Archive for December, 2009
Not 24 hours after MartinKronicle.com listed Bailout Nation as one if it’s best reads for 2009, the “Henry and Aaron Show” tried to steal my thunder by naming Barry Ritholtz TechTicker Guest of the Year for 2009.
Mozels Barry, and thank you for taking the time to speak with me and my humble operation this year here in Los Angeles.
For the traders reading, you should have an understanding of the political economy, how the Fed works, and some fundamentals.
There are only a few Fed watchers who are very good IMHO…but they are not traders. Yet, there are one or two worth listening to. Kathleen Hayes comes to mind as probably the best non-trader Fed watcher. But for insight from a guy who manages risk, I suggest you read Ritholtz and his blog (link below). He lays it out in common, plain English.
Question: Why should I need to know about the FOMC, the Fed, and economic fundamentals?
Answer: Try and meet with a prospective client and start telling them how “you buy 20 day breakouts and have a 10 day trailing stop and never have more than 8% portfolio heat with no more than 3 correlated directional positions…” and watch their eyes glaze over. For all the BS chatter that you don’t need to know fundamentals to be a great trader, ultimately you need to have an understanding of such to hold a conversation with your clients and potential clients, if nothing else.
To get to the point where you can do that, I recommend you do two things:
–Read The Big Picture
–Read The Economist
You can get syndicated RSS feeds from both or join the mailing list. If you’re hardcore, get the print copy of The Economist and read it at the gym. If you’re a savvy marketer, buy a subscription for your best clients…every week they’ll be thinking of you, and you’ll have plenty of talking points.
Happy New Year and may all your losses be small and manageable losses!Read More
What are your daily habits?
I think it’s important for aspiring and new traders to time-block their days. Write down everything you do from the time you get up through to the time you go to bed. Notice especially what is happening in the background. If you have music or TV on, write that down too. If you have certain or specific people around you OR NOT, write that down too.
Linda Bradford Raschke suggested that beginners follow a single market and write down the price action in 5-minute intervals. This could go under research for example, and IMHO I think it’s a great exercise.
I would define your routine to include trading your model or doing what you think you need to do to make money. How you get your trade ideas, entering orders, and research for example. If you don’t have an algorithmic model yet, that’s ok – you’ll get there.
A ritual, on the other hand, is something that feels good, but doesn’t necessarily make you any money. “I get up, hit the can, put on the coffee.” Putting on the coffee is a ritual. Reading the paper while you’re in the WC, is also a ritual.
Surfing the web while at your desk during market hours is probably ritualistic too: it’s a form of entertainment. You may disagree b/c you may get what you think is very valuable information from the blogs. I do not think that is research per se, b/c I believe that everything you need to know about what you’re trading is always reflected in its price. I do read lots of blogs, but I know what it means to me and my time and how it may or may not benefit my trading: it doesn’t benefit my trading, but I like to do it.
Trading IMHO, is also mechanical. Some of the best traders trade by having their orders on the floor, while they are out doing other things. Being a trader does not mean being glued to your screen. It looks good in movies and on TV, but it kills your eyes. Being glued to your screen may be a big, macro ritual that leads you to FEEL like you’re being a trader.
Paul Tudor Jones said that trading takes place between 5 and 10 pm. Get it? The markets are closed. He’s laying out his plan for the next day or days. My guess is that he’s unavailable to anyone during that time frame. Who gets face time with you when you are laying out the next day’s goals, objectives, and trading ideas?
One of lessons you’ll garner from this exercise is to make sure that you are doing the things that make you money most of the time. If the statistics are correct that we are using only 10% of our brains, we need all the critical time we have to make it count in our trading. If you have trouble focusing, we’ll address that in future blog posts.
You can send me your daily time-block if you want and I’ll give you some free feedback. One of my courses at UCLA will deal exclusively with these concepts. I reserve the right to use your question or material (maintaining your anonymity of course) as a future blog post for everyone to learn. You will not be humiliated nor shamed in any way. I study my own behavior as such.Read More
I’ve read my share of books and I consider myself a voracious reader: I love to read. I have an e-book reader, but there are certain books that I think you need to hold in your hand, so I read both.
You can tell about my reading preferences a little, because most of the podcasts I’ve done are with authors about their books. At the very least, the guests have written a book or two during their careers.
