The Lund Loop - Your weekly update on markets, trading, and life.
|Nov 17 2018||Public post|| 4|
For reasons I’ve written about in the past, I don’t like to travel. But lately, I’ve been doing a lot of it.
This week I was in Chicago, and on the way back I tweeted the following;
This tweet encapsulates the advice I got from my first trading mentor.
”Whenever possible,” he said, “try to trade overnight futures on an airplane with shitty WiFi while pounding high ABV craft beer. It’s the best strategy for a long and profitable trading career.”
Here’s the percentage of people that must trade on a plane: 0%
Here’s the percentage of people that should not trade on a plane: 100%
And yet, there I was, putting on a position 30,000 feet over the Colorado Rockies. So what gives?
Allow me to rationalize.
First off, I was trading as small as you can trade – one contract of the Nasdaq E-mini.
Second, I had a clearly defined, short-term goal. Risk $250 to make $1000.
Third, to mitigate Wi-Fi risk I entered a conditional order that, if filled, automatically set a stop and a target order.
And finally, I was scratching an itch.
Watching the futures since Sunday afternoon, I had seen many opportunities to trade, but circumstance didn’t allow me to give these opportunities the focus and attention they needed. So I passed.
But I was itching. Bad.
Fear of missing out is something I’ve struggled with long before it was FOMO. And I bet most traders/investors feel the same way.
Knowing that there was so much volatility in the market on Monday and not being able to act on it killed me. In years past, I would have forced a trade - or ten - on my phone, in between meetings, only to have my head handed to me.
Nowadays, I breathe, count to ten, and remind myself that there will ALWAYS be other opportunities, ones I’ll be better set up to act on.
Perhaps it’s a maturity thing? Perhaps it’s a wisdom thing? Or maybe it’s just a tired of getting your head handed to you thing? But whatever thing it is, it still leaves an itch.
And it’s okay to scratch that itch. You just got to know when and how.
Despite the altitude, thin market, tenuous internet, higher than normal blood alcohol level, and all wisdom to the contrary, my plane trade was less risky than if I had pushed things Monday.
Money won is twice as sweet as money earned.
And though it’s bad form to admit it, that’s what trading is all about.
They say that the type of music that was popular when you were in high school will always be your baseline for “good” music. I suspect it works the same way for the value of money – it’s based upon your first real job.
From the summer of my sophomore year in high school on, I had a string of jobs that included everything from construction site gopher, to busboy, to Christmas tree hauler, to caddy at Bushwood Country Club.
But I got my first full-time job at age twenty, as a bellman at the Sheraton Newport, where I made minimum wage, plus tips.
At the time, the minimum wage was $3.35/hr. and tips were hard to come by, due to the Sheraton’s deceptive marketing practices.
The hotel was known as a corporate property, meaning, not geared toward tourists or vacationers, but those who worked for big corporations.
Each week, some massive Midwest conglomerate would fly 12 to 24 new hires out to their SoCal offices for orientation and put them up in the Sheraton, Newport Beach.
So what do you think of when I say Newport Beach?
These new hires assumed that the hotel, if not right on the beach, was pretty damn close to it, and set their expectations thusly.
Unfortunately for them, due to a quirk of the assayer’s office, the city line tracks Upper Newport Bay, which extends almost 10 miles inland, at the very end of which sits the Sheraton – Newport Beach.
Anger and bitterness ruled the day when these cornfed newbies first realized there would be no need for the bathing suit, towel, and sun screen they packed. Suffice to say, this realization did not make them the best tippers.
And so, I survived mostly on my meager wages, which if I could pick up enough shifts, might amount to $160/week - before taxes.
That’s my baseline.
No matter how successful I get, how much money I make, or what my station in life becomes, that number will still be the subliminal yardstick by which all else is measured.
And it all factors into the itch.
As a bellman, I busted my ass. And I put up with all types.
5:00 am coffee calls with arrogant a-holes who insinuated a tip before closing the door in my face.
Insecure middle-managers exercising futile power plays to curry favor among the corporate hierarchy.
A raven-haired PBX operator who said she loved me and wanted to build a life together, but then shacked up with some random surfer dude in the hotel bar one night.
But I’m not bitter.
Point is, every dollar had a burden – real or imagined - attached to it.
And If you told the 20-year-old me that you could earn five weeks+ wages in under an hour, while sipping free drinks and rocking out to Black Flag, my head would have exploded.
Which is why every one of the $365 I walked away with when I closed my plane trade was so, so sweet.
It’s all about context.
