Real Toppy

I’ve presently got fifty-seven different equity short positions. That sounds insane given what the market is doing, but there you have it. I wanted to share a few of them form the real estate sector that I think are particularly intriguing:
Slope of Hope

General hysteria from the media makes it tough to pay attention to the real issues?

On August 26 I wrote The End Times in Texas: media portrayal versus reality about the contrast between the tone of at least some media stories regarding Hurricane Harvey and what Houston-based friends were saying in email or on Facebook. My post sought to avoid the selection bias of typical media reports by seeking on-the-ground accounts from non-journalists.

Within about 40 hours of that post it became apparent that the scale of damage was close to the worst-case scenarios that had been painted. None of my on-the-scene friends had been prepared for it. Now I’m wondering if the media’s generally hysterical tone is partly responsible for folks discounting the likelihood of the worst-case scenarios.

In the not-so-glorious-as-remembered days of my youth, newspapers didn’t have to work desperately to capture readers and advertisers. More or less every family in a city would subscribe to that city’s principal newspaper. There was a steady stream of subscription and advertising revenue even during “slow news” periods. An editor could run a quiet “human interest” story on the front page if there were nothing sufficiently dramatic happening to justify a big headline.

Today, however, newspapers have to compete for attention with other online diversions, streaming video, video games, etc. So even the most irrelevant information is characterized as having the potential to change readers’ lives, the smallest issues debated in Congress become life-or-death, and the most ineffectual action taken by a president is the next step toward tyranny.

As an example, here’s a front-page expose from the New York Times on the same day, August 26, as my Hurricane Harvey post: “Late Wages for Migrant Workers at a Trump Golf Course in Dubai”:

“Trump is not the owner or developer of Trump International Golf Club Dubai nor does it oversee construction or employ or supervise any of the companies or individuals who have been retained to work on the building of the project,” said a company spokeswoman, Amanda Miller, in an emailed statement.

The Pakistani driver who works at the Trump course arrived three years ago, seeking to support his wife and two boys. He took a job driving a pickup, earning over $ 800 a month, or more than twice his pay at home. He is supposed to be paid within the first five days of the month. Frequently, a week or more passes without the money arriving.

In other words, after reading about 15 screens of text one learns that the subcontractor of the subcontractor of the Trump partner does eventually pay workers in full. This merited “top of the home page” placement on the same day as stories about one of our largest cities being potentially flooded.

Readers: What do you think? When everything is presented as a crisis do we lose our ability to perceive the true potential crises?

Related:

Philip Greenspun’s Weblog

The real stop

A trader on the desk wrote this in his daily review:

Took the train home with (redacted, Senior Trader at firm) today, we had a really good chat. Seeing how far he has come and how he views trades.  Does Not trade price action so much. He focuses more on his overall idea and trades it loosely.  Shorting rallies covering dips, buying pullbacks and selling pops.  

Makes me think about some of my main ideas and different ways I can trade them.  Should I be smaller and let the stock really flex?  Should I be bigger and risk X amount of my daily stop loss?  

Something to think about moving forward.  I get so caught up in price action, and not the overall idea and bigger picture sometimes it messes with me.  Going to take some of the things he said and try them and see what works best for me.  

@MikeBellafiore

This raises two important issues for traders: a) setting the real stop b) trading your PlayBook.

The real stop

When making a swing trade, there is a stop that many successful traders use: “when I know the trade is wrong”.

As short-term and intraday traders, we must be careful to set stops that do not afford realistic risk.  We must also factor how much we are willing to lose with this real stop.  If we need a larger stop, then we must trade with smaller size.  Absent this then our trader losers can become outsized.

For example, I am in a swing short right now in UBNT.  Where do I know I am wrong in this short?  Above 52.  Everything else is just noise.  (I know I am right below 48ish.)

Having said that, I must acknowledge that my win rate will be lower with swing trades than with scalps or momentum trades.  When I am right, I must make more.  I must hold for the real move as well, when giving the trade the real stop.

Trading your PlayBook

I do see many developing traders grasp onto the trades of more successful traders, thinking this is their path forward.  It is important to find a role model, from which to learn.  It is important to be exposed to trades with edge.  Starting with trades with edge taken by other traders is a good place to start your live trading.  But, but, but to become your best trader you must develop your PlayBook.

This means making trades your own.

This means determining your own strategies for your trade theses.

This means building your PlayBook from your unique strengths.

Let me offer an example.  On our desk there is a team that focuses on a subset of stocks.  The team leader is an exceptional trader.  Many of the traders on his team are very strong traders.  In fact, I cannot think of one that is not profitable.

