Friday, February 27, 2009

All Natural, "It's Okay"

Trader B spray choice.

The RO Report, "Mess" Edition

Today was a real chopfest. We gapped lower with lots of bearishness, but then ripped higher the entire first hour. After that, it was chop until a mild sell-off in the last hour.

Not fun trading action despite the impressive volume, over 1.8 billion traded.

I recall when the Bear Stears (remember them?) news dropped two Augusts ago that we were doing over 2 billion a day and sometimes close to 3 billion on the NYSE. If we start to see volume rise, it could be an indication that some kind of climax is approaching.

Or, perhaps volume is simply rising as stocks across the board get cheaper, making traders have to buy more shares to make the same profits. Who knows?

Anyway, we tested Dow 7,000 today. And no, it's not the bottom... so expect a nice 6,000 number sometime next week. My stomach churns for boomers locked into stupid retirement accounts.

The RO got clipped today. Out of 29 traders, 15 were gross positive or 52%. That's bad... worse, only 1 trader made over $1,000 gross and 9 lost over $1,000 gross. Were I not dead this year, I'd suffer from survival guilt with my #2 showing. As it stands, I don't feel guilty at all. I'll take the #2 and a solid close to my week.

The Manservants dominated. And "Trader D" pulled a rare "George Michael" today. (A "George Michael," for you n00bs, is when a trader's daytrading account and swing account are the worst two accounts of the day.)

"George Michael" - Trader D, -$10,783 on 281,000 shares traded.
Trader 10*, -$2,562 on 8,000 shares traded.

3. Trader J, -$1,981 on 30,000 shares traded.
4. Trader F, -$1,827 on 96,400 shares traded.
5. Trader N, -$1,501 on 97,800 shares traded.

"Lucky Pierre" - Trader B, $2,045 on 733k shares traded.

2. Trader S, $593 on 9,600 shares traded.
3. Trader O, $457 on 24,400 shares traded.
4. Trader R, $405 on 11,400 shares traded.
5. Trader T, $314 on 5,700 shares traded.

Week In Review

I hate dogs because people let them bark outside their houses for hours on end. Another good reason to hate dogs is because they all worship Satan. See below.

Slightly Possessed Demon Dog - Watch more Funny Videos

I'm so happy that "the Fly" finally released his PPT to (roughly) coincide with Obama taking office. Whenever he complains that the market is tanking because of something Obama did, I'll just blame the PPT. Gonna be a fun 8 years. DT Wins Again!!!

The Reformed Broker sits down with none other than JP Morgan to discuss the financial mess we're in.

Then he re-imagines "I Will Survive" by Gloria Gaynor sung by Vikram Pandit. Internet gold.

Just in case you've missed the last 10 or so years of the Internet, Time gives you the top 99 things you've missed. I was #100 apparently.

Overkill punishments dished out by the greek gods.

The diary of a sperm. Surprise ending!

File under crazy religious zealots... dude kidnaps a woman, saddles her into an adult diaper, and then reads the Bible to her FOR THREE DAYS!

Is This The Bottom?

Bobby Jindal, America's Slumdog Millionaire.

Trader X found a nice graphic of Golden Parachutes.

Einstein solved major problems with one second nano dreams. Zentrader tells you how you can do the same thing.

Topless coffee shops? Changing the meaning of "You want cream with that?" forever.

Worried about the moral hazard that all the bailouts create? Stop worrying!

Thursday, February 26, 2009

The Big Pink, "Velvet"

Naked chick alert... 2/3 of the way into the video there is a topless woman whipping something. Porn Thursday indeed!

The RO Report, "Leaves" Edition

I traded early, made some easy money and decided to spend the rest of the day raking and picking up leaves.

You may ask, why the fuck would he do that? The answer, my friend, is that right now I'm all about small consistent victories that will rebuild my confidence. I traded only 6200 shares today and made about $600. A great confidence builder. If I manage 3 positive days in a row, I'll build my share size on each position. That's my plan for now.

As for the RO, they had a pretty solid day. These past few days have really helped bring a few guys back to positive or nearly positive on their year to date levels. Volume slackened a little today, but the bulls suffered another reversal. Those recent lows are very close...

Out of 29 traders today, 20 were gross positive or 69%. 8 traders made over $1,000 gross and 3 lost over $1,000 gross. I was #10 of 29, happy. The Bosses took the day.

"Lucky Pierre" - Trader B, $10,147 on 432k shares traded.

2. Trader D, $8,842 on 310k shares traded.
3. Trader H*, $5,152 on 18,300 shares traded.
4. Trader C, $4,933 on 122k shares traded.
5. Trader &, $2,021 on 50,200 shares traded.

"Chambermaid" - Trader A, -$5,626 on 130k shares traded.

2. Trader L, -$1,599 on 40,000 shares traded.
3. Trader N, -$1,361 on 95,800 shares traded.
4. Trader V, -$770 on 51,464 shares traded.
5. Trader F, -$546 on 95,400 shares traded.

Click here for Brian's take.

Jindal's Response To Obama's Speech

When All Else Fails, Steal From Holy Taco

I've had a hard time finding windows of time to write my longer posts this week. So while I have many in development, none are ready for "prime time."

I appreciate your patience. As an apology of sorts, I offer the following without comment or explanation.

null - Watch more free videos

Wednesday, February 25, 2009

Portishead, "Pedestal"

The RO Report, "Volume" Edition

I'm not going to throw a party or anything, but it appears volume has returned to the market. Two days in a row we've traded over 1.5 billion on the NYSE.

I was very hopeful at 3pm when the market was ripping and the financials were leading. When we decide to go higher again, the financials are going to have to lead. Also, the fact that USO climbed higher and was pinned to the highs was positive.

Unfortunately, we're in a nasty bear market and rallies get absolutely no respect.

