What Don Draper Taught Me About Being a Man

Don Draper from the television show, Mad Men, has been on my mind a lot lately.  This year because of COVID, Bagel and I have watched a good amount of television.  Since January, we’ve ripped through The People v. O. J. Simpson: American Crime Story, Community (S1-6), When Calls the Heart (S1-2), Under the Dome (S1-2), and I also discovered and personally devoured all four seasons of Rick and Morty as well (Bagel dislikes cartoons so she sat that one out).  Of all of the shows I’ve seen this year though, Mad Men is definitely the most thought-provoking.  The show’s actually quite old; its first season released back in 2007.  And while I remember at the time watching the first two or three episodes, I eventually lost interest and never continued.  Thirteen years later though I think I’m finally now mature and old enough to appreciate Mad Men— this is probably one of the best television shows I’ve ever seen. 

To be clear, this is still not a show that I’d probably watch on my own.  Left to my own devices, I generally turn to television to be entertained.  Fare like Rick and Morty and Community are right up my alley.  But now I’ve met Bagel, my repertoire of appreciation has significantly expanded!  On our evening walks, Bagel and I often like to discuss Mad Men and its different characters.  While the show is fictional, it possess a fidelity to the 1960s that I’ve never seen in period television.  In the past, I’ve watched (and tremendously enjoyed!) period pieces like Spartacus: Blood and Sand and The Tudors but let’s just say that “period authenticity” isn’t exactly the appeal of those particular Starz and Showtime cinematic masterpieces.

Mad Men fascinates me though precisely because is so real.  I love all of its attention to period detail.  The way people smoke and drank (and littered after picnics in the park!) back in the 1960s is insane!  And since I obviously wasn’t around for the Cuban Missile Crisis or the prospect of nuclear annihilation, seeing people live during those periods have been hugely educational.  And while there are tons of things I could discuss (and probably will in future posts), today I wanted to write about Don Draper.  Specifically, what I’ve learned from him about what it means to be a man and a good husband.

I’ve always been proud of my own honesty and transparency.  But what I learned from Don is that when you’re married, being a good husband does NOT mean telling your wife and family everything.  In the past, I always foolishly believed that I should tell Bagel everything.  For example:  Our finances.  Let’s just say this year has been a very rough ride.  And there are times that when I’ve mentioned the specifics of our finances and budget to Bagel, it’s just needlessly stressed her out. If I lost a good chunk of money day-trading one day, it’s not like she had any way of helping to recover that money. She was helpless and this added information did nothing for her except ruin her day.  I always thought I was being a good life-partner by telling her everything.  But now I realize I was wrong.

On days when I’ve lost a ton of money and I’d tell Bagel about my poor results, she’d get super stressed out.  But then a few days or weeks later, I’d often make back all of the money!  And then I’d tell Bagel about my good days too.  I had thought that we were a team and so I should share with her, my failures as well as my triumphs.

But I now see the tremendous error of my ways.

By sharing my daily ups and downs with Bagel, I was needlessly taking her on my rollercoaster ride.  She often had trouble sleeping at night and poor appetite on days when I lost a ton of money day-trading.  When I reflect on this year, I see all of that was entirely unnecessary.

What I learned from Don Draper is that when you are the man of the house, your wife (or S/O, life-partner, etc) doesn’t actually want to know everything.  As the man, it is your duty to be the provider and primary caretaker.  (Or if you’re a house-hubby and the wife is the one who works, then the same would go for her.  Basically, I’m talking here about situations where one spouse works and the other stays at home as the homemaker.)  If you are the primary provider of a single-income household, it is simply your duty to provide comfort and security to your S/O.  You need to find a way to put food on the table and roof over your children’s heads.  And that’s it. There is no need and no reason to share all of the gory details on how the sausage is made.

You don’t need to share every single financial detail with your S/O.  Now, two caveats here:  First– if your S/O specifically asks, then sure– you can tell him/her the details. 

However, if they don’t ask, as the Main Provider of a single-income household, your job is to give your S/O a sense of stability and security.  Absolutely, make a monthly budget and expect everyone to stick to it.  But aside from that, there’s no need and no purpose to share daily details with your S/O.  The second caveat is– sure, if things really go sideways, you should tell your life-partner.  For example, Bagel and I have agreed that there is a certain number our household savings (that I day-trade with) should never fall below.  And if I ever fall under that number then I should automatically tell her.

