Hot Air: I've Figured Out What Caused Wall Street to Crash and Burn

(c) 2009 F. Bruce Abel

Jeff:

Good to get your "cached" note. Took a licking trading the past three weeks through X, C, RF, which started out as day-trades the latter two in one fell swoop of a buy, then I lightened up (immediately) when C was an immediate loser, but kept half;

X was a big winner for a while, but did you see the earnings last night!! RF I will keep I think. C is probably too late to sell. X -- probably will sell on any rise.

I knew the volatility potential with C and X. Sort of like options thrills. But I feel shitty, of course.

But I've now got the secret to the Wall Street problem figured out -- and I am a microcosm (sp?) of it. Under being a Pattern Day-Trader, you must keep your account above $25,000 or be barred from adding to any position. And it happens during the day, any time the account, computed each minute or so, or even instantaneously, dips below. (On the other hand, it can go back above $25,000, too, and you're free to squander it all on new trades.)

So after a series of nice, somewhat profitable, days of trading, I was transferring money back into my checking account.

Before the open a week or so ago I could see that my account was going to dip below $25,000 in the regular market so I loaded up with C and another slug of X in pre-market while the account still showed I was above $25,000. Otherwise I couldn't trade that day. (One-day delay in moneylink for transferring money back and forth to Schwab)

See, I lost discipline by even factoring in the $25,000 rule and wanting to get orders in before "the window closed." Then I compounded matters by turning a trade into an "investment."

That's the problem that addicts have. That's the problem Wall Street Traders have too.

The computers are there to replace the emotion (addiction) of the trader, and they produce consistent profits, say. But the trader becomes bored. "What am I, a machine-tender?" So he again loses discipline, jumps in with both feet and disregards the "machine."

No need to reply. I know you are busy. But it's good to vent to an insider rather than telling Sissy about the trading disaster.

Bruce
-----Original Message-----From: Sent: Monday, April 27, 2009 9:07 PMTo: Subject: Re: Cincinnati Musings

Bruce-great to hear from you, sounds like things are going well. (I just found this email in my "draft" box and realized that I never completed and sent it). We've now moved well out of college hoops and are in the weeds of the baseball season. I went to the final game of the Sox sweep over the Yanks last night (we have season tickets here). Last summer we did make it to Great American, courtesy of the good people at Cincy Bell who gave us their tickets behind the Red Sox dugout.Unfortunately our kids are in school until late June up here, so probably no road trips for us. One of these times we will definitely catch up with you and Genny.Things have been great here. Both of my kids (Kyle 10, and Julianna 8) are hockey players, and I picked it up so I can help coach. That keeps me pretty busy (a 7 month season!) and gives me a good outlet to blow off steam when the market is testing my limits. So far I've survived all the ups and downs, which in and of itself probably merits a book. In the meantime, it's mainly a character-building exercise.Glad to hear from you.Regards,Jeff
---------------------------------@: Saturday, March 28, 2009 7:28:18 AMSubject: Cincinnati Musings
From Bruce@Eun’s Computer:

Hey Jeff:

Genny passed along your email. I’ve been wondering about you and your family in these chaotic times. Since you are one of the “good guys” I wasn’t too worried. We’d like to extend an invitation for you and family to enjoy Canada in June when Genny will be home for most of the month.

For the past seven or so years I’ve been developing an expertise in employment law. Since they say it takes 10,000 hours to be good at anything I figure I’ll be pretty good at it by about 92.

But I’m an advocate of Yellow Page “advertising,” which for me means a bolding of my name under “employment law” in the outlier counties’ (Clermont, Butler, Warren) Yellow Pages. For a while I was getting two calls of a morning. (For some reason it’s always in the morning.) This still returns a paltry “living” but it keeps me sharp. And since I have no overhead and no commuting headaches, I love it. And with my new persona of being “nice” to the Bad Guys (employers) I settle rather than having three-year cases that then lose on “summary judgment” (the damn intimidated federal judges, not just Republican ones).

In fact Becca’s husband, Doug Worple, the head of Barefoot Advertising, now BBD&O, has the perfect tag line for a possible advertisement for my practice: “For those willing to settle for less!” – see Abel, or whatever.

I’ve reopened a Schwab account with some of my earnings for trading since Sissy’s trust has (along with everybody else and their trusts) gone down 40% or so on the equity side and on the “bond” side has been in bond funds, some of which had Fannie preferreds (why???; they are not bonds after all)..

I’m sure you have a “book” in you about the financial market as you see it. Care for a ghost writer? I like to write you know.

By the way we live 100 yards away from the Youklis’s, you-know-who’s cousin and wife. (Uncle and wife?) But – now I remember – we did email back and forth last summer and I had to duck out of a ballgame when the Red Sox were in town. Or is Altzheimer’s setting in?

My nephew Marty Bingham has survived the take-over by Wachovia as a bond manager in Charlotte, pretty high up with Wells Fargo.

Back to the weekend and NCAA Basketball!!!

Bruce