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Get the Joke
James Lackey
12/24/2005
James Lackey: "Get the Joke" Posts: The Year in Review
"This is another interesting thing. A good partnership is one of the most important success factors in bridge, yet almost no book deals with it. Same with trading. 99.9999% of the books are geared to the individual trader. However, a lot of professional trading is being done as a team member. You're on a desk, you're part of a team, you get judged on the team's P/L." -- Bruno, a stroke past midnight, Jan. 1, 2005.
Tsunami post: "The elders told us that if the water recedes fast it will reappear in the same quantity in which it disappeared," 65-year-old village chief Sarmao Kathalay told the paper. So while in some places along the southern coast, Thais headed to the beach when the sea drained out of beaches the first sign of the impending tsunami to pick up fish left flapping on the sand, the gypsies headed for the hills." -- Gibbons Burke, Jan. 1, 2005.
"Other anecdotal evidence of a Euro Top Jan 18th Mercedes C230: 25,1% cheaper (incl. taxes, transport, etc...) when reimported from the USA Porsche Cayenne: 19.6% cheaper Toyota Celica: 26.5% cheaper The economist Burgernomics index is showing 25% overvaluation of the euro (for the last 15 years it has been a fairly good indicator for the performance of currencies-- at least better that the trade balance/budget deficit combo)" -- Jean Paul Schmetz.
headlines crossing Bloomberg: "Gates says he is "short the dollar." Gates: $ to "go down" "I recall no precedent for him commenting on asset prices." gz. "Perhaps Warren is trying to unload his humongous $25 billion short onto his good friend Bill." -- TonyC, Jan. 28, 2005
"There is only one book that really matters and IT'S YOUR RECORD. Not too simple at all if you have a documented record of making money over both LONG 15-10 years and short 1-3 years you have been tested by time price temperament sentiment and logic. The best education is when you put into practice all you think you've learned. Then and only then will you start to have a record that will demonstrate you know something worth repeating to others. The spec list is the right mix of students, amateurs, hobbyists and pros. All of us, myself included, at different points in time and experience have morphed through all stages when I talk about a new venture in, say, trading ISHARES where we are HUGE, I assure you I was an amateur when it all began...BECAUSE I HAD NEVER DONE THAT BEFORE. You pay the price if you think you can read a book on this topic that will show you how to make money from day one...if that was so, then there would be no industry no product no market no endeavor that had a barrier to entry." -- Mr. E, Feb. 10, 2005.
"Last night I was reading the newspaper with the wife and laughed out loud throughout this Times article (link below) on the poker-playing Princeton student. I read her the following quote:
"I'm playing this game, treating it like a job," he said. He predicts that he could make up to half a million dollars a year, just playing on his computer every day. "Even with the bad runs," he said, "I haven't had a losing month or even too long of a losing session. I think I'm a pretty smart guy, and I'm only going to get better at cards."
"Poor kid," I said. "As an Ivy League senior you'd think he'd be aware that all gamblers die broke. She gave me a quizzical look. "All gamblers die broke? But you gamble on horses!" "That's true," I said. "But I really enjoy it." "How can you enjoy it if you know you're eventually going to die broke," she asked, sounding startled. "That's easy. I don't do it for the money." -- Kevin Depew, March 15, 2005.
"I understand the point being made, but how should one take a loss? The usual prescription advocated in trading books is a stop. I find when backtesting trading strategies that stops often reduce profits by prematurely killing trades that would have turned profitable." -- Steve Ellison, March 17, 2005.
"May I suggest that mentally the trader often has a similar 'style' that he excels at, and finds it mentally difficult to run when the course conditions are against him. And rather than spending his time defending his style would do best finding the right mental exercise to expand his abilities. In running, I have never found this to lessen my instinct to pounce when the conditions are favoring my style." -- Russell Sears, March 28, 2005.
