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One Good Trade – Mike Bellafonte

  1. Only trade setups you recognize, that are statistically in your favor, that have high payout when correct
  2. P/L doesn’t matter, just make sure you follow your rules.  Profits flow from discipline.
  3. Review your trades constantly.  Video reviews are the best
  4. Only trade stocks in play – high volume, big intraday moves, low spread
  5. Get used to being wrong, 30 – 40% of the time you will be wrong.  Get out of trades when you’re wrong, close to the price that you realize you are wrong
  6. Use visualization exercises to help your trading.  Ie:  imagine a trade hitting your exit price, and exiting immediately.  Then, imagine not exiting immediately and it going against you.  Recognize your emotions (ie: anger, frustration, denial) and how they can affect your mindset in future trades.
  7. Use a training simulator to go over trades, u can learn up to 10x faster.
  8. Trading is not investing, you have no clue where things will end up tomorrow, just over the next couple minutes.
  9. Returns of 100% – 500% are possible.
  10. Learn how to read the tape (level II), buying / selling much more obvious
  11. Open, mid-day, and Close have different strategies to profit from.
    1. Open  – use the tape
    2. midday low volume,
    3. Close go with the trend
  12. Set your max loss to 1/2 your average trading gain, try to be profitable 7/10 days
  13. Make if-then statement for all your trading setups
    1. If the 30 bid is tested, with significant volume on the bid, and holds, then…get long
    2. if the 30 holds, who is the buyer?
    3. if the 30 holds and slows, then sell if the buyer is not near or thick offer near
    4. if 30 holds and the bids step up, then consider another lot
    5. if 30 holds and a ton of volume is done on the bid, then do not sell until a reason to sell
    6. …+ 30 more things
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The Disciplined Trader – Mark Douglas

Chapter 5 – Prices are in Perpetual Motions with no Defined Beginning or Ending

  • What are usually thought of as three simple decisions of enter, hold, or liquidate a trade become a perpetual process of deciding how much is enough from both a profit and a loss perspective. If you are in a profitable trade, is there ever enough? Greed stems from a belief that there is never enough or there won’t be enough. In an unlimited environment that is in perpetual motion, isn’t there always the possibility of getting more? The appetite of true greed can never be satisfied; it will always leave the greedy ones with a feeling of lacking regardless of how much they have acquired. If you are in a losing trade, you won’t want it to exist because it represents failure, so you can just act as if it doesn’t, by convincing yourself that you are in a winning trade that hasn’t gone in your favor yet.
  • Your last trade obviously has nothing to do with the potential that
    exists in the market at any given moment. When you feel compelled to get back,
    it puts you in an adversary relationship with the market.
Chapter 6 – The Market is an Unstructured Environment
  • In an unstructured and unlimited environment, it is essential that you establish rules to guide your behavior. You will need to create definition and give yourself direction. Otherwise, you will feel overwhelmed with too many possibilities. Without these rules one of the most likely possibilities is that you will create devastating losses for yourself. The big psychological problem here is, if you make up and have to play by your own rules, you also have to take total and complete responsibility for your actions as well as the outcome of your actions
  • Most outside people would be shocked to learn that except for a small minority of successful traders, the rest fall into a group that, at any given moment, have no idea about what they are going to do next or know why they are 
  • even doing what they are doing. If you asked them to tell you specifically how they make money or lose money, they couldn’t tell you
  • If you don’t know what you did to win the last time, you obviously don’t
    know what to do to keep from losing this time. The end result is intense
    anxiety, frustration, confusion, and fear. You feel out of control,
    experiencing a sense of powerlessness as you are swept along by the ensuing
    events and wondering what is the market going to do to you today.
  • Taking responsibility is a function of self-acceptance. You can measure
    this degree of self-acceptance by how positively or negatively you think of
    yourself when you make what you perceive as a mistake. The more negatively you
    think of yourself, the greater your tendency to avoid taking responsibility, so
    you can avoid the pain of your harsh thoughts, thus generating a fear of making
    mistakes. However, the greater the degree of self-acceptance you have for
    yourself, the more positive your thoughts will be and the greater the degree of
    insight you will be able to extract from an experience, instead of generating
    fear. The more self-accepting you are, the easier it is to learn because you
    are not trying to avoid certain information.     
Chapter 7 – In the Market Environment Reasons are Irrelevant
  • The reasons traders would give for their actions are irrelevant. Most traders don’t know why they did what they did because most traders don’t plan their trades, thus eliminating any connection between themselves and the results of their trades. Most traders act spontaneously and impulsively and then ascribe the rationale for their behavior after the fact. Most of these after-the fact reasons are either justifications for what traders did or excuses for what traders didn’t do
  • If you want to learn to predict price movement, you don’t need to pay
    attention to reasons. What you need to do is determine how the majority of
    traders perceive the external conditions in relationship to either their fear
    of scarcity, or their fear of missing out, or both
Chapter 8 – The 3 stages to becoming a successful trader
  • In an unlimited environment, if you can’t confront the reality of a loss, then the possibility exists for you to lose everything, in each and every trade. If you believe trading is like gambling, it isn’t. In any gambling game you have to actively participate to lose and do nothing to stop losing. In the market environment, you have to actively participate to get into a trade and actively participate to end your losses. If you do nothing, the potential exists to lose everything you own. When you participate in gambling games, you know exactly what your risk is and the event always ends. With the markets you don’t ultimately know what your risk is, even if you are disciplined enough to use stops, because the market could gap through your stops. Also because the event never ends and is in constant motion, there is always the possibility of getting back what you are losing in any trade. You won’t need to actively participate to get back what you are losing; you just have to stay in your trade and let the market give it to you
  • So even though you can’t actually control the market’s movement, you can
    learn how to control your perception of the market’s movement in a way that
    allows you the maximum objectivity. Learning to perceive objectively will
    increase your ability to let the market tell you when to get in and when to get
    out. You can learn how to trade where you won’t be using information to justify
    your beliefs but rather to perceive the most likely possibilities in any given
    moment.

 

Part III – Building a framework for understanding ourselves

  • We will thoroughly explore the nature of fear and how it compels all of
    us to act without a perception of choice. The predominate underlying force
    behind most traders’ actions causing prices to move is fear—the fear of missing
    out (competing for the supply) and the fear of loss.



