Has anybody met (or traded with) any of the Market Wizards?

[MichaelJ]

I'm not as much of a Wizards "groupie" now so I probably won't try to contact Trader Vic unless I one day invest in his funds or something.

I see in his updated bio that he has traded for Soros in the past. I was not aware of that but I did know there was a Cooperman (Omega) connection. That would be an interesting tale from his perspective I'm sure, though he probably signed non-disclosure agreements every which way...

Quote from billpritjr:

FYI

See under "Executive Profiles" below

let us know if you make contact with him!

good luck

http://aftllc.com/About.html

 

[MichaelJ]

Great story Pabst.

What does "knew how to trade uncompetitive" mean?

When you say "sleazy" and "steal" - you mean legal "theft" basically that the floor traders had a legitimate advantage being where they were? Or was it stealing in a moral sense even if not illegal? Or worse?

Thanks

Quote from Pabst:

I traded in the Bond pit with Tom Baldwin for ten years...
Baldwin was the consummate floor trader. He had a sleazy side that knew how to trade uncompetitive. However many guys on the floor could only steal.

 

[Osiris]

Quote from Johnny Walker:

I met Trader Vic at a gold mining conference in San Francisco last November. He gave a 30 minute speech and gave copies away of his new book. The point of his speech was that gold was going to got to 3,000 dollars by 2009 and he showed some strange way to hedge it. I can explain in more detail if you want.

____________________________________________

I don't mean to pull the thread away from the original topic, but I'd be curious to hear what Trader Vic had to say about the gold trade and the hedge...thanks Johnny

I have never gotten even close to speaking with any of the market wizards, but:

A friend of mine knows a guy that is more an institutional trader....and this guy knows William O'Neil fairly well. The fellow that I know mentioned to the institutional guy that he wanted to see an extra column of info for the IBD website version of the paper, just as a passing comment. The institutional fellow says "Oh really, I'll mention that too him tonight, I'm having dinner with him" About two days later...the info my friend wanted was added I thought that was pretty cool...i'm sure it was just an easy addition on the website...but still

 

[Pabst]

Here's a paradox, Michael. There were illegal things that weren't immoral, and legal things that were immoral. Much behavior was predicated upon "pit etiquette." As everyone knows, open outcry is not FIFO. So a big issue was "who made the market" and for how long should they be entitled to fulfillment at their price. In the Bond pit there was about 500 locals and brokers trading the lead option month on opens. (the pit population would dwindle as the trade slowed during the day). The physical distance between the best bid and a seller could be thirty yards. So if the market is 17 offered and a broker bids 17 for more than what's showing, he has to physically acknowledge each seller. In otherworlds if a broker gets 800 to buy he must say Mike "I'll buy a hundred, Pabst I'll buy a hundred, I'm 17 bid now for just 600!", and so on. Very quickly of course. Well Baldwin and most ANY local would treat the 17 offers that were in his area as his property. So often that original 800 lot order would only get 500 and now be turning the mkt 17b while some locals would be able to get long 17's and then lean on the balance of that 800 lot that's ALSO on the bid. Obviously there's still risk as the 17's may trade right out. But over the LONG HAUL, that's a % edge. Nothing illegal, but still sleazy. I did it often so I'm not throwing any stones....

Quote from MichaelJ:

Great story Pabst.

What does "knew how to trade uncompetitive" mean?

When you say "sleazy" and "steal" - you mean legal "theft" basically that the floor traders had a legitimate advantage being where they were? Or was it stealing in a moral sense even if not illegal? Or worse?

Thanks

 

[MichaelJ]

So if I extrapolate that to my experience in electronic equities, the analog would be - and correct me if I'm wrong...

Stock XYZ is bid 400 shares at 52.16, offered 300 shares at 52.17

An order comes in to buy 1000 shares at 52.17. But that order doesn't get 300 shares and then make a new high bid of 700 at 52.17.

Instead, the "Baldwin" or "Pabst" floor trader forces the 1000 share order to wait just a second. The floor trader buys the 300 offered shares at 52.17 ahead of the 1000 order and then can have an edge since they basically have free upside since if the market turns down they just use the 1000 high bid at 52.17 as an exit?

So, am I right in understanding this as legalized frontrunning due to the lack of FIFO? I guess that's why seats have always been fairly expensive.

But I have heard that the failure rate in Chicago pits was historically pretty high. So even with that edge, the non-Baldwins of the world still found it pretty tough.

