Wizard of Wall Street Oct-Nov Edition

E

eagle488

Introduction-

Hello everyone!

This is going to be my first journal on EliteTrader. The purpose of this journal is not so much to tell you about my trades, but to expound on thoughts, share ideas and learn from others. No matter how young or old, how experienced or inexperienced, how educated or uneducated, you can always learn new ideas. Who will have the next latest and greatest idea is the question? Will it be the man who just left state prison or the man who just graduated Harvard? Will it be the 50 year old trader who has 30 years of market experience or will it be the homeless man on the corner? Hehe. We simply dont know who will have the next best idea. So all ideas are welcome here no matter who you might be.

I want to start off by presenting to you what I believe to be the greatest way to make money off of the market. That very ideal is common knowledge to some of us. That one ideal I speak of is fear.

If you travel along the FDR in lower-mid manhattan, you might happen to look across the way and observe what appears to be a castle in ruins. This isnt a castle, however, but a hospital that was built during the civil war era to care for small pox patients. This hospital is located on Roosevelt Island and was not always connected with a bridge. The island was used to isolate smallpox (and other disease laden) patients from the rest of the city over a hundred years ago.

http://www.hoursofdarkness.com/Renwick_Smallpox_Hospital/Renwick_Smallpox_Hospital.htm

Eventually, the diseases that plaqued the city were contained and the hospital became obsolete. It was a gorgeous hospital indeed, so why did they let this great building become such a ruin? There are buildings just as old in the city that have been carefully preserved. The main reason is FEAR. Of course, you cant catch any diseases by going over to the ruins, but it is the fear of disease that keeps everyone away.

It is this same unreasonable FEAR that keeps a good stock down. Companies like Yahoo and American Airlines were much better opportunities then Google ever was. Now you might be laughing by now and saying that how can these troubled companies possibly be better then Google? In 2002, Yahoo was trading at an adjusted close of 4-5 dollars on a daily basis.

http://finance.yahoo.com/q/hp?s=YHOO&a=03&b=12&c=1996&d=08&e=29&f=2002&g=d

American Airlines was trading at under 2 dollars at some points in 2003.

http://finance.yahoo.com/q/hp?s=AMR&a=00&b=2&c=1980&d=02&e=29&f=2003&g=d

Look at where both these companies are trading today. $25 and $33 respectively. So why didnt you buy $1000-5000 in shares back when these stocks were trading at such lows? I mean, you lose that much on a single daytrade daily or weekly? You lose that much on a bad options play? The reason why you didnt invest a minimal amount of cash back in the day was FEAR. However, a few other smart investors bought in using just a few thousand dollars of cash. They turned $2000 into $33000 for American Airlines.

Now I will tell you the greatest way to lose money in the market, GREED. Greed pushes you to make risky trades. You logic to yourself that your not a millionaire so you must engage in the riskiest strategies possible. When you see a profit on the screen, you reason to yourself that the stock will go higher. Oh, how many times have I seen a profit and not taken it only to realize a loss later on. I was simply too greedy. If I had taken the profit, then I could have moved on from there that much wealthier, but I ended up taking a loss. Believe me, there are many such transactions that are up on my WALL OF SHAME. Its a cork bulletin board that I have erected where I place all my screwups. Not only do I get to view the wall, but everyone else gets to view it too. Its so I will never forget and serves as punishment for stupidity.

These are the basics behind making and losing money. Fear and Greed. You must respect these two words highly. Capitalize them when you type them. They are how we make (and lose) our money from day to day.

Just a disclaimer, I am not saying to roll all your cash into a scary situation like American Airlines. No, that would be Stupidity. (Another concept that we will address as I go along that also must be capitalized). Nor am I saying you must pile out of a stock because it just went up 10 cents. The concepts of Greed and Fear must be followed with an educated learned skilled approach. They are not neccasarily supposed to be followed quite literally. On the other hand, what would it hurt to roll a token amount of cash into the scary situation? The downside of investing $2000 into scary AMR would be $2000, the upside would have been $33000. Your perfectly willing to throw money away at some chick you just met who you hardly know, now why wouldnt you throw a token amount at the scary airlines? You can only lose with the chick where as it can go both ways with scary air.

As we progress forward, I will be making several different entries on stocks or philosophies or whatever. Hopefully, someone might learn something from this. Hopefully, I might learn something too.

Unlike other people who troll on the internet spouting nonsense, I am willing to meet up on Friday at my usual happy hour destination to discuss strategies. I'll even bring my laptop and aircard. My usual place is Ulysses at 95 Pearl Street in the NYC financial district on Friday right after 5pm. Cheap beer, lots of chicks. $15 parking if you arrive after 4pm. Free parking up front if you can get a space. All the receptionists from the big companies get off and meet up with beers in their hands. Lots of big wigs in suits from the various firms. Hey, I like it. Everyone should come down because this is the only way to make connections. Connections help you move up in life and give you ideas.