A ham sandwich at your favorite deli is a thing of beauty. A ham sandwich sitting on the pavement on a hot summer day is a trip to the ER.
I talk a lot about trading because I love it so much.
It’s right up there with my kids, drums, craft beer, a good book, my best friends, The Twilight Zone, Christmas, and The Damned.
But it’s all about context. And scratching that itch.
The money that I use to trade makes up only a portion on my overall financial plan. An amount that, if I were to lose it all, would delay, but not derail my long-term goals.
I have a 401(k). An IRA. Life insurance. A couple of 529 plans. CDs. Money market funds. A few gold and silver coins. Some crypto-currency. And most importantly, cold, hard cash.
And when I get to a certain profit level from trading, I sweep the excess into my long-term investments. It rarely goes the other way.
When it comes to trading, I’ve run the gamut. From using a fraction of my net worth to putting everything I had on the line during the most volatile periods the markets have ever seen.
And now at 51, I think I’ve found a happy medium. Where trading is like a side hustle that I can dip in and out of when circumstances warrant.
That allows me to scratch that itch I’ve always had - and always will have - without putting my financial future in jeopardy.
Remember that the next time you see some dick talking about trading futures, drunk, on a plane.
There is a Buddhist proverb that says, “A man can’t go into the same river twice.”
This is because the river is constantly flowing and changing. But more so, because the man is changing as well.
A man who sets foot in the same river one year later will be a different man, shaped by the forces of time and experience.
This is an optimistic philosophy going forward, but a sober, pessimistic one looking at the past. It assumes that your understanding of things gone by – especially those which circumstance has frozen in time – will never be fully realized.
This was driven home to me a couple of years ago as I was going through my late father’s record collection.
I love this collection.
And every few years I’ll pull out the milk cartons that hold it, just as I did as an eight-year-old boy, to thumb through the albums that made up my father’s musical library.
The smell of the cardboard reminds me of him. When I slide the vinyl out of their sleeves, gently blowing off the dust, I think of how he once did the same thing.
At that time he was a man who had only a bright future ahead, one far removed from the cancer that would eventually part him from his young family.
It is a moment frozen in time. That I can, at best, only understand in the context of a twenty-year-old man-boy – my age when he died.
My father wasn’t dumb, but he wasn’t a particularly intelligent man. And to compensate, he gathered bits of wisdom from those he admired and looked up to and incorporated them into his world view.
He didn’t do this out of ambition, but out of curiosity. That which he didn’t understand or relate to wasn’t intimidating, but genuinely interesting, and I often think of how overjoyed he would have been to have half-Vietnamese grandchildren - or eat their grandmother’s bun rieu cua.
But he also wasn’t someone who made simple mistakes. Good with his hands, he embodied the “measure twice, cut once” philosophy. That’s why I was devastated when I came across the following on the back of one of his albums.
“13.71? Maybe it was a mistake,” I said. “Anybody’s mind could drift when doing addition.”
Then I saw that it wasn’t an isolated incident.
I don’t know why his math mistake hit me so hard.
Perhaps because it shattered the image I had of my father as a very thoughtful, methodical man.
How could he make such a mistake. How could he forget that the measurement of time was based on 60 and not 100?
What sort of dolt was my father? Was I wrong about this man I looked up to and loved oh so much?
Was he in fact, not the town sage but the town simpleton?
Would the man my 20-year-old self thought so highly of been dismissed as a matter of course by the 48 year old me?
This thought pained me so that I began to question everything I thought I knew about the man.
Flashback to the summer of 1979.
I still liked KISS, Ted Nugent, and Aerosmith, but there was this new thing that was bubbling through the radio - and garages of Southern California - called punk rock.
And I liked it.
At the moment, I was trying to capture it on the cutting edge technology of the day - the cassette tape.
It’s the only format you could take with you - in the car, to the beach, to your friend’s house - anywhere there was a cassette player, or better yet, a boom box.
So as KROQ’s Jed The Fish talked over the outro of some wussy new wave band, I simultaneously hit the play-record buttons, hoping to capture a punk anthem from local heroes Black Flag, FEAR, Circle Jerks, The Weirdos, or X.
And always, I’m tracking the time on my cassette tape. First off, because they are expensive. Second, because if I am lucky enough to catch a true foreign gem from the Sex Pistols, The Clash, The Damned, The Jam, Buzzcocks, et al., I don’t want to run out of tape.
And so I watch the counter intently.
Yes, I remember the counter.
I don’t really know what my father was like.
He died before video became ubiquitous.
