If you did not read Chart Addict’s post, regarding handcuffing strange men to metal pipes, I strongly suggest doing so. Great stuff.
I want to expand upon what he said, with a little “Fly twist.”
I have tried all sorts of investment methods. During my career, I have been a Warren Buffett type of investor, bond guy, small cap guy, big cap guy, niche play guy, day trader, swing trade and finally, what I am now: “don’t give a fuck ’cause I am right guy.”
Everyone out there, trying to bank some coin in the markets, will endure staggering losses. It’s part of the game. However, with experience you can skirt dumb rookie mistakes, most likely executed by most of you retards— day in and day out.
My “Godliness” came to me, in increments, after the crash of 2000. Naturally, I made obscene coin in 98-2000; but who didn’t? However, only after wiping out my personal brokerage account, within a few quick weeks in 2000, did I learn the value of “Trading with the Gods.”
See, “The Gods” don’t give a shit about bull markets or bear. It’s important to understand your risk threshold and NEVER approach it. All of my big mistakes came when I was pressured to cover a short or sell out a long, due to margin issues. During the years of 2001-2003, I pigeon holed myself, trading only on a cash basis, fucking around with big dividend stocks and distressed debt. An experience of solitude, to say the least. But it gave me time to see things in slow motion, instead of the knee jerk action of idiot high beta stocks.
If you think stocks are stupid, you should see the bullshit that takes place in junk bonds. But that’s a whole new topic.
Before I execute a trade, my mind is already set on where that stock should be, within 1 day, 1 week, 1 month or even 6 months time. And, I always have a general thesis to trade around. For example, in 2006 I loved oil/gas. In 2007 I was a big restaurant/beverage fan. In 2008 I was all about shorting the shit out of China and banks. And in 2009 I am all about shorting commercial Re and oil.
The market runs in cycles and it is important to identify what cycle we are in, prior to setting a thesis.
After that, you need to understand that even though you feel a stock like BAC should go to zero within 6 months, it can triple in two, before going lower. NEVER put yourself in a situation that will force you out of a position, because “the pain is too great.” Whatever plan you have in your little head will likely be tested, via egregious losses. Be prepared for losses.
Fuck all of the greed. Greed is good, but it bankrupts more people than a drunken CDO manager at a Bear Sterns annual BBQ.
I view investing like driving on a road. I know where my destination is, short VNO, BXP, ESS, KIM etc. However, on the way, I might drive off road for a quick snack (scalp trades) or take a nap (cash). Nonetheless, at the end of the day, I know where I am going; and I know that I will be right.
Hence, “Trading with the Gods.”
UPDATE: Santelli still on fire.
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The fly is god so we are “trading with the gods”
Thanks for the outstanding advice. The Fly regularly slaps me around reminding me what I should be doing and I always profit because of it.
Is there such a guy as the “too early guy?” Back in early 2007, I thought the shit was going to hit the fan with mortgages, banks, housing, the economy, etc. However, the gov’t kept sugar coating everything telling us how good things were and are going to be (ie ever increasing jobs created, no inflation, etc.) After meeting a “don’t give a fuck ‘cuz I’m right guy,” the “too early guy” could be lumped in with the “rookie retard guy,” huh? Thanks for the blog Fly… nothing like reading someone who keeps it real.
AWESOME article! Don’t really need to say more than that.
We all are the “too early guy.”
That’s why it’s vital to remember your thesis and always default to it, when confused. More often than not, if you are an avid reader of news and in tune with reality, your general thesis will be correct, eventually. It’s a matter of risk management and knowing when to spot inflection point.
I am sure The PPT will help many of you identify that.
I had my butt handed to me 9/11/2001.
Fuck oil!
Stage II sucks!
Excellent advice Fly! The “too early guy” often gets wiped out without learning proper risk management or having the patience to wait until the rest of the world catches up with reality. The “wall of worry” is often larger than your bank account when your thesis is early.
Inflection points are often tough to catch and the PPT looks like an excellent tool to monitor for them sector by sector. Keep it simple and don’t second guess yourself if you are informed enough to justify your investment thesis and smart enough to not exceed your tolerance for risk. There are more important things in life than money. Don’t obsess over it, learn the cycle of business and markets, manage risk and find your own niche that you are most efficient at trading or investing in.
White House spokesman Robert Gibbs said Friday that “this administration continues to strongly believe that a privately held banking system is the correct way to go.”
Long 30,000 UYG at $2.00
I too got my ass handed to me because of greed. I will not make the same mistake again.
looking forward to the PPT.
Does anyone know what happens to UYG if it touched zero. Does it get zeroed out?
Don’t forget to click this link to have a letter sent to your Congressmen to urge them to vote NO on the trader tax. If it passes, market liquidity will be significantly reduced buying/selling stocks will no longer be a way to make any coin.
http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/
you wrote “And in 2009 I am all about shorting commercial Re and oil.”
what is commercial RE? give me an example..sorry my english is not so good 🙁
and if understand we are still short 🙂
Excellent addition to a great post.