Chapter 10 – How Memories, Associations, and Beliefs Manage Environmental Information

  • The implications are that much of what we experience of the outside
    environment is shaped from the inside, not from the outside as most people
    would assume. In other words, our first-time experiences shape the meaning, as
    well as determine the quality of energy connected with that meaning, and then
    once the meaning exists inside of us, it shapes our experience of the outside
    by the way we pick and choose information and how we feel about that information.
  • What you have just been given is an example of why the vast majority of
    traders cut their profits short and let their losses run. In a winning trade,
    the fear of losing will cause us to focus our attention on information that the
    market is going to take our profits away, compelling us to get out early. In a
    losing trade we will focus our attention on just the opposite information—
    anything other than that which would indicate the trade is a loser. Fear causes
    us to act without a perception of choice. When we are afraid to confront
    certain categories of market information, it drastically limits the choices
    that we perceive as available. Cutting a loss isn’t a choice if we
    systematically block from our awareness any information that would indicate
    that we are in a losing trade. Staying in a winner isn’t a choice if we are
    consumed with the fear that the market is going to take away our money.
  • To prevent these blind spots in our perception, we have to learn to
    trade without fear. And to trade without fear we need to completely trust
    ourselves to confront and accept whatever information the market is offering
    about itself, and we need to be able to trust ourselves to know that we will
    always act in our best interests without hesitation, regardless of the
    conditions. Any endeavor will require some degree of trust
Chapter 13 – Managing Mental energy
  • In other words, we pass on our ignorance, as well as our wisdom, without
    knowing at the time the difference between the two. And what was passed on that
    was dysfunctional will be regarded as the truth just the same as the wisdom.
  • You can wish and hope that the market will come back, or you can cut
    your loss and make yourself ready to take the next opportunity. To be able to
    cut your loss and be ready to take the next opportunity requires that you
    change anything in your mental environment that would cause you to avoid
    confrontation and consequently wish and hope. The less cause you have for
    wishing and hoping that something will happen, the more you will know that when
    you get that certain feeling, it is a true intuitive impulse, and the more
    confidence you will have to follow it.
Chapter 15 – The Pyschology of Price Movement
  • If, for example, a market has been making consistently higher highs and
    higher lows, to determine what is likely to happen next, ask yourself the
    following questions: 1. What kind of price action will sustain the buyers’
    beliefs that they can make more money? 2. When are sellers likely to come into
    the market in force? 3. Where are old buyers likely to take profits? Where are
    old sellers likely to lose faith in their positions and bail out? 4. What would
    have to happen for buyers to lose faith? What would have to happen to draw new
    buyers into the market? You can answer all these questions by identifying
    certain significant reference points where buyers’ and or sellers’ expectations
    are likely to be raised and where they are likely to be disappointed if they
    don’t get their way.
Chapter 16 – Steps to Success
  • First and foremost, you may need to change your perspective or the focus
    of your trading. Until now your focus may have been to make money. If this is
    so, you will need to change your perspective to “What do I need to learn
    or how will I have to adapt myself to interact more successfully?” You
    need to stay focused on mastering the steps to achieving your goal and not the
    end result, knowing that the end result, money, will be a by-product of what
    you know and how well you can act on what you know. There is a tremendous
    difference between focusing on money and focusing on using your trading as an
    exercise to identify what you need to learn. The first will cause you to focus
    on what the markets are giving you or are taking away from you. The second
    perspective causes you to focus your attention on your ability to to give
    yourself money. With the first perspective, you are placing some of the
    responsibility onto the markets to do something for you. With the second
    perspective, you assume all the responsibility.
  • Predefine what a loss is in every potential trade. By
    “predefine,” I mean determine what the market has to look like or do,
    to tell you that the trade no longer represents an opportunity, at least not an
    opportunity in the time frame in which you trade.
  • Execute your losing trades immediately upon perception that they exist.
    When losses are predefined and executed without hesitation, there is nothing to
    consider, weigh, or judge and consequently nothing to tempt yourself with.
    There will be no threat of allowing yourself the possibility of ultimate
    disaster.
  • To help you learn how to be with the flow of the market, I pose a series
    of questions that are designed to keep you focused in the “now
    moment” to determine what is true about the market. 

    • 1. What is the market
      telling me at this moment? 
    • 2. Who is paying up to get in or get out? 
    • 3. How
      much strength is there? 
    • 4. Is momentum building? 
    • 5. Can it be measured relative
      to something? 
    • 6. What would have to happen to indicate the momentum is
      changing? 
    • 7. Is the trend weakening or is this a normal retracement? 
    • 8. What
      would show that? If the market has displayed a fairly symmetrical type of
      pattern and that pattern has been disturbed, then it is a good indication the
      balance of forces has shifted. 
    • 9. Are there any places where one side will definitely
      gain dominance over the other? If that point is reached, it still may take
      sometime for the other side to be convinced they are losers. How long are you
      willing to give them to stampede out of their positions? 
    • 10. If they don’t
      stampede out of their positions, what will that tell you? 
    • 11. What did traders
      have to believe to form the current pattern relative to the past? Remember that
      people’s beliefs don’t change easily unless they are extremely disappointed.
      People are disappointed when their expectations aren’t fulfilled. 
    • 12. What will
      disappoint the predominate force? 
    • 13. What is the likelihood of that happening? 
    • 14. What is the risk of finding out in a trade? 
    • 15. Is there enough potential
      for movement to make the trade worth the risk?
  • If you can’t determine the significance of any particular high or low or
    any other significant reference point for that matter, then you have to ask
    yourself if it is worth the risk of finding out? How much room will you have to
    give the market to define itself before it is evident that the flow of the
    market is not in the direction of that trade?
  • Keep in mind that since the market is in perpetual motion, it puts you
    in a position of having to make never-ending assessments of the current risk in
    relationship to the current possibilities for reward. To do this effectively,
    you will have to learn to observe the market as if you were not in a position.
    This perspective will free you to take whatever action is appropriate for the
    situation instead of hesitating, hoping, and wishing that the market will make
    you right.
  • Which, of course, is always going to be less than what is possible from
    the market’s perspective. If we are perceiving much less than what is
    available, then we are out of touch with what is possible from the market’s
    perspective and setting ourselves up for a painful forced awareness. To be
    objective you have to make “uncommitted assessments of the
    probabilities.” Which simply means that you have no commitment to any
    particular outcome. You just observe what is happening in each moment as an
    indication of what will probably happen next. Here is what objectivity feels
    like, so that you can recognize when you have achieved it. 