Aside from these two caveats, a good S/O should just exist to be your life-partner’s rock.  Don Draper never shares any of his daily work shenanigans with Betty; he simply shoulders all of the troubles and burdens alone. That is his sole responsibility and duty as the Man of the House. Betty doesn’t care what Don does at Sterling Cooper; she just wants to be able to shop for groceries, take care of the kids, go horseback riding, hang out with and drink wine with friends, etc.  When you get home from a hard day’s work, you leave it at the door.  Your wife just wants a lovely husband, safety, and security.  That is what it means to be a man.

What a V-Shaped Recovery Would Look Like at this Point…

From my Reddit post I made this afternoon:

Today marks the ten-year anniversary of the COVID-19 virus which a decade ago swept the world. Originating in Wuhan, China, the virus spread quickly starting in December 1, 2019. After jailing Dr. Li Wenliang (who eventually died) for spreading “dangerous misinformation,” the Chinese government enacted an unprecedented lockdown that quarantined 11 million in Wuhan and 57 million in 15 other cities in the Hubei province starting on January 23, 2020. Chinese state-owned news media lauded President Xi for acting so swiftly and decisively to ensure the safety of the public health. “It only took seven weeks,” remarked one Chinese health official. “That is definitely a record.”

Meanwhile, in January 2020, Americans preoccupied themselves blithely following the Trump impeachment hearings that were destined to go absolutely nowhere. When asked in January how she intended to convince the Republican-controlled Senate to impeach President Trump, Majority Speaker of the House, Nancy Pelosi, simply shrugged.

“Ultimately,” Pelosi remarked, “the American people generations from now will care about this Kabuki theater. For posterity’s sake, we needed to have it recorded in the history books that at least we tried.”

Despite isolated incidents of Americans dying, particularly in nursing homes, American citizens finally woke up and took notice of COVID-19 on Monday, February 24, after the Dow dropped 1,032 points.

After four weeks of market turmoil, the Dow finally hit its bottom intraday on Monday, March 23, at 18,213, 38% down from its all-time high of 29,568 that it struck on February 12.

Normally, after such a steep decline, markets stage at least one relief rally, which did indeed occur. Beginning on Tuesday, March 24, markets surged on a three-day rally recovering 23% of lost ground all the way to 3:30p on Friday; the Dow managed to reach 22,327 before people came to their senses and realized that no one wanted to hold a ticking time bomb over a potentially volatile weekend.

Buoyed by Powell’s willingness to do “whatever it takes” and work “hand-in-hand” with Treasury Secretary Mnuchin to operate the Treasury like “his personal piggy bank,” markets continued their historic run back up to all-time highs. Veteran trader, Andrew Borowitz, called it, “The Easter Miracle– Trump came out and declared that our economy would reopen by Easter, April 12. And everyone on Wall Street believed him. It really actually happened.”

A critical point, Borowitz notes, was the highly anticipated jobs report released on Thursday morning, March 26: Despite no vaccine being in sight, on Thursday markets shrugged off a historic 3.3 million unemployment number (the whisper number being something closer to “5 million” as CA alone had reported 1 million) and continued its meteoric climb back to all-time highs.

Even as a record number of bodies piled up in New York and Los Angeles with the virus continuing its exponential spread, the market resumed its surge back to the top based solely on Trump’s hope and optimism and Powell’s ability to print unlimited money. Noted hedge fund manager, Bill Ackman, commented on CNBC at the time, “If there’s one thing I’ve learned in my 30 years of doing this, it’s that you don’t fight the Fed. When you create the world, you make the rules.”

Ten years later, Secretary of Health and Human Services, Alex Azar, in an interview with Bloomberg’s Matt Levine, reflected, “Thank God unemployment claims websites kept crashing and timing out. We really dodged a bullet with that one.”

Lessons and Mistakes Learned in My 15-Month Adventure So Far

I posted on Reddit this Sunday afternoon:

Like Buffett says: “You don’t know who’s swimming naked until the tide goes out.” Meaning: In a rising market– everyone looks like a genius and posts monster returns. It’s only during a crash do we see what separates the professionals from the amateurs.

