Archive for May, 2010

Another bet

The other day, myself and a friend were discussing ways for me to get him kicked out of the country.  We ended up settling on two different options.

  1. If I become the Attorney General of the United States, he has to leave the country forever and turn in his passport at a foreign embassy.
  2. If I become the Secretary of Homeland Security of the United States, he has to do the same thing.

My first act as office holder of either of those two offices would be to get him kicked out of the country and get him placed onto a terrorist watch list. 


I then tried to get a third title added, the directory of cyber security (sometimes referred to as the cyber czar, this is a new position created by President Obama).  He said to this “No, I’m not going to go for that one.”

I then replied “You’re not going for that because you think that I might actually be able to get the position!”

“I know!” he answered.

Well, if I do ever get it, I’m still going to attempt to get him booted out of the country.

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Sometimes, my reputation proceeds me.

  1. A few weeks ago, I had a slight change in my reporting structure at work.  In the very first meeting with my new team, it was said of me “Terry, we hear that you hate spam more than anyone else in the world.”
  2. A couple of days ago, I was having a chat with a potential new manager for me (my fourth one this year), and when he entered my office, he said to me “Oh, I’ve heard a lot about you and how much you know about spam.”
  3. This past weekend, I saw the Lost season finale.  Another couple was there whom I hadn’t met before.  Apparently some other friends had been chatting me up a bit (you know who you are, thanks for that) because they said “Terry… magician?”

It’s nice to have an impact before I’ve even arrived.

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I’m not much of a fan of soccer, but I do enjoy watching the World Cup.  Even though they are perennial losers, I still enjoy cheering for England, the country where I used to live.  There’s no point in cheering for the United States, they have no chance of winning.

Anyhow, I came across this video created by Nike.  It’s entertaining, especially the part from 2:20 – 2:25.

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I can hear my neighbor beneath me snoring every single night.  It’s loud.  And it comes through the floor.  I’ve decided to nickname “Baron von Snores-a-lot”, or the Red Baron for short.

I have only seen him twice.  He seems to be a guy in his 40’s or 50’s, not particularly overweight but smokes.  I saw him as I was coming back from getting my mail, and as I passed him I thought to myself “There’s the Baron.”  How can one person make so much noise unconsciously?  It’s unbelievable! Ohhhh!

I decided to sleep on my couch one evening.  I just couldn’t be bothered to go to bed because the Red Baron goes to bed earlier than I do. He switches on his nocturnal chainsaw and keeps me up.  Why is it my neighbors just can’t leave me be in peace?  Like the ones to south of me?

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I closed another option position today using my paranoid strategy.  I bought put options on Owens Corning on May 6.  They were up, then down, and now up again.  Since they expire in 2 days and are now making money for me, and since the market is now oversold, I decided to close them down.  I can’t take the heat.

However, I closed them for a nice 67% gain in two weeks.  Counting all of my open positions as of this minute, then trading options I am up 45% on the capital I have expended in two weeks.  That includes 5 winners and 3 losers.  I have made more on my active trading in two weeks than I did in my Lazy Portfolio in 5 months (before the correction).  I’m not ready to switch to options trading, but I have been proven right over the past little while.  The only times I have been wrong is when I have gone long on the market (ie, bought calls).  In fact, all of my losers are call options.  I need to stick to my downside strategy.

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This past weekend I did another dance performance (video to be posted sometime, I forgot to take my own camera along).  The idea for this performance, however, differed from previous ones.  Whereas in previous ones it was about the dance and my own personality took a bit more of a back seat, this was the reverse.

This time around, my goal was to do a dance performance blind-folded.  Thus, the goal was to do a routine without sight and thus incorporate a little bit of magic into it.  As I explained, I had been thinking about how to do this for a while.  The effect is that I am doing something that appears nearly impossible.

It’s essentially a memory effect.  After doing the routine over and over again with my instructor, I started to get a “feel” for things.  I memorized how many steps each pattern took, the relative position of rotations (ie, when we turned, I knew which direction I was pointed) and then on Fridays when I would go and do regular dancing, I got a feel for how big the ballroom would be.  Then, when doing the dance performance, the first 1/3 of the routine was done normally, and I then put on a blindfold for the next 1/3. 

