Street looking off towards the lake sipping the last of freds good single malt and talking business and women with Fred until the wee hours.
Saturdays the air show. It was somewhat limited because of cloud cover and the blue angels couldn’t do their high level activities. Still a good time and we were at last joined by mark” the voodoo prof” mcnabb and the ever lovely Elana.. The cloudy skies kept out the crowds so we had a good spot right by the giant corona bottle to watch the show,. As virtually all the spec listers know what a corona bottle is, it made a nice beacon for the group to gather. Jason’s beautiful bride Wendy joined us and it was a great way to send a Saturday watching the f18s of the angels, an f15, a kc135, a air of f16s and a wide array of bi planes and stunt craft sweep along the shores of lake Michigan In my mind the location alone, along with the divers group of aircraft make it one of the premier air shows in the country and worth a trip.
At this point we went back cleaned dup and gathered for the train ride north to join the Pam “the book lady” van Giessisen for night of ribs and talk. The ranks of the group swelled with th3e addition of Dr Brett and his delightful wife Margie, as well as for the first time in years, David” how in the hell did I end up in Wisconsin” Hillman and his bride Paula. Mark told great stories of life in Deltaville VA complete with the epic battle of the spotlight, the roving trick or treating boatyard dogs that come by on a regular schedule and the local cast of characters in the little bayside town. I got a chance to talk with Dr Brett about his new book and trading activities and spend some time with Hillman. Although we talk often on the phone there is no substitute for just hanging out over a cold beer talking. Subjects ran from interest rates to tock markets to fantasy football and baseball. (Paula of course blames me for his addiction to fantasy games but all I did was introduce him to the concept). Pam provided as always a great spread with ribs, fire-roasted corn on the cob and even ice cream flown in from Cincinnati. Her husband Johan somehow found a six-pack of Mickey Big Mouth malt liquor and joyfully announced to the ensemble that he finally had the appropriate beer for Melvin. Funny, very funny. Pam’s ex roommate and current neighbor was on hand as well. He is over the top outrageously gay and his stories and antics were a source of constant laughter. We ate, talked with Pam’s off beat country music playing in the background. The weather was a little chilly, perfect for backyard gathering in pams great little garden in the city All in all another wonderful night with a great group of specs and friends.
Sunday was just dr. Doom the voodoo prof , élana and I . A great breakfast at the peninsula, a short trip to the air show on a much better day for it and then..a nap of course. I met up with my old assistant from Annapolis who recently relocated to Chicago and spent some time with her and her new beau. She is making twice what we could have ever paid her, has a new boyfriend a great new apartment and has blossomed in the move to the Midwest. She’s a fantastic young woman and I’m very pleased with her happiness and success.
Then off to the final dinner. Our foursome was joined by the pretty eye doctor lady and the very attractive real estate woman. Again lots of market talk, stories and adventures past and present, some cocktails, lots of laughter and the all too soon the weekend was over. All that was left was to arise on Monday and fly back to the real world.
Some Chicago land Observations;
I could write a book on what I observed when riding the El. Unlike the NYC subway I’m not talking about the passengers. As the el winds through Chicago, in many places apartments and stores are literally just feet away. I took three trips on the el this weekend, to midway and back and out to pams. I saw signs in apartment windows for the white sox, the cubs and the bears, almost every brand of beer known to man (except Mickey’s Bigmouth. I haven’t seen that stuff since Jr high) and three signs with peoples myspace address on them.I saw couples arguing, couples who most decidedly were NOT arguing. I saw three little old ladies on a balcony, oblivious to the train roaring past, having what looked to be high tea. As the street passed by you got a sense of each neighborhood. There were brothers hanging on the corner, avaricious yuppies on the prowl, college kids on the party, cub’s fans on the sauce and blue-collar guys just on the way the hell home after a long hot day. If you want to experience Chicago, ride the el. I’m telling you I could write a book.
The idea of the curve steepening trade makes more and more sense to me. You might need some good-sized pockets and balls to hold it until it works but being long the five and short the 30 makes a lot of sense to me here.
Chicago is way overbuilt. There are half finished buildings and apartment for rent. Condo for sale signs all over the skyline of the city. Banks and lenders with a lot of new and conversion conversion loans on the books are going to have a hard time ahead. Would love to hear any observations from other cities on this.
Selling puts on value stocks that have fallen in value and therefore have a little volatility pump to them just seems smart to me after talking the option side with some option guys this weekend.
The value of the Spec list goes way beyond the content. It’s the friends that have come to mean much more that even the valuable lessons I have learned here. The 4 or five gatherings each year are the highlight of the calendar.