If I’ve done a podcast, you can bet that I thoroughly enjoyed the book and thought it would be interesting to get inside the author’s head by recording the conversation and making it available to all of you for free. You can also subscribe to them via iTunes if you want.
However, sometimes I take it a step further and I blog about it at Mises or HP, and write a review at Amazon.com.
As far as Recommended Reading lists are concerned, I still believe in all the classics, however, I’m sure that there is not much insight I can provide that hasn’t already been delineated – that’s why they’re classics. Hence, I’ll spare you the blathering.
Here are some books that I’ve read in 2009 that I enjoyed, in no particular order. Some were for fun some for business. I generally have no use for fiction, as you can tell. I don’t need the $1.17 in commissions from Amazon Affiliate Marketing, so you’ll have to go to Amazon.com yourself and look them up. I’ve noted where I’ve done a podcast with the author at MartinKronicle.com or an Amazon Book Review.
How We Decide by Jonah Lehrer
Bailout Nation by Barry Ritholtz (Podcast)
The Dollar Meltdown by Charles Goyette (Podcast & Amazon Review)
A Gift To My Children by Jim Rogers (Podcast)
Trader Vic on Commodities by Victor Sperandeo (Podcast)
The Devil We Know by Robert Baer
Animal Spirits by Akerlof & Shiller
The King of Oil by Daniel Ammann (Podcast & Amazon Review)
Whispers From Eternity by Paramahansa Yogananda
One Of A Kind by Dalla & Alson
Catch Me If You Can by Abagnale with ReddingRead More
I choked on my words and stuttered, but ultimately held my own after some encouraging words from Manish before going on: “You’ll be fine. You’re on right after Rakesh Jhunjhunwala” and “You’re probably the only white guy who will be on all year.” It was about 120 degrees Fahrenheit in the studio. Other than that, it was a piece of cake.
Udayan and Mitali wanted to know about stock picks and “what do you think of XYZ?” But that’s their model: they are used to getting lots of tips and tricks. I was just sticking to my model. Stick to YOUR model.
This was filmed on July 14, 2005 in Mumbai.Read More
I just posted an article at the Ludwig von Mises Institute (LvMI) on the book The King of Oil: The Secret Lives of Marc Rich by Daniel Ammann. Below is the text:
To hear author Daniel Ammann tell the story, Marc Rich was run out of the United States. If his thesis is correct, President Clinton’s pardon of Rich (and Pinkus Green for that matter) should have been just the beginning of an apology the size of which could be immeasurable.
At the heart of Ammann’s book is the life of Marc Rich who created what is known as the spot market for crude oil.
Rich began his commodity career working for Philipp Brothers, (now Phibro) – a part of Occidental Petroleum – before launching his own firm in 1974 with Pinkus Green and Alec Hackel. The new firm was to be called Marc Rich + Co AG. Rich is a Randian and was known for making large commodity deals on handshakes.
Most international companies, including the American Seven Sisters, had legitimate offshore entities to better manage their tax liability, among other reasons. So that Marc Rich + Co AG had several such entities should not have come as a surprise to any international commodity dealer.
If not for an overzealous US Attorney Rudolph W. Giuliani, Rich undoubtedly would be in the United States. He was indicted for dealing with Iran during the hostage crisis. Yet, according to Ammann, each of the American Seven Sisters – through subsidiaries – were doing business with Iran all the while…obviously a double-standard. President Carter’s nationalist decree, as many government interventions, eventually harmed Americans more than helped. Carter was impotent and for the most part powerless during the whole Iran hostage crisis.
Marc Rich + Co AG admittedly was never part of the establishment. Furthermore, their main office was founded in Zug – not the US. This would allow them to legitimately recognize revenue through channels that would lower their tax liability. There’s not a publicly traded firm on the NYSE that doesn’t have legitimate offshore entities for their foreign dealings.
Rich was ultimately indicted for illegally dealing with Iran during the hostage crisis and tax evasion. He did not flee: he was in Switzerland at the time and never returned to the US.
Giuliani, no stranger to the perp walk, saw an easy target and literally made his case. Giuliani got his political win in that he very publicly seized tens of millions of dollars in frozen assets in the US.
However, he didn’t drop the case as he often did after all the fanfare and press that he got BUT he didn’t bring the case to trial either. Had he taken Rich through the court system and lost, he would have lost much political capital.Read More