Things I read so you do not have to.

I am constantly seeking a different point of view other than my own. I know there is a thin line between right and wrong because of trade offs. What makes something right for me, you may not be willing to accept those trade offs. It is always about trade offs. The next thing I look for in an opposing point of view is a persons willingness to understand and address their bias. If they fail on the previous two but make a logical argument all may be forgiven.

I do not seek out idiotic financial writings, they find me and stick in my brain. Like a bad 80’s song, it will not go away. You may disagree with me but I have to at least offer a different point of view.

Curtis Faith

I recently read Curtis Faith’s book “Trading from the Gut”. I liked the book very much. One of the first things he talks about is not being able to predict the markets long term and he does not like to do it. So his recent and subsequent posting of selling everything is perplexing. My guess, and it is just that, is that he writing a book or has written a book about spotting market troubles or the markets are broken, etc. Smart from a marketing standpoint, shitty thing to do to your readers. If you want to stay relevant and respected to the people in the financial world you do not do that, ever.

From a purely fundamental view I do not disagree. But a rally heals everything. It always has and always will. There is no way for me to know if you are better off selling everything today or not, no one does.  Doing so means you are a jackass who should not be trusted.  There are two important factors outside of fundamentals and technicals. How much has retail participated and how much more will the government participate?  What are they going to do with capital gains tax?

There is no way to tell, at this point, what the tax ramifications are. If you do not sell your holding for a winner and take the 15% cap gains verses the unknown tax rate you are making a mistake.  There is also no way to tell how much the public has participated. I have looked at inflows and outflows but  the message gets jumbled. If you have a better place for information or a different point of view please let me know I currently use www.ici.org.

OK, assuming the tax cuts are not going to be passed and retail and government is not going to participate anymore, does that mean the market has to go down? Most importantly does that mean everything will go down? Does that mean it is right for everyone to sell everything? The answers to all those are no.  Now and forever.  Even if they sell because of cap gains, they can still buy it the next day.  But sure lets put our money in bonds when, despite what the government is saying, there is inflation.

Probably the most disgusting thing he said in his whole post was:

“I can’t exactly explain why but I feel even worse at the gut level about the markets right now.”

Great buddy, now I understand why people hate the financial media. BECAUSE OF  YOU AND PEOPLE LIKE YOU.Ok, Mr. Curtis or should I call you the boy who cried wolf, thanks for the warning.

Wall Street Cheat Sheet

Elliot Turner announced the death of day trading.  Once again thanks for the warning.  It is a great headline, it caught my attention.  If you get past the first part of the article, where he cherry picks a quote, he gives some great information.  Once again, I do not accept his trade offs as he probably does not accept mine.

The quote he cherry picks is from a letter written by Schonfeld to let its traders know about the impending layoffs.  There is also controversy surrounding the reasons behind the letter in the first place.   Mr. Turner quotes the Schonfeld letter:

unfortunately, our vision of the future of trading has changed. It is getting much tougher for traders to make a living or get by.

Oh fuck, you are right, time to exit trading because a prop trader can’t make money.  Or just hold on for a bit, lets add a little context.

“Bull and bear markets come and go. Good trading markets come and go. But unfortunately, our vision of the future of trading has changed. It is getting much tougher for traders to make a living or get by. The direct competition from black boxes, stat arb and high frequency trading which continues to grow at exponential rates is here to stay and has caused us to change our outlook for lesser skilled traders.”

As someone who has had many communication failures, with the added context it is obvious what he meant. When times are tough, we are not going to allocate resources to the people who are not using them efficiently. If you apply Mr. Turners logical to all industries; housing, manufacturing, just about everything is dead.  Your parents still have a basement right?

Mr. Turners next statement makes me sick to my stomach.

“I’m not sure many daytraders understand their place in the market to the point where they would subscribe to the arbitrageur label; however, at its essence, day trading is the attempt to make money off the market’s intraday fluctuations.”

So day trading is easy that everyone should make money and they risk their time, money, and livelihood without understanding their place in the market.  Once again, he is talking about the inexperienced trader.  Also everyone is trying to make money on the fluctuation of prices.  If the market does not move no one makes money outside of dividends and options.

I have talked about the changes in the market.  I talked about how it blew out many of my friends.  If you think for a second this is easy, you are already done.  The biggest change in the world has been speed, quantity, and cost of information.  The institutions always held the information advantage but that is gone.  Right at this moment, it may not seem like there is an advantage but it will come back.

Prop trading is not gone, it just has changed.  The exchanges will have to solve the problem between the liquidity providers and hedgers.  Giving preferable treatment to those that make them the most money.  Right now, in my opinion, they are making operational mistakes.  Treating everyone the same looks good on paper, but there is a reason why almost every company in the world rewards loyalty.

Summary

What Curtis Faith said was irresponsible, the problem with financial media is they attempt to make the information concise.  They do not make it concise by building in context, they do it by simplifying it.  It is not simple.  I do not have a clue what is going to happen to stock prices. I think he is forgetting that the economy, stock market, and personal wealth are not the same thing.  Also, he is violating the code that all professional traders must live by.  If you are going to give a trade you must always give a time frame, where you are wrong, and where to get out.

I think Elliot Turner’s article was for page views, I do not blame him.  I am sure it did very well.  Also he took some time to write it.  His conclusions, I do not really agree with.  Parts are very laughable.  I am a hypocrite but we need to stop killing things. Everything is cyclical.

Of course I am worried about the health of the market.  I also have a personal stake in the health of  day trading. It is my profession and those of many of my friends and I also have a trading education company that caters to intra-day trading.  I may be wrong on all accounts but I hope it at leasts create some dialog.

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4 Responses to Things I read so you do not have to.

  1. […] This post was mentioned on Twitter by Eli Radke and Trader Habits, Nucky Thompson. Nucky Thompson said: RT @eradke: Things I read so you do not have to. http://bit.ly/aZXgCT $$ #markets %ES #trading // Good stuff …. READ IT!!! […]

  2. If it was easy, they wouldn’t need you.nEveryday another auction.

  3. […] a hard reason for a reacting. For some of you this may come off as ironic after being critical of Curtis Faith. However there is a big difference between your gut reaction causing action and preventing […]

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