And full disclosure– for the past three weeks since Feb 21, I have been positively reamed from every which way in my positions (long AMD & MU). I’d started day-trading Jan 2019 (after being inspired by the show, Billions) and had been doing pretty until Feb 21 but the past three weeks have been totally humbling and has revealed to me that I am a total amateur. If I get out of this alive, I’ll know now it was completely luck and that I’m totally not a genius.

All that said, I thought I’d take this opportunity to share some hard-learned lessons I’ve learned these past 15 months. This stuff more applies to active traders (as opposed to investors, which is why I’m not posting this in /r/investing).

Humble Advice from a Beginner re Active Trading

  • Get proficient on the Quantopian platform. To be clear: I am in no way associated with Quantopian. I just use one of their free accounts for data exploration, pricing info, and analysis. But it’s really awesome; I regret not knowing it better before I started. Yes, you will need to know a little Python and Pandas (a programming language and a software library package) but it’s incredibly basic and easy to use. Eons ago, I was once a history major. If I can figure it out, so can you.
  • The market is difficult to time. Here’s the stat that is always tossed about: “If you missed the ten biggest up-days of the past xyz years…” As consequence: Know your time horizon and always have an “investment thesis.” As the ol’ saying goes: “Bulls make money. Bears make money. Sheep get slaughtered.”
  • Keep an eye on the VIX.
  • Keep an eye on “Wall Street Week Ahead” posts on /r/stocks. (I can’t believe I didn’t know about this sub sooner… I guess you don’t know what you don’t know… /u/bigbear0083 is a national hero; someone give this person a Nobel prize.)
  • And specifically– if you’re day/swing trading any specific stocks, follow the stock’s sub, if it exists. Eg. I just learned about /r/amd_stock a month ago and have been following it ever since. In particular– I wish I’d known about this post of catalysts last year.
  • Go straight to the source. The next two economic indicators I’m most paying attention to are the US Labor Bureau Stats and ISM numbers on April 1 & 3. (More on that at the bottom.)
  • Finally: (And again, just my humble 2c.) Get a wife. (Or a husband/life-partner, etc). YMMV on this one, but personally, it’s helped me tremendously. When you’re parked in front of your computer the entire weekend crunching numbers and scouring news, you need someone to feed you. Also, someone to periodically bug you to leave the apartment to go out for walks for fresh air. Marriage is net good.

Things I did Wrong

  • Use the candlestick charts; not just the line charts.
  • Deleveraging spills over, even into safe asset classes, during historic plunges. Three weeks ago, I kept huge positions in memory and semiconductors thinking, “Oh– if the market melts down from COVID-19, it’ll only be travel, movie theaters, dining out, etc. that plunge.” I had 100% erroneously thought that in a downturn, asset classes not directly affected would be shielded. I was totally wrong. What I know now, which I wish I knew three weeks ago, is that in a massive downturn, all asset classes will plunge. And here’s one major reason why: Investors, big banks are usually highly leveraged. When the pandemic hit, they took huge hits on the “losers” (airlines, oil, etc). In order to smooth out the losses from the losers, folks are forced to sell winners as they dramatically deleverage positions to cover margin calls/retain capital position. Therefore, even “winning” stocks/classes will be affected in a downturn. Maybe, in the long term, data centers/semis/memory/etc, may come out ahead. But none of that matters in the hyper-short term (on the magnitude of weeks). I made this mistake in my mental model. Never again. (If there is a next time.)

Things I did Right

  • Use a Roth IRA as a “pace account.” Put ETFs and some blue chips in here and then just leave it. Having a pace account allows you to easily compare how you’re doing with your active trading against your passive strategies at any given point in time.