I of course made the plane with time to spare. That is to say as they closed the doors. I was saved only by being able to find a spot in the garage instead of the shuttle lot. Good thing I had the coupon for 5 dollars a day off the regular. Fifteen bucks a day and the ability to run like hell instead of waiting on the molasses shuttle seemed like a pretty good price all things considered. As we leveled out at 30 thousand and whatever feet, I cut a much-needed cup of coffee from the hostess and settled back in with a bizarre novel suggested by a friend who until now I thought was fairly normal. The Nymphos of Rocky Flats. A nymphomania-inducing virus (gotta get some of that). Nuclear Power. A couple of vampires and a plot even more twisted that that may sound. It was one of the funnier books I ve read in a long time. The flight was uneventful except perhaps for fellow passengers who wondered why the sleepy looking guy in the aisle ten window seat kept cracking up. I finished the book as we landed so I left in the seat pocket for the next person along. Given it garish title and lurid cover I am sorry I didn’t get to see the look on the face of the finder.
Grabbed the train into town and then a cab up to Fred “Dr. Doom” Crossmans happy be back in Chicago again. It has become my favorite city in the US by a wide and comfortable margin. I am sure there are nasty parts of the city but as I spend almost all of my time there in the gold coast or downtown I am impressed by its cleanliness and friendly tone. It has art, culture great restaurants, bars and all the amenities of a great city. The skyline and the lake are spectacular views and it has a deeply imbedded traders culture. And oh yeah. Lots of beautiful women. Fred was busy trading his positions the day before expiration and mumbling about default rates, inflation and pumped puts as I arrived. I checked my positions, we chatted about the market and stocks we liked or disliked and then headed down to the pancake house (www.originalpancakehouse.com/) off rush for a bite to eat. We were joined by Ed ‘the poker pro” gross who had recently relocated to the windy city from LA to take up full time trading again. We had a nice breakfast and talk about options trading, markets in general and what the hell is wrong with women anyway. At the conclusion we made plans to meet later for drinks and went our separate ways for the afternoon. Fred is the perfect host for these weekends because he just goes on about his daily routine and doesn’t feel the need to play host. He took off for the gym and I went walking around the city. Went down to Navy Pier and took in the sights and sounds and watched the two lead planes of the Blue Angels flight team do their acclimation flight around the lake. I walked around the lakefront, up Michigan Avenue hit a few bookstores and just generally played tourist for a few hours. The back to the condo, checked in on the market close, phoned a few orders into my assistant and settled down to read for a bit. Naturally this led to a short nap to prepare for the evening. I made the round of calls and made sure Jason “I ll trade anything” Thompson, Ryan “ nope just Eurodollars for me” Carlson and the poker Star had the where and when of the evenings plans.
At six we set out for the evening, heading as always to Melvin B’s (www.meetandpotatoes.com/melvin_bs_homepage.) Fred’s favorite spot in all of Chicago I suspect. Melvins has a great patio for people watching and enjoying a few beers and snacks..best mini burgers in Chicago as well. It ended up being a great evening with a fantastic group of specs joining us at the table In addition to Fred, Jason Ryan, the poker star and myself we were joined By Omid malekan, James the Listmaster Goldcamp, one of his associates, Ryans wonderful new girlfriend Shauna, Tom the sugarman marx and his associate the weird Biotech guy. Fred’s sister Nancy and his brother in law who was in town to attend the Democratic national Committee meeting. As pretty much everyone was short stocks perhaps the booze flowed a little faster. One of the night’s highlights was the discussion between a slightly intoxicated and very animated Poker Star and the high level communis, I mean democrat on the electability and wisdom therein of Hillary Clinton. The beers flowed intermixed with discussion on markets, politics and with Ryan there naturally travel,. He regaled the table with stories of his adventure in places such as WerethehellamIastan and Theveryairisfatalapol.After Melvin’s Fred, the communist and his sister decided to call it a night as did Jason,Ryan and Omid. Tom ,WB , the poker star and myself repaired to Dublin’s for a nightcap. I immediately spotted two pretty girls and struck up a conversation. Ed came over and joined us and at some point tom And WB slipped off into the night with WB muttering about some bar he knew full of Russian mail order brides. We sat and chatted with the two girls for an hour or so. Amy I think it was and Michel, two sisters down from Detroit for a weekend of shopping and drinking. One married, one not. I was talking to the not while poker star worked on the married. If nothing else we gave them some good laughs at our expense and a few free drinks before I had to call it a night. I was up early the next day and didn’t want to stretch it out too bad my first night in town.