    • You feel no pressure
      to do anything 
    • You have no feeling of fear 
    • You feel no sense of rejection 
    • There
      is no right or wrong 
    • You recognize that this is what the market is telling me,
      this is what I do 
    • You can observe the market from the perspective as if you
      were not in a position, even when you are 
    • You are not focused on money but on
      the structure of the market
 
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Japanese Candle Stick Charting

Main point is:  Know where you are in the trend.   This provides context to the pattern
Reversal Patterns – Only means trend is at risk of not continuing
Ch 4. – Reversal Patterns

Hammer and Hanging Man

    1. Real body is at the upper end of the trading range, the color is not important
    2. Long lower shadow is greater than 2x height of body
    3. No, or very short upper shadow

Must wait for confirmation with the hanging man (the market top).  The larger the gap between close of hanging man and open of the next day the better.


Engulfing Pattern

  1. Real body must engulf prior real body
  2. Opposite color, unless almost a doji

Dark Cloud Cover

    1. After uptrend
    2. Strong white day, which opens on its low, closes on it high.  The next day has a long black body, opens on its high, closes on its low
    3. Closes well within (about 50%) in the white body
    4. Black body (2nd day) opens above a major resistance level and then fails.  Old support can be used as a resistance level

Piercing Pattern – same as above except opposite (also less reliable)

Ch 5. – Stars – Small real body that gaps away from the large real body preceding it.  As long as the star body does not overlap the previous body it is considered a star.  Color not important

Morning Star and Evening Star (opposite)

  1. Tall black real body, followed by small real body which gaps lower, followed by white real body that moves well within first period black real body.
  2. Gap on 3rd day is not always necessary
  3. Volume on 3rd day > volume on 1st day
Shooting Star and Inverted Hammer (opposite of hammer / hanging man)

  1. Small real body at the lower end of its daily range and a long upper shadow, color not important
  2. Real body that gaps away from previous real body
  3. Wait for verification that a reversal is taking place by looking for a gap in the reversal direction outside the real body
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Dollar Cost Averging

BigPic  – “Here is the best free advice you will ever get:
The easiest, simplest, least risky thing you can do with your money is to dollar cost average on a monthly basis into a few indices – SPX, QQQ, Emerging Markets, Small Cap. If you can add a risk management component – get out of stocks when they break their 10 month moving average – that’s even better.

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Weekend Millionare’s Secrets to Investing in Real Estate – Mike Summey Roger Dawson

Ch 1  – Get Rich Slowly

  • Real Estate is lucrative because:
    • 9:1 Leverage, 10% down 90% loan
    • Tax benefits:
      • rent not subject to social security or self employment taxes like money you earn from working
      • passive loss deduction (expenses, interest, depreciation)
      • tax deferral – defer income on sale of property by reinvesting by a certain period
      • tax free sale – avoid taxes if you lived there 2 out 5 years before selling
      • long term capital gains

Ch 2. – Wealth as an income stream

  • Goal is to get cash flows not property apprecation
    • 15 houses at $1k rent / month  = $15k / month = $180k / year which is equivalent to $3.6M at 5% in a CD

Ch 3 – Income to Value Ratio

  • Annual Gross Multiplier  – if you see an 8.2x in an ad for the following 16 units, 8 2s, 6 1s, 2 furn. studios…8.2x, $787,200.  The rent / year = $787200/8.2
    • bad because there is not account for: how/who pays for utilities, property taxes, vacancies, management costs,insurance (fire, liability, flood), maintenance, cost or purchase

Ch 4 – Small rent increase snowball your net worth

  • Raise rent every year by a small amount
  • apartment buildings compound the effect

Ch 5 – What makes property a good buy

  • Buy at wholesale price ( distressed sales ), but expect that only 5 – 10% offers will be accepted
  • Only buy properties with a positive cash flow
  • Best buys often come w/ the most problems

Ch 6/7 – Finding a property manager

  • Familiarize yourself w/ neighborhoods before you buy.  Want to find places where people will always be renting
  •  Call property management firms and ask them :
    • Are you or do you have a division, exclusively engaged in property management or do you primarily list and sell properties?
    •  Do you deal primarily w/ residential or commercial properties?
    • In what geographic areas or the market are most of the properties you manage located?
    • When you meet determine how they advertise vacancies, show properties, screen tenants, procedures for collecting past due rent, supervise evictions, control maintenance costs, deal w/ after hours emergencies, accounting they provide owners, fee structure, if they are licensed.  => should be between 6% – 12% of rents collected
    • when you sign agreement, insert a clause that gives you the right to cancel immediately within 30 or 60 days for any reason or immediately, w/o notice if any representations of the agreement are breached => won’t be a problem w/ a reputable firm
    •  Find out if they will be willing to look at new properties w/ you because it allows you to get professional advice from ppl who know the market

Chapter 8 – bread / butter properties

  • 2 / 4 bedroom, w/ 1 – 2 baths, about 800 to 1400 sq feet
  • Beware of good deals on expensive properties, they may sit vacant for many months
  • don’t go for cheap properties that you’re not comfortable being in yourself

Ch 9 – Learn your market

  • map your area ( 10 miles around your house ), every week new properties come up
  • talk w/ the neighbors at different properties, find out problems in their neighborhood, give them your business card

Ch 10 –  Asking prices

  • Usually house is 2%- 20% lower than asking price
  • When you offer, use your ROI to determine your upper limit

Ch 11 –  Seller Types

  • Sellers have moved – someone else in the house and the property looks like crap.  Make sure house will be in good condition after painting / cleaning / carpeting
  • Sellers divorced – try to find out as much info about each party as possible such as previous offers, how long it has been on the market,
    • you can draw up separate agreement w/ each party if necessary
  • Ask for lots of extras you don’t care about so you have room to negotiate what you actually want
  • Home equity to retirement => offer 0% or very low interest for steady stream of payments to retired person.  When you do this financing, these are some things to consider:
    • don’t use a standard bank-type note that contains a due-on-sale clause
    • if you ever did sell / trade the property, having an assumable no-interest mortgage would be a big advantage
    • include a clause giving you the right to substitute collateral, because even if you sell the property, you may want to keep the loan and secure it with another property
  • buy house from person, but let them rent from you

Ch 17  – Profit is made when you buy

  • scarcity – home prices rise when the number of people wanting to live in an area is increasing and regulations or terrain in that area restricts new building
  • inflation – during times of inflation you want to own as much real estate as possible.  when inflation is low you want the cash flows of the property to be sustainable