"Who is more bullish? Is it time zones, or holding/folding, or something else that causes the phenomenon noted by the Chair? Things have changed to some extant, because of online trading and VWAP-type programs. In the past, the little fish showed up at the open. That's when the sharks ate them. The close was when the whales hunting plankton scattered the sharks" -- Bruno, March 29, 2005.
"I'm with Mr. Schneider on this one. The market is similar to the secular bear market as it stood on December 8, 1994, with the S&P at 445. At that point the S&P was about 5% below where it had been one month earlier. The decline was plain for all to see, unsanctioned by the church, and clearly secular. Three years later the market was at 982." -- Prof. Charles Pennington, April 1, 2005.
On Boston Scientific conference call: Question: "Given that your stock price is sitting at a 52-week low, would senior management [who have sold some $200 million of stock over the last two years] consider using some of their own money to buy back shares?" Answer: "I don't care how cheap it is. I've got $6 options so buying at $30 is a bunch of bullshit. In answer to Victor (and of possible interest to other questioners): The 'buying at $30 is a bunch of bull----' answer was the ONLY candid and honest statement in the entire conference call. Perhaps he was tired after an hour of dissembling." -- Daniel V. Grossman, April 19, 2005
"I am just sick to death of elites or others who claim to be in the know making sweeping generalizations about people and deciding that they know best for me. -- Pamela van Giessen, April 29, 2005
"A modest attempt to bring the record up to date:"
1982: Double-digit unemployment 1983: Record budget deficit 1984: Technology new issues bubble bursts 1985: Dollar too strong 1986: Dow at 1800 - "too high" 1987: Stock market crash 1988: Worst drought in 50 years 1989: Savings & loan scandal 1990: Iraq invades Kuwait 1991: Recession 1992: Record budget deficit 1993: Clinton health care plan 1994: Rising interest rates 1995: Dollar at historic lows 1996: Greenspan "irrational exuberance" speech 1997: Asian markets collapse 1998: Long Term Capital collapses 1999: Y2K problem 2000: Dot-com stocks plunge 2001: Terrorist attacks 2002: Corporate scandals 2003: Gulf War II 2004: High oil prices 2005: Trade deficit
-- Steve Ellison, May 8, 2005.
"I was coached in the philosophy of, "Just don't swing at bad pitches,' rather than, 'Wait for the perfect pitch.' The problem with waiting for the perfect pitch: E.g., Barry Bonds lifetime stats. After 1-0, .340. After 0-1, .235. After 2-0, .299. After 0-2, .123. I propose trading is not altogether different. It's not the perfect pitch we want -- just a good pitch to swing at." -- Tom Ryan, May 20, 2005.
"The beautiful thing about mortgages is this: the collateral behind them is NOT MARKED TO MARKET. As long as you can pay--there is no margin call. Things might be a little leaner for me later--but I won't get forced out of my home as long as I can write the checks. Should I be less bullish on myself, perhaps? Well, if I am, then where am I, and what am I doing here? I am able to adapt, and I will find a way to survive and earn and provide for my family. We close tomorrow on the new place." -- Justin Klosek, May 19, 2005.
"The only thing that Mr Dow 5000 ever said that made any sense to me and that I could count was his remark about the risk-adjusted return of moving out of 30-day (money market) paper into paper of 90-180 day duration and how it was among the best risk-return moves one could make. Everything else reminds me of that joke about stock traders having strong opinions about bonds and bond traders having strong opinions about stocks." -- Tom Ryan, May 25, 2005.
"It takes a cold, logical evaluation of whether the trade is a good trade at the current level. In other words, if the market is a short, it shouldn't matter that you've already carried it up a few points unless a) you're out of money or b) past your pain threshold. My rule of thumb is that it's never wrong to cover half a trade if you're in so much pain you can't think rationally. If you find yourself saying "Let it get back to even and I'll cover" or "Please oh please Mistress of the Markets, if you let me out of this trade I'll never sell a put/sell short/buy GM again" then you are in a bad trade and should bail." -- David Wren-Hardin, June 10, 2005.