My Personal Future Outlook (aka, Guess)

  • Again, I’m not a professional so take this with a grain of salt. But here’s where I think things are going: I agree with RBC: SP 2300 is the Maginot-Atlantic-Wall-Mason-Dixon-Rubicon. Either we hold this level (expecting a “garden variety recession”) or an utter bloodbath ensues. My personal belief (well, more like hope and prayer) is that we hold the line with intraday bottoms going as low as SPY (~232) which is the bottom we hit on Dec 26, 2018. (For reference, we ended Friday at SPY 269 but did sink as low as 248). We’ll find out next week; in particular, on Monday.
  • Last Wednesday, Trump gave the single most catastrophic Oval Office address I’ve ever seen. On Thursday morning, markets reacted accordingly. Friday’s Rose Garden address was better. I am now praying/hoping for sideways action until the ISM report on April 1 and Jobs report on April 3. Everything hinges on these two reports. (Btw, February 2020’s job report was absolutely spectacular. In fact, BLS actually revised Dec 2019 and Jan 2020’s numbers upwards.) Right now, I feel raw utter panic has gripped the country. People see barren aisles at Whole Foods and Trader Joe’s. They see five-hour queues at Walmart and Target. People can’t buy toilet paper and water…. etc. Schools are closing, NBA/NHL seasons are canceled. Movie releases are getting postponed. (God, even the mighty Vin Diesel, King of Coronas, couldn’t hold out against the Corona virus…) Etc.
  • My bet (hope and prayer) is the BLS and ISM numbers on April 1 & 3 won’t be as bad as people are expecting. If that’s the case, the market will absolutely rocket into the stratosphere. (I made this prediction several weeks ago and I’m holding to it.) I am personally guessing that we’re about to witness the shortest bear market in the history of bear markets and the fastest recovery man has ever seen. If there is contraction, I believe it’ll be very short-lived. (Maybe one quarter at most.) We’ll see. (I can elaborate more on my theory if anyone’s curious. But since this post is getting really long; I’m just going to omit that theory here.)
  • My humble opinion is that this panic is 100% overblown and we’re in an emotional nosedive right now. People think the sky is falling and there is no guidance of any kind right now to indicate how bad things will be. So everyone’s bracing for the worst. I saw some guy on Seeking Alpha yesterday proclaiming Dow ~17,000… (No link for him as I think he’s a complete nut. But I guess we’ll see who’s the fool… him or me…)
  • Futures open at 6p ET tonight. That’ll be the first indication of what next week may look like.

Good luck and Godspeed out there.

PS. This is hilarious.

A Single Objective Reality

What I really enjoy, for better or worse, about day-trading is how unforgiving it is towards people in their “reality-distortion-bubbles.”  Nowadays, it’s become en vogue to wander the planet with your “own truth.”  And for the most part, that’s fine.  You’re welcome to believe whatever you want about gun rights, gay marriage, abortion, etc.  No one is going to fight you on it; at least there’ll be no consequences re what you believe.

But with the market, there are consequences.

The market is anything but simple.  But it does offer something simple that is rare nowadays:  A single objective reality.  At any given point in time, all of the world’s nuances, complexities –geopolitical risk, a company’s performance, expectations, scandals (or rumors thereof), etc– are reduced to a single number– the price.  You can believe all you want… but it won’t do a lick of good unless you’re right.

In this post-truth era, such a stark, unforgiving black-and-white worldview is refreshing.  There are no gradations here.  On any given day, the price will move either up or down– there are no alternatives.

The other feature fascinating about day-trading is how merciless and agnostic it is from a time perspectives.  Years of gains can be lost in a single week or even day.  Months and weeks of gains can be lost in a single hour.

On the flipside:  A single day of gains could exceed everything you’ve made in the past week or month.

There is something, to me at least, that is very intriguing and counter-intuitive about this:  The lazy trader who rolls out of bed late one day and makes the right trade could very possible win bigger than the diligent trader who rises at the crack of dawn every day and meticulously sits at his station every day of the year.  Nowhere else have I ever seen the saying more true than in day-trading:  “Sometimes it’s better to be lucky than good.”

The Question

So the walls are closing in… total portfolio is down over another 10% today… the pain just keeps mounting.  Total drawdown now approaches 30%, I think… it’s been two weeks.  In times like this, I often comfort myself with the old Persian lament:  “This too shall pass.”

At this point I’m essentially stuck in a long-term hold.  It’s basically become a game of chicken… which will happen first?  Will the market rebound?  Or will I get margin-called?  That is the question.  On a lighter note, one unexpected upside is the sudden time and energy that not day-trading has suddenly freed up!  Since I’m no longer actively day-trading every morning, I’ve been able to focus more on what Cal Newport calls, “deep work.” I’ve been using some of this extra freed time to study historical bear markets and their circumstances. In particular, WP wrote a fascinating postmortem of the 2018 December downturn.