They all attack trades uniquely.

They all get big in different ways.

They all trade their own PlayBook from the same trading opportunities.

It is terrific to co-opt trades of another.  But in the end, you have to be your own trader.  You want to develop a PlayBook based upon the trades that make the most sense to you.  You want to develop a PlayBook that allows your talents to flourish.

That top trader is different than you.  If you want to be as good as him, then you need to trade the setups that allow you to express your strengths in the markets.

As always, I welcome your comments/feedback- mbellafiore@smbcap.com.

*no relevant positions

 

 


SMB Training Blog

The Real Purpose of Parenting

I was gulled by the title into downloading The Real Purpose of Parenting as an audiobook from Audible. Here are a couple of Amazon reviews that we can be pretty sure were not placed by the publisher:

It seems I’m the dissenter – but I started to hate this book. First, the author could have made his point in 15 pages, but the book is interminable (at just 196 pages) – presenting anecdote after anecdote, some of which are, as far as I can tell, barely relevant. Second, the presentation is pretentious and the prose tiring. Third, the book seems so intent on making a very specific point that it tramples over a considerable amount of potentially useful ancillary material. Difficult to read, sloppily written, a touch arrogant. With those gripes in mind, the author’s primary argument is perfectly valid, but not original (Brain Rules for Baby males the some point, in one sentence, 3 years earlier. . .). Bleghh.

As soon as Dr. Dembo started talking about how ridiculously centered our culture is on winning at all costs, and the fact that we don’t give our children any space to fail and learn, I found myself shaking my head in agreement. The trouble is, the author outlines the problem eloquently, and repeats it ad nauseum, but never really makes good on his claim to tell us what the alternative is, at least not in a realistic way. Yes, he does offer some examples from his own practice, but I suspect the half dozen examples or so are only the ones that had relatively happy endings. … I invested some seven hours listening to the Audible.com version, and believe a good blog article about listening to your children more and having more respect for who they really are and what they want and are capable of, would have achieved just as much.

As with most titles in the self-help section, the reviewers are correct in that a 15-page essay would convey the same information. The book was narrated by the author, though, and it was kind of interesting to hear just how convinced of his own importance a psychologist could be. (Actually it is unclear exactly what credentials make the author “Dr. Dembo”; he isn’t listed at healthgrades.com or vitals.com and a Google search didn’t reveal what his educational background might be. On the third hand, there is no research evidence that PhDs in clinical psychology are more effective than minimally trained laypeople at providing talk therapy.)

Dembo opens the book by attributing most of America’s problems to Dr. Benjamin Spock, the author of a 1946 book that Dembo seems to think was used as a bible by American parents (how many of them bothered to read even one book on parenting? and how many Americans actually follow the Bible for that matter?). According to Dembo, Dr. Spock told Americans that their children should be constantly reinforced with positive experiences, thus building their self-esteem. Dembo says that the result is children who are terrified of failure, afraid to try, and prone to cheating and/or lying in order to avoid or cover up failure.

What’s the solution though? Send a child to Poland on an exchange? (see Smartest Kids in the World: Poland for “In Poland, the lowest grade was always one, and the highest was five. After each test, he waited to see if anyone would get a five; no one ever did. No one seemed surprised or shattered, either. They shouldered their book bags and moved on to the next class. Kids in Poland were used to failing, it seemed. The logic made sense. If the work was hard, routine failure was the only way to learn. ‘Success,’ as Winston Churchill once said, ‘is going from failure to failure without losing your enthusiasm.’”) Dembo doesn’t say.

The anecdotes that Dembo provides are mostly of parents who don’t bother listening to their children and push them to live the parents’ dreams. Eventually the child snaps, quits college, and goes to work at a blue collar job. But what about Tiger Mom? She pushed her daughters to achieve academic and musical success and it apparently worked out wonderfully. If being an American means aspiring to collect SSDI, take OxyContin, and play Xbox, what is so bad about parents pushing children to do something other than than follow their natural inclinations? Usually in the families that Dembo describes there are multiple children and all but one actually did achieve what the parents hoped for. Shouldn’t we look at statistics rather than anecdotes to figure out what is likely to work out best for the average child?

One area where Dembo’s advice seems sound is, if your family has gotten to the point where everyone is riled up and shouting all the time, it makes sense to establish a set of laws (he calls it a “family constitution,” but really it is more like a legal code) that can be applied dispassionately. Reflecting the fact that every American who isn’t addicted to opiates is addicted to electronic devices, all of the suggested punishments are removal of phone/tablet/computer/Xbox privileges. So instead of yelling at a child for doing something bad, remind the child of the previously agreed-upon rule and punishment (“consequence” in the doublespeak of the book). Parents should have the demeanor of a police officer writing a speeding ticket.

