Mar

30

No CountryWith moves in the first hour of trading on several occasions reaching half the yearly average move in prices, limit moves in the agricultural commodities happening almost one in two days, and volatility in stocks recently showing that a 2% daily change is average, the fifth biggest brokerage saved by just a hair from going under, and Fed infusions to preclude a market meltdown a la 1907 and 1929, it's apparent that the market is no longer for old men.

I've developed a few indicators of this. One being the 90 second, two point move down in Bunds on Friday ("in den Keller gerauscht"), down five points at the time for the week, shifting the decks for $6 billion in value from those with the stops, and the 14 days of 1% or more moves that we've been running each month in stocks, the daily moves in soybeans of limit up or down 10 of the last 20 days, the half-hour declines of 15 points in S&P at the end of the trading day and the frequent air pockets in all markets with 25% of margin moves in 30 minutes.

James Lackey recounts:

For the past month, for all the big up and down opens the total sum of only about 10 points. The problem isn't the open, its the the open to lunch. One day this month the S&P had a glorious comeback to close the day up 48 after a down 15 pointer, but that was a tough 28 point up open pullback to buy. An up open-12:00 had another big up day of 53, sell that big up open of 23 and you missed out. Often the down moves closed down for the day and the ups, up.

If you didn't catch the open or jump on an up open for the open-12:00 you missed many a move. Worse, buy a down open after down days and you get pinned to the mat. That is nothing new for March. How about a double dipsy doodle failure? Friday was miserable.

Janice Dorn writes in:

These movements may be related more to psychological state than to age. Those in their sixth and seventh decades know best when to be in and when to stay away. It looks like there are a lot of novice traders,  likely of every age, suffering from manic-depression, who are unable to hold positions for more than 10-30 minutes, and whose moods vascillate from sheer depression to euphoria in fairly rapid sequence. I don't know how to test this other than the types of mail I get every day from traders. They want "in on the action" in the "hot commodities" and don't have a clue what they are doing.

I got mail from someone the other day who had never traded real money and has to go to the back room of a store owned by his cousin to watch the markets since he does not have high speed connection at home. He told me that "some big firm" in the east wanted to hire him immediately and give him $2 million to trade. This was based on his paper trades that showed that he could make 0.4% a day scalping.

I think that we may also may be dealing with increasing emotionality and overconfidence among traders, for a number of different reasons, including instantaneous worldwide communication. Add to this the relentless and shameless promotion by futures and commodity trading services and firms, and one has a recipe for at least part of what often seems to be an incomprehensible, violent and volatile mess.

Usually when someone says "I've never seen anything like this before," it means he is losing. In the past months, it is becoming clear, in a number of commodity markets, that we really have never seen anything like this before.

Nigel Davies proposes a remedy:

Perhaps the more mature speculator should head for Mauritius where the stock exchange is open from 9am to 12.30pm. This leaves plenty of time for hot tea before the open and it finishes in time for lunch. And then one can have a nice game of checkers in the afternoon.

Alston Mabry comments:

J BardemThe scene that gets shown over and over is where the hit man goes into the gas station and tells the old man to call the flip of the coin. The hit man explains how the coin has been traveling all these years to come here at this moment for this decision. The old man, bewildered, asks, what am I gonna win or lose? Everything.

Which strikes me as an interesting metaphor for what many investors have experienced in the last year or so. That coin is all the things you didn't know about, that were coming your way: the mortgage derivatives, the borrowed money, the margin calls, the collapse in home prices, the volatility, the troubles at Bear. One day a guy walks in the door and says, "Call it."

Gregory van Kipnis adds:

My take on this provocative film is along similar lines, but without the comfort of an apparent opportunity for a decision. For me the "hit man" is pure evil that may come your way and give you the sense you have some control (chose heads or tails), or that the outcome is probabilistic (50/50), when in fact the outcome is predestined, it is all fate made to look like a game. Notice the line, which comes close to the end, when he appears in the wife's bedroom. When asked why he was there he says you were doomed when your husband didn't accept my offer to trade the money for your life. I got him, I got the money and now I getting you. Then he adds, 'this is all I can do for you.' He gives her the appearance of control with the offer of a coin flip. She refuses. The rest is left to your imagination.