For me, this has particularly meant concentrating on the day-trading bot.  I spent most of this past weekend scraping indices pricing and volume data for DIA, SPY, and QQQ from the past three years.  I have the data at minute granularity but now the challenge is just properly wrangling it before putting it into the db.  (Eg. Some fields are ‘NaN’ and I’ve been having to manually fix those data integrity errors.)

Additionally,  it also means I’ve been able to spend more time focusing on writing.  I’m still aiming to write a post a day to post on this blog… we’ll see if I can keep it up!  As I’ve mentioned elsewhere, I often don’t know how I feel about something until I properly sit down and put my thoughts into written words.  So as we enter the third week of the correction (soon to be a bear market if we sink just a little further!) I’ve had a lot of time to just sit on my hands and think.

One other revelation that struck me recently is how similar day-trading and investing is to religion.  As I sit here in my leveraged account and contemplate existential questions, watching my balance drop day after day, I look back at previous price action and it reminds me a lot of the bible.  The Great Head Fake of December of 2018 when Abraham’s faith was severely tested.  The parting of the Red Sea when Tesla shot up to $969 per share, wrecking Tesla shorts on one side and David Einhorn on the other.  Just like the bible, we’ve got our share of prophets too– some bona fide; some false.  Cramer, Ackman, Dalio, Simmons, etc.  The list goes on and on.

A Global Chase for Yield

Sharing here for posterity; from my Reddit comments that I posted over the weekend:

Here are the usual caveats:  I’m just a guy in my bedroom.  I don’t have a fancy MBA or work at some prestigious, boutique financial firm.  I’m just a guy trying to day/swing-trade for a living in my humble abode.  Watching the show, Billions, back in 2016 is what first piqued my interest.  And I started actively trading at the beginning of 2019.

One:  Re hard economic data and China– It’s a country of ~1.4 billion people.  Because of the one-child policy that lasted for decades, there’s also a pretty big M/F gender disparity.  Additionally, in such a top-heavy government, Xi cannot afford to look weak for much longer; his COVID-19 honeymoon is quickly waning, IMHO.  Many big companies are already highly automated anyways.  Those of them that aren’t will simply throw human bodies at the assembly lines to meet production quotas again, regardless of infections.  Remember, there are no human rights in China; it’s a communist state.  Either come to work or you’re fired and will never work again anywhere for the rest of your days.  I recall that scene from Chernobyl where the workers were already so badly radiated that they decided to just keep shoveling the uranium “for the greater good.”  In times of crisis, humans lives (esp in communist states) are forfeit and cheap in the mission of the almighty dollar/RMB.  Gotta keep the engine of capitalism humming!  (There’s great irony in this, I know.)

Two:  Looking forward, what is the strategic macro picture?  Here’s my speculation for several moves ahead on the board:

  • Meat-space is going to get increasingly more fraught.  I currently live in an apt rental complex and I already see those Amazon Prime vans making multiple trips a day delivering stuff to our complex.  Millennials are already reluctant to go outside.  My God, back in my day, going to the mall, getting pizza, and hanging out at the arcade was a thing.  Nowadays.
  • The other day I was in line at our local Walmart (when times are good, it’s Target and Whole Foods.  When times are like now, it’s Walmart and Aldi’s) and some guy ahead of me was in line was trying to use multiple gift cards to make a huge purchase.  There was some problem with the register and the whole ordeal took something like ten minutes as the queue grew increasingly long, with everyone inline growing considerably annoyed.   Yes, there was something like twenty registers, but only three were manned at the time (it was a weekday afternoon).  I mean, seriously, can you blame millennials for not wanting to venture out into meat-space?  It’s awful.
  • So back to now:  What are the implications of COVID-19?  Will it make meat-space more attractive or less?  You do that math.  My feeling is that the Coronavirus will just accelerate what had already been a growing trend:  People doing more commerce from home, people being more entertained at home, etc.  I’m a big follower of a16z and their big claim to fame is “Software is Eating the World.”  I wholeheartedly believe in that.  This is why I currently have huge positions and am overweight in memory and semiconductors.  I believe in more datacenters, more people going online (according to Andreesen, only half of the global population is currently online.  Vast swathes of South America, Africa, etc are still in the queue, etc), and that basic human way-of-life is fundamentally changing.
  • Also, I do believe we’ll eventually figure out crypto.  And that translates into (my belief, anyway) a big/bright future for semis and memory.  Long AMD and MU!