The next morning Jason and Ryan had arranged tours of the two big Chicago exchanges, The cbot and the CME. Out first sop was the CBOT to watch the opening of the grain markets. We were limited to the gallery but even that was a treat as it has been closed to the public for the most part since 9-11. The floor is not the floor anymore and this was obvious from the start. The pits are far from packed. Grains recently went electronic and the pit already lost 20 percent of order flow to the electronic traders, Jason predicts it will be 80% electronic within the year. The grain traders seem to average about sixty and appeared to be guys who had always traded and never took up golf. With the alternative being retiring and moving to Florida with the wife to play shuffleboard and watch jerry Springer, they opted to trek down to the pit and sell a trade a few contracts a day. Again the very knowledgeable Jason pointed out that most of the pit trading was spread related as you could get it done there with one trade and had no leg in/out risk. It was when we walked over to the financial gallery that the impact of electronic trading has had on the open outcry pits was most obvious. The state of the art high tech bond floor was EMPTY. A few clerks and exchange employees and maybe a total of 10 trading jackets looking for the odd pick off trade were visible. The thirty-year bond pit, once the wild and wooly foreground of trading was empty. Completely empty. We saw no trades and most of the monitors were on espn instead of cnbc. It looks like an empty warehouse of high tech equipment.
Off now to the Merc were we are able to go down on the floor. Here to we saw the impact of electronic trading. There was some action in the milk and the now infamous cheese pit and the eurodollar back months and options pits were busy, again mostly in the form of spread trades it appeared to me. The SP 500 pit had less than a hundred people left and looked nothing like the shots we saw on TV back in the 90s. The SP options pit was busy as it was expiration but even that was a controlled crowd, the Nazz and Nazz option pits were empty and the TV actually WAS turned to Jerry Springer. It gave an eye opening view at the future of trading. Back to jasons office for Pizza and conversation while Ryan checked on euro dollars,sugarman checked sugar, omid looked over the spooz and I ll trade anything Thompson looked over stocks, oil, grains bonds and the level of his Jan marshmallow/June Smores spread trade. After again checking my positions and calling the office Tom Marks and I walked up Wacker Drive towards the river, him back to his hotel and me back to chez crossman. It was the first chance I had ever had to spend any time with tom and I found him to be a great guy, very knowledgeable on commodities particularly sugar of course and a damn good guy to know, he has great stories of his old pit trading days and a real delight to talk with.
After my requisite nap, Friday night shaped up as a repeat of Thursday with the same cast heading out for the evening. Melvin b’s, Jillys (www.jillyschicago.com), the Frog bar (www.hugosfrogbar.com) Pj’s (www.pjclarkeschicago.com) and tavern on Rush (www.tavernonrush.com) . We hit tem all as the night progressed. By this time Tom had been joined by the lovely Magdalena and they bailed early in search of food. It was in the tavern that the pivotal point of the evening was reached. The poker star met a gorgeous young woman who was in her second year of residency at an area hospital and they hit it off. She rejoined her friends and PS told her we would be in PJ’s. 10 minutes after we walked in PJs she and her friends appeared. She invited us to join them at an upstairs table. Fred and I went up to say hi but had no intention of joining the younger crowd. After we said our helloes and left a happy poker star in their company, DR Doom pulled a Fred classic. Spotting two attractive blondes at the next table closer to our age, Fred, motioning me to follow, went over sat down next to them and said “ Hey I’m Fred, Are you going to eat that last mini burger?” The fair Jennifer and Pegeen sat with we two intrepid invaders and talked for the next several hours. Pegeen turned out to be a very nice Irish American lass(like the name didn’t make that obvious) who worked in advertising for a leading business publication . We talked about books, poetry, our shared love of yeats, how come we could no longer recite poems we used to know like our own names, a little business, the usual where do you live where are you from etc, etc. During the course f time, we joined by Omid and a slew of Jewish Iranian cousins, the list master, Mr. Marks and the weird Biotech guy came back and the two ladies quiet little dinner before they went to a party over on Michigan had become a full out roaring spec list after dark gathering. I think they liked us and enjoyed the show but they didn’t return our call the next day so perhaps I was mistaken. By this time the Poker Star. had dumped the doctor because she couldn’t name any tracks of his favorite rap album. A typical Chicago Friday.Again as the group broke up late that night, PS and I hit a final club for a nightcap and ended up.of course talking to girls at the bar and staying later than we meant to. At the conclusion of the evening, I ended up sitting high above State Street looking off towards the lake sipping the last of freds good single malt and talking business and women with Fred until the wee hours.