I hate late day reversals and always have a hard time trading them.

It was a mixed day in the RO. Out of 30 traders today 19 were gross positive or 63%. 7 traders made over $1,000 gross and 4 lost over $1,000. I gambled on a couple of MOCs at the close and lost... DNA, man. I was #23 of 30.

The good news is that we had a full on "spray" by Trader A. As you know, that means he picks tonight's song. I will post it later. He led the Bosses to victory.

"Lucky Pierre" - Trader A, $26,632 on 297k shares traded.

2. Trader D, $11,496 on 307k shares traded.
3. Trader C, $7,422 on 147k shares traded.
4. Trader B, $6,861 on 524k shares traded.
5. Trader F, $5,850 on 198k shares traded.

"Chambermaid" - Trader Z, -$7,787 on 309k shares traded.

2. Trader R, -$6,903 on 22,000 shares traded.
3. Trader &, -$2,603 on 22,400 shares traded.
4. Trader J, -$1,356 on 13,800 shares traded.
5. Trader E, -$675 on 11,400 shares traded.

Stock Market Trend Analysis 2/25/09 from brian shannon on Vimeo.

Another Person Who Shouldn't Trade

This is a perfect example of a low probability setup. Traders always need to balance risk and reward. This here was all risk...

Brutal Roof Jump to Trampoline Faceplant - Watch more Funny Videos

Ed Seykota: Market Wizard

(Yes, I'm skipping right over Gary Bielfeldt. However, while he seemed like a nice dude in the interview, his hands aren't squeaky clean according to this Forbes article. A fun read if you're familiar with the Market Wizards interview.)

Anyway, the Ed Seykota interview has been my favorite thus far in Market Wizards.

Why? Well, I appreciate anyone who can have a good sense of humor and be humble despite being richer than a cat in a fish store.  Also, the man has the ability to break trading rules down into aphorisms that stick in your head.  I've read a lot of books on Buddhism and I'm always amazed at how simple but dense some of the writing is.  A lot is conveyed in a very efficient way.

Seykota on trading is as good as Thich Nhat Hanh on Buddhism.

Okay, sure, all the humor and humility in the world isn't going to make you money if you don't have some other things working for you.  But I want to stress that developing a good sense of humor and a true sense of humility (not to be mistaken with false modesty) are very important if you hope to be a good trader.

Think of trading as a lifestyle, not just an occupation. It's longevity you are striving for, not simply riches.  Having a sense of humor and humility will help keep you in this job through difficult times.

And longevity is important.  According to Seykota, "Longevity is the key to success."

Again, I'm re-reading this book during a difficult stretch in my career, and so I tend to focus on those parts of the interviews that deal with setbacks.  But Seykota didn't even want to talk about setbacks...  the dude was just focused on the here and now and the positive future. I liked that because only by focusing on what's in front of me will I be able to move forward again.

Seykota is primarily a systems trader. He wrote some sort of trend following trading system that generates buy and sell signals, and he sticks to it. I couldn't help but wonder if this was why he was so damned cheerful and happy... he's got a goddamn robot making hundreds of millions of dollars for him.  What's not to be happy about? Still despite this fact, he had many insights that can apply to us daytrading types.

I mentioned how he doesn't like to dwell on mistakes. He moves quickly past them and focuses on the next opportunity. Obviously, this is a great skill to try and develop. When you start dwelling on past errors, you tend to want to correct them as quickly as possible. This can lead to overtrading, or taking excessively large bets in an attempt to "make back" all the money you lost.

While occasionally this might work out for you, long term, it's not a good strategy.  So, when you make a mistake, move on.

If Seykota finds himself in a trading slump, he simply limits activity.  Meanwhile, if things are going well he gets more aggressive and takes larger bets. Again, this seems very simple but in practice, it is often tough to remember. That's why reading books on trading should be part of your everyday job description as a trader.

There are many truths to trading that are obvious but also easily forgotten.  Books help you remember.

Seykota says that cutting losses is the most important element of trading. After 10 years I can't tell you how sick I am of hearing this trading axiom.  However,  it's constantly repeated because it's a very tough rule to master.

I mean, look, you're going to read these words over and over again: "cut losses short."  I guarantee it.  If there is one positive change you make today to your trading, promise yourself that you're going to read these words now, "cut losses short" and master them.  Here and now. Done.

Easy enough, right?  But in practice, when the screens are flashing and the news is spitting out of your computer speakers or worse, the television, connecting to the rules in your head is often difficult.

Always remember... trading is simple as you want it to be.

Take the small loss.  Just take it.  You can always get back in if the situation improves.  As Seykota puts it, "Losing a position is aggravating, whereas losing your nerve is devastating."

Finally, Schwager asks what a losing trader can do to transform himself into a winning trader. Seykota responds, "A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That's the kind of thing winning traders do."

In other words, adapt or die.

You need to constantly change with this game since the market is constantly changing. Don't get attached to a certain style of trading because you are setting yourself up for much pain in the long run. Instead, understand that you have to constantly reinvent the way you approach the market all the while hanging onto the core principles of trading.

Seriously, this was a great interview to read. If you are just picking and choosing through the book, be sure to spend a half hour and read this one.

Tuesday, February 24, 2009

Great Speech By Obama

While it is already being derided by so called "first tier" bloggers, I will submit that it's much nicer to have a President who sets lofty goals during a time of crisis, instead of one who tells you to "go shop."

Staff Benda Bilili, "Polio"

A reminder that polio still plagues much of the world. Why the fuck not?

The RO Report, "Relief Rally" Edition

Never has relief been so palpable...

If you've been following along, you know that 2009 has not been kind to the RO. There has been lots of blood, large drawdowns, and a couple of blowups. So it's nice to see nearly everyone do well together.

