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Posts Tagged ‘trading’

The Problem Is Not the Market, The Problem is You

Posted by Larry Doyle on November 19th, 2009 12:14 PM |

Trading on Wall Street is fascinating. Picture yourself surrounded by individuals within three to four feet on every side, a manager at the end of the trading row, and salespeople screaming to get your attention. In what may appear to be bedlam, one must be able to properly manage significant levels of risk.

What are the key character traits necessary to manage risk? The ability to calculate quickly while maintaining exceptional levels of poise, focus, and discipline. Why do so many competitive athletes make their way to Wall Street? These trading floors are the equivalent of locker rooms and athletic fields.

As with any athletic atmosphere, there are also some very healthy egos on Wall Street trading desks. The very nature of the enterprise attracts those who have strong belief in their own abilities. Competition promotes ego. That said, throughout my career I witnessed varied levels of success inflate individual egos to the point where the ego became unmanageable, the risk outsized, and the subsequent losses fatal. That scenario repeated itself at every shop on Wall Street.

Having witnessed it, I kept a short cutout from a trader’s magazine. The magazine item addressed the topic of losses. I wish that I saved this clip, but I distinctly recall its message. In so many words, it said ‘the problem is not the market, the problem is you, the trader. You need to accept that the market and its participants are not wrong, but that you and your ego are not willing to accept initial losses so they grow to the point where the losses become fatal.’ (more…)

It’s the Economy, Stupid!!

Posted by Larry Doyle on October 16th, 2009 9:05 AM |

The American public is becoming increasingly wise to the ways of Wall Street and Washington.

Many Americans were duped by financial practices and products emanating from Wall Street. Where was Washington? I would assess Washington’s involvement and responses in the following fashion:

1. At worst, Washington was complicit given a wide array of failed public policy programs, especially in housing. These public policies were largely ‘greased’ by lobbying dollars and campaign contributions.

2. To a large extent, Washington was negligent in terms of oversight, especially on the financial regulatory front.

3. At best, Washington was naive given a general lack of understanding of markets and finance.

The American public is now responding in appropriate fashion. How so? In increasing numbers, they are choosing not to play the Wall Street game. What game is that? Active trading and investing. While the numbers of pure day traders may have increased, the American population at large is focused elsewhere. Where is that focus? On the economy at large and on their individual pocket books.

Washington’s focus on Wall Street and its selling of the market rebound as reflective of a return towards prosperity is a product that will not fly . . . try as they might. Why?

It’s the economy, stupid! Reports this morning indicate that wages will likely show the greatest decline since 1991. Even in the face of declining wages, consumers’ purchasing power is being further eroded by the continuing decline in the value of the dollar. That decline is inflationary which hurts consumers but it continues to present a very cheap funding vehicle for those who want to use the greenback to employ leverage in the markets. Who has the advantage in that process? The large banks. Do they spread that wealth in terms of increased credit and higher savings rates? Now why would they do that?

The American saver and consumer shouldered the cost of the bank bailouts in 2008. They are now shouldering the cost of the wealth transfer to the banks in 2009. While Washington would like to sell this dynamic differently, the American public gets it.

Washington will continue to sell this dynamic at its peril.


St. Patrick Smiles on the Market!

Posted by Larry Doyle on March 17th, 2009 5:34 PM |

When trading bonds, I used a rule that Tuesday’s price action often reversed Monday’s. While that rule of trading was strictly a quirk based upon years of experience, I found it happen so regularly that I never discounted it. 

Supported by a surprisingly strong housing starts number (+22% to 583K) and a relatively mild increase in PPI (producer price index) of .1%, the market opened relatively flat today but firmed all day right into the close. The major stock market averages closed up 2.5%-4%!! (more…)

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