Weekly Grail Report

Jan 112010
 

Let us not forget what it means to be a trader. It means that I am free to own property: shares of a private company or contracts in a commodity. I can take delivery of my property and dispose of it as I wish, or I can trade it to others. My decisions are mine to make; I need not follow the dictates of those who would put other interests–those of gods, governments, or guns–above my own. If I lose, it is my loss. If I profit, the gain is mine.

Freedom means that I have a voice. If I like an investment, I can tout it in online bulletin boards and blogs. If I don’t like the way the government is managing the economy, I can vote my conscience, not only at the ballot box, but in the marketplace by investing or withdrawing my funds.

But freedom is even more than that. Freedom is the ability to make one’s living by one’s judgment, and not being limited to subsistence through the toil of his or her hands. Freedom is the ability of a single individual sitting right here, right now, at a personal computer, to write words that can be read years later, in faraway lands. Freedom is downloading reams of market data and conducting research that, just years ago, would have taken weeks to complete. Freedom is the ability to see who is bidding, offering, buying, and selling in global marketplaces. It is the unfettered opportunity to participate in the economic vigor of developing nations.

Without freedom, there is no trading. Trading is a celebration of economic and political freedom. Slaves are traded; they do not trade.

All this freedom, however, is for naught if we, ourselves, are not free. It is the deepest of ironies that we experience greater freedom–far broader potentials–than those who came before us. And yet, in our lives, in our abilities to master ourselves, we are no freer. Amid opportunity, we remain partial; tethered to our conditioning.

What it means to be free is to be able to choose, to live with intention. The free life is one that we guide: a life lived with purpose, direction, and meaning.

Trading, like all great performance activities, is an opportunity to cultivate the intentional life. Pursued properly, it is a path to freedom.
– “Enhancing Trader Performance” by Brett Steenbarger

Have you ever really thought about why you trade or invest?

If your motive is just to make money I’m afraid that success and satisfaction will be difficult to achieve.

It should be about much more than making money. It’s ultimately about freedom. The freedom to live where you choose, to do as you please, to succeed or fail according to your own ability and effort without being dependent on anyone but yourself. It’s also about reaching your full potential as a person.

Dr. Steenbarger’s words remind me of  Richard Russell, the dean of investment newsletter writers and the author of The Dow Theory Letters. Russell has been a trusted stock market sage for over 50 years and I have personally benefited from his wisdom for over 30 years.

Russell has written thousands of pieces about the stock market (He’s well over eighty years old and still writes every day). But, interestingly, he says the most sought-after piece he’s ever written is not about the stock market. It’s about something he originally wrote in the early ‘70’s called “The Perfect Business.”

Russell quotes his dad (a retailer among other things) as saying…

Richard, stay out of the retail business. The hours are too long, and you’re dealing with every darn variable under the sun. Stay out of real estate; when hard times arrive real estate comes to a dead stop and then it collapses. Furthermore, real estate is illiquid. When the collapse comes, you can’t unload. Get into manufacturing; make something people can use. And make something that you can sell to the world. But Richard, my boy, if you’re really serious about making money, get into the money business. It’s clean, you can use your brains, you can get rid of your inventory and your mistakes in 30 seconds, and your product, money, never goes out of fashion.

And something that Russell says is “super-important” for a business to be ideal — it “satisfies your intellectual (and often emotional) needs.”

But ultimately the freedom it affords is the reason the “money business” is the perfect business.

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It’s the Price, Stupid – Not the Chart

Nov 302009
 

A price chart is an attempt to model relevant aspects of price change. Price change is not linear displacement, whether vertical, horizontal or oblique. Nonetheless, price change can be represented as vertical displacement and time elapsed as horizontal displacement. Such a model, however, invariably supports relationships that does not correspond to anything in the original process. The angular inclination of a trend on a price chart is a visually striking feature of this representation. Such angles have no intrinsic meaning for the price series, but this is one of the many factors (along with our facility for pattern recognition and wishful thinking) that contributes to our interpreting more from price charts than rigorous testing reveals is there.
– William Eckhardt

I think Michael Covel does a good job interpreting Eckhardt’s cerebral comment. I just want to expand on it because I think it’s important.

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10,000 hours to greatness

Sep 032009
 

I’ll begin touching on what it takes to be a successful investor. Very lightly at first, but gradually getting much more in depth.

Success in this business begins with a commitment. In Malcolm Gladwell’s book, Outliers, the second chapter is about  what he calls the 10,000-hour rule. His conclusion is it takes 10,000 hours of practice to become really great at most things worth pursuing.

From This Is Your Brain On Music, by Daniel J. Levitin…

“The emerging picture…is that ten thousand hours of practice is required to achieve the level of mastery associated with being a world-class expert—in anything. In study after study, of composers, basketball players, fiction writers, ice skaters, concert pianists, chess players, master criminals, and what have you, this number comes up again and again.”

The BEATLES Portrait by DamyanGladwell cites several examples of the 10,000-hour rule. One is the Beatles. Before they were rich and famous the Beatles performed live about about 1,200 times. Sometimes they performed eight hours a day, seven days a week. They started out about as good as you and me and evolved into something extraordinary. I think it’s safe they put in their 10,000 hours.

Many say that Hall-of-Famer Ted Williams is the best hitter that ever played the game of baseball. He used to bristle when someone would call him a “natural.” His retort was he only became a natural after swinging a bat 200 times a day, every day,  for years.

I know I have over 10,000 hours invested in the markets when you consider everything  I’ve done over the years related to trading and investing. The good news is I’m slow. I think it can be done in a much shorter period of time. But the specific number of hours is not the point. The point is, just like becoming a master at anything, you have to put in the work. You must be committed.

I’ll write a lot more about commitment in the future because it’s been my observation that most people who fail in this business never gave themselves a chance to succeed. They were never really committed in the first place.

There is a tendency to think you can read a financial book or two. Maybe subscribe to a few blogs. Make a few paper trades. And, presto, you’re good to go. Unfortunately, it doesn’t work that way. You have to commit your time and go through all the steps — steps that most people never even think about.

However, you very well may find it’s a labor of love. You would be hard pressed to find an endeavor that offers as much intellectual and emotional satisfaction as the “money business.” It’s fascinating and a lot of fun. If it gets in your blood, it won’t seem like work.

So you might as well get started. An hour today and you only have 9,999 hours to go :-)

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