Ch 18 – Negotiating pressure points

  • time pressure – when ppl are under time pressure its much easier to get terrific buys
    • things to look for:
      • behind on mortgage payments and don’t see how they can catch up
      • in foreclosure and in danger of losing the property unless they can find a buer
      • need money to pay off mounting debts
      • contracted to buy another home and can’t close on it until they sell this one
      • need money for college, have to pay for wedding, large medical bills
      • need capital to acquire / expand business
      • lost lawsuit and don’t have money to settle it
      • retiring and want to move to Arizona
      • make your own checklist from your observations
    • acceptance time – people need time to digest the fact they aren’t getting what they expected for their property.  never close the door by saying ‘this is my final offer’
      • instead say ‘I’m not saying I’ll be in a position to buy later, but we can always talk some more’
  • Spend lots of time w/ the seller
    • longer you keep sellers involved in negotiations, the better chance you have of getting what you want
    • take lots of time inspecting the property, ask as many questions as you can think.  Discuss things you have in common (sports, ect.), measure some of the rooms and write it down, pace off the backyard…
      • you are doing this to build trust and mentally this makes people think they have invested something in you and don’t want to walk away w/ nothing for their time.  this will help w/ flexibility on price, terms, ect
      • note that this also works against you because you will not want to walk away w/ nothing either.
    • work out all the details, so you’re not surprised by anything (ie: appliances cost)
  • Questions to ask sellers/find out in other ways: – don’t be timid, be upfront about the questions.   don’t ask yes/no questions ask who, what, where, when, why, how questions
    • how long have they owned
    • how long has the property been for sale
    • how many offers have been made
    • what does the seller plan to do w/  the money from the sale
    • how much does the seller owe on the property
    • is the seller under any pressure to sell
    • what are the reasons for wanting to sell.  are these the real reasons?
    • will the seller carry back any financing
    • if listed w/ real estate agent, when does the listing expire
    • hidden problems w/ the property
    • any nearby problems that affect value of the property
  • Project that you’re prepared to walk away
    • You can do this easily, if you have multiple properties that you’re interested at that time

Chapter 20 – Negotiating Gambits

  • Ask for more than you expect to get (lower price, lower interest rate for financing, seller pays attorney fees, termite inspection, home inspection, survey deed preparation, title insurance, later closing date if seller wants to close quickly, personal property like furniture, rugs, appliances)
  • Go even more conservative w/ strangers because they may be willing to go for even less, it’s easy to build rapport if you make concessions
  • Minimum plausible position – make offers that are very low, yet will be taken seriously.  you will be surprised at how low this is
    • imply flexibility w/ this offer
    • Letting the sellers negotiate up from your MPP will make them feel like they won
  • Bracket the seller’s asking price ( what they asked for, vs lowest they will go before saying no)
  • No is just the beginning of negotiation
  • Never say yes to the first proposal because it makes the seller think they could have done better
  • Flinch when they first tell you the price like you’re slightly shocked
  • Play reluctant buyer => ‘i hate you had to spend so much time for nothing, but to be fair, what is the lowest price you would take for this property’
  • Vise technique – ‘i’m sorry you’ll have to do better’ then don’t say anything until they speak again

Chapter 27 –  No down deals that work

  • Pay one house off completely, take a mortgage out against your house and then pay all cash deals for another house
    • ie: Your house is 100k, and it is completely paid off
    • You go to the bank, and get a loan (typically 90% – 95%) for the worth of your house
    • You find another 100k house, but only offer 60k – 80k for it
    • Since this house will also be fully paid of, you rent it and then a loan out against the new property (typically 90% – 95%)
    • Do this about 6 times (6 new houses + 1 original house), until the mortgage money from each house minus the amount you paid cash for it = final value to buy a new house
    • All the rental streams pay for the houses and you keep the rest
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Michael Covel – Trend Following

Chapter 1

  • Let’s put change and Trend following in perspective.  Markets behave the same as they did 300 years ago.  In other words, markets are the same today because they always change.  This is a philosophical underpinning of Trend Following.
  • Follow the trend – don’t try to guess how far a trend will go.  You can’t.   “Price makes news, not the other way around.  A market is going to go where a market is going to go” =>(this guy is stating that you should follow the market, while i believe i must anticipate it…)
    • Let’s say you saw a stock go from 5 to 100.  When it was at 5, you didn’t know it was going to go to 100.  And trend followers didn’t know it was going to go to 100 either.  But they were buying all along, knowing that it could go to 100 even though it might not.  You can’t time the trade.  No one can pick a top or bottom
  • A wise trend follower once told me a story with a new trader who wanted to learn the secrets.  The experienced trader took the newbie out to the beach.  They stood there watching the waves break against the shoreline.  The neophyte asked, ‘what’s your point?’  The trader said, ‘go down to the shoreline where the waves break.  Now begin to time them.  Run out with the waves as they recede and run in as the waves come in.  Can you see how you could get into rhythm with the waves?  You follow the waves out and you follow them in.  You just follow their lead.’

Chapter 2 – Great Trend Followers

  • Bill Dunn – Only 2 systems.  The first he made in 1974, 2nd in 1989.  The major strategic elements – how and when to trade, how much to buy and sell – have never changed in almost 30 years.  We expect change.  None of the things that have happened in the development of new markets over the past 30 years strike us as making the marketplace different in any essential way.
    • His economic / political opinions do not form the basis of his buys and sells
  • John Henry – No one consistently can predict the future.  Prices, not investors, predict the future.  We rely on the fact that other investors are convinced that they can predict the future, and i believe that’s where our profits come from
    • He studied 18th and 18th century price data to prove to himself that there was only one successful way to approach trading
    • Long term trend identitifcation
    • Methodology is designed to keep discretionary decision making to a minimum
    • Risk management – strict formulaic risk management system that includes market exposure weightings, stop loss provision, and capital commitment guidelines that attempt to preserve capital during trendless or volatile periods.
    • Global diversification – participates in 70 markets in many countries
    • long term – ‘There is an overwhelming desire to act in the face of adverse market moves.  Usually it is termed ‘avoiding volatility’ with the assumption that volatility is bad.  However, I found avoiding volatility really inhibits the ability to stay with the long-term trend.  The desire  to have close stops to preserve open trade equity has tremendous costs over decades.
    • stocks – the current thinking is that stocks have outperformed everything else for 200 years.  But there is no one in the year 2000 that you can convince to jettison the belief that 200 years of performance will not cause stocks to grow to the sky.   What will be new to them is an inevitable bear market.
    • On his system:
      • time frame is long term, with the majority of profitable tardes lasting longer than 6 weeks, some lasting several months
      • the system is neutral in markets until a signal to take a position is generated
      • it is not uncommon for markets to stay neutral for months at a time, waiting for prices to reach a level that warrants a long or short position
      • predefined levels of initial trade risk.  if a new trade turns unprofitable, risk parameters will force a liquidation when a preset level is reached.  A trade can last for as little as one day in this situation.
    • The changing world is not going to hurt if you have principles designed to adapt.  So the markets Have changed.  But that’s to be expected and it’s good.