Our current president is transparently corrupt.  The one thing, as far I can tell, that he cares about most is himself.  I’m sure somewhere he’s invested lots in the market, personally.  Also, he has lots of rich friends.  The only thing Trump can really hang his hat on atm is America’s record bull run.  Trump will move heaven and earth, legally or otherwise, to make sure the market doesn’t fail.  That’s what sets him apart, IMHO, from previous presidents who were bound by things called “laws” and “norms.”  You’re welcome to bet against a megalomaniac who currently controls 1.5 of the three branches of the American government (maybe even 2.5/3, if you count SCOTUS) who only cares about himself and his own wealth.  Personally, I’m aligning my own interests with his.

Also, I sincerely believe –especially if it ends up being Bernie or Biden– that Trump is a virtual lock in November.

Two Reasons the Market will Rebound Sooner Than You Think

Longtime lurker, first-time poster to this sub. I’m fully cognizant that this post may not age particularly well next week, or in the weeks hence (especially in light of recent news), but whatever; I have no shame putting myself out there. This is why God gave us anonymous Reddit handles.

One: It’s an election year.  Trump absolutely won’t let this market fail.  By hook or crook, he will 100% do everything within his power (and not in his power) to prop up the market.  (Including working Powell like a sock puppet.)

Two: Investors will eventually realize/recollect what I still remember from two weeks ago:  It’s a classic chase for yield.  As expensive as they’d gotten, as recently as two weeks ago, US equities still remained a bastion of growth compared to virtually everywhere else in the world.   And that was before COVID-19.  If the rest of the world was already teetering on the precipice of blazing-dumpster-firedom before the Coronavirus outbreak, now the full-on zombie apocalypse has actually arrived, where do you think all of those pension funds/hedge funds/etc are going to get their returns for 2020? (They need to be able to somehow justify charging those fat fees!)  Italy?  The UK?  Germany?  China?  America has now literally become the only game in town. The market is forward-looking; after the initial panic settles, where will that chase for yield go?

Game on.  I’m all in. Last week hedge funds suddenly woke up and remembered why they existed. But eventually, when the inevitable rebound happens, I expect Big Algo to launch it into the stratosphere. It shall be thunderous unlike any man has ever witnessed before. I obviously have no idea where the exact bottom is, but I’ve learned that precisely timing it is a fool’s errand. (If you’re able to do it, then good on you. I am happy for you; I am simply not as skilled as you are.) The only way (for me at least) is to ride it out. Assuming you’re not facing a margin call, etc, my humble suggestion is to just take a vacation and not even look at what’s going on. Check back in a week or month or two.

(Disclaimer: I’m personally currently long AMD and MU– I believe in the Big Data Story! PS. AMD’s Investor Day is March 5! Am expecting great things!)

PPS. All that said, I’m fully aware there are tons of people thinking the worst is yet to come. This clip from WSB is one of the funniest things I’ve seen in a long time.

The Battle Station: A User Story

Every morning, I wake at a leisurely hour and waddle over into the kitchen to make my usual coffee and bagel with cream cheese. Then I putter into my room and unhurriedly take a seat at The Battle Station.

The Battle Station is a six-display setup in a 3×2 configuration. Each display is 43″ and pushes ~4k– specifically 3840×2160.

By the time I sit in front of the Battle Station, all six displays have already woken up (when not in use, they’re either dormant, in power-saving mode, or they’re displaying some cool screensaver that looks very technologically futuristic and fancy).

On Display 1 & Display 2, the Nancy the News Scraper is already running. Basically, 24/7– Nancy monitors all of the major news outlets on the internet. Her job is to keep me informed on significant world events. On any given day, where’s the news cycle? What are the headlines? What’s the general global sentiment? [By sector? By company? By topic? Ponder this more.]

Nancy – Phase I

Every morning, Nancy I will scrape the homepages of several major news outlets (Bloomberg, NYT, Yahoo Finance, WSJ), save their homepages as giant, full-page, png-files on imgur, and display each homepage in its “News Bizcomp.”