The trick works wherein I establish a series of counting steps using a mnemonic technique.  Each sequence of steps is assigned a piece of furniture in my living room where I would practice.  The number of steps in each sequence corresponds to a series of objects on each piece of furniture.  So, when I did a couple of turns, I visualized four of my juggling balls on the left side of the couch and each pattern I would pick up one juggling ball and remove it.  On the rocking chair were some of my favorite decks of cards.  It’s a bit more complicated than that but the angles of the turns work the same way.  The rocking chair is at a 60 degree angle so I knew which way to turn.  For the actual performance, at a run through, I would simply move the angle of the furniture in my mind.

The part with the blindfold is something that I am very proud of.  The blindfold is one of my handkerchiefs, and they are quite opaque.  I genuinely cannot see through them.  But I have to get it on very quickly.  There’s a part where my partner and I rotate around each other, I take out the handkerchief, roll it up, tie it around my head and then kind of finesse it so that it looks flat rather than triangular due to the center portion hanging down.  This was important to me because I wanted it to look aesthetically pleasing.

The problem is that taking out the handkerchief and tying it up, best case, took about 16 seconds. That’s a long time in a performance and left little room for error as I only had 20 before I had to re-engage with my partner, do a quick grapevine move, and then continue.  It simply wasn’t working.  The solution, then, was to use two handkerchiefs.  One was prepared ahead of time where I rolled it up and sewed it down with thread so that the center piece wouldn’t stick out.  I also sewed down other parts to ensure that it looked “flat”.  I then put it into my right pocket.

At the beginning of the routine, I took advantage of a piece of misdirection.  I walked out to the middle of the floor with my unprepared handkerchief and started waving it around the way a magician might.  I folded it once, twice, three times, and then a fourth time.  I looked up at the audience, put it into my pocket, grinned, shrugged my shoulders and extended my palms as if to say “That’s it.  I don’t actually have anything for you! <sheepish grin>”  Later on in the routine, rather than grabbing the unprepared handkerchief, I remove the prepared handkerchief (which is still opaque, just looks nicer folded up that way) that has had its ends tied together ahead of time.  I pretend to tie it together, place it around my head, get it into the correct position, find my partner, and continue.

Note that this doesn’t actually add anything to the routine other than to make it go more smoothly.  Rather than taking 16-20 seconds, this one only takes 7 seconds including the playacting of tying it together.  But the idea I have implanted into my audiences mind is that I showed an unprepared handkerchief at the beginning and the assumption later on is the one I pull out to blindfold myself is the same one that I displayed at the very beginning.  The audience’s original memory is the one that fills in the gap later on.  And the motivation for that is to deceive the audience into getting them to think what I want them to think if for no other reason than I am a magician and that’s the kind of stuff I do.

I thought that was a nice psychological subtlety to add to the routine.  It’s a unique value-add that only I can bring to the table.

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Trading tidbits

I have a number of pieces of advice I give when it comes to investing in the market.  Investing is something you do long term, my Lazy Portfolio is something I consider investing.  It is not active, it is passive except once per year when you rebalance.  For most people, I recommend a Lazy Portfolio as a way to gain the markets.

Trading, or speculating, is different.  Your time frame is shorter.  You holding period could be minutes, hours, days, weeks or something months.  Months is bordering on investing, though.  Anyhow, trading is far more difficult than investing and requires far more psychological discipline than investing.  The reason is that the market is a difficult place to earn a living.  Yet trading is incredibly rewarding when it works out for you and is a thrilling place to be.  So without further ado, here are some of my pieces of trading tips that I live by:

  1. The four most dangerous words on the market are “This time it’s different.” 

    Jesse Livermore, a famous speculator, once said that human nature never changes, and never will the stock market.  By this he means that there will always be asset bubbles and busts.  During 2003-2007, the real estate market kept climbing, and so did the markets.  There were many people who assumed that this time it was different.  The market cannot keep climbing so there must be a correction.  But the market never did correct.  Why?  Well, maybe it really was different.  Due to technology, the entire world was participating in a boom cycle for the first time, not just the developed world.  Prosperity was around the corner; indeed, upon us.  The survival rate of the human population was increasing and therefore it was logical to assume that real estate could only keep climbing.