Chapter 10 – Trading Systems

  • Risk management is to direct and control the possibility of loss
    • Clarify trading / risk rules until they can be translated into computer code
    • Include diversification and instrument selection into back testing
    • Optimize parameters for back testing / stress testing
  • Trading systems – how does the system determine:
    • what market to buy / sell at any time?
      • currency, interest rates, stocks, metals, energy, crops, livestock
    • how much of a market to buy or sell?
      • Position sizing < 5% assets / trade (initially 1-2%)
      • Adjust positions based on current equity
    • when to buy / sell?
      • after a trend has begun.  the goal is to ride the trend
      • technical indicators are a part of the system not the system.  And only about 10% (MACD, %R ect…)
      • you will probably have more losses then gains because you don’t know which trend will be the big winner.  You accumulate many small losses trying to find it.
    • when you get out of a losing position?
      •  before you get in the position, set your stops at 1 – 2% of equity
    • when you get out of a winning position?
      •  you can’t spot reversals until they happen
      • you get out after the trend peaks and is on the way down
  • Trading system you design for one asset must be able to work in different asset classes.
    • If you design it for T-bonds, when you apply to Euro, corn, gold or anything else it should also work reasonably well.
    • Design parameters should also work well.  If CCI at 20 works very well, but 19 and 21 don’t, it is not a robust model.
    • You should be able to describe the strategy in relatively simple terms.  (ie: CCI anticipates lows and highs in the market based on the frequency of previous lows and highs)

Appendix – Trend following research

  • Tested stocks 1983 to 2004, includes delisted issues, adjusted for dividends, volume / $15 min price filter, $250K minimum traded / day in 1983(inflation adjusted for future periods)
  • Entry at all time high
  • Exit at previous high  – 10*ATR(14 of previous high) [for volatile stocks could be 55%, non-volatile, could be 20%]
    • 15% return, had some years where loss was much greater than stop loss because of a gap down or something else.  1987 was almost 5% of trades.  However, there were regular periods were avg $ gain / stop loss in $ was 60% of trades.
  • Russell 3000 statistics
    • 50% of all stocks significantly underperformed the index
    • 25% of all stocks that have ever been in the index are responsible for ALL the gains
    • Most of the big winners spent a disproportionate amount of time making multi-year highs (from $20 -> $200 happens in increments)
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Reminiscences of a Stock Operator – Edwin Leveree

Chapter 2

  • There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time.
  • No man can always have adequate reason for buying or selling stocks daily or sufficient knowledge to make his plan an intelligent play.

Chapter 5

  • The average ticker hound goes wrong as much from over-specialization as anything else.  After all, the game of speculation isn’t all mathematics or set rules.
  • If a stock doesn’t act right don’t touch it; because being unable to tell precisely what is wrong, you cannot tell which way it is going.
  • All a man needs to know to make money is to appraise conditions
  • They say you never grow poor taking profits.  No, you don’t.  But neither do you grow rich taking a four-point profit in a bull market.
    • I made up my mind to be wise and play carefully, conservatively.  Everybody knew that the way to do that was to take profits and buy back your stocks on reactions.  And that is precisely what I did, or rather what I tried to do; for I often took profits and waited for a reaction that never came.  And I saw my stock go kiting up ten points more and I sitting there with my four-point profit safe in my conservative pocket.
  • That is when I discovered that suckers differ among themselves according  to the degree of experience.
    • This semisucker is the type that thinks he has cut his wisdom teeth because he loves to buy on declines.  He waits for them.  In big bull markets the plain unadultered sucker buys blindly because he hopes blindly.  He makes money until one of the healthy reactions takes it away from him at one fell swoop.  But the Careful Mike sucker does what I did when I thought I was playing the game intelligently according to the intelligence of others.
    • The big money was not in the individual fluctuation but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend
  • After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this:  It was never my thinking that made the big money for me /  It was always the sitting.  My sitting tight!  It is not trick at all to be right on the market.  You always find lots of early bulls in bull markets and early bears in bear markets.  I’ve known many men who were right at exactly the right time time, and began buying or selling stocks when prices were at the very level which should show the greatest profit.  And their experience invariably matched mine yet they made no real money out of it.
    • Men who can both be right and sit tight are uncommon.  I found it one of the hardest things to learn.  It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
    • The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do.  The market does not beat them.  They beat themselves because though they have brains they cannot sit tight.
  • Disregarding the big swing and trying to jump in and out was fatal to me.  Nobody can catch all the fluctuations.  In a bull market your game is to buy and hold until you believe that hte bull market is near its end.
    • To do this you must study general conditions and not tips or special factors affecting individual stocks.  Then get out of all your stocks!  Wait until you see or until you think you see the turn of the market; the beginning of reversal of general conditions.

Chapter 7

  • You can’t expect a market to absorb 50k shares of one stock as easily as it does 100.  He will have to wait until he has a market there to take it.  There comes the time when he thinks the requisite buying power is there.  When that opportunity comes he must seize it.  He has to sell when he can, not when he wants to.  To learn the time to sell , he has to watch and test.
  • But after the initial transaction, don’t make a second unless the first shows you a profit.  Wait and watch.  That is where your tape reading comes in to enable you to decide as to the proper time for beginning.  It took me years to realize the importance of this.
  • Suppose a man’s line is 500 shares of stock.  I say that he ought not to buy it all at once.  Suppose he buys his first hundred, and that promptly shows him  a loss.  He ought to see at once that he is in wrong; at least temporarily.