Agreed. Thx 4 sharing and what you are saying is not to become devilDOGmatic. You can have your thesis and have it eat you before it plays out. You must be flexible for nothing is written in stone, except the Dow/Gold ratio hitting 1:1. 😉 😀 8)
Agreed. And be careful about using the news for making decisions. Here’s an important instructional video.
http://www.youtube.com/watch?v=zeqA8cUE24E&feature=related
After that, you need to understand that even though you feel a stock like BAC should go to zero within 6 months, it can triple in two, before going lower. NEVER put yourself in a situation that will force you out of a position, because “the pain is too great.”
Maybe I’m asking the wrong question on a stock jockey’s blog. i would never allow a stock to double or halve against me. Perhaps it’s how currency traders trade as we rarely see fast doubling action. Vol on some individual stocks these days is 50% at the money while its around 13% for currencies.
I always play for at least 3:1 bets minimum. and have a prearranged stop loss. To take the sting out having to cut a losing pos i always leave the stop.
I look at capital allocation. It could very be that I may take a position with a loss limit 100% or 1/2 the stock price. However I would look for a potential trade 3 times that and i would be careful in terms of allocating the amount of capital against it. Less if it a bigger stop loss.
Look I’m not magic. If I get 60% right and 3 times the risk capital I’m doing wonderful. Most years I get 50% right in currencies. capital allocation is the key and watching the downside.
Funnily enough the 80/20 rule seems to apply. You tend to make 80% of your money with a few great trades.
interesting commentary , Fly.
Commercial real estate investment trusts that have caught my eye are retail store owners like SPG, TCO, FRT. These guys own strip malls, factory outlet stores, shopping malls, and the like. If your thesis is that retail spending will fall, then eventually these REITs won’t be able to raise rates enough to cover their falling occupancy percentage and they’ll have to cut their dividends – leading to dramatically falling prices.
I looked at RTL but that etf is not very liquid.
I think it’s too late to hit the hotel/lodging REITs. Already been butt-raped.
It seems to me the only way to get out of this bank mess is for the treasury to buy the debt, put it into a public fund and sell shares allowing the debt to be reorganized. Do not overpay for the assets, pay market price, if its 22 cents on the dollar so be it. We can not bailout the big banks. We need to save the nation’s economic system. There are small banks that are healthy out there that can pick up the pieces of the commercial banking side. The investment banking side will be lost for Citi and BofA. So be it. Smaller firms can pick up the I banking slack.
http://finance.yahoo.com/news/Journal-Register-files-for-apf-14432454.html
Another newspaper victim. Chase agrees to reorg the debt. Do they really have a choice. How many more reorgs can they do without it vastly cutting into their bottom line. As more companies go into BK more lenders will be shitting the bed. The system is really in trouble IMO
I’ve seen a lot of commenters, here and elsewhere, that rail against bank nationalization while favoring an approach much like what T MOE proposes.
Here’s the thing: what T MOE proposes is nationalization. Buying the assets at market value is a forced liquidation of the insolvent banks. It is much like what the FDIC does with failed banks, except that FDIC sells the assets on the market instead of buying the assets itself.
That is a simplification, of course, but, when you have the government forcing the liquidation event, instead of the usual process through a bankruptcy court, nationalization is what has happened.
“There are small banks that are healthy out there that can pick up the pieces of the commercial banking side. The investment banking side will be lost for Citi and BofA. So be it. Smaller firms can pick up the I banking slack.”
This is my thesis now, too, T Moe – at least as of Friday night, LOL!
I have been focussed on shorting the financials that will fail, and now I am looking for those that will prevail.
BBT was suggested to me even before the debacle started in earnest by someone I trust implicitly and who has the analytical skills to slice and dice. BBt raised the divi at least once in the last year and though I have been tradin in and out of it in that time have now legged into a long term holding, hedging as necessary.
Also looking at USB, but on only a cursory level so far.
Don’t nationalize – euthanize.
To j-
‘Does anyone know what happens to UYG if it touched zero. Does it get zeroed out?’
As I have too much of that bitch of a whore UYG, with the US Gov’t her pimp than I care to admit, I can only imagine if it goes under $1, it could touch ‘0’. Does that wipe it off the board? I say most likely , no. The entire Dow Financial index would have to fail and I would imagine they shut the market down just prior. If C and BAC get nationalized – which could mean nothing more than a temporary restructuring , it only strengthens some-maybe a ton of banking financials with regards to the panic rumors. UYG Holdings of C and BAC only equal 8% so I do not believe nationalization (a very broad termination) of those two could crash UYG. There is so much fear/greed/panic (all synonyms for trading)surrounding Bank Nationalization.
Me? I’m holding UYG at various buys from high $6 on down.
