Daily Speculations
May 2003
The Old Man and the Sea
“Now we fish together again.”
“No. I am not lucky. I am not lucky anymore.”
“The hell with luck,” the boy said. “I’ll bring the luck
with me.”
“What will your family say?”
“I do not care. I caught two yesterday. But we will fish
together now for I still have much to learn.”
--Ernest
Hemingway, The Old Man and the Sea
From: Trader
To: Vic
Subject: The more I trade
Date: 05/09/2003 23:20:32
the more I feel I have absolutely no clue. Today I was long coming in,
stayed in until 32.50, sold, and shorted a bit at close. Why the hell
did I short? Because I felt like trying to reverse all this emotion,
same as why I went long the other day. I am thinking more and more the
thing is just to wait for an extreme move - one from a wild day up or
down to a run in one direction - pick a spot, load the boat, and get the
hell out of the room. The last part, of course, I cannot do. I like to
watch. All of the recent posts on hidden order make leave me with the
weary mirth of the failed alchemist.
* * *
By testing patterns you would see it not good to sell short a big rally –
especially over weekends. Vic
* * *
You think maybe its time just to buy the dips and lighten after a big
move? With the drift and the reversion potential of the last three
years, yes, I see it. But what about this VIX here? And -I can't help
thinking this way - the valuation of the tech sector on any reckoning
of free cash flow is absurdly high. We would buy none of these
businesses at these prices in going private transactions. Okay, the
yield curve is very very steep. If the long end continues to come down,
together with the dollar, it's a huge margin loan to the economy, but I
can't help seeing a short side too. What am I missing?
* * *
You are missing what 99% of the recent posts on the spec list are
missing., and what threatens to Greshams-law our list to death. You are missing merely
seeing what happens when the market hits a x-day maximum at the end of the week.
And testing what happens. That's all I’m talking about. Not whether it's too
high or low, but whether it's good to sell a new high. Not at all. Bulls are
powerful in almost every market when they make money. Young man, the fish is not
tired at all, and when the morning comes he will be joined by his wife and
children to pull you. Vic
* * *
Yes. It's true, I have felt the fish, and he is strong. And I have not
tested to see when he starts to make his swing, but you are right. He is
still moving straight out.
Maybe for the good reason Susan cited, I have to get a data
file. I only have one set of hands. Thanks. I bring you coffee any time.
I was long was the ES, and what I shorted at 32.5 after selling longs
was also ES. I was long NQ 21.5 to 44, but did not short it (although I
confess a yearning to have done so.) So as for Friday, the fish did not
kill me. It will kill another day tho, I am sure.
* * *
You are very humble young man. And as far as I know you have caught
many fish this year, more than I. But you like to pretend that I can still
catch them well. And for that I thank you. Vic
* * *
From: Jack Tierney
Aha, a cry from the wilderness and one I can appreciate. And an answer that
I can appreciate even more. I've been reading the comments on TA for some
time now trying to grasp just which are the essential elements (price,
volume, volatility?) and which can be eliminated (candlesticks, P/Es, wave
theories, historical precedence?). All have, at different times, been both
remarkably predictive and remarkably innacurate.
After spending hours reading a variety of books, articles, and posts to the
List I determined I wasn't capable of embracing the many different factors
that drive the market. After reading one essay, though, I determined that
I'm not alone...in fact, NO ONE, including the estimable Mr. e, has the
capacity. And it's largely why I, for the time being, abandoned my bearish
stance. You can send all the material you wish proving that this market is
40% oversold or that according to the Fed model it's reasonable to buy
equities sporting P/Es of 33 or whatever...it will not change my mind: ours
is an economy in terrible shape. BUT that's begging the question. The
current market seems indifferent to historical facts and accepted (by some)
wisdom.
From a market perspective, the only important question to be answered is:
Will it go up or down? Vic's answer: "that's all i'm talking about. not
whether it's too high or low. but whether it's good to sell a new high"
encapsulates what I had missed for so long. By abandoning the impossible
quest of discovering the market's mechanics and studying what the market has
done under given circumstances, one is freed from the arduous and frequently
unsuccessful efforts that go into gathering information and positing what
the market should do.
The essay, "I, Pencil" was written in 1958 by Leonard Read. I'll
occasionally throw out an URL for an interesting article or essay but leave
it to you to follow up or not. This one, though, should be read.
http://www.econlib.org/library/Essays/rdPncl1.html
Jack
He was an old man who fished alone in a skiff in the Gulf
Stream and he had gone eighty-four days now without taking a fish. In the first
forty days a boy had been with him. But after forty days without a fish the
boy’s parents had told him that the old man was now definitely and finally salao,
which is the worst form of unlucky, and the boy had gone at their orders in
another boat which caught three good fish the first week. It made the boy sad
to see the old man come in each day with his skiff empty and he always went
down to help him carry either the coiled lines or the gaff and harpoon and the
sail that was furled around the mast. The sail was patched with flour sacks
and, furled, it looked like the flag of permanent defeat.
…
He was asleep when the boy looked in the door in the
morning. It was blowing so hard that the drifting boats would not be going out
and the boy had slept late and then come to the old man’s shack as he had come
each morning. The boy saw that the old man was breathing and then he saw the
old man’s hands and he started to cry. He went out very quietly to go to bring
some coffee and all the way down the road he was crying.
Many fishermen were around the skiff looking at what was
lashed beside it and one was in the water, his trousers rolled up, measuring
the skeleton with a length of line.
The boy did not go down. He had been there before and one
of the fishermen was looking after the skiff for him.
“How is he?” one of the fishermen shouted.
“Sleeping,” the boy called. He did not care that they saw
him crying. “Let no one disturb him.”
“He was eighteen feet from nose to tail,” the fisherman
who was measuring him called.
“I believe it,” the boy said.
He went into the Terrace and asked for a can of coffee.
“Hot and with plenty of milk and sugar in it.”
“Anything more?”
“No. Afterward I will see what he can eat.”
“What a fish it was,” the proprietor said. “There has
never been such a fish. Those were two fine fish you took yesterday too.”
“Damn my fish,” the boy said and he started to cry again.
“Do you want a drink of any kind?” the proprietor asked.
“No,” the boy said. “Tell them not to bother Santiago.
I’ll be back.”
“Tell him how sorry I am.”
“Thanks,” the boy said.
The boy carried the hot can of coffee up to the old man’s
shack and sat by him until he woke. Once it looked as though he were waking.
But he had gone back into heavy sleep and the boy had gone across the road to
borrow some wood to heat the coffee.
Finally the old man woke.
“Don’t sit up,” the boy said. “Drink this.” He poured
some of the coffee in a glass.
The old man took it and drank it.
“They beat me, Manolin,” he said. “They truly beat me.”
“He didn’t beat you. Not the fish.”
“No. Truly. It was afterwards.”
…
“Now we fish together again.”
“No. I am not lucky. I am not lucky anymore.”
“The hell with luck,” the boy said. “I’ll bring the luck
with me.”
“What will your family say?”
“I do not care. I caught two yesterday. But we will fish
together now for I still have much to learn.”