I welcome everyone to the happy hour because we simply dont know who will have the next best idea. Sam Walton came from a depression era poor family and his first job was at Penny's. The CEO of Starbucks grew up in a housing project on Staten Island. Donald Trump first job was in his Dads old unimpressive office in Queens. If you think you have the idea, then bring it on.

So now we move forward with the first edition of the Wizard of Wall Street. Hehe. Originally, I thought I would just call this Strategy Lab, but I thought it too plain and no one would read it. The Wizard of Wall Street it is. . .
 
Before I move onto the next topic, I want to reply to the first poster. I will be honest. When I first read his post, I replied too quickly with some choice words and was admonished by the moderators for my actions. The content of his message makes it appear that he was attempting to simply graffiti my journal for whatever malicious reason. OK, I will take his words in kind and be a good sport.

However, the title of my journal "Wizard of Wall Street" isnt meant to mean that I am the Wizard of Wall Street. I simply created the title because it seemed more eye catching then anything else. I actually was thinking of the "Wizard of Oz" to be honest where we are all following the yellow brick road to meet the wizard only to find it is some Goldman trader pulling ropes behind a curtain. The golden brick road is the one we are all walking down together. Eventually, we might just find the wizard.

Whatever, it seemed like a good title so I thought it would ring well and attract more attention that way. As well, Im not saying my philosophies or thoughts are the right ones. I just thought I might expand on my thinking at the current time and, for those who choose to read, I would receive civilized and thought out replies versus profane one-liners. I guess that is the nature of the internet. Your entire work is suddenly brought down by some guy who wants to throw a tomato.

So now I want to move on to my next topic which is Stupidity.

Stupidity is the trait in which I believe a person can make the most or lose the most money on Wall Street.

There was once a young man in Vietnam who had hopped out of a helicopter to walk across a live minefield under fire against the direct orders of the pilot in order to rescue several other Marines that were too scared to walk through the field to the waiting helicopter. This young Marine actually walked through the live field 6 different times while being shot at by enemy forces and carrying other Marines on his shoulder. On two occasions, there were mines that went off in the field during the rescue. "Bouncing betty" type mines that fly up and explode in mid-air sending shrapnel everywhere. Later on when he was asked how he knew where the mines were, he answered that he just took a guess walking through the field and the others followed in his footsteps.

http://www.marines.mil/moh.nsf/0000...000003c919889c0385255fa2006386aa?OpenDocument

This man is a great man, a hero, do not get me wrong. He saved an entire platoon of Marines in Vietnam. However, his actions demonstrate the concept of studidity. Going against direct orders from a Lt. Col., running through a minefield in which he does not know where the mines lay while under fire and carrying fellow Marines. This was a situation in which if he had failed then he would have been surely either dead or court-martialed. However, since he was a success, he was branded a hero.

In the same way, engaging in a particularly risky concept can either brand you a true trader or a bankrupt fool. For example, overusing leverage when trading an equity. You can either really compound your cash very easily or owe more then you have very quickly.

Brian Hunter is well talked about in the press. During the Summer of 2005, he had engaged in some particularly risky strategies. They panned out well for him in 2005 and so he was labeled a star trader. However, such strategies did not pan out well in 2006 where his overuse of leverage brought down an entire hedge fund.

As mentioned earlier, could it have hurt to get into American Airlines at such a cheap price. Well, those that missed the opportunity thought that they could get into Delta. I remember that fateful day. There were many analysts and brokers who had strong buy ratings on Delta when it happened. There were commentators on CNBC who were saying that you should get into Delta. Many of them had missed the AMR opportunity and thought that Delta would be for them. However, they failed to read all of the SEC filings before going long. If they had read the SEC filings, then they would have seen where the company had stated that they would most likely file bankruptcy in the near future. Getting into Delta, I believe, was an act of stupidity.

The day of the Delta bankruptcy announcement was one of carnage for those who decided to long the stock.

To me Wall Street is a triad of fear, greed and stupidity. Money can be made from fear, money can be lost from greed and the big cash can be made/lost with stupidity.

Everyone should have a diversified portfolio of different equities which can weather the test of time. You will often see me writing about such silly things like savings bonds, DRIP plans, ROTH IRAS, 401k, etc. When I was graduating high school, I wish someone sat me down to explain all of these things. Unfortunately, I had to learn on my own. Every younger person I come upon, I usually tell them about these silly things, but no one ever seems to listen. Before a person decides to go out and try to be the wonder trader, they should have at least started the accounts I have described.

Would it hurt to have a IRA? In fact, its the one account that you can never lose through bankruptcy. I believe that only through court mandated child support can it be dipped in for other then retirement purposes. So if you declare bankruptcy or hit some pedestrian on the street and get sued, they cant touch your IRA.