In its current state, Nancy I doesn’t do anything fancy (anything AI-related; though that’s an eventual hope). Currently, I just rely on Nancy I to assist aggregating and archiving each day’s news headlines into imgur. Essentially, right now I just want an easy way to “time travel.” When I’m performing historical analysis, I want an easy way to look at any particular day and pull up its chart, relevant news, and general headlines of that particular across multiple publications.

In the future, Nancy II will scrape all of the major news sites, looks at the headlines, and identifies the headline’s chief subject. [More ideas?]

Two left-side two monitors:

The center two monitors:

The right-side two monitors:

The Day-Trader’s Credo & The Bagel List

Relying on day-trading as one’s sole means of daily income possesses several financial implications.  One of which is that your bank balance and daily/weekly/monthly cash flow can be highly unstable and uncertain.  I’ve only been day-trading for five months but have already been forced to endure lengthy down-stretches.  Statistically and historically, the models almost always tell you that your positions will recover.  But believing that –especially during huge rocket rides or death slides– and practicing the discipline to hold your positions in the face of unrelenting onslaught are two totally different things.

It’ll be useful before proceeding further to first clarify a few points though.  Again, these are simply the practices which have worked for me.  These are not recommendations, etc.

Since income from day-trading is always uncertain, it engenders both “save for a rainy day” and “if we got it, spend it” mentalities.  There is nothing more frustrating than being frugal and saving tons of money over a long period of time (say, many months) only to have those hard-earned savings all incinerated in a single swoop by an unexpected market downturn in a single day or week.  Conversely, because sudden plunges could happen any time, that’s also why I’m not extremely leveraged (2:1, at most, and only for short periodicities).  Remember, assuming you’re leveraged even at a modest 2:1, if your holdings decline by 50%, then you’re entirely wiped out.  (For reference:  LTCM was leveraged as 25:1 at the time of its collapse).  Also, generally speaking, even if you’re not leveraged, if you lose 50% one year, you’ll need to make 200% the next year just to get back to even.  Thus, whenever I see a hedge fund manager having a terrible run, losing 30% or even as much as 50% during a bad stretch, I’m never impressed when they rebound 40% the next year.  If you lose 30% in one year, you’ll need make 150% just to get back to even.  Only coming back 40% means you’re still down by a lot.

Continue reading “The Day-Trader’s Credo & The Bagel List”

Parable of the Three Traders

What is Quantitative Finance?  As Wags on Billions once astutely summarized:  “Wild guesses, with math!”

Before we dive deeply into the math world that is Quantland, into regressions, covariances, and Sharpe Ratios, I want to step back and tell a little parable that is good to always have in one’s mind as background.  Today, I want to specifically ask and answer a question that I honestly wondered about for the longest time.  Why are Wall Street traders and hedge fund managers paid so extravagantly and obscenely?  What exactly do they do?

The banal answer, of course, in the simplest formulation –before the Era of Derivatives and other “Financial Weapons of Mass Destruction” (as Warren Buffett once coined)– is traders sit behind their trading desks and buy and sell equities all day long.  Dear Reader, I know this is difficult to fathom, but there once upon a time existed a world before computers and the internet.  Back in these olden days of yore –before options trading, calls, puts, strike prices, and whatnot– it really was just “buy low and sell high.”  And while the financial world has obviously exponentially exploded in complexity this past half-century, I want to return to that era when things were simpler to tell today’s parable.  Strategies, tactics, and tools may have evolved, coming and going with the times– but the overarching mandate of professional traders who trade for a living have not:  They are there to generate as much money as humanly possible for whatever institutions that employ them.  Let’s examine this Parable of the Three Traders to illustrate how they do that.