Thoughts?

Quote from Pabst:

So if the market is 17 offered and a broker bids 17 for more than what's showing, he has to physically acknowledge each seller. In otherworlds if a broker gets 800 to buy he must say Mike "I'll buy a hundred, Pabst I'll buy a hundred, I'm 17 bid now for just 600!", and so on. Very quickly of course. Well Baldwin and most ANY local would treat the 17 offers that were in his area as his property.

 

[rosy]

Quote from MichaelJ:

So even with that edge, the non-Baldwins of the world still found it pretty tough.

Thoughts?

just because you are in the pit doesn't mean anyone will trade with you.

 

[Pabst]

Using your analogy, the 1000 shares would get probably 200 of the 300. After all if the order didn't buy any then the pit wouldn't know that there was any bona fide interest in buying the 17's. Now don't get me wrong. OFTEN, using your analogy, the broker may whisper "Tom are you at 17?" and Baldwin would sell the ENTIRE 1000 with only 300 to lean on. The Bond pit was like poker. The community cards were the resting orders. They were shown so we knew what was "on paper." What one RARELY knew was the position of the dozen or so locals who at any time could have a position of 500-2000. Those were some deadly down cards. Often I would see nothing really offered, think the big guys were caught short, so I'd step out and bid for 20 lots into the offer. As soon as 50 guys say SOLD! simultaneously, you figure out that do did the wrong thing.

The failure rate in an established market/pit is probably not as high as advertised. But standing in a spot near "paper" i.e. in close approximation to floor brokers who fill customer orders, is PARAMOUNT to success in most pits. It's hard to get a good spot. There were kind of "shifts." Traders who made money early would leave for the day and then smaller guys who stood down a couple of steps could "move up" for garbage time or the close.

Quote from MichaelJ:

So if I extrapolate that to my experience in electronic equities, the analog would be - and correct me if I'm wrong...

Stock XYZ is bid 400 shares at 52.16, offered 300 shares at 52.17

An order comes in to buy 1000 shares at 52.17. But that order doesn't get 300 shares and then make a new high bid of 700 at 52.17.

Instead, the "Baldwin" or "Pabst" floor trader forces the 1000 share order to wait just a second. The floor trader buys the 300 offered shares at 52.17 ahead of the 1000 order and then can have an edge since they basically have free upside since if the market turns down they just use the 1000 high bid at 52.17 as an exit?

So, am I right in understanding this as legalized frontrunning due to the lack of FIFO? I guess that's why seats have always been fairly expensive.

But I have heard that the failure rate in Chicago pits was historically pretty high. So even with that edge, the non-Baldwins of the world still found it pretty tough.

Thoughts?

 

[easyrider]

Quote from Pabst:

[B. Often I would see nothing really offered, think the big guys were caught short, so I'd step out and bid for 20 lots into the offer. As soon as 50 guys say SOLD! simultaneously, you figure out that do did the wrong thing.

[/B]

LOL..

 

[Aok]

Pabst says...

"As soon as 50 guys say SOLD! simultaneously, you figure out that do did the wrong thing."

LOL!

Thanks for sharing your stories Pabst.

More Baldwin stories please.

In regards to the thread: LBR and cant remember if he was in the back of Wiz #2, Mark Cook. Taught me all I needed to know regarding options.

Though he is not a wizard, I had the very good fortune of trading with Chick Goslin.

Learned alot from him.

 

[Johnny Walker]

Quote from Osiris:

____________________________________________

I don't mean to pull the thread away from the original topic, but I'd be curious to hear what Trader Vic had to say about the gold trade and the hedge...thanks Johnny

Trader Vic owned a company called Alpha Financial Technologies and there he developed a fund called the Diversified Trends Indicator which is based off of futures. He sold this fund to to Standard and Poor"s a few years ago. Its now called Standard & Poor’s Diversified Trends Indicator, the link to read in depth about it is right here
http://www2.standardandpoors.com/spf/pdf/index/dtiwhitepaper.pdf

Trader Vic told us to buy gold future contracts on the NYMEX using treasury notes as collateral instead of cash and to hold the contracts for the next 3 years. He then said put another portion of money into the Diversified Trends Indicator in order to hedge the gold position in case the market crashed before it went up. He gave us the usual gold bug reasons why gold will go to 3,000 in the next few years. His number one reason for the explosion in gold would be all that excess liquidity will find its way into the thinly traded gold markets pushing it up like never before.