James Sogi opines:

Big SurfTruth is, we have seen this before, the consecutive afternoon drops — right at the bottoms of July and August during 2002, before some big rises. Too few to be robust, but as precedent. But it seems the micro action is slowing down. Like Friday, quite odd. 2-3k on the bid and at the ask. I think the sides are starting to equilibrate. Ranges and gaps are dropping.

In the surf lineup, I'm the oldest guy out except for Makalwaena Bob at 72. I see lots of teens and 20s out. Fewer in their 30s and 40s. None after that. They're strong and careless about danger. They talk about silly kid things. I've seen many of them drop out of the surf lineup: weight, beer, kids, job, drugs, lack of interest, injury, arrests. Its good to still be out there after all these years. It's a different perspective. Its hard to stay in shape and strong and flexible. The speed is down. I try to be in the right spot at the right time. Wait for the nice sets. Avoid getting caught inside. I keep an eye on the horizon, the weather, the buoys, the tides, satellites and can be there when the waves and conditions are right. I like having nice equipment to fit the conditions. I see many parallels in the markets and trading.

Mr. Albert reports:

Here are a few recent qualitative observations from an equity day trader:

1) The speed of price changes is way up and the 'noise cloud' around price is much expanded.

2) The change is volatility from one day to the next is dramatic.

3) Stocks often trade very hard in one direction and then stay there without much of a reaction.

4) My 10 mbps line is compressed to ~1.5 mbps and pinging Yahoo times out for three iterations at the open.


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13 Comments so far

  1. Jay Nelson on March 29, 2008 4:48 pm

    I see older men and ladies, often walking on canes or leaning on caretakers or relatives for support, more frequently getting honked at as they cross avenues in residential parts of Manhattan. I do remember a time not too long ago when drivers would refrain from honking even if an older person took alot longer to cross than the walk light gives them. No longer.

    We all need to get where we’re going, I’m as guilty as the next guy. But drivers honking at slow elderly street-crossers is a too-frequent occurrence.

  2. Anatoly Veltman on March 29, 2008 6:18 pm

    I’m sure that crack-spread trades of last 30 days qualify. You never had as many days of opposite moves in Heating Oil (HO) vs. Reformulated Blendstock (RB).

  3. Paul Marino on March 29, 2008 8:32 pm

    Speaking of old men; does anyone on earth talk his book more than Jim Rogers, Marc Faber and T. Boone Pickens?

  4. James Miles on March 30, 2008 6:03 am

    Much of the current pain comes from the obligation to stay involved, both imaginary and real. Private traders who took heavy hits early in the year (that is, nearly everyone) feel that they can't miss out on some of the strong up days we are having. They could, in fact, step off the gas and wait for a time when they feel they know what might happen next.Often, though, the obligation is real. Many insitutions are benchmarked, and their clients harry them in the the months when they "underperform." Crucially, this now goes for many hedge funds in the equity space. The natural, mature approach at the moment might well be to run light exposures — but if there's a piece of good news or just a weight of cash coming in, hedge fund clients will bemoan failure to match index upside. A top percentile long only European fund manager has just launched his first absolute return fund and is chasing his tail: his monthly newsletter discusses the difficulty of matching the EUROSTOXX 50; a box on the same page tells us "the Fund aims to produce absolute returns irrespective of market conditions." He is so haunted by the potential for a pop that he can't contemplate even a small net short. Just five months into his career as a hedge fund manager, his poise has gone. He was at the top of his previous game — long only — for eleven years. More old traders and even older clients would be good right now.