    But it didn’t.

    Eventually, the bubble burst.  The market entered into a 2-year bear market.  Just like every single other boom cycle, the bubble burst and we came crashing down to reality.  The real reality?  It’s never different.  History may not repeat itself, but it rhymes.  If you’re ever in a stock and believe it will go up because it’s a different kind of company (like Apple or Google), trust me, it’s not different.  Believing so will cost you money.

  2. Hope is a four letter word.

    Hope is generally assumed to be positive, but not on the markets.  The term “Four letter word” is a euphemism for a dirty phrase.  When some people buy stocks, they buy at the wrong time and start sitting on a loss.  First it’s small and people hope for it to come back.  Then it gets a bit larger and they hope that things will turn around.  Then the stock really starts to tank and then people are resigned to thinking it’s a long term investment, hoping that it will return to its peak.

    A lot of people bought Lucent, Cisco and Microsoft hoping that they would either go up or will return to its glory days.  On the markets, there is no room for hope.  Either you cut your losses or you wait forever, hoping for an event that may never come and ties up your capital such that you can’t make a profit elsewhere. 

  3. Stay liquid.

    This is one of my favorites.  Liquidity refers to the ease at which you can get into and out of a position.  On the stock markets, liquidity is abundant.  I can log in to my broker’s website and buy stocks and sell options with relative ease.  It’s easy to execute stocks that have a lot of volume.  By contrast, real estate is very illiquid (as I am finding out).  There are only limited buyers and sellers and it takes forever to get into and out of a position.  If you are going to tie yourself to a long term position, make sure that it’s a good one.

    I kind of liken trading stocks to going out on a coffee date with someone.  Buying real estate is like getting married.  One’s liquid, one’s not.  Be careful about the liquidity of your relationships, too.

  4. The markets are expensive place to buy a thrill.

    I say in my introduction that trading is thrilling, but if you’re in it for the thrills, it’s going to cost you a lot of money. The reason is that the markets are related to money, and money is an emotional subject.  But it should be an emotional subject because of what it represents – you can use money for food and shelter (ie, basic survival) and also luxuries (ie, stuff you like to do).  We need money in order to live and therefore it goes right to our limbic brains.

    Unfortunately, our limbic brains are not necessarily the best allocators of capital.  When we get a lot of it, we feel a rush of energy.  But when we lose a lot of it, we start to panic.  And trying to get it back doesn’t necessarily mean we will get it back.  Most people often follow it up with a series of mistakes.

    So, if you’re in the markets for the thrill, you’ll get it.  But the emotional rollercoaster can also be very draining.  Trading for thrills will send a trader into premature retirement.

  5. The market is like the Lord, in that it helps those who help themselves.  The market is unlike the Lord, in that it does not forgive those who know not what they do.

    This is a quote from Warren Buffett and I chuckle every time I read it.  The idea behind it is that the market is an expensive place to get an education.

    There is plenty of money to be made from trading the markets.  But it’s difficult to do it.  And if you don’t have a trading plan or understand what you are doing – and really understand it – you will lose money over the long term.  That’s why I recommend a Lazy Portfolio, because the general trend of the market is up and you want to participate in it.  If you are going to trade, you are likely to get spooked and miss out on the best trends because it is hard to time the market.

    A good trader expects to outperform the market.  A poor trader can expect to perform much worse.

Those are some of my top trading tips.  I would consider myself an average trader, at best.  But yet I continue to try and will continue to try.  I’ve now lived through a bear market so that’s kind of exciting to me.  I always said that I wouldn’t switch to becoming a full time trader until after I had lived through a bear market.  Now that I’m learning options, we’ll see where this current strategy takes me.

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