Read this very interesting article on Bank Nationalization
http://money.cnn.com/news/newsfeeds/articles/djf500/200902201442DOWJONESDJONLINE000833_FORTUNE5.htm
And , here are UYG’s 10 holdings, which are only 33% of their Assets
http://finance.yahoo.com/q/hl?s=UYG
Call it what you want. If it is quasi nationalization so be it. I have said on this board for months that the banks were insolvent. Injecting more capital is pouring bad money after even worse money. The bakers have to suffer their fate. Let the banks reorganize and consolidate, and there must be survival of the fittest. That is not to say we should abandon the FDIC. They must stand behind all bank deposits! If it is nationalization as you say well that is the price we must pay as a nation for the failure to regulate the big boys as we do the small players.
Raz thanks for the article
“Harvard economist Greg Mankiw said if some banks are actually insolvent, then the government should intervene with a “massive reorganization.”
“Some might call it nationalization, but more accurately it would be a type of bankruptcy procedure,” he recently wrote on his blog, noting the equity holders would get wiped out and bond holders would get the assets. “Suddenly, these financial organizations have a lot more equity capital and not a shred of debt. And all done without a penny of taxpayer money.”
Nationalized socialism has never really been the American way so there is a learning curve here. I know when Germany was led into a National Socialist party during the Third Reich, there were a series of fires and crises that led up to it. There has to be a certain level of desperation in the people first. I know there have been a lot of steps in that direction taken of late, but clearly the Obama administration isn’t interested in going there. At least I don’t think they are.
Even Paulson said, “This is something we never wanted to do”. The problem is that once you open Pandora’s box here, there simply is NO going back. It becomes impossible. The natural course that follows always ends badly.
Therefore, privatization must occur. Once that message is sent, investors will reinvest in the banks and this will all be over with.
omfg-
What do you mean by privatization? The Pandora’s box has already been opened and has been opened for a long time with the Keynesian theory. deficit spending and borrowing does not work IMO
Mr Fly,
Please write a book on your experiences.
My time machine says Best Seller.
If we merely borrow to fund the economic bailout, we have two major problems. The contraction of leverage far outnumbers the actual money supply even if we now count all the cash and outstanding debt as money. Because there has been no regulation of the amount of leverage between banks as is done within the exchanges who raise margin requirements in the futures to manage the amount of leverage, we are looking at a contraction that could exceed GDP in multiples. Borrowing to bailout the banks is indistinguishable from moving money from your left posket to your right pocket. we are actually further adding to economic contraction by soaking up cash in the system and redistributing. this is merely a form of Marxism!
T Moe, that’s what I meant by saying “There have been a lot of steps taken in that direction of late”. When I say that I mean in our last century of American history.
It’s really not our bag though. We aren’t very good at it.
FLY;
Yes the market runs in cycles but in a bear market any news can change a cycle. Take shorting commercial Re. Every Tom Big Dick and Harry is gearing up for this trade. It is a crowded trade before it happens. This is still a day trading and options market. Big picture is from one day to 1 week. When we see the next up move the big picture will come into play. I will wait until than to form an opinion. For all I know Industrials and materials might lead. Who knows but a crowded trade before it starts is not my type of game. That doesn’t mean I won’t short Oil and commercial Re on a retrace if they play!
enuf said
Soooo nice to meet you ! 😀
If I could have some wishes right now related to trading I would wish to be able to sit in the same room with a knowledgeable trader and trade along side him.
I would wish to have a little angel on my shoulder that told me….NO dont do that, yes that looks good.
I would wish to have a best friend who was an awesome trader that I could call up and ask them questions.
I would wish to not be alone trying to tackle this very difficult market….
.
standing ovation.
Very nice add-on
Thanks Master Fly!
This is not a prediction. The Oil contract $wtic P+F chart just went to $57 a barrel. Just information. Note: this is the most positive P+F chart in the Commodity Index. Even over Gold. That is the Price Objective or PO.
I think we are getting close to a bounce. My guess is that we open down a bit on Monday then shorts/dips start to cover/buy.
Lottery Ticket:
BAC (long) sell at $5.50
PPT launches tonight.
How far this great nation has fallen. We are now begging the Chinese to keep buying our treasuries.
http://www.breitbart.com/article.php?id=CNG.42a44b0f5d9cf5c9762e80574e79a3d5.831&show_article=1
It’s all over.
This could be a problem
http://www.bloomberg.com/apps/news?pid=20601109&sid=azObP8_4deuI&refer=home
Lady G,
Click on JF to send an email.
Fly, We have The Oscars- PPT– and the world collapsing all in the same night. I think I’ll do carry-out at B-Dubs.
Fly,
You got punks trying to take credit for your shit.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_G/threadview?m=te&bn=8089&tid=336336&mid=336336&tof=7&frt=2
Fly,
Clinton doesn’t have to beg the Chinese to continue buying treasuries because they have no choice. If the US falls the Chinese will fall. The US is a large consumer of Chinese products so the Chinese will not bite the hand that feeds them. Likewise, China is the largest creditor to the US so the 2 are tied to the hip at this point.
Fly,
Time to bring back the internet laserbeam and blow up Dexter for plagiarism on the GS yahoo message board! Nice catch Berlin!
bo yoder:
http://hardrightedge.com/dor.htm