It's the kind of day that renews confidence.

I have no idea what to expect tomorrow. My guess is that this was mostly short covering ahead of the Obama speech, but we had solid volume today and the VIX cratered so perhaps it will last a bit.

It would be nice to look back at this point in June and see a nice double bottom.

The RO kicked ass, putting in probably the best day of 2009. Out of 30 traders today 23 were gross positive or 77%. 15 traders made over $1,000 gross and only 3 lost over $1,000 gross.

I was #15 of 30. Baby steps. I know the game. It's all about building back up and not trying to make it all back at once.

The Bosses dominated.

"Lucky Pierre" - Trader B, $29,509 on 746k shares traded.

2. Trader A, $19,464 on 572k shares traded.
3. Trader D, $14,785 on 527k shares traded.
4. Trader Z, $13,545 on 244k shares traded.
5. Trader C, $10,457 on 369k shares traded.

"Chambermaid" - Trader E, -$1,881 on 75,600 shares traded.

2. Trader M*, -$1,571 on 0 shares traded.
3. Trader 9*, -$1,204 on 600 shares traded.
4. Trader T, -$908 on 4,900 shares traded.
5. Trader G, -$493 on 45,000 shares traded.

Today's heatmap is the inverse of yesterday's...

Click here for Brian's take.

Since I got busy trading today, I didn't have time to finish the Ed Seykota post. It will be up tomorrow.

Those Principled Republicans...

Where would we be without them?

Another Disappointed Customer

Meanwhile, my discussion of the Market Wizards interview with Ed Seykota is in development. I'll either have it published midday today or tomorrow.

Monday, February 23, 2009

Tahiti Boy And The Palmtree Family, "1973"

The RO Report, "Chickens Without Heads" Edition

Back when I was in grade school, I had this teacher who always used to complain that us kids were running around like "chickens without heads." As an adult, I recognize that this teacher was probably somewhat disturbed.

However, the image has stuck in my head and today I get to use it because I watched CNBC. Every person who was on CNBC today was running around like a chicken without a head, with the exception of Dylan, who is a bit cooler than most. No one knows what's going on... all anyone has are questions... it's a great mess.

People are a bit freaked out, and rightly so. Trader P pointed out to me that we're almost exactly 50% off the Dow highs of 14,198 set back in October of 2007. It's an amazing and swift giveback. However, unless you're among the lunatic fringe who, sadly, seem to frequent "the Fly's" site almost exclusively now, you can see it in a positive light.

Unless you truly think the world is coming to an end, most of the pain is probably behind us. And if you truly think the world is coming to an end, what the fuck are you doing reading this anyway? You have work to do! Go get that gun! Go buy those grains!

I traded very lightly. I'll continue to do so until I get a consistent trade going... a trade I see over and over again and that works. When this happens, my confidence will come back and I'll start trading heavier again.

I know I am not the only trader suffering from confidence loss right now. The RO got slammed. But, like the market, I plan on being around in 10 years. In 10 years, these couple of months of drawdowns will be a blip.

Anyway, the Manservants took it to the Bosses today. Out of 28 traders today, only 10 were gross postive or 36%. 5 traders made over $1,000 gross, but 8 traders lost over $1,000 gross. I was #11 of 28, or basically flat.

"Chambermaid" - Trader B, -$22,858 on 385k shares traded.

2. Trader D,
-$16,881 on 252k shares traded.
3. Trader F,
-$16,053 on 89,600 shares traded.
4. Trader H*,
-$13,793 on 25,300 shares traded.
5. Trader C,
-$7,421 on 117k shares traded.

"Lucky Pierre" - Trader Z, $6,185 on 80,100 shares traded.

2. Trader A,
$4,394 on 116k shares traded.
3. Trader E,
$2,624 on 22,400 shares traded.
4. Trader N,
$1,617 on 24,400 shares traded.
5. Trader V,
$1,461 on 31,200 shares traded.

Click here for Brian's take.

Sunday, February 22, 2009

"Trader Tax" Would Kill Stock Traders

"Out of opposition, a new birth."

-Carl G. Jung (1875-1961). Psychology of the Transference

Meanwhile, check out this article to understand why a new birth may be our only option. The old patient is cold. (h/t Jawbreaker)

IMPORTANT: The so called "Trader Tax" would be the end of proprietary trading as we now know it. It would place at 0.25% transaction tax on "the sale and purchase of financial instruments" including stocks. It is in a bill, H.R 1068 which is currently being debated for passage. If you are a proprietary trader, you need to write your congressperson to voice your opposition today.

Here is the full text of the bill.

Friday, February 20, 2009

Week In Review

Stephen King killed John Lennon. Really? Be sure to check the video on the left.

Dude in China has 5 mistresses. He can't afford them all so he holds a contest to see which one he should keep. They all die.

An Oral History of the Bush White House.

True, it sucks to miss your flight, but this woman takes it a bit far.

See if you can find me in this photo of 18,000 naked people.

Despondex, for the annoyingly cheerful.

Use your cell phone much? Might as well get tagged and tracked like a game animal.

25 people to blame for the financial crisis. You can vote how innocent or guilty you think they are!

Thursday, February 19, 2009

Tom Petty, "Won't Back Down"

Let this serve as a message of warning to my detractors, and to the market in general.

A Warning From Hank Brummel

On a recent afternoon, I drove to the local hardware store. I had to buy some rock salt to melt the ice covering the brick steps that lead to our back door. Ice clings stubbornly to brick.

Last month, my father-in-law slipped on some ice and landed flat on his back. He couldn't get into his car for 2 weeks. The same thing happened to my father a couple of years ago, except he wasn't so lucky. He broke 4 ribs, punctured a lung, and spent a few nights in the hospital. I still remember visiting him...