Dembo’s experience is with families functional enough to get down to his office and pay his bills. Thus they tend to be upper-middle-class two-parent households, hardly representative of the modern U.S. (see “Fewer than half of U.S. kids today live in a ‘traditional’ family” (Pew Research)).

This book does raise the question of whether there are any good books on parenting per se. Are there any good books on interacting with other adults? How To Win Friends and Influence People? If there aren’t good books on how to have successful interactions with other adults, is it reasonable to expect that there should be good books on how to interact with children?

Readers: What else is out there in this subject area?

Related:

  • The Nurture Assumption, a research-based book that concludes the main influences parents have on children are (1) genetic, and (2) choosing a neighborhood (thereby choosing a peer group)

Philip Greenspun’s Weblog

Joker Real Estate

This morning’s Daily Post brings with it, as always, dozens of colorful real estate ads. In one case, they’ve given up even trying to pretend the prices are sane………. Of course, it actually is a very cheap prices for an Atherton property. What has always struck me about real estate agents around here is how […]
Slope of Hope

This Was Real

There are some things that have happened in real life which, had you told someone not that far in the past, they would find it incredible. And I mean “incredible” in the literal sense – – not credible – – impossible – – beyond belief. Not simply “gosh, gee whiz.” For instance, teleport yourself back […]
Slope of Hope

Wonder Woman movie: Questions about the real (mythological) Amazons

Four friends and I went to see Wonder Woman the other night. Like any real American, most of my education comes from watching TV and the rest from Wikipedia. Now these two sources are in conflict.

Wikipedia: “Amazons were the daughters of Ares and Harmonia (a nymph of the Akmonian Wood). They were brutal and aggressive, and their main concern in life was war.”

movie: the Amazons are opponents of Ares and their main concern in life is peace.

If memory serves, the Amazons would have sex once/year and then, 9 or 10 months later, kill any male babies. Thus did they have a society of mortal females that could continue indefinitely. (Historians don’t say what happened in the case of transgender Amazons who identified as male starting at a later age.)

In the movie, by contrast, the Amazons seem to be immortal (they’ve been alive for thousands of years anyway) and they don’t have any children, except for one. (On the third hand, they can be killed by bullets so maybe they aren’t immortal?)

The interesting question for me is why the filmmakers decided for commercial reasons that it was better to have the Amazons be fighting against Ares and war rather than children of Ares and pro-war. Why did all of the Amazons have to be peace-loving? If the goal was to feature a peace-loving star, why couldn’t the star be a rebel who disagreed with the war-loving Amazon majority?

Obviously it is just a movie so they don’t need to stick to the Greek sources, but it is more trouble to make up new stuff. Why did the screenwriters go to the trouble? And if they had the energy to make up this alternative history of the Amazons, why were they too lazy to explain why an Amazon who leaves the community to fight with men can never return. Is it Cooties or what?

Verdict on the movie overall? One friend expressed boredom and complained that Ares was cut and pasted from the emperor in Star Wars. Personally I enjoyed seeing the imagined world of the Amazons the most and also liked the part where the Amazon discovers and tries to blend into the ugly urban world of mortal humans.

[Separately, the guy who took our tickets had a serious disability that had stunted his growth and left him confined to wheelchair. Plainly he could have qualified for SSDI and enough taxpayer-funded OxyContin to brighten his days. Yet he was working as cheerfully as anyone else. A good reminder for those times when we feel that walking into work is oppressive!]

Philip Greenspun’s Weblog

Build trades around the direction of the real trade

In a monthly review, a promising trader found an important area of improvement: build trades around the direction of the real trade.  The trader in his monthly review wrote:

Before the Open yesterday, our top trader was fielding trade ideas from junior traders on his desk.  One junior trader offered an idea that was dismissed by the top trader.  He counseled, “The news is not good enough to be interested in that stock.”  This top trader wanted something that could soar or dive intraday to make it worth his attention.  Looking at the big picture for this opportunity, it was not big enough.

I was chatting with Merritt Read more […]
SMB Capital

Keeping It Real

This post has to do with something which may seem like an oxymoron: integrity in financial prognostications. What inspired me to address this topic? Oh, that’s easy: As you can see, back on February 22nd, Dennis “Commodity King” Gartman went on CNBC to declare that, at long last, for the first time in about five […]
Slope of Hope