Saturdays the air show. It was somewhat limited because of cloud cover and the blue angels couldn’t do their high level activities. Still a good time and we were at last joined by mark” the voodoo prof” mcnabb and the ever lovely Elana.. The cloudy skies kept out the crowds so we had a good spot right by the giant corona bottle to watch the show,. As virtually all the spec listers know what a corona bottle is, it made a nice beacon for the group to gather. Jason’s beautiful bride Wendy joined us and it was a great way to send a Saturday watching the f18s of the angels, an f15, a kc135, a air of f16s and a wide array of bi planes and stunt craft sweep along the shores of lake Michigan In my mind the location alone, along with the divers group of aircraft make it one of the premier air shows in the country and worth a trip.
At this point we went back cleaned dup and gathered for the train ride north to join the Pam “the book lady” van Giessisen for night of ribs and talk. The ranks of the group swelled with th3e addition of Dr Brett and his delightful wife Margie, as well as for the first time in years, David” how in the hell did I end up in Wisconsin” Hillman and his bride Paula. Mark told great stories of life in Deltaville VA complete with the epic battle of the spotlight, the roving trick or treating boatyard dogs that come by on a regular schedule and the local cast of characters in the little bayside town. I got a chance to talk with Dr Brett about his new book and trading activities and spend some time with Hillman. Although we talk often on the phone there is no substitute for just hanging out over a cold beer talking. Subjects ran from interest rates to tock markets to fantasy football and baseball. (Paula of course blames me for his addiction to fantasy games but all I did was introduce him to the concept). Pam provided as always a great spread with ribs, fire-roasted corn on the cob and even ice cream flown in from Cincinnati. Her husband Johan somehow found a six-pack of Mickey Big Mouth malt liquor and joyfully announced to the ensemble that he finally had the appropriate beer for Melvin. Funny, very funny. Pam’s ex roommate and current neighbor was on hand as well. He is over the top outrageously gay and his stories and antics were a source of constant laughter. We ate, talked with Pam’s off beat country music playing in the background. The weather was a little chilly, perfect for backyard gathering in pams great little garden in the city All in all another wonderful night with a great group of specs and friends.
Sunday was just dr. Doom the voodoo prof , élana and I . A great breakfast at the peninsula, a short trip to the air show on a much better day for it and then..a nap of course. I met up with my old assistant from Annapolis who recently relocated to Chicago and spent some time with her and her new beau. She is making twice what we could have ever paid her, has a new boyfriend a great new apartment and has blossomed in the move to the Midwest. She’s a fantastic young woman and I’m very pleased with her happiness and success.
Then off to the final dinner. Our foursome was joined by the pretty eye doctor lady and the very attractive real estate woman. Again lots of market talk, stories and adventures past and present, some cocktails, lots of laughter and the all too soon the weekend was over. All that was left was to arise on Monday and fly back to the real world.
Some Chicago land Observations;
I could write a book on what I observed when riding the El. Unlike the NYC subway I’m not talking about the passengers. As the el winds through Chicago, in many places apartments and stores are literally just feet away. I took three trips on the el this weekend, to midway and back and out to pams. I saw signs in apartment windows for the white sox, the cubs and the bears, almost every brand of beer known to man (except Mickey’s Bigmouth. I haven’t seen that stuff since Jr high) and three signs with peoples myspace address on them.I saw couples arguing, couples who most decidedly were NOT arguing. I saw three little old ladies on a balcony, oblivious to the train roaring past, having what looked to be high tea. As the street passed by you got a sense of each neighborhood. There were brothers hanging on the corner, avaricious yuppies on the prowl, college kids on the party, cub’s fans on the sauce and blue-collar guys just on the way the hell home after a long hot day. If you want to experience Chicago, ride the el. I’m telling you I could write a book.
The idea of the curve steepening trade makes more and more sense to me. You might need some good-sized pockets and balls to hold it until it works but being long the five and short the 30 makes a lot of sense to me here.
Chicago is way overbuilt. There are half finished buildings and apartment for rent. Condo for sale signs all over the skyline of the city. Banks and lenders with a lot of new and conversion conversion loans on the books are going to have a hard time ahead. Would love to hear any observations from other cities on this.
Selling puts on value stocks that have fallen in value and therefore have a little volatility pump to them just seems smart to me after talking the option side with some option guys this weekend.
The value of the Spec list goes way beyond the content. It’s the friends that have come to mean much more that even the valuable lessons I have learned here. The 4 or five gatherings each year are the highlight of the calendar.
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