From the door of his room I looked in to find him sitting up in his bed, wearing one of those hospital gowns that were designed by armless blind people: the kind that expose your ass when you stand. He was staring idly at the thin gray curtains that separated him from his roommate, an angry old man who was mumbling something about laxatives.

Hospitals gowns, old people and laxatives... Incidentally, all great conversation starters if you ever find yourself burning in hell.

Dad's thoughts seemed scattered. We were at some sort of "teaching hospital" and minutes after I arrived, 8 or 9 doctors stood conferring over a clipboard at the foot of his bed. They were debating the best way to re-inflate my father's lung. Many of them seemed young. My father had this idea that his lung would get better on its own; however, the hospital people wanted to put in a chest pump and re-inflate it for him.

"DT," he whispered to me, "this place is like a veterinary hospital. Of course they want to give me a chest pump! Where else are these kids going to learn how to do this?"

I won't say that he panicked, but my father looked fearful. It was awful seeing him in that condition, and it has stuck in my head. He's not paranoid like I am... actually, quite the opposite. Anyway, he got out of there and his lung inflated just fine: no chest pump.

What's the point of this? Ice has been trying to kill my family for years. As a result, each winter when it shows up on my steps it's a sort of "revenge play" for me to melt it all. Ice isn't welcome at my house; when it shows up, I take it personally.

So, as I was saying... hardware store, rock salt.

The hardware store is always uncomfortably warm and smells of herbicides and fertilizer. The man who works the section by the entrance constantly wears a stoned, glazed-over, look. And, in fact, he is always stoned. In another lifetime, I got heavily into darts and joined a pub's "dart team." Clearly, this topic needs its own post... However, let's just say I really got to know a lot of the local degenerates and "Bob the builder" here was one of them. I asked him where the rock salt was and without looking up from what he was doing, (trying to release a gumball from the gumball machine) he said, "automotive."

So I was on my way to the automotive section when I bumped into Hank Brummel. He was stacking suet blocks into his basket. When he looked at me, his face immediately went dark.

Hank is a celebrated figure around town. He's 95 or so, but you'd think he was 80. He's still very independent and mobile, and you'll see him strolling around in a fashionable cardigan sweater, hair fuller and whiter than a blizzard, waving to everyone he passes and making small talk. I've heard that he developed the first motors for windshield wipers. GM had bought his patent and he became very rich.

Without a greeting, he grabbed me by the elbow and said in a low voice, "Bad times are ahead." I made some hopeful gesture and said, "Barack Obama!"

Hank wasn't impressed. He stood there next to a display of window washer fluid and blinked patiently at me. "DT, we've been building up to this for years and years. It will take years and years for things to get back to normal." He looked thoughtfully at the floor and shook his head. "Even then," he said flatly, "things will just be different." Brummel's eyes grew nebulous. "I mean, it's not for me I worry. I'm going to die soon... hopefully anyway. But I have 30 grandkids to think about."

I knew Hank had lived through the Great Depression and so I asked him, "What do I do if things get as bad as you think?"

He looked right through me with his cloudy old man's eyes and said, "Plant a garden, raise chickens, and buy a gun."

"Jesus, Hank," I said as some nervous laughter escaped, "a gun?"

"Yes, DT. A gun."

And with that, Hank Brummel darted down an aisle full of cabinet hinges and disappeared.

I purchased my rock salt no longer confident that ice was worth all the worry.

Wednesday, February 18, 2009

Pink Floyd, "If"

Xcelera Anybody?

Behind each flash of red and green on a stock trader's screen there is a story to tell.

Back in 1999, many of those flashes were created by "regular" people who had just opened Ameritrade accounts. They were driven to the market by the "tech bubble" and their newly acquired access to real-time quotes. They abused the letter "e," which quickly became the world's most overused prefix, and buzzed about initial public offerings.

Seemingly sane analysts were on CNBC plastering ridiculous price targets on companies that were nothing more than a vague idea and a ticker symbol. Surely there were some who protested, but the vast majority in the media claimed that things were "different this time" and that the economy had fundamentally changed. The bulls were released through the TVs that hung from the heavy steel brackets over our trading desks. As professional proprietary traders, we were like sharks swarming to devour the chum they tossed to us.

Unfortunately, the bulls also found their way into the living rooms of unsuspecting Americans who had a friend that "cleaned up" in AOL.

CNBC hit us all with an intoxicating combination of cold analysis, sex and humor. The men in pinstripe suits with gelled hair spoke of fundamentals while a young Maria Bartiromo bumped and grinded with the traders on the floor. Joe Kiernan and David Faber acted like they were fraternity brothers, Mark Haines was your cranky uncle, and during commercial breaks, humorous online trading commercials sold the stock market to a new generation of investors.

The overriding message was, "Hey you! Why are you letting the rich guys make all the money? Any monkey can figure this shit out! TRADE! LAUGH! CHECK OUT MARIA'S TITS!"

Since we're so far removed from those times, let me give you a quick reminder of what things were like. The case of the Linux IPO was not uncommon. The stock was initially priced between $11 and $13 a share. A week or so before the IPO, the price had doubled to $22. When it opened for trade, the first open market transaction was for over $300 a share! But the lunacy wasn't reserved solely for the NASDAQ stocks. Corning, the glass company traded on the NYSE, gave us our fair share of excitement. You can find their bowls in your mother's cabinets. In 1999 though, all anyone cared about was fiber optics, made from GLASS, and we watched as this tame company went from $15, to $115 and back to $15 in about a year.

In 1999 if anyone suffered from an anxiety disorder, it wasn't brought on by Osama Bin Laden or by their mountain of mortgage debt... Instead, people were afraid of missing the next big thing. But because no one knew anything about the companies being promoted, the common reaction was to buy first, just in case, and ask questions later. Xcelera anybody?