There are limits to how much I can place in my IRA so those accounts are not my largest. As well, I choose only to utilize mutual funds which earn a modest return. However, I regard them as my most prized accounts. There are few people out there that will be able to touch those accounts when things go wrong.

We all have our own version of trading. My version of trading does not involve options, futures or daytrading. Actually, there are few occasions when I will dip into a daytrade. However, I dont believe in sitting in front of a monitor all day long. Its boring, its agonizing and takes away from my life. Too much trading, as well, exposes you to more risk in the market place.

I believe in sweeping up undervalued equities that I reasonably believe could double within a 6 month time-frame. Then waiting and waiting. Before I sweep up any equity, I perform an intensive background check to include even digging into the biographies of senior management. I will purchase reports from the brokers, read all the SEC filings, intensively go through the financials, etc.

Lets take, for example, BRLC. This company had traded at 2 dollars and some change over the summer at one point. If you research the company and the laws, you will find that this company was ideal to get in over the summer. Congress has mandated a switch over to HDTV in the coming future and you can reasonably assume that people will be buying new television sets. A growing television set company trading at 2 bits is a screaming opportunity. (Dont try to get into it now, its too expensive where it is)

So I have concluded my philisophical introduction. Thank you for being patient in reading this long diatribe. Ultimately, someone is going to throw a tomato at me. I guess that is to be expected.

However, I am going to present a company that I expect to triple. This company, I feel, is trading at an extreme value right now and it is a name familiar to all. I will not reveal the name at the current time because I want to establish a position. On a few of the names I have revealed, all of a sudden the price went up to where I couldnt establish a position. I can say that it is a company that deals with foreigners. The more foreigners who come to our country, the more this company will make. Some of the analysts have downgraded the stock to bring the price down so they can make an entry point.
 
Here are a list of companies that I believe to be a strong buy at the current time and might double in the next 12 months.

Yahoo. Started at $24.15.

Western Digital - Price when coverage initiated: $17.87

Legg Mason Price when coverage initiated: $86.25

Marvell Price when coverage initiated: $16.25.

Riverbed- I believe Riverbed will most likely double in the next 12 months. However, its current price is too high. I believe it has to pull back to the teens before I would hit the buy button.
 
Keep it going. you seem pretty inspired.

It makes me think how traders attempt to tiptoe through the minefield that these markets can be -- leverage is the primary decider of how big the mines are. Your entry and exit strategies and methods will determine how often you hit them.

I have trading accounts as well as retirement and 'non-trading' mutual fund accounts, and I agree its good to be diversified.

your wizards title reminds me of market wizards, a book I find quite inspiring.
 
hey. sorry if i upset you but if you come on a place called Elitetrader and call yourself a Wizard of Wall Street and then write long letters about things that sounds like a total newbie it isn't something that the professionals here will take too seriously. You wont find too many people here interested in savings bonds or even 401k advice. good luck though.
 
Did you bite this off of Winning On Wall st?? Tell Marc to stop selling newsletter subscriptions and start trading like he expects all his clients to do...


"Marc Mandel, the Wizard attended the Wharton School of Business at the University of Pennsylvania where he received his Bachelors of Science in Economics degree. He was Senior Vice President of one of the largest Wall Street Investment Banking firms and has been active in the financial services industry since 1975. He co-founded the financial public relations firm, Boulder Financial Group. Currently he is Chairman and CEO of the Financial Services Company, Wall Street Radio.Net."

marc_about_us_3.jpg
 
Let's talk about a word that you didn't mention. It's probably the most important but least appreciated word. The word is "perspective". This is what separates the few successes from the many failures. Anyone can throw out Greed, Fear, etc. we have all read that many times in the textbooks. However, incidents of greed and fear only become apparent in hindsight. Sure, now we can say that AMR was a case of fear after the stock has gone to $33. I sincerely doubt you would have been pounded the table at the time. Perspective is the most difficult attribute to achieve in the moment. The ability to see the world around you with clarity and make accurate judgements without the emotion, bias and hysteria surrounding the moment. A VERY rare quality indeed. Why haven't you mentioned the most obvious case of greed? Have you looked at a chart of the Dow for the last 10 years vs. historicals? Am I one of the few to have "perspective" and see the current greed of the past decade or so? Or, will others chime in with the many reasons that makes the moves justified? It's not that simple, everyone's got an opinion. I don't own stocks as investments and I don't expect to for a long, long time.
 
I am going to interrupt my regularly scheduled journal.

I have a feeling that Marvell will announce something very soon. The end of day trading tells me that something might have leaked at the end. Heavy volume and huge price spike. Not sure what is going on, but there have been LBO rumors.
 

Attachments

I went to get gas for my car at the gas station and a Monster for the other work I have to complete. I thought that the trading of Marvell was just about over for the day.

Then I come back to see a $5000 profit.
 
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