Trader 1: "The idea of having an opinion that is useful or superior on a consistent basis is an illusion. Or, better yet, is a delusion. Better to just develop the skills to trade the market without an opinion. When you say that to most people, they look at you and you realize they don't have any idea what the hell you're talking about." REPLY: MORE LIKELY THEY HAVE REALIZED THAT *YOU* DON'T KNOW WHAT YOU ARE TALKING ABOUT! If you are long for whatever reason (a hunch, or a technique, discretionary or mechanical, simple or sophisticated) then you are bullish. And if you are short you are bearish. And you will make money only to the extent that in the future you are right (i.e. conditional expectation is positive). Conversely if you don't have an opinion then you must stay out of that particular market (flat). You may say you don't have an opinion, but your brokerage firm knows whether you are bullish or bearish on a particular market, and can even quantify the extent of your bullishness/bearishness." -- Alex Castaldo, June 19, 2005.
"This has been one of the greater truths of market ecology as public participation in the market has increased over the last 20 years. Anomalies that existed for decades disappeared overnight. Trading strategies that worked since the dawn of time stopped working. As capital in extraordinary amounts chase whatever worked last year, the strategy was doomed. we've seen it in the last five years in risk arb where returns went from a steady, almost clockwork double digits to sub 5 for any serious amount of money. In distressed securities the amount of new money literally forced the larger more established players to invent new ways of capturing the returns at the expense of the newbies .And except for an exalted few -- the likes of Tepper and Ross come to mind -- returns went away. I think we will now see this with stat arb, pairs and statistical pattern trading." -- Tim Melvin, July 1, 2005.
"The reason is something of great value to us and our freedom, namely, freedom of the press. The press does not have a fiduciary relationship with its readers and its readers would be foolish to expect to have the same degree of professional from financial writers in the press that they might expect from an investment advisory service. There are those of us who question whether the SEC should have as much power as it does over the securities industry, but it is clear to most Americans that the true press should be free of government interference as to who may be a reporter and what they might write. For once that power is extended to one area of the press what is to stop it from being applied to other areas and soon the government might be in a position to curtail freedom of expression through such regulations. Even with regard to financial areas such powers might cause corporations to use their political powers to get government to restrict unfavorable commentary on their activities to the detriment of the free flow of information which is so important to properly functioning markets." -- Rudy Hauser, Aug. 12, 2005.
"The only way to survive as a spec is to be aware of the *context* markets operate in. You can't trade debt off economic data without knowing "the Fed is on the move", for instance. Yes info flow and market microstructure are important, but failing to grasp the meta-environment in which prices are set is bound to be fatal." -- gz, Aug. 25, 2005.
"Speculators perform an indispensable service for the country and the world financial system. In times of panic, disruption or disaster, when many are looking for or need cash at any price, speculators provide the liquidity and take the merchandise. Cash Money is worth more in times of panic or disaster when the funds are needed for other than capital projects. For this valuable and indispensable service, they are paid a higher rate of return to compensate for the valuable nature of their service. For the speculator, the service aspect can be as rewarding as the profits. A friend commented that trading is very painful and stressful and a mistake can result in serious loss. Other professions are no less painful nor less stressful.. A mistake in any field will result in serious loss, even loss of life, or loss of the job. The stress is as great as are the length of hours or years spent mastering and performing the skills. Practice develops the mental and physical toughness to perform the daily task in any area." -- Surfer Sogi, Aug. 30, 2005.
"Wise words indeed from Dr Zussman, to which I'd add: The original query was about a child, and children have an amazing radar for hypocrisy. They learn (or don't learn) the values Dr Zussman enumerates (and others: courage, honor, loyalty, empathy, courtesy, respect, integrity, patience, fairness, dependability et al.) not through parental advice (if only it were so easy!) but through observing parents' actions. A parent is a 'living textbook" to which a new page is added every day. And as Dear Abby says, the best advice is that which is requested. I've found unrequested advice to my children has a zero or negative 'coefficient' (but maybe I'm a subpar parent). Note that adults value (as in, 'pay for')advice about specifics: from the attorney, doctor, or tax-accountant. But when did you last consult a $500/hr philosopher? Children are the same, their requests are concrete, advice on how to tell minnows from tadpoles, or how to pronounce a multi-syllable word in a reader." Stephen Wisdom, Sept. 7, 2005.