Indeed, this was the free-money era for investment bankers; the regular guy was in the market buying and the professionals were selling to him.

Weird stuff was happening every day, but to a new trader like myself, it didn't seem weird at all. This was the environment in which I was learning. It was sort of like growing up in a household where your Dad was a lion tamer and you didn't realize that this was odd until you were older.

The bustle and the energy from the exchange lifted out of our screens in those red and green flashes and drew us in. This was way before the anonymous hum of the hybrid market. The energy then was more visceral and personal. It was as if you could feel the pain and greed in the quotes. A big offer was lifted and you felt the flood of elation. A huge bid got smacked and you could almost see the bulls hang their heads.

And I was there, creating my own red and green splashes on the screens.

Early on, I remember focusing on three stocks: RDN, AVY and MUR. No one pulled me aside and told me to watch these stocks... in fact, no one told me anything. The only guidance I received was to watch the broad market, as 3 of 4 stocks move with it, and take my cues from there. I learned to search out stocks that had at least a one-point daily range, were priced between 10 and 100 dollars a share, and traded upwards of 200k shares daily.

I had good days and bad. At the end of my first 8 months, I came away with a respectable $40k. Looking back, I was being way too conservative. If anything had to fundamentally change it wasn't the media coverage, it was the way I viewed money. Surely, given the huge price advances on display one was almost encouraged to think that money wasn't real.

This was also spurred on by some of the traders surrounding me and how they dealt with huge gains and losses.

Tuesday, February 17, 2009

Smog, "I Break Horses"

The RO Report, "Vacation" Edition

I need to take a break from this market. For now, I will also be taking a break from posting the RO. I've just never had such a struggle and need to go into my own world for awhile.

Could be to the end of this week, could be longer. I'm just gonna feel things out and do what seems right.

I'll continue to post the Tuesday through Friday posts.

Paul Tudor Jones: Market Wizard

Now, let's get one thing out on the table right away... Any dude who throws "Tudor" into his name, if he isn't an asshole, just sounds like one.

If you throw Tudor into your name and you play golf, YOU ARE AN ASSHOLE. It's a law stronger than Newton's Law of Gravity.

I dare any of you to prove me wrong on this. (Note: I don't know if PTJ plays golf, so he may not be an asshole at all.)

Okay, now let's get to the interview.

No... you know what? Forget it. I can't do it. And since my eyeballs have practically been bleeding all weekend due to some ancient virus that my daughter brought home from her filthy nursery school, I can't stand to sit and stare at the screens now and write much about this dude. It's a weakness, but I can't get over the name.

I'll leave you with what struck me the hardest...

PTJ traded through the 1987 crash and Schwager asks him if he believes the crash was "an early warning signal of more negative times ahead." Here is part of Tudor's response...

Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken ten years to build. If the economy starts to go with the kind of leverage that is in it, it will deteriorate so fast that people's heads will spin. I hate to believe it, but in my gut that is what I think is going to happen.

I know from studying history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time. Reagan made sure that the economy would be great during his term in office by borrowing our way into prosperity. We borrowed against the future, and soon we will have to pay.
So let me ask you... Has it taken 22 years for our chickens to come home to roost?

Bernie Madoff Doll

File this under the always growing "Why Didn't I Think Of This?" category.

Click here to order your own miniature Bernie Madoff doll that you could clobber with a little hammer.

Sounds good... however, since we're now in the Greatest Depression, (thanks in part to fuckaloons like Madoff) I'd suggest that instead of shelling out $100 for this thing, build your own out of toothpicks or something and just use a hammer you already have.

Monday, February 16, 2009

Frontline: "Meltdown" Airs February 17th

Click here to view a clip.

Sore Eyeball Disease & Roy Longstreet

I was taken down this weekend by a very odd virus that ferociously attacked my eyeballs. It sounds funny now, but it was very painful. This isn't a very medical way of looking at things, but it was almost as if my brain was on overdrive, and the heat from it was basically cooking my eyeballs like two eggs, which felt as if they were about to burst, and ooze from their sockets down my cheeks.

So as I was laying in bed with a fever and sore eyeballs, I decided to pick up a book that "Trader P" purchased for me called "Viewpoints of a Commodity Trader" by Roy W. Longstreet. Now, I know some of you closer readers out there are like, "Duh, why read if your eyes hurt" but I couldn't sleep, and I needed a diversion, so stop being a dick.

The chapters are short, and I am going to type out an excerpt from the chapter entitled "A Time To Rest" for you here, because it, in conjunction with my sore eyeballs, told me it's time to take my foot off the gas a bit. Here goes:

"A Time To Rest" by Roy W. Longstreet

I have known very successful traders who, afraid to take a vacation for fear something important would happen, eventually lost their "touch." One such individual is reported to have lost more than $4,000,000 over the past five years.

When faced with such a situation, it's time to ask yourself two fundamental questions. First, is this the only opportunity that will ever come my way? Second, if this is such a great opportunity, am I mentally, physically, and financially prepared to take full advantage of it?

If the answer to either is, No, it's time to stop and rest. It's time to let the soul catch up with the body, to give yourself the chance to think a little clearer, to plan a little better.

Going forward, I'll be taking more days off. I'm pushing too hard from a mentally exhausted state, and it's driving me backwards.

Acknowledging this has made me feel better already.

Sunday, February 15, 2009

Sunday Space

The whole aim of Newspeak is to narrow the range of thought. In the end we shall make thought-crime literally impossible because there will be no words in which to express it... Every year fewer and fewer words, and the range of consciousness always a little smaller.

