Michael Covel: News & Info.

I am moderating a Managed Funds Association panel at The Ritz-Carlton, Key Biscayne, FL (February 11-13, 2008). This is for the MFA’s Network 2008.

Malcolm Gladwell is an interesting guy.

From Mark Cuban comes reinforcement for entrepreneurs.

The following true/false questions were sent out to the second group of Turtles. These questions were used to help decide who was picked and who was not:

1. One should favor being long or being short whichever one is comfortable with.
2. On initiation one should know precisely at what price to liquidate if a profit occurs.
3. One should trade the same number of contracts in all markets.
4. If one has $100,000 to risk, one ought to risk $25,000 on every trade.
5. On initiation one should know precisely where to liquidate if a loss occurs.
6. You can never go broke taking profits.
7. It helps to have the fundamentals in your favor before you initiate.
8. A gap up is a good place to initiate if an uptrend has started.
9. If you anticipate buy stops in the market, wait until they are finished and buy a little higher than that.
10. Of 3 types of orders (market, stop, and resting), market orders cost the least skid.
11. The more bullish news you hear and the more people are going long the less likely the
uptrend is to continue after a substantial uptrend.
12. The majority of traders are always wrong.
13. Trading bigger is an overall handicap to one’s trading performance.
14. Larger traders can “muscle” markets to their advantage.
15. Vacations are important for traders to keep the proper perspective.
16. Undertrading is almost never a problem.
17. Ideally, average profits should be about 3 or 4 times average losses.
18. A trader should be willing to let profits turn into losses.
19. A very high percentage of trades should be profits.
20. A trader should like to take losses.
21. It is especially relevant when the market is higher than it’s been in 4 and 13 weeks.
22. Needing and wanting money are good motivators to good trading.
23. One’s natural inclinations are good guides to decision making in trading.
24. Luck is an ingredient in successful trading over the long run.
25. When you’re long, “limit up” is a good place to take a profit.
26. It takes money to make money.
27. It’s good to follow hunches in trading.
28. There are players in each market one should not trade against.
29. All speculators die broke
30. The market can be understood better through social psychology than through economics.
31. Taking a loss should be a difficult decision for traders.
32. After a big profit, the next trend-following trade is more likely to be a loss.
33. Trends are not likely to persist.
34. Almost all information about a commodity is at least a little useful in helping make decisions.
35. It’s better to be an expert in 1-2 markets rather than try to trade 10 or more markets.
36. In a winning streak, total risk should rise dramatically.
37. Trading stocks is similar to trading commodities.
38. It’s a good idea to know how much you are ahead or behind during a trading session.
39. A losing month is an indication of doing something wrong.
40. A losing week is an indication of doing something wrong.
41. The big money in trading is made when one can get long at lows after a big downtrend.
42. It’s good to average down when buying.
43. After a long trend, the market requires more consolidation before another trend starts.
44. It’s important to know what to do if trading in commodities doesn’t succeed.
45. It is not helpful to watch every quote in the markets one trades.
46. It is a good idea to put on or take off a position all at once.
47. Diversification in commodities is better than always being in 1 or 2 markets.
48. If a day’s profit or loss makes a significant difference to your net worth, you’re overtrading.
49. A trader learns more from his losses than his profits.
50. Except for commission and brokerage fees, execution “costs” for entering orders are minimal over the course of a year.
51. It’s easier to trade well than to trade poorly.
52. It’s important to know what success in trading will do for you later in life.
53. Uptrends end when everyone gets bearish.
54. The more bullish news you hear the less likely a market is to break out on the upside.
55. For an off-floor trader, a long-term trade ought to last 3 or 4 weeks or less.
56. Other’s opinions of the market are good to follow.
57. Volume and open interest are as important as price action.
58. Daily strength and weakness is a good guide for liquidating long-term positions with big profits.
59. Off-floor traders should spread different markets of different market groups.
60. The more people are going long the less likely an uptrend is to continue in the beginning of a trend.
61. Off-floor traders should not spread different delivery months of the same commodity.
62. Buying dips and selling rallies is a good strategy.
63. It’s important to take a profit most of the time.