"It is widely understood that there are three ways heat is transferred from one thing to another: conduction, convection, and radiation. I think convection is a transfer of mass, not heat, which is where I diverge from the mainstream. I also think "change of phase," such as the energy involved in evaporation, is another form of heat transfer. Nobody seems to deny this very loudly, but they still stick with the original three and ignore this one, much to their peril when it comes to making energy and water related decisions. The large numbers of people who ignore it, and stubbornly stick to the original three, probably parallels ways in which people don't understand the forces that move markets." -- Henry Gifford, Sept. 12, 2005.
-- Dr. Kim Zussman, Sept. 20, 2005.
"Talking out of 10 years of basketball experience, I have never seen or heard of a team with less ability winning by shooting 3-point shots." Spec's reply: An exception to this rule is Grinnell College. It is a small school in the middle of Iowa whose team is full of short nerdy white guys. To compensate for athletic shortcomings, they play a unique brand of basketball. The 15 players are divided into three squads of five who play 90 seconds of game time, then sit out for 180. Each 90 second stint is a flurry of full-court, high pressure defense mixed in with 3-point shooting on offense. Grinnell will give up a lay-up to have the chance at a 3 pointer. They only practice two things: running and 3-point shooting. Most teams score many easy 2 point baskets in the first half, then run out of gas in the second, and Grinnell's 3-point shooting takes over. Grinnell was featured on an ESPN2 game last year, but didn't play as well as they could have. Their system is a good way to maximize the potential of your athletes." -- Mike Ott, Oct. 13, 2005.
"What I don't like about the title 'Extraordinary popular delusions and the madness of crowds' is the implication that contrarian individuals might therefore be right. I must admit to having seen some deluded crowds in my time, but usually they're quite sensible compared to the completely crazy individuals one finds on the planet. Of course if it's down to a choice I'll pick the crazy individuals any day of the week. Why? Because they'll be so busy fighting amongst themselves that they won't gang up against you. Which I guess is why I like chess players and traders." -- GM Nigel Davies, Nov. 5, 2005.
"Dude, we are always wrong as day traders. Once you accept that fact your life will be pleasant. -- Craig Maccagno, all year long.
"I beg to disagree with the above statement that unskilled investors act randomly. In my experience and opinion most unskilled traders feel the need to be told what to do. Consider the financial media. The average financial story has some number X reported as up or down. Then a statement is included that "analysts said the the market was (up/down) because of X." The ONLY other type of story run in the financial media is a list of stocks to buy now with no reason or at most a one line reason. The novice concludes the markets are simple and one can simply buy the news and profit when the market reacts to the news. He is oblivious to the fact that the news is already discounted when he and the other newbies hear it. His actions are not random and will not achieve random results." Dr. Phil McDonnell, Dec. 22, 2005.
'Get the Joke' Post of the Year": Hany Saad, Wed., Jan. 12, 2005.
"In reference to your quote du jour, I remember few years back when I drove through a high-end Toronto suburb and looked at the houses (mansions) which at the time served as an inspiration to where I want to go and got me to think of the line of least resistance to get to my destination. I chose the stock market which turned out to be far from being the "line of least resistance."
I remember then the first thing that came to my mind was "surely the owners of these mansions took above average risks." .Risk was the keyword to me in my early twenties. My friends, however, chose to call it different things. "they must be drug dealers"..."they must be related to the mafia"...it surprised me, even at that age as it does now how people refuse to accept that someone can reach for the stars and get to the stars honestly.
