iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
18,477 Blog Posts

There’s Only One Way to Survive a Market Like This — And Life Advice from Dr. Le Fly

Contrary to popular belief, 2018 has been an arduous year for equities. There have been numerous false starts, blow ups, melt ups, and varying spates of nothingness. If you look at the median returns of the individual sectors, it’s rather bewildering. I don’t recognize a common thread or scheme, but something that resembles chaos and randomness.

I think in many respects the market takes its cue from leadership — and at the top of our leadership is the Presidency and all of the people who surround him. Like I said, chaos.

There are a few certainties that you can bank on when trading, one of which is being wrong a lot. The other is having great times, unbelievable trades that often provides a sense of invincibility. At times this success can be deleterious to one’s trading — as it changes the natural character of a person into something filled with hubris. Pride always comes before the fall.

The only way to last in this business is by adhering to a set of rules. A 10% stop, if you believe in such a thing, should be a hard line in the sand. A certain allocation scheme, diversification and holding period, once established, should be followed. Strategies should be analyzed at least once per quarter and adjusted against a benchmark.

Also, if you’re trading aggressively and hold a lot of small capped stocks — quit benchmarking against the SPY. What you’re doing is super risky, so you should be marked against the Russell, Nasdaq, or something else.

For me, I’ve found equanimity in placing the largest part of my money in a quantitative strategy. There’s no emotion involved, only a set of rules that are followed, robotically, and then analyzed for performance. Over the past year, this strategy has crushed the indices, so I am pleased with it. But I knew heading into this sojourn that the degenerate side of me would not be able to sit idle and watch stocks trade without getting involved, so I set aside a small fund for trading.

At 41 years old, I know myself, attributes and limitations, and am honest enough to know what I’m capable of and where I’m lacking. The biggest failures that I know of always came from people doing things they weren’t built to do — getting in over their heads in ventures that proved to be ruinous. When you lie to yourself, stubbornness is a byproduct and this weakness will exacerbate losses.

Are you a trading prodigy, a genius? I don’t know — are you? If you think so, what proof do you have? Is it in your genes — do you have a large net worth? Maybe you’re not a trading prodigy, but that doesn’t mean you can’t build a massive fortune either. I once interviewed a woman who needed investment advice, a secretary, who had a liquid net worth of ~$900,000 — all due to being a disciplined spender and living within her means. I also know people who make $500,000 per annum, but have no money in the bank. All of it is spent on clubs, mortgages, cars, and vacations.

One thing is for certain, the things you want aren’t going to be given to you — so you better have a plan to acquire them and that begins with being mature enough to know what you’re capable of doing — you fucking faggots.

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41 comments

  1. acehood

    If everyone lived within his means what would happen to global markets?

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    • infinitezuul

      For the median US income of 59k/year, living within his/her/xir means currently is defined as having a negative net worth no less than -$350,000.

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  2. sarcrilege

    Another way to survive a rigged casino like this is to opt out and sit pretty in assets with no counter-party risk. But that’s only for those who are disciplined (by experience) and not compulsive gamblers. Thus, that excludes everybody here except yours truly.

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    • numbersgame

      Do peopel look like ants sitting on your high horse?

      Counterparty-risk is only one kind of risk. It is important and often overlooked (as 2008-09 demonstrated), but sitting on gold hasn’t proven a good investement historically. Also, counterparty-risk only exists if you can’t get taxpayers (often unwillingly and unknowingly) to bail out your counterparty.

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    • shr1

      I didn’t know you were such a pussy?

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  3. roundwego

    With all shorts stopped out. Crash time.

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  4. ferd

    41? Yeesh. When I need advice on which adult diaper to use, I know where to go.

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    • joyous__ending

      Tremendous wisdom for a man of 41. We can all learn from The Fly and his generous sharing of knowledge, advice, and honest reflection.
      You don’t need diapers, you need a deeper thought process.

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      • ferd

        Were you that pimply little ass-munch that brought Miss Kane apples and such in 7th grade?

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        • joyous__ending

          Who cares about 7th grade? “that pimply little ass-munch” is doing a hell of a lot better in life and more respected among his peers than you today.

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          • ferd

            Sorry to have upset you. I’ve been cyber bonding with Fly for decades and I can remember when he’d bash on anyone over 40 ..with humor of course. I love and increasingly respect Fly. Perhaps you could lighten up.

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    • Dr. Fly

      I started blogging here when I was 28. I’m getting old.

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      • mx2101

        Fly- Yes, you are getting older. Old? Well…

        I’m at the age where knowing it could end any day and inevitably will is with me always. It wasn’t that way when I was younger.

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  5. joyous__ending

    Hardest part is waiting for that oversold signal, and lately the first oversold signal is not the one to take, but the second or wait a few days.

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  6. ferd

    Anyone tempted by GE?

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    • cancel19

      I bought some cheap May calls in $GE last week. Hope they make some money soon.

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  7. tonka

    I mocked you for your short vol strategies in the past, but I am starting to truly believe a martingale strategy would work now that $SVXY has been cut to -0.5. It would probably take a move bigger than 1987 to make it go to zero.