-George Orwell (1903-1950), Nineteen Eighty-Four, 1.5, 1949

Friday, February 13, 2009

Janes Addiction, "Up The Beach"


The RO Report, "Simulator" Edition

I almost took today off. After the carnage yesterday, I had all those Market Wizards in my head telling me to take my foot off the gas.

Instead, I found a compromise. I went surfing early and realized, as I was out there bobbing in the water that I was doing far more good for myself surfing, than trying to force trades. I had the best session of my life. It was amazing. Immediately afterwards I wrote about the experience which I'll probably post in a couple of weeks.

After I came back, I traded on the simulator. I lost $17,490 on the simulator. So, in a way, I actually made that money since I would have lost it had I been trading live... get it? DT Wins Again!

Anyway, the office did okay. Out of 28 traders, 18 were gross positive or 64%. 4 traders made over $1,000 gross, and 1 trader lost over $1,000.

Enjoy the long weekend. I have a full week of posts ready to fire next week, including a history and an around the house.

"Lucky Pierre" - Trader A, $5,984 on 76,124 shares traded.

2. Trader 9*, $2,854 on 2100 shares traded.
3. Trader 10*, $2,513 on 0 shares traded.
4. Trader K, $1,135 on 32,400 shares traded.
5. Trader F, $690 on 18,600 shares traded.

"Chambermaid" - Trader H*, -$1,655 on 7,300 shares traded.

2. Trader D, -$558 on 114k shares traded.
3. Trader L, -$428 on 31,400 shares traded.
4. Trader G, -$397 on 59,200 shares traded.
5. Trader V, -$264 on 14,200 shares traded.

The Week In Review

Lucid Films Presents - The Stimulus Package

(Irreverent and NSFW)

I say pay the Somali pirates to heckle the illegal Japanese whaling ships.

The more that comes out about the salmonella peanuts, the more it stinks. It also highlights how insecure our food supply is.

Note: 123456 is not a good password...

Amazing passive solar house in Iceland. I find things like this inspiring.

Prospectus is blogging again and he's spilling the beans on Richard's sex life!

Take back those bonuses!

I still don't Twitter. Soon I'll be in the minority.

Hilarious new blog about Digg. Zen and the Art of Digg. Dude, "friend" me.

Great Moments In Willful Ignorance. The Reformed Broker runs a very funny and consistent site. It has become a daily read for me.

It's been a tough week. Here's some inspiration in the form of a squirrel.

Enjoy the day off on Monday.  I know I need it!

Thursday, February 12, 2009

Radiohead, "You And Whose Army?"

When you're losing in this job, it feels like you're fighting a war.

The RO Report, "Fuck The PPT" Edition

Whether or not you believe any of the conspiracy theories regarding the "PPT," or the Plunge Protection Team, you have to admit that the way news stories suspiciously drop at important market levels is very coincidental to say the least.

The RO got completely fried this afternoon when some news dropped at 3:05, just as we were breaking the lows of the morning.

Anyway, I have a sick family and this market is trying its hardest to make me sick too.

Here's the numbers.

Out of 29 traders today, 8 traders were gross positive, or 28%. 3 traders made over $1,000 and 14 traders lost over $1,000 gross. Many lost a large multiple of $1,000. I was #21 of 29 adding a lot to my worst streak of my career.

"Chambermaid" - Trader Z, -$32,481 on 89,000 shares traded.

2. Trader C, -$31,486 on 290k shares traded.
3. Trader N, -$26,680 on 109k shares traded.
4. Trader F, -$11,642 on 137k shares traded.
5. Trader A, -$8,162 on 216k shares traded.

"Lucky Pierre" - Trader 10*, $1,627 on 2,800 shares traded.

2. Trader R, $1,107 on 24,806 shares traded.
3. Trader M*, $1,068 on 0 shares traded.
4. Trader X, $187 on 4,200 shares traded.
5. Trader G, $155 on 26,000 shares traded.

What a disaster.

An Odd Interview

Pointed out to me by "Trader X" from the RO, not the more famous Trader X.

This dude has a nice beard.

The Gods Have Conspired Again

To put off publication of my new history post, "Sympathy For The Maria."

No doubt it is due to the controversial nature of this post.

Anyway, Judy fell a bit ill last evening preventing me from having the time to edit it down. Been a tough week for blogging over here.

Wednesday, February 11, 2009

Barry Manilow, "Copacabana"

Awful. Worse, I'm not even sure if I'll get that history post up tomorrow. Time has been short.

The RO Report, "Surfing" Edition

When I surf, I generally use my longboard. And waves that are good for longboarding tend to be more forgiving than a good shortboarding wave which is typically steeper and faster.

Due to some utter stupidity during my last hour of trade, I nearly "manservanted" myself on a day I knew wasn't good for trading. As punishment, I took my shortboard out and head to the shore. I'm an awful shortboarder and I took some nasty wipeouts...

Anyway, the RO managed to have a solid day. The early morning run in gold and commodities was played well by a number of traders.

Out of 28 traders today, 17 were gross positive or 68%. 6 traders made over $1,000 gross and 4 traders lost over $1,000 gross. I was #23 of 28. Disgraceful.

"Lucky Pierre" - Trader A, $12,907 on 75,800 shares traded.

2. Trader D,
$7,245 on 123k shares traded.
3. Trader B,
$6,164 on 129k shares traded.
4. Trader C,
$2,813 on 74,400 shares traded.
5. Trader E,
$2,508 on 20,100 shares traded.

"Chambermaid" - Trader Z, -$2,720 on 49,300 shares traded.

2. Trader P,
-$2,319 on 24,200 shares traded.
3. Trader 10*,
-$1,811 on 2000 shares traded.
4. Trader V,
-$1,671 on 59,200 shares traded.
5. Trader R,
-$694 on 37,500 shares traded.

Click here for the heatmap.

And here for Brian's take.

Quiet Blog... Quiet Market

Could a storm be brewing?