Chapter 8

  • When I am long stocks it is because my reading of conditions has made me bullish.  But you find many people, reputed to be intelligent, who are bullish because they have stocks.  I do not allow my pre-possessions or my prepossessions either to do any thinking for me.  That is why i repeat that I never argue with the tape.  To be angry at the market because it unexpectedly or even illogically goes against you is like getting made at your lungs because you have pneumonia.
  • summary of shorting into a bear market
    • he was the first man who could see a big pile of gold, so he started running towards it with a shovel and wagon.  then a big gust of wind came and knocked him over and he lost his shovel and wagon.  he got up dusted himself and kept on running towards that big pile of gold.  he tripped and lost his shirt, but got up and kept on running until he couldn’t run anymore.  then he realized he should have been walking to that big pile of gold, not running.
    • every time he shorted, the market would rally hard until he had lost almost all his money.  he should have waited until the conditions were exactly right for him to place his short.
    • When the market was ready to weaken:  This came when he saw a printed advertisement for some stock in a newspaper.  It was for an IPO for some stock just ahead of two other IPO issues which had been announced earlier.  The later issue was trying to beat the other two railroad IPO to whatever little money was there floating around Wall Street. This is why Cramer says pay attention to the IPO market.

Chapter 9

  • When stocks cross the 100, 200, 300…ect.. threshold, they tend to run up.  However, during this bear market, when the tape suggested a stock that had just crossed 300, when to about 302 and started falling, when it should have gone up to 310.  He sold the shares at a small loss, and began shorting lots of other stocks.
  • Bear market rallies
    • Call money rates will keep going higher and higher (rates banks lend to brokers)
    • When the bottom comes, there will need to be some injection of liquidity.  In his example it was provided by bank reserves by JP Morgan, ect.  There was also no bids for particular stocks that usually are bellwethers for the economy,

Chapter 10

  • In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be up or down.  The thing to do is to watch the market, read the tape to determine the limits of the get-nowhere prices, and make up your mind that you will not take an interest until the price breaks through the limit in either direction.
  • Pat Hearne system – professional gamblers don’t chase big wins.  they want highly probable moderate wins.
    • Pat’s system was based on buying 100 shares at a particular price, if the stock moved up 1%, he’d buy 100 more shares and set a stop at -1% for 200 shares.  If it moved up another 1% he’d buy 100 more shares and reset his stop at -1% for 300 shares.
  • The successful trader has to fight their two depp-seatd instincts.  He has to reverse what you might call his natural impulse.  Instead of hoping he must fear; instead of fearing he must hope.  He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.
  • The conclusion that I have reached after nearly their years of constant trading, both on a shoestring and with millions of dollars is this: A man may beat a stock or a group at a certain time, but no man living can beat the stock market!  A man may beat a horse race, but he cannot beat horse racing.

Chapter 12

  • Percy Thomas – he was a brilliant salesman who sold some books to Livingston. he had a ‘magnetic’ personality and was very intelligent
    • They became friends and would talk stocks / commodities.  One day Thomas came up with a bullish pitch for cotton and Livingston had a small bearish position.  He began to accept Thomas’s facts and figures and began to feel he had been basing his previous position on misinformation.
    • Once he had covered, he had to go long cotton because he had become convinced.
    • More than once I was warned against placing too much reliance on Percy Thomas’ brilliant analyses.  It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urgings of a magnetic personality when expressed by a brilliant mind.

Chapter 17

  • I have sometimes bought a stock during an undoubted bull market and found out that other stocks in the same group were not acting bullishly and I have sold out my stock.  Why?  Experience tells me that it is not wise to buck against what I may call the manifest group-tendency.  I cannot expect to play certainties only.  I must recon probabilities and anticipate them.
    • Experiences had taught me to beware of buying a stock that refuses to follow the group-leader

Chapter 21 – Manipulating Imperial Steel

  •  He had options at $100 and stock to go from $70 to $100.
  • There wasn’t much of a float and very low volume, but the the stock was undervalued at $70.
  • He created demand by buying up all the stock at $70 and a little higher to attracted lots of traders who consequently took it higher.
  • He sold most of the shares he had to the traders and they eventually stopped buying once they noticed his demand had stopped.  They subsequently sold the stock at which he bought at a point higher than $70.
  • He did this until he marked up the stock to $100, and on balance only accumulated about 7000 shares.  For every share he bought, he expected the public to buy at least 1 share as well on balance.  But the big selling of your accumulated position is down on the way down.

Chapter 24

  • The public always wants to be told.  That is what makes tip-giving and tip-taking universal practices.
  • Brokers should not dwell too strongly on actual conditions because the course of the market is always 6 to 9 months ahead of actual conditoins
    • Today’s earnings do not justify brokers in advising their customers to buy stock sunless there is some assurance that 6 to 9 months from today the business outlook will warrant the belief that the same rate of earning will be maintained.
    • The trader must look far ahead.  If on looking that far ahead you can see, reasonably clearly, that conditions are developing which will change the present actual power, the argument about stocks being cheap today will disappear.
  • There is a law that punishes whoever originate or circulates rumors calculated to affect adversely the credit or business of individuals or corporations, that tend to depress the values of securities by influencing the public to sell.  Originally the chief intention may have been to reduce the danger of panic by punishing anyone who doubted aloud the solvency of banks in times of stress.  But it serves also to protect the public against selling stocks below their real value.  It punishes the dissemination of bearish items of that nature.
    • The nature of the game as it is played is such that the public should realize that the truth cannot be told by the few who know.
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Nassim Nicholas Taleb – Fooled by Randomness

  • Just because something hasn’t happened in the past, doesn’t mean it won’t occur in the future.
  • For this reason he buys options on unlikely events because their is no accurate model for determining its risk, so for the most part it will be underpriced
  • Jamie Dimon of JPM said the crash was a 25 sigma event that means it shouldn’t happen in millions of universes over billions of years.  Yet over the last 100 years, we have witnessed several of these ‘unlikely’ events.
  • LTCM was based on this belief as well, took less than 5 years for a different model to break.
    • LTCM sold everything US and bought everything that yielded higher.
    • CDS markets swamped the CDO markets leading to many financial institutions going bankrupt.
    • Follow the debt to get the answer of who will get screwed.
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Jim Cramer – Confession of a street addict