All I have of him are these 14 seconds in which he coos to my baby cousin and is particularly unverbose – significant or not due to the fact that he would have the seizure that revealed his brain tumor only three weeks later.
The truth is, I will never really know who he was.
For all eternity he will be cloaked in the reality I created for him - and frozen in time.
But I know he’s not stupid. He’s not unthoughtful.
“Wait a minute,” I said. “The tape deck?”
“It goes to one hundred,” I said with no Spinal Tap irony.
And of course, there was guilt for not giving him the benefit of the doubt - for even thinking such a thought - but more so, palpable relief that my mental memorial to my father was still intact.
I can only hope that 50 years down the line - when my children have much more than 14 seconds of video and old record albums to judge me by - they are more charitable with my memory than I was of my father’s.
Bucket o’ Charts
For the last 100 years the stock market has averaged 9-11% return. So what happens in the short-term really shouldn’t matter.
But let me add this….
I have noticed that short setups have been failing recently. And just as long setups failed at all time highs, this could be a sign that we have a bottom - of indeterminate time frame - in place.
That being said…I still don’t think there has been enough pain and blood for the final bottom to be in. I would be much more comfortable getting long if we had a HUGE flush lower to clear out the weak hands.
But the market doesn’t care about what I want.
So, on to the charts….
The SPX plunged out of a rising wedge (yellow lines), bounced, and settled below all major moving averages. The first sign that this drop is done would be the recapture of the 200-day moving average.
Pretty much the same story as the SPX. This index has a very clear line in the sand at the recent lows. Recapturing the 200-day moving average would be a positive development.
The Dow is in (slightly) better shape than the other indexes as it’s still above the 21 and 50-day moving averages. Watch this relative strength to see if it holds up.
A few weeks back I said that the market could not crash without AAPL. And, as if on cue, AAPL gave up the ghost.
The bad: Its broken an uptrend line and is below the 200-day moving average.
The good: This held support at about $182.50.
This HQ search has become an albatross around Amazon’s neck. Now it seems like everybody is gunning for them.
The stock is stuck in an intermediate-term downtrend and is below all notable moving averages. For now, the trend is down.
The brokenest of broken stocks, Facebook has broken recent lows, support, and is running away from all moving averages. This stock/company has problems that we aren’t even beginning to understand.
Here you see a set of progressively lower trendlines capturing price, which is below all major moving averages.
Nothing to do here unless the most current downtrend line - or support level - is broken.
Who would have guessed that with all this recent volatility, TSLA would have been one of the better performing stocks?
But if you move out a bit, TSLA has really just been in an almost two-year range, between $387 and $250. If you follow technical analysis, that says that there is a range breakout of $137 on tap - meaning $524 on the upside and $113 on the downside.
This company is a proxy for the crypto-currency market. And as that market goes (down), so goes NVDA - in a downsloping channel.
WTF is going on here? As the markets have tanked, TRIP ran to all-time highs, basing just below such right now.
This is the type of relative strength you want to pay attention to and keep on your watchlist for when markets stabilize.
There’s always a bull market somewhere. Right now it’s in (leveraged) natty gas.
Tweets of the Week
Here’s a couple tweet that got some traction. You can follow me on the Twitter at @bclund
It’s Good, It’s Good
One of my favorite comedians, Brian Regan, did a similar jag as mine about pregnant women, only 1000x better….plus some other cool bits.
Here’s one of the baddest beats in the history of poker bad beats.
If you didn’t have a chance to listen to KROQ in the ‘80s, this is a taste of what you’d have heard.
Apparently, beer is at risk from climate change. What(burp)ever! (The Outline)
I have a love/hate relationship with Anne Lamott. On one hand, she is a fantastic writer who has written one of the definitive books on how to write.
On the other, she is a vampiric bleeding heart liberal. I’m so confused.
What do you think? (New York Times)
I don’t even like sports, but this is just so cool. The origin of all 30 NBA teams. (Mental Floss)
Chopsticks are born from broken baseball bats. (New York Times)
A story of love kept alive in a time of war - by way of paper. (The Walrus)
As a parent of children that have too much homework, I have long thought that cursive needed to be killed. The common ballpoint pen agrees with me. (The Atlantic)
Thanks for reading this week’s edition of The Lund Loop. And if you haven’t figured it out by now, I want to hear your opinion on these, or any other topics you see fit to espouse on.
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Talk to you soon,
P.S. It should go without saying - but I’ll say it anyway - all opinions expressed here in The Lund Loop are my own personally and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.