Clusterfuck To The Poor House - The Stimulus Package

See? Jon Stewart can grill the Dems as well.

"Starfish Hitler" Slows Publication of "Sympathy For The Maria" History Post

I made a valiant effort, but was unable to defeat this thug in time to publish my weekly history post. It will be up tomorrow.

For the remainder of the day, I will resort to my third-tier blogging skills to provide you with enjoyment. Perhaps I will punish myself by watching a Dennis Kneale segment.

Tuesday, February 10, 2009

The Fleet Foxes, "Mykonos"

The RO Report, "No Squeeze" Edition

If you were bearish on this market all day and waiting for an opportunity to get short, you were likely frustrated. There was no bounce, no squeeze, just steady selling.

The internals were completely disgusting. The XLF was down 10%. Crude oil is pinned. We are poised precariously over the lows made about a week ago. After that, we go to the November lows.

I turned CNBC on today for the first time in months. I was all about listening to Geithner explain The Plan. I was unimpressed. I also wasn't big on the dog and pony show afterwards, when he did his live interview with Brian Williams and Steve Leisman.

It made me very afraid. I feel very dark.

There is no doubt in my mind now that we'll be revisiting those November lows soon. After that I'm not sure what the fuck is going to happen, but I don't think it will be pretty.

Despite all the gloom and doom, the RO had a great day and I repaired at least a little of the damage that I inflicted upon myself recently. Out of 30 traders today, 25 were gross positive or 83%. 16 traders made over $1,000 gross, and 3 lost over $1,000 gross. Solid numbers across the board. I was #13 of 30. Very happy.

NOTE: I am trying hard to get the history post up tomorrow. If it doesn't happen, it will be up Thursday.

"Lucky Pierre" - Trader Z, $18,168 on 228k shares traded.

2. Trader B, $17,141 on 335k shares traded.
3. Trader H*, $10,329 on 18,100 shares traded.
4. Trader P, $9,746 on 262k shares traded.
5. Trader C, $9,219 on 149k shares traded.

"Chambermaid" - Trader 10*, -$2,927 on 2,900 shares traded.

2. Trader 6*, -$2,618 on 100 shares traded.
3. Trader G, -$1,749 on 110k shares traded.
4. Trader U*, -$831 on 3,700 shares traded.
5. Trader 9*, -$498 on 2,000 shares traded.

This heatmap looks like a bad joke, but it's real.

Richard Dennis: Market Wizard

I read the Richard Dennis interview from Market Wizards during the tumult of last week. I can say surely, that had I listened to one particular message from the interview that I could have saved myself $5,000. Schwager asks what to do when things aren't going well. Dennis cautions that, "a certain amount of loss will affect your judgement, so you have to put some time between that loss and the next trade." Indeed.

Since my troubles from last week are still rather close-at-hand, I can say undoubtedly that my judgement was clearly affected by my losses.

For example, at one point last week, I was going to war with GS. Just shorting it over and over again because I thought the move up was overdone and that the stock should be going down. When I looked back on my trades in GS, I was surprised to see that it was perhaps the strongest stock on the exchange the day I was shorting. Was I expecting it to go from the strongest to the weakest or something? Hoping to get lucky?

That wouldn't have worked... according to Dennis, luck accounts for "absolutely zero" when it comes to trading success. Instead, it was like I entered into a little bubble of hate and GS was the only stock on the exchange to trade.

Furthermore, when I was involved with these "unlucky" trades, I couldn't imagine it going higher when it was trading $89. Then at $90 I thought, "it's just gonna pop above and scum back down to trap longs."

At $94, I don't remember what I was thinking, but I'm sure it was dark.

This illustrates another important point made by Dennis: "You should expect the unexpected in this business; expect the extreme. Don't think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I've been in this business, it is that the unexpected and the impossible happen every now and then."

Had I been able to take a couple steps back, clear my head and have some perspective on the trade, I could have saved myself thousands of dollars. If you get into this situation, take Dennis's advice. I'm not sure how much time needs to pass, but do something to clear your head, trade another stock and do something different than what you are doing.

It doesn't come as a surprise to hear that Dennis (like Marcus and Kovner) lost money initially. But despite his early setbacks, he had "a need to try to succeed." People ask what a trader needs to do well. Some people think you need a "good head for numbers" or "an ability to analyze data." That stuff won't hurt you. But first, a potential trader must have that desire to try to succeed on his own.

Dennis reserves a certain amount of vitriol for the stock market. He says stocks are "random" and that they didn't offer enough fundamental information to create a real trend to trade. Or, as he succinctly puts it, "There is not enough information, not enough fundamentals. Just nothing going on." 

Damn commodity traders!

But despite his adoration for commodity trading, he bemoaned the growth of computerized trend trading and all the resulting false breakouts he believed were due to too many people watching for the same patterns. He then made a rather dark prediction, "There will come a day when easily discovered and lightly conceived trend-following systems no longer work."

Man, I thought... everything I do is lightly conceived! But I also thought of Trader X, and his new patterns and this made a lot of sense. The patterns are constantly changing and it's our job as traders to find them.

His critique of Keynesianisam is interesting and oddly enough, timely given the current environment. "Keynesian economics was a solution to the problem of over-saving and under-consumption, which was a fair enough attempt to pull us out of the Great Depression. The problem now is the exact opposite: under-saving and over-consumption."

Market Wizards was published in 1989... can you imagine how much worse the problem of under-saving and over-consumption has grown in the last 20 years? The best you can say is the the near future should prove to be a very interesting time to live, though not necessarily comfortable.

Finally, Dennis throws at least one specific trading rule our way, and while I'm not a swing trader, it makes sense. He explains, "it is important not to have a short position with a loss on Friday if the market closes at a high, or a long position if it closes at a low."