Short Answer Questions

On the back of the true/false answer sheet, please answer these questions with one sentence each.

1. What were your standard test results on college entrance exams?
2. Name a book or movie you like and why.
3. Name a historical figure you like and why.
4. Why would you like to succeed at this job?
5. Name a risky thing you have done and why.
6. Explain a decision you have made under pressure and why that was your decision.
7. Hope, fear and greed are said to be enemies of good traders. Explain a decision you may have made under one of these influences and how you view that decision now.
8. What are some good qualities you have that might help in trading?
9. What are some bad qualities you have that might hurt in trading?
10. In trading would you rather be good or lucky? Why?
11. Is there anything else you’d like to add?

The other day I was forwarded a rant that included this excerpt:

“I drove a Porsche 911 Cabriolet, flew a Beechcraft Baron 58P, lived in a house on the lake in Tahoe that recently was listed for $10 million, had two boats on the lake and a 50 foot yacht in the Caribbean when I was 23 years old. Money, my friends, means nothing.”

I could not disagree more with that last desperate sentence. A speech (read) that backs my contention more eloquently than I could ever state myself. The best excerpt from that speech?

“Let me give you a tip on a clue to men’s characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it. “Run for your life from any man who tells you that money is evil. That sentence is the leper’s bell of an approaching looter. So long as men live together on earth and need means to deal with one another–their only substitute, if they abandon money, is the muzzle of a gun.

An excerpt from one of the best movies of the last few years:

The trailer:

As I reflect on the year that was 2007 I am reminded of wisdom from years back:

As you consider that great excerpt from “The Fountainhead” consider another character from the same book - “Ellsworth Toohey”:

Ellsworth Toohey seeks power to control men and does so under the auspices of “humanitarianism” and a false sense of selflessness. Toohey destroys greatness by exalting mediocrity. He lives to empty souls and fill that void with his own power. Through encouraging sacrifice, removing some form of a man’s desire, he hopes to be there to collect on that sacrifice, as he says on p. 666 “When there’s service, there’s someone being served.” He is the ‘benevolent dictator’ bent on making men subservient so he can control their destiny and “well- being”, effectively promoting the slave/master relationship that he extols as having existed throughout mankind (this is also noted by Roark in his courtroom speech at the end of the book). Toohey’s target in this conquest is man’s mind, and he sets out to muddle it by pitting men against men and establishing a sense of doubt in their being. He plots to destroy their ability to judge on their own, inciting them to think first of everything and everyone but themselves.

Earlier I posted screen shots of interviewees for the film I am producing. Here are more:

Harry Markowitz (Nobel Prize Winner)
Barry Ritholtz (Fund Manager, CNBC personality)
Peter Borish (Fund Manager)
Rich Blake (Magazine Editor)
Tala McDonnough (Model)
Karina Jett (Pro Poker Player)
Evelyn Ng (Pro Poker Player)
Chris Ferguson (Pro Poker Player)
Antonio Esfandiari (Pro Poker Player)
Howard Lederer (Pro Poker Player)
Steve Zolotow (Pro Poker Player)
Paul Wasicka (Pro Poker Player)
Me in Macau

The back and forth crossover from the world of cards (bridge, poker, etc.) to Wall Street is much more prevalent than the average person might know.

“The basic concept that applies to both poker and trading is that the primary object is not winning the most hands, but rather maximizing your gains.”
- Jeff Yass

I received a call the other day from a guy who wanted to buy a domain I own for his daughter’s rock band. Turns out that he runs all alternative investments for one of the top five U.S. banks. When he called me he had no idea who I was or what I did. He just had a phone number. I took the liberty to ask him about the investing styles he was associated with assuming that trend following trading had crossed his desk. Not only had it crossed his desk, he had read my first book. Now that is a small world random story! To top it off he had earlier in his career worked many years for one of the top trend followers of the last 25 years. Not sure I want to sell the domain in question as I have a use in mind for it, but it does say something about returning people’s calls. You never know who you will bump into.