Chapter 3 – Money Man

  • First time he started trading, he was down 9.9%, he had  a provision that if he went down 10% his funds would be returned back to his investors.  A legendary trader named Lattanzio told him to sell everything, start over, and learn to trade from Karen
  • Karen (aka trading goddess) taught him difference between hedge funds and portfolio manager stuff.  Most PM talk about underweight / overweight sectors, but that doesn’t matter in the hedge fund world.
    • Analysts at were idiots and they can’t make you money.  They know nothing.
    • Never take a position unless you knew something that no one else knew, a legal edge.
    • She tried to anticipate moves of analysts before they were made, and placing big bets on the direction that analysts were going to go.  That way you never owned anything idly, and always had an exit strategy.
  • Karen’s strategy
    • make dozens of calls to brokers and analysts every day to ask them what they thought of stocks and look for situations where the analysts were growing more positive, and then you fed them positive info that you got from others.  Tell them someone else was going to upgrade.  If you caught them on the phone before they had told their sales forces that their earnings estimates were too high or low, you might have something.  You didn’t move until you were fairly sure that you were about to catch the upgrade or downgrade
    • The analyst game was a game of sponsorship because analysts like to get behind stocks and bull them.  You have to get in on the ground floor when they start their sponsorship campaign.
    • You want to buy something and flip it into the sponsorship => that is the only sure way of making money
  • Trading ‘flow’
    • When big accounts come in adn buy or sell stocks, they move the stocks in the direction of their trading.  If you sold two million shares of a stock it would move from $26 to $24.  Once the selling is finishe,d the stock would lift as the supply dries up.  The goal is to buy the lsat 200k shares and tarde out of it into other buyers who want ot take advantage of the decline.
    • If you do enough commission business that you know who was executing the portion of a big sell order, and also know whether any analyst might be on the verge of recommending that stock, by keeping track of all the buy recommendations at every firm.
    • This is essentially a day trading strategy, however she also needed to know if the company was more positive in its outlook than the analyst network, then they could make a fortune anticipating upgrades and downgrades.
  • Signs of 87 crash
    • Many stocks were giving up gains they had put on the last 2 or 3 years.  Analyst recommendations weren’t working.  Sellers frequently overwhelmed buyers by the end of the day, with the market ending considerably lower than it began.
    • Market went from 2800 to 2400 then 2200, Karen grew increasingly adamant that they market would crash, and they went to 100% cash.  The next monday the market crashed 500 points.

Chapter 4 – Building a Hedge Fund

  • As Dow dropped from 3100 to 2300, Cramer grew very negative that the country wouldn’t pull out of its tailspin.  I thought we had a recession and inflation problem, a banking system that was teetering, and a budget deficit that was mushrooming out of control.  When you overlay Iraq’s destabilization of the world economy on top of that you had a market that might take out the lows of the 1987 crash
    • Karen didn’t care about theoretical underpinnings of the market, just about what made people buy and sell stocks.  Karen knew that big money was human.  It was a beat that if let loose by events would buy everything in sight.  They beat didn’t care where stock shad been or how high they moved; it just wanted to buy.
    • She said the US would win the war and that would change everything, despite the recession, unemployment, and teetering banking system.  All the technical charts were also ignored, despite them screaming downturn.
    • Within a few weeks consumers came back with a vengence, feeling better about themselves.  Oil prices plummeted and stayed low.  The banks were able to use the Fed’s lower interest rates to rebuild their balance sheets.
  • Cramer and Jeff B’s style
    • make money every single hour.  also develop long-term capital gains
    • style consists of figuring out what would be hot, and what would be the next big buzz.
    • They became merchants of the buzz, getting long stocks and then schmoozing with analysts about we saw and hear that was positive. Or short stocks and talk to analysts about the negatives.
    • Analysts existed to promote stocks
    • Cramer would read annual reports everyday and built up a network of analysts and CEOs he could talk with.
    • They discovered the right CEOs would pull their stocks out of tailspins promptly.  They would zero in on the problems Cramer identified.  The CEOs who followed their stocks cared about their shareholders and took their stock personally.

Chapter 9 – the man with 2 careers

  • I told him that I was buying everything in sight…I told him when I heard people advocating panic, as Biggs did the night before, or Grant did moments ago, I had to buy the panic because no one ever made a dime panicking.
  • We put $200M to work in that first half hour, buying 25k shares every half point down of all our favorite tech names right into the weakness.  At 10am, when it started lifting, I jumped on my desk and screamed at everyone in the office to start buying something…Don’t work about cash, Don’t worry about margin.  I want stock, I want it now.
  • By 2pm, I was able to trim back our holdings to where I was comfortable that we weren’t borrowing too much money, and by 3pm I was off margin altogether.  We pulled in about 6% that day.

Chapter 14 – Crisis part I

  • We put our hundres of millions to work almost immediately, in the 1st hour of the first trading day of the new year.  We just piled right in at one level, rather than buying, 10k shares every half point, on the way down and legging into the positions ofver many days, as we would have when we were less certain of ourselves.
  • That was hubris, we’d been so right for so long that we thought we knew the right levels instinctively
  • Every few years, there would be some market that seemed impenetrable to all but a few funds that always thought they knew better.  One year it might be Mexico,  and Mexican telcos were hot, or Mexican banks had to be owned.  You would rush in, just when banks were ready w/ inflated stocks and bond offering that raise larges sums of money.  The Mexican ‘blue chips’ would then peak and crash.
    • I had seen Brazilian markets be the ‘only place to be’ during one spring, the Argentine markets the ‘net big thing’ a few months after Brazil had been annihilated.
    • Occasionally, the rush would be on to the banks in Singapore, or construction companies in Bangkok or casino and hotel concerns in Malaysia.
  • In 1998, Russia had drawn everyone.  It would have been fine if LTCM had not because it was the largest hedge fund in the world.  They had attracted so much money because when they pitched you, it did so with a tone that made you feel that the moneymaking was automatic and riskless.
    • I always figured that in the private these guys knew the truth: who the heck knows what your return is going to be in this game?  Luck trumped skill so often that unless you were humble about it and realized that things could go wrong, you were simply making a sales pitch for a vacuum cleaner that never broke down.
    • When one firm commanded the respect of Wall Street, the brokers who entered its orders would tag along for the ride.  They all talk about what the big money is doing, and when the big money doubles down, by borrowing money from the brokers, the traders at the brokerage house do the trades themselves and tell every other client to do the trades too.
    • LTCM had gone long every piece of paper in the universe, from Mexican day put bonds to Russian government bonds, and shorted against US government bonds as a hedge.
    • One Russia started collapsing, all the traders started betting against LTCM.  LTCM had shopped themselves to all the brokers, so everyone knew their positions.  Collectively, this group began buying long-term paper that drove yields to absurd lows that created an inverted yield curve.
      • An inverted yield curve makes S&Ls lose money.  Cramer was long many illiquid small S&Ls that would get killed in this environment because S&L borrow from depositors short term and lend money long term.  With short term rates higher than long term rates, there would be many losses.  Naturally everyone started dumping these stocks.
    • With the final collapse of LTCM in Sept, Cramer started buying the dip.  The first day of October the Dow dropped 200 points, mostly in the financials.  They lost $30M in one day.  Hayes Modem dropped from $4 to $2 on bankruptcy rumors.  Not a single 1 of the 100 positions they had went up.