Okay, with that I leave you to go and make a million bucks.

Monday, February 9, 2009

The Fiery Furnaces, "Widow City"

The RO Report, "Sleep" Edition

We were locked in a low volume 100 point range today as the world awaits The Big Plan To Save The World.

It's funny, but reading "the Fly" last night and how he spoke about Reagan and deficit spending blended nicely with my reading of the Richard Dennis interview in Market Wizards, which I'll be discussing here tomorrow. In the interview, Dennis says that deficit spending is going to ruin the country.

Perhaps, 20 years later he will be proven right.

Anyway, more on that tomorrow. Not much to discuss. Everyone traded light and the RO did an exceptional job of preserving capital.

Out of 27 traders today, 21 finished gross positive, or 78%. While that sounds great on the surface, there were many sub $200 gains today. No one did much. The RO was rangebound. I placed very few trades and was flat, minus a small overnight from Friday that gave me a loss on the day. I was #24 of 27, which seems almost unfair on a day I did absolutely nothing...

Trader B pulls off another "doubledong" as he and his swing account gain the top two spots.

"Lucky Pierre" - Trader H*, $3,045 on 12,000 shares traded.

2. Trader B, $2,624 on 82,000 shares traded.
3. Trader D, $2,418 on 100k shares traded.
4. Trader C, $1,869 on 60,200 shares traded.
5. Trader N, $1,329 on 76,600 shares traded.

"Chambermaid" - Trader A, -$1,571 on 187k shares traded.

2. Trader 9*, -$621 on 3200 shares traded.
3. Trader M*, -$606 on 0 shares traded.
4. Trader S, -$104 on 4,571 shares traded.
5. Trader V, -$72 on 41,000 shares traded.

Brief Thoughts On A Bad Week (or two)

So each Monday I post and explain a good trade from the previous week.  Unfortunately, after de-balling myself last week, I find I don't have much to work with.

Instead, I will say the following.  I had a real war going on with myself, trying to decide whether I was pushing myself out of some "comfort zone" as far as my position sizing or if I was really fucking myself up, psychologically. Ultimately, I believe I will look back on the last two weeks as a positive.  It is always good to push yourself in this occupation and I learned a few things about myself regarding discipline and focus.  Namely, discipline isn't my strong suit and it's better for me not to "focus lightly" when trading.

While having somewhat precise rules is comforting to a certain extent and makes the job less stressful on many levels, I found that they stripped me somewhat of my instinct.  Instead of getting out of winning positions, or at least "lightening" them, I found myself holding for larger rules, as long as I wasn't getting stopped out per my rules.

In short, I had a hard time balancing my rules versus my instinct.

However, and this is really what caused my massive losses, when positions went against me, I often didn't exit fast enough, because I began believing in my positions too much.  So I was using the rules to keep me in positions, but not using them properly to exit positions... a rather deadly combination...

I will leave you with two final thoughts that I heard last week.

First, from my father, who knows that when I start thinking about money, I cripple my ability to trade.  He said, "If you are thinking about the money, then you are not focusing on the right thing which is the trade.  Instead, you are trying to make back the money you lost and this is irrelevant to the trades you are making today."  I thought this was pretty insightful from a man who has never read a book on trading and who still doesn't truly understand what I do each day.

Second, "Trader P" related a thought from the Charles Longstreet book (which, incidentally, will be the third book in the Dinosaur Trader book club).  Longstreet said he'd rather be right 60% of the time and execute his plan 90% of the time, than be right 90% of the time and execute properly 60% of the time.

We'll see how this week goes.  I'm going to work hard on keeping a positive mindset and starting each day with a blank slate.

I sometimes think of myself in graphical form.  If I looked at myself on a 10 year chart, this would be a minor pullback.  Last week I made a huge red candle with a tiny wick off the bottom.  This week let's hope for a big green one closing at the highs.

(Tomorrow I will have a post on "Market Wizard," Richard Dennis.  He also offers a few insights on trading slumps.)

Sunday, February 8, 2009

Sunday Space

For de little stealin' dey gits you in jail soon or late. For de big stealin' dey makes you emperor and puts you in de Hall o' Fame when you croaks. If dey's one thing I learns in ten years on de Pullman cars listenin' to de white quality talk, it's dat same fact.

-Eugene O'Neill, The Emperor Jones

Saturday, February 7, 2009

What You Missed The Week Of February 1st, 2009

There's no getting around the fact that this week was very hard on me. For the first time in my 10 year trading career, I find myself down on the year. I'm heading out of the house for the weekend and then will return late Sunday afternoon to (hopefully) get in a surf session. Perhaps my victory Friday with the surf session will get my head straight.

Anyway, I started last week with a post about a good trade I made in FAZ. Since I got so blasted this past week, I don't think I can find any particularly good trades to highlight for this Monday's post. Instead, I'll post a bit about the negative mindset I found myself in later in the week.

Each Tuesday I've been highlighting a chapter from the trading classic Market Wizards, and this week I wrote about Bruce Kovner. Coming up this Tuesday, I'll discuss Richard Dennis.

On Wednesday I served up a history post about the trader I called "Char." Since I've had a lot of questions about these posts, let me clarify... all of these characters are based on real people but they are mainly caricatures.

On Thursday, frustrated by the influence of all the powerusers on Digg, I wrote an open letter to these powerusers, asking them what they wanted from me. Many people questioned my sudden obsession with Digg. To you I say, Thursday was a wonderful day for traffic around here.

Finally, on Friday I gave back to the Internets with a large post of links. However, I couldn't help myself when I came across this video of Jon Stewart tearing into Dick Cheney, the worst person on earth, so I had to post it.

Thanks for reading. Tomorrow I'll have my new "Sunday Space" post up.