    You were not wrong. You were just early.

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  8. chiweez

    I’ve been perusing Fly’s blog on and off for 5 years or so. This is one of my favorite posts. It succinctly describes the man and his modus operandi He then proceeds to insult you at the end of it all for good measure. Fucking faggot.

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    • ferd

      I agree, great post. But why use words that gay readers may find offensive. I figure people are born gay …not a choice. So I don’t use such words. Quite different than, say joyous, choosing to be an ass-munch.

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      • Dr. Fly

        When I say faggot I do not mean sexual orientation — I mean retard. When I say retard, I don’t mean mentally addled, I mean fucking moron.

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        • ferd

          As I’ve argued with Sarc, words mean what they mean to people at the moment they’re being said/typed. Arguing that you can create and use your own language is moronic.

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          • infinitezuul

            Tell that to the people that use the word “literally” to mean “Can you believe it?”

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          • numbersgame

            IZ, Those people are literally not worth paying attention to.

            ferd, I don’t think that regular readers of Fly’s (of the homosexual persuasion) will be offended. “Fly” is but a character. If somone said something liek that in a conversation, it would be different.

            Now, I do agree that using lanagauge like that makes it more acceptabel in our society, so it does hurt homosexuals, to some (small) extent, even when used in an (apparently) non-offensive manner. However, much more serious is someone like Mike Pence, who will say shit like “No offence, homosexuals are an abomination.” and actively work towards polices to enforce that view.

            It’s much better to be insulted to one’s face than to have someone be polite to you and then work behind the scenes against you. Just look at Trump, who said he will raise his own taxes to give the wokring class a tax break. Or who will help his energy buddies while poisoning the water supplies of their workers’ children. Truly a sick individual.

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          • ferd

            Agree.

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      • sarcrilege

        It’s all that hormone disrupting bisphenol A (BPA) plus all that other shit in the water and food which is likely responsible for the increase of gender confused millennials. But still, those cocksuckers amount to no more than 2-3% of the whole population but with all the hoopla encouraged by the Soros’ connected and funded marxist movement, one might get the impression that every other bolshevik is a faggoting homo…think of it, bolsheviks are faggoting cocksuckers. I just collapsed my own argument.

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  9. acehood

    RIP Avicci

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  10. stockslueth

    At the top is a Mad Hatter’s tea party.

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  11. bambaclot

    Yes, have a plan… and stick to it, i.e set automatic buy / sell triggers. Do not rely on your own capabilities. Trading like a cold ass, emotionless robot is the way to go for the longer run.

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  12. ferd

    I do believe I’ve set some sort of record in this thread for thumbs down …unblemished by any thumbs up. In the future, I will flag (kidding) when I attempt humor when Joyless is about.

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    • sarcrilege

      Stop flattering yourself. I hold all-time record for thumbs down. Watch me so you can learn how pros do it. There’s a lot of easily offend-able snowflakes on here and I know how to trigger them all w/o even exerting any effort.

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  13. numbersgame

    Great post, Fly.

    Also, to those that think they ARE trading geniuses, it takes mire than profits to verify that. Consider this: there are literally hundreds of thousands (millions?) of traders. So now imagine all those traders are monkeys (or computers) making random decisions. I guarantee that one of them is going to make at least +100%.

    So this means that a true genius trader will not have “intuition,” because that can’t be distinguished from blind luck. Instead, a genius trader must have developed a cold strategy, that works in all kinds of markets, so you better backtest that shit. Also, make sure you have a “black swan” hedge in case things go terribly wrong, as they did for the *literal* financial geniuses at LTCM in the ’90s.

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    • fryguy15

      No. The only thing that matters in trading is the scoreboard over time. Why? because the point of trading is to make money, nothing else.

      Most people lose money in stocks because they follow the financial markets for the mental stimulation and thrill ie. wrong reasons.

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      • numbersgame

        The scoreboard only matters over the LONG TERM. My point, which was over your head, is that probabilty indicates that there will be some very profitable (in the short term), yet very bad traders/investors.

        Long XIV is the classic case of short term success based on a foolish long-term strategy (that the VIX will continue to stay below near single digits).

        Now if you tell me someone made a profit trading stocks for 20 years straight, then THAT is a good trader. Consistency is the key.

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  14. fryguy15

    That secretary probably had a very boring life. The whole point of busting your ass and making money is to spend it, no?

    I know some people that have a million + in cash in the bank. Yet they never do anything and live modestly. I never understood that. What is the point? Its like their life goal is to see the numbers increase on their bank statements.

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    • sarcrilege

      no and yes respectively… Numbers in ounces, btw.

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    • Dr. Fly

      @Fry

      Some people are happy doing little things and actually are unhappy when spending money.

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    • moosh

      Maybe that secretary had a very scary life, trying to pay bills and shit? Not boring. Does not want repeat. Everyone is different yo

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  15. Dr. Fly

    Reasons to not spend money like drunken sailor

    Legacy
    Charity
    Saving for retirement
    etc

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  16. CoinSpeak

    ditch stocks. trade crypto. you’ll have a year’s worth of experience every month. the highs and the lows.

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