Mentoring
I’ve mentioned before that I’ve been mentoring a kid and teaching him how to trade. He’s been really impatient, as he thinks I’m too conservative in my approach, and the rules I gave him. I stress longevity, risk management, and not over trading. He’s rather impatient, as I’ve been making him come over and play chess and gin rummy instead of being glued to the screens. Even though I give market allegories with each game, he sees no lesson from the exercises of the games. Like the mentor in the old show Kung Fu, I’ve started to call him Grasshopper. Part of me realizes that it’s a generational thing…..these kids all want instant gratification.
We were discussing returns this morning, and he believes all this bullshit on the internet and thinks that he can make 5-10% returns per week with no sweat. I keep telling him that if he could make 5% per week, every week, Goldman would give him half of the company for free to trade their account and both would come out ahead. He came over yesterday morning and was wondering why I didn’t short oil yesterday. I went over the rule that I will not trade when I’m not feeling 100%, and had a long talk about discipline. Sure, I could have shorted oil, as I knew exactly what the market was going to do. However, despite the decline in oil, my mental condition would have made it better than 50% that I would have still lost money.
I’m going to still keep helping this kid out, but I’m going to notch things up. So far, he’s piggybacked a couple of my trades and has made decent money. What I want for him to do is to figure out a trade for himself, put it on, and lose his ass. Despite the fact that I have a financial interest in his account, I want him to take a big hit. He will learn so much more from taking a big hit than anything else. I’m planning on giving him enough rope to hang himself, get nailed, then start back from scratch. After he has a nice hit or two under his belt, then the real lessons can begin.
Luckily, he has no interest in blogging, and doesn’t read my blog.
I need to get off my lazy butt and finish my book. I’ve almost got it done, and see the light at the end of the tunnel. However, I’m sure that my friend that I’ve drafted into reading it will offer much more constructive criticism, and I’ll be rewriting till my fingers fall off.
My son returned to school and has been calling me every couple of hours just to see if I’m OK. I appreciate his concern. My sister is leaving in a week, and then I will be left to my own devices.
My own devices will probably include spending a lot of time in Sarasota on my buddy’s new sailboat. He bought an old 1978 Morgan 41, and is working on restoring it to pristine condition. It’s a pretty decent boat, and needs a little updating and cosmetics. My master plan is to help him with the boat, learn as much as I can about fixing up boats, then maybe starting my own little project.
I’ve been looking at another LeRoy Neiman seriograph. It’s called, “Chicago Options” and I might get it to put next to my other Neiman. Although lithographs and seriographs aren’t what I collect, I do like this work.
We’ll see.
Jeff
Hey Jeff,
We’re not all impatient. Some of us would be overjoyed with 15% pa.
I may have some free time – if you want a hand fixing the boat or whatnot I may be able to come give you a hand for a week or two since my brother’s just over the bridge.
Also, I’d love to see the book when it’s ready.
Best,
Alex
Alex
September 3, 2008 at 9:42 pm
Alex,
I hope to finish the book in a couple of weeks. This operation slowed me down just a little bit.
A 15% return annually isn’t bad if done over a long period, like 30 years. I try to achieve a little better than that, and keep my losses small. Three years ago, I lost 2.8% for the year, and that’s the first losing year I had since around 1982. 1987 wasn’t too hot either, but I pulled it out in December and ended up making about $80K for the year after being a low seven figures in the red. Notice I won’t discuss losing months…..I’ve had a bunch of bad ones sprinkled throughout my career. As for losing weeks, I have them more frequently than I’d like. Still, as long as I’m right and still have my edge, the losing periods just put me into survival mode until conditions improve. Survival mode is probably the most overlooked area of money management.
Where does your brother live….Tampa or St. Pete? I’ll ask my buddy how much help he needs with the boat and get back to you. I look forward to working on this boat, as I’d like to do my own project.
Jeff
masteroftheuniverse
September 4, 2008 at 4:28 am
Jeff- I hope your recovery is going quickly & you’re back to normal soon.
I too got caught not being able to trade oil the past few days as I moved into a new house & my office is only partially set up. I think the only ones surprised that it broke so hard were the news reporters. The spreads didn’t widen out as much as I expected them to before the storm hit.
I think that ADD, or maybe not ADD in its clinical definition but something similar, is very common with most young guys now. I believe that its pretty much taught to them all through school that they have to be doing something every minute of every day or else bad things happen (i.e. can’t get into a good college, can’t find the good party, can’t make as much money, etc.). They even have GPS tracker things for cell phones so you can know where your friends are at all times…..whatever happened to being unavailable???? I had some of those tendencies for a while and they definitely reduced my trading results. I read Timothy Ferriss’s blog & book there are some good ideas in both of them. Mainly the ideas about a low information diet that worked well for me. There is some good stuff by Josh Waitzkin (spelling?) in there about how multi-tasking severely reduces ones mental capacity & focus level. His book is a good read too.
The big change for me recently was to stop multi-tasking & only focus on a few very important things at a single time. My results improved quite a bit after I focused on doing that. This was one bad habit I brought over from the corporate world that was harder to break than I thought.
Regards,
Eric
Eric
September 4, 2008 at 11:33 am
My brother is over at Eckerd in St. Pete just over the Sunshine Skyway.
Boats are fun – if I had a few million in pocket at the moment I’d probably buy one and sail around the Caribbean for a few years, drink a lot of rum, read books, and spearfish.
Those are pretty impressive runs of returns – I’m pretty old school in the way I look at businesses, and am undoubtedly a poor trader in that respect as by simply buying and holding undervalued companies (as my old firm does in large scale and I would do in small scale) I guarantee sustained periods of negative returns.
Alex
September 4, 2008 at 8:13 pm
Jeff,
I have discovered a truly marvellous proof of this, which this margin is too narrow to contain.
.
Jevon
P.S. Can’t wait for your book! Hope you get better soon!
Jevon Jaconi
September 8, 2008 at 8:08 pm