OffTopic - but interesting reading and a major influence on moment to moment market action nowadays. Long article...will post in three parts.From the Washington Post magazine a few weeks ago.
Part I
MASTER OF A NEW UNIVERSE; WITH MONITOR, MODEM AND MOUSE, LAWRENCE BLACK OF ALEXANDRIA-A MAN WHO LIVES WITH HIS PARENTS AND HAS NEVER HELD A REAL JOB-BECAME ONE OF THE BIGGEST STOCK TRADERS THE WORLD HAS NEVER HEARD OF
STEVEN MUFSON
Sunday, May 16, 1999 ; Page W08
It's 3 o'clock on a March afternoon and the Dow Jones industrial average has pierced the 10,000 mark for the first time in history. There is still an hour to go in the trading day. In a drab beige room at Net Trade Inc. in Arlington, two wall-mounted TV sets are tuned to CNBC, whose anchors are breathless with anticipation of the market's close. The Dow's 30 companies, foundation stones of the American economy, are the talk of the town and the toast of the big mutual funds.
Lawrence Black is barely listening. Sitting in the back of the room, he is tapping buy and sell orders into a computer terminal with four monitors in front of him. His stocks of the day -- 18 of them -- come from a different universe. The companies trade under symbols like BAMM, COOL, FLAS, HELO, EPAY, CMGI, ABOV and EFAX. Not one of them is a household name, few of them make any profits and some barely have any revenue at all. But because he usually owns them for anywhere from 60 seconds to 45 minutes, Lawrence doesn't care.
He started the day holding 1,100 shares of EPAY, the symbol for Bottomline Technologies Inc., a maker of software for electronic payments. Yesterday afternoon, he had looked at a chart of the minute-by-minute prices for the stock; because of the smile shape of the chart -- rising nicely at yesterday's close -- he was optimistic about how it would open.
This morning, his optimism was rewarded. The stock opened $4 a share higher than it had closed, and within a minute Lawrence had sold his shares for a profit of $12,800. A good thing, too; 27 minutes later, EPAY dropped $33, or one-third. By then he had made 127 other trades, cashed out an unusual overnight position in GNET, a collection of Web destinations, for about $15,000, scored big on quick turnarounds in EFAX, an Internet fax service, for more than $10,000 and was eyeing FLAS, the Internet access provider FlashNet Communications Inc., which this day is selling shares to the public for the first time.
Now, Lawrence is buying IMCL.
"What does it do?" a visitor asks.
"It goes up right now," he answers.
But not much. Within four minutes, he sours on IMCL and sells his shares at a small loss.
On to BAMM, or Books-A-Million. At 3:09 he makes seven purchases. During the next two minutes he has a change of heart; he sells it all in five different transactions, losing a little less than $100. He spends the next 15 minutes doing more of the same with shares of EFAX, BAMM and GNET.
Frequently at the end of the trading day, many stocks make sharp moves up or down, and Lawrence is searching for prime candidates. From 3:27 to 3:33, he buys EFAX three times again. At 3:35, he buys GNET five times and EFAX nine times. At 3:38, he sells some GNET. A minute later, he's buying it again. Suddenly, he loses faith in GNET. The buy orders look scarce. From 3:40 to 3:43, he bails out of GNET and loses more than $3,400.
At this point, he's still sitting on 4,600 shares of EFAX, when its stock price begins to totter ever so slightly.
"Oh, [expletive]," he says. "Is EFAX breaking down?"
"Could be," says a fellow trader nearby.
"It's going straight down right now," Lawrence says anxiously. It's still 3:43. "Let's short it."
To short a stock is to sell shares you don't own on the expectation that the price will drop and you will be able to buy shares later at a cheaper price to "cover" your short sale. Lawrence sells off the EFAX shares he owns, taking a loss. Then he keeps on selling, shorting 1,160 shares. Three minutes later, he buys enough to cover the short and makes about $2,100 back. At 3:49, he's shorting again.
And then Joe Kernen, one of the anchors on CNBC, says he's going to do a report on Hello Direct Inc., a marketer of brand-name telecommunications equipment, after the commercial break. Lawrence doesn't wait to listen to what Kernen is going to say. He frantically pounds the function key for buying HELO; the computer tells him he snagged 1,200 shares. He has learned that the mere mention of a stock on CNBC prompts traders like him across the country to log on and buy. He calls it the Joe Kernen Effect, and he says he made $200,000 or $300,000 off it last year.
Sure enough, HELO starts to rise within seconds. And as soon as it does, Lawrence sells, making $1,237.50. Turnaround time: less than one minute. The commercial break hasn't even ended yet.
Ten minutes left in the trading day. Lawrence burns half of them selling more EFAX, bringing his short position to 2,500 shares. The price keeps sliding. "You would think everyone and his mother was shorting this thing," he says. Then he starts buying shares to cover his position.
His "Dukes of Hazzard" watch starts to play "Dixie." That's his one-minute warning. Just after the watch goes silent, CNBC broadcasts the closing bell on the New York Stock Exchange floor and official trading ends. Lawrence keeps buying EFAX in the after-hours market, bringing his position to zero by 4:03.
In 13 minutes, he has made seven sales and 10 buys of EFAX. He has earned more than $2,400, minus commissions.
It's been a strange day. In the first hour of trading this morning, he had made more than $50,000. He spent the rest of the day giving about $10,000 of that back. Overall, he made 596 trades -- and $43,032.30 -- today.
Lawrence rubs his eyes and groans. "Ugly," he says. "To be up that much in the morning and think you're going to have a big day."
Lawrence Black is one of the biggest stock traders the financial world has never heard of. Last year, sitting in the windowless, beige office in Arlington, he bought and sold more than $1 billion worth of stock in nine months. Although his profits were a tiny fraction of that amount, they still exceeded his wildest dreams. In the first three months of this year, he made more than $1 million.
At the same time, however, Lawrence, at the age of 27, still lives with his parents, in the Alexandria house they bought before he was born. He has never held a real job -- with the exception, his mother points out, of a stint bagging groceries at a Safeway. A graduate of West Potomac High School and James Madison University, where he majored in English and economics, Lawrence has done nothing other than trade stocks.
He is a day trader. He may be the archetypal day trader.
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