Chapter 15 – Crisis in 1998, Part II

  • Cramer had opened his fund for redemptions because Eliot Spitzer needed money.  His fund was down almost 25%, and the market was doing poorly, so many people would be interested in the redemptions.  It totaled almost 1/3 of his fund.
  • Cramer had to defend his positions because everyone knows from the quarterly report to the SEC what their biggest holdings are.  Just as the ‘sharks’ drove out LTCM, they would also kill Cramer’s fund..
  • He bought lots of call options well above the price of the stocks to make short sellers think he knew something good would happen short term.
    • After first 5 days of October, they had lost $50M, they were down $100M for the year
  • Cramer called up his S&Ls and told them if they didn’t institute buy backs for their shares, he would dump all his holding in the market to drive the stock price down.  This would lead them to be taken over by other banks, so their jobs might be on the line.

Chapter 16 – Crisis in 1998, The Trading Goddess Returns

  • On Oct 8, at 12:18PM Cramer lost it and capitualted.  He wrote an article entitled ‘Get Out Now.’
  • Nikkei was down 5.8%, Germany was down 4.5%, FTSE was down 4.1% despite a rate cut  by the BOE that morning.  The S&P futures were down 24 points the ‘down limit’ (fallen as far as they could go legally), the most he had ever seen.
  • Prominent technicians and fundamental analysts were lowering their previous estimates saying we had much lower to go
  • The S&P oscillator was very negative.  Decliners outpaced advancers by a 9 to 1 margin
  • For months I had been arguing that this market had to bottom somewhere, but these declines, this news, these pressures, the dollar crash, the Japan reversal, Germany, no rally in Britain, the drug stocks rolling over, Abby Jo going negative, Acampora giving up, the impeachment, the goddamned redemptions, no hep from the Fed, it was all unraveling right before my eyes.  And here’s my wife wanting to buy, acting as if nothing’s going wrong, acting as if it just another day and there are bargains everywhere.
  • That day there was a rumor about a possible rare between-meetings conference call by Greenspan.  The market lifted by 20 points on a possible Fed bailout.  At 12:34PM, the Fed was going to act ‘relatively swiftly’ because ‘wealth destruciton was so noticeable’.  The Fed would provide the liquidity necessary to stop any decline.  The would cut rates by as much as half a point, and this would change everything.
    • At this time Cramer’s article to get out of the market was just published on his website, right when he found out that the bottom would not get any lower
  •  The market ended up rallying the rest of the year

Chapter 17 – Inside the IPO

  • Dotcom paper overwhelmed supply just as the Fed wanted to relieve the nation’s credit crunch.  There was so much cash around by November of 1998, so furiously was the Fed printing money and lowering rates, that it began to seep into the private equity market.
  • If alot of people were jazzed about an IPO story, they would try to get as much of the underwriting as possible hoping it would be hot.  They would flip it, taking delivery of the stock for about 30 seconds an dumping at the much higher price that it opened.  Usually it was hopeless overvalued or a real stinker that nobody wanted anyways.
  • Marketwatch offered 2.75M shares at $17, it rose to $130 the first day..  theglobe.com opened $90 above where it was supposed to.  Two dotcom’s doing this meant a trend was in place.  Marketwatch went up so much because of the tremendous advertising vehicle and terrific placement w/ AOL and Yahoo, but they had no subscription revenue.
  • When theStreet.com went public, it was initially priced between $9 – $11.  However, because of who was controlling the IPO process, the later a stock went public the more ‘demand’ would be there and the stock would open even higher.  The way the made this demand was by batching market orders together that had been opened during the day and then opening the stock late.

Chapter 21 – Repositioning Cramer Berkowitz

  • Needed to figure out a metric to grade the dotcom stocks by.  Earnings didn’t matter, revenues didn’t matter, valuations didn’t matter.  We needed to measure heat, what was hot and what was not.  We needed to measure fashion, to try to figure out what would be popular with the buyers, not what we liked ourselves.
  • Part of our great strenght at hte compnay was the recognition that investing is almost all psychology and very little substance, despite what the multimillion dollar research staffs of Wall Street.
  • I knew from my sell-side days that you could spin any story, fundamental, or otherwise to justify any investment
  • It seemed that each year we were paying more and more for the same level of earnings
  • I wasn’t willing to short stocks that we all agreed were overvalued because shorting on overvaluation is a chowheader’s game.  There is always some fund manager out there who can cliam a stock is undervalued on 2010 earnings and will buy it up seemingly forever or until his funds runs out of money
  • MicroStrategy was the dotcom darling stocks, just as IBM, Intel, and MSFT were the tech darlings.  It was a company with real revenues, earnings, management and prospects.  Until all of those prospects were found to be strictly virtual in nature and nothing was real.  It made up revenues and earnings and fooled everyone.
    • Companies have a clear idea in good times what they are going to earn.  The companies played the earnings beat rate game.
  • The realization that it was at last over came hard, we had been making so much money on the long side we were extremely unwilling to switch direction.
    • When April came, the Nasdaq was still at 4500, but Todd suggested we were on the verge of a collapse of titanic proportions.
    • If you took out the props, the tight supply, and the better-than-expected ruse, and you loosened supply and disappointed in earnings, I argued that there was no end to where your stock could fall. => we sold almost everything tech by end of April.
    • What a contrast Oct 8, 1998 was when I was so wrongly worried that a bear market loomed.  Then earnings were set to boom; now they looked ready to collapse.  The Net was imploding
    • After the dead cat bounce we decided we were done with committing a lot of capital to stocks as long as they remained as precarious a they had become.  Now that the market had finally seen it spirit broken, we not longer feared the short side.