I remember to this day...risk. The one thing that amazed me then was the ownership turnover of one of specific house this high end residential area. The one house/ castle that was the most elegant and spacious and definitely most pricy of all. I came to the conclusion that yes, these people took a lot of risk but they grew accustomed to the risk and couldn't get enough of it. So when their luck turned they had to sell their real estate and live more modestly to cover their debts or their margin calls (an obscure concept to me then). so, through observation, while almost everyone I know reached the conclusion that these people are dishonest drug dealers and mafia members, I could only think of risk.
this beautiful 4 letter word that I myself grew latter accustomed to and in love with. In my trading years and years later I try to quantify this concept and find the point of maximum risk and usually find myself an entry point.
Yes Virginia, I learned the concept of risk and I made a living quantifying and trading the highest risk point, but that's not the end of the story. I also one time pawned my Rolexes and sold my car trading that same concept to pay my margin calls (a concept I am very well aware of now). As if by magic I learned the concept of risk but forgot to digest the lesson from the high real estate turnover. Why did I skip that chapter of the lesson? I couldn't answer that when I was 20 and I still can't answer it now that I am trading the same concept...the highest risk entry...a point that I found today in the markets and could not think of anything other than finding an entry price on the long side at these levels. Nothing else mattered.. That four-letter word...
The four-letter word that is ruling my life and will either take me one day to the stars or the bankruptcy courts. Remember Gordon Gekko in the wall street movie saying to bud fox "greed is good, greed works" I would only substitute greed with risk. The real estate left an impression on me but oddly the ownership turnover didn't.
Yes Virginia, I will take risks till the day I die...and yes, I acknowledge my poor money management skills and yes I refuse to learn and yes, "qui ne risque rien n`a rien." I believed the French then and I believe them now...Risk, my friend, is how this earth turns. Risk took us to the moon and Mars, and risk will bring a better tomorrow...Hany"
: Hany Saad inquires:
Hey Lack, Thnx for choosing my post for the "get the joke post of the year" award... ...What is the award? Do I get a check to cover my margin call caused by taking too much "uncalculated risk"? Get the joke?
Mr. Lackey responds:
I'd be happy to cover all calls for 50% of the profits over the next week. That's a huge joke there. I always took a lot of risk compared to my cohorts. Nothing compared to Vic or the real pros. Back to when I first started in the bucket shops. We had the main backer that every year either got cornered in a huge short or hammered in a panicful long. A guy named $#%@ would always bail him out. I remember the other backers, partners and traders of our firm always complaining, "That is how he makes so much more than all of us. He takes stupid risks, yet someone always bails him out. We can't trade like that." Well, I learned two things. One, you have to take enormous risk to profit in this game. Secondly, that guy $#%@ was a genius. He came in once or twice a year, bailed out the guy and took down profits off of a seemingly very risky time or trade. Yet when I thought about your post, my trading, Vic, the SpecList, all these years of panics, squeezes, etc., by the time a good trader is on the brink, it is perhaps the best time to jump in for a full profit. It's like the old men with their canes who come in once a year. I asked the $#%@ guy one time at a dinner party if he was a trader or just backed traders. He responded, "Oh, I just back traders on Amex/ NYSE and once in a while I come in the markets myself." I never caught on to what he meant until years later. He waited until everyone else was in trouble in a panic, and came in for himself and took profits down from everyone. The rest of the year he let everyone else grind it out. -- LACK
If your post did not appear here you may be in the "Book of Greatness" for 2005 spec-posts. For some reason in 2004 "greatness" and "get the joke posts" were equal. This year my saved greatness vs. get the joke posts are 10-1. Perhaps the explanation is quoted below.
Worst Failure of the Year to 'Get the Joke': LACK on REFCO
To honor 2004 'Get the Joke' post of the year:
"The irony of trading, whereby you cannot boast of success lest family expect more, nor complain of failure and risk disdain." -- Kim Zussman
*(Vic was ineligible due to unfair advantage.)
James Lackey is a Florida trader.
(address is not clickable)