  5. David Whitesel on March 30, 2008 7:19 am

    Some of the folks Janice mentions might be served by following the repoting of Michael Yon, flat out the best correspondent on the ground in the Middle East. His writing about strategy and tactics, civilization under fire, networked systems, true valor and courage, is off the charts great. http://www.michaelyon-online.com/If your ever lacking perspective, his work will enable you to find it fast. Michael separates the mature from the immature, in reporting real life dramas, the benefit to the reader accumulates, as character traits, as requisite, emerge, when your enemy is the deadly arts.

  6. Lon Evans on March 30, 2008 11:46 am

    Mr. Sogi is as sagacious a ever. The old guys, those still kicking, know well the game, and, so, are less swayed by reactionary fluctuations, those atavistic knee-jerks demanded by youth yet having been weaned of limbic proclivities. As a runner, once highly competitive, I find wisdom in Jim's noting similarities between his sport and trading. With experience comes perspective. I am now stronger than I've ever been. I am able to train to a level never achieved as a younger man, and all due to having had a handful of decades during which to learn, gain perspective. The down side is in no longer possessing the speed with which I was once graced. If only I had known then… Fortunately, trading demands less a youth's strength, and more an old man's wisdom. lon

  7. steve leslie on March 30, 2008 12:19 pm

    Promoting books. In the financial world, nobody promotes himself more than Jim Cramer, with the possible exception of Suze Orman. For books in general I vote O'Reilly.

  8. George Parkanyi on March 30, 2008 12:41 pm

    Actually, this market is the perfect country for old men. In the movie, a whole lot of young men die, but I can only think of one confirmed kill of an "old" man, the poor guy who gets killed for his car. Yeah, it's the young men that all get mowed down - even the dogs buy it! In the movie, the old men have seen this before. They don't like it, but they know what to engage and what not to. In this market you want experience over enthusiasm. You want the "old" guys who've seen this it all before, who have a better appreciation for the risks and are less likely to let themselves get swept up in it all. Airline pilots are there not because it's particularly difficult to fly a plane (even I landed — sort of — a 747 in an Air Canada flight simulator once), but to deal with the situation if something goes wrong. That's when experience is at a premium. In the famous Gimli Glider incident in July 1983, an Air Canada Boeing 767 ran out of fuel at 41,000 feet over Manitoba because of a metric conversion error by the ground crew in Montreal. It just so happened that experienced pilot Captain Robert Pearson, also a glider pilot, was able to reach into the back of his mind and remember that there an old abandoned World War II airstrip outside Gimli north of Winnipeg. With no engines or power, Pearson was able to safely wrestle the plane down to the ground using glider techniques, including side-slips (to slow it down) that had never before been tried with a wide-body jet. In this country - bring on the old men. Cheers, George PS - I once actually flew on the Gimli Glider after it was repaired was put back into service. Cheers, George

  9. V/Trundaev on March 30, 2008 1:05 pm

    A Soviet Nobel Prize winner (in physics) L. Landau once said “Almost everybody can be an academician (member of Academy of Science). But it requires 30 years for a talented one and 200 years for a persistent one.” Maybe a majority of us simply will encounter with a lack of time to become an academician of trading?

  10. Greg Herder on March 30, 2008 9:05 pm

    Notwithstanding the high volatility the flip side is (in Australia at least) the endless up ticks and down ticks at certain levels as all the desperate weak speculative position takers try to support their positions.

  11. m on March 30, 2008 11:01 pm

    Mr. Brolin is also a serious stock trader, when he’s in between acting gigs. Short term mostly.

  12. Lon Evans on March 31, 2008 3:31 am

    "O'Reilly"? The very same SOB, who rather than end up in court defending self against charges of sexual harassment chose instead to divest self of some many millions? The very same SOB, who with perfect knowledge of his accuser's past (and it weren't pretty) chose instead to buy her off?So is Rupert Murdoch your only source of information, or just the preferred?lon

  13. m on March 31, 2008 4:46 pm

    L: "blah, blah, blah" would be a more interesting reply. {almost sounds like some xxxx fueled rant you're on}

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