Continue reading “Parable of the Three Traders”

#003 | Philosophically Opposed – Part I

Previously, I’d mentioned that both Bagel and I are profoundly, philosophically opposed to day-trading.  Today I wish to elaborate a bit on why.  Again, the target audience of this blog is laypeople who’ve never day-traded, or who may never have even invested before, who are looking to simply learn more about the subject.  After poking around on Facebook this past summer (and engaging in random arguments with complete strangers as I’m occasionally wont to do) I quickly discovered that many people actually don’t possess basic financial literacy and historical knowledge about the stock market.  People will know about “America’s Top Model” on television but won’t have the slightest inkling about how the stock market, that is, the foundational pillar of modern capitalism, works.  In fact, many people on FB –at least the folks I corresponded with this past summer– will rail insistently against all of capitalism, decrying the entire economic system as “evil” and “rigged.”  And they will somehow do this without being even able to articulate to me the difference between bonds and stocks.  Look, to paraphrase Josh Lyman:  “…I realize as an adult not everyone shares my views of the world… and with an issue as [big as the economy] I’m prepared to accept a lot of different points of view as being perfectly valid…” but when it comes to the stock market, we’re talking about the economic engine that drives the American and global economy!  A cornerstone of modern civilization!  If you’re going to rant at me in dissertation-length posts on Facebook about how, “Bernie is a Genius and Capitalism is Bad,” then we’re gonna at least get the names of the damn commandments right! 

You know, it’s okay; I didn’t know much of this material either until my mid-twenties. Despite having been a good student, having gone to college, and even having worked at a bank (albeit, again, not for the financial side), I was ignorant of much of the inner-workings of how the American financial system actually works. This post seeks to shed a little light on the subject.  Let’s start with some basic background.

Continue reading “#003 | Philosophically Opposed – Part I”

#002 | Why I Day-Trade

Day-trading was never my first choice, at least not for a living.  It’s not an activity I’ve willingly entered into.  First, it’s something I’ve actually tried before.  And my experience then was mixed.  I had incredible highs and soul-crushing lows.  Second, from all the reading I’ve done on the subject, and from my own personal experience, I’ve found day-trading incredibly dangerous and risky.  While some day-traders may make short-term profits, in the long-run, virtually all get positively destroyed and lose their shirts.  Repeatedly, I’ve read online and heard from countless sources that the real way to build true wealth is to buy and hold for the long-term.  Buy value stocks and buckle in for a long, thirty-year ride.  This is how the all-time greats like Warren Buffett and Peter Magellan amassed their tremendous fortunes.

I totally agree with this assessment.

Furthermore –and this may be a little lofty/high-minded, but I’m just going to put this out there– I philosophically disagree with the entire concept of day-trading.  I’ve mentioned in a previous post that Bagel 110% condemns me day-trading. And I actually also 100% agree with her as well.  [More on this in a future post.]

Additionally, know that the playing field is hugely stacked against individual investors.  In markets, it’s the institutional players –the Bank of Americas, Citibanks, Goldmans & Morgans– that control all of the real money.  These outfits are massive in scale, employ the most brilliant people, and possess unparalleled resources in terms of research analysis, technology, and connections (government and otherwise).  Day-traders and individual investors are known at these banks as “Retail Money” or, more pejoratively, “Dumb Money.”

Continue reading “#002 | Why I Day-Trade”

#001 | Welcome to Adventure!

I am starting a blog written anonymously about day-trading. Of course many posts will cover day-trading; but I envision some posts will also be about my general lifestyle– that is, day-trading as a means to pay rent, buy groceries, and pay bills. When you’re just a normal, regular prole trying to day-trade for a living, you’ll find that it’s not a 9-5 job. It’s more a like a startup you’ve self-bankrolled that’ll engulf your entire life and every waking moment. Even when you’re not trading, you’re thinking about trading. Or you’re preoccupied with a massive position you’ve taken on that’s moved against you. Or about half-a-dozen other things on your many to-do lists. I’ve transferred just about every last cent out of my Citibank and Chase accounts into my Fidelity brokerage and am putting it all on the line. It’s not some abstract number in some 401k that blithely moves up and down which you see every other quarter or maybe even once a year. This is real life. As John Hoynes would say, “Welcome to the NFL.”

Why written anonymously? Well, while my closest friends will know my true identity, I’m confident they will remain discreet.  And generally, it just makes me more comfortable.  In person, I’m usually reluctant to share personal financial details (I was always taught that it was bad taste and a faux pas to do so in polite society) but if this is a blog that’ll largely be about my adventures (or misadventures) in day-trading, then it’ll simply be unavoidable disclosing some personal financial information.  I’ve thought about this lots and have made my peace with it.  I love writing.  I love programming and finance.  Combining the two –at least for now– makes sense to me.

Continue reading “#001 | Welcome to Adventure!”