***OT*** Dear Zain/Rehan/Zachary – On thread and life:
It was nice to read your letter this morning in Kuwait. I think you’ve made a valid point as far as the variety of posts is concerned. However, I would think that the “Idea” thread is dedicated, since its inception, to market direction and reasons for that direction. We have seen this thread going through lot of transitions in the process. It has a strange kind of tendency that sometimes or some months there would be increased fervor in posting and then all of a sudden left to my ownself and me.
I describe them as seasons of idea, not unlike when Siberian winters approach and migratory birds move on to warmer habitats. In all likelihood, IDEA is like a safe island where migratory birds hop over before moving on to warmer climes. Previously whenever this has happened on IDEA it has been at a point of great change. I relate the increased number of present postings on IDEA to several factors: One, people get bored posting on the same threads and move on to new homes, which they readily desert as soon as they find comfortable housing, or sometimes, some threads lose the cult status due to reasons like self-promotion and economic benefiting from hosting of the thread.
On very rare occasions I see increased posting on IDEA; when there’s change of market direction, like migratory birds tell you of the impending winter, as here in Kuwait between Siberia and South Africa, I see many new birds on their way to warmer climates, likewise the increased activity on IDEA thread can be likened to the migratory process where bear threads become inhospitable as opinions don’t really matter much to be on the short side of the trade since everyone else is on the short side so, naturally, the propensity to move on to a balanced thread in such nice circumstances, where bears have huge smiles on their faces, does give their opinions a great feeling of self-importance.
This is again an intellectual exercise to know the nerve of your thread. It is very much a part of your education process also – changing patterns, behaviors, not-to-be-ever-wrong kind of attitudes, lack of admission of guilt are all human weaknesses. When I host this thread, I not only host it for market directions, I try to feel the pulse, with all my limitations of course, of human tendencies that impact the market. A man with overwhelming bull tendencies, I try to reason out with bearish opinions and always do a ground check of realities in my own mind before I post. Here the thread responsibilities are clearly widened. I cannot simply write just a few lines. The expectations from my very few readers are immense and as I’ve established this thread from the very beginning is based on reason and integrity. I wish we could continue to do so.
The migratory patterns of the posters also depict a dilemma that is a lack of consistency. For me, the thread is like my home. I come and talk to my children, talk to the markets, I analyze global events with my severe shortcomings and myopic perceptions. I retire in the lounge of my thread and talk about personal issues, discuss betrayals, get help from my fellow posters in my personal life, extend my friendships beyond cyber space and really feel good to come back after a hectic day to read my posts and that of my fellow posters on issues which interest us beyond markets, of course, markets remain are prime concern.
It is for this reason, Zain, that I’ve take intellectually bold and honest positions on market directions, where I discussed with you recently of the higher probability of markets going down rather than up as the distribution curve is always skewed in favour of lower markets. Now I am not a fool to take a chance against a probability event. The reason I do that is that I have only one check – What has changed since 1995? How have ground realities changed? Yes, earning momentum can correct the stocks. Last time I purchased TXN it was at $50; I did not get out of it until $121. Now, I see TXN at $47, i.e., old $97 I will take a chance again at a 30% discount.
Now the problem with the thread direction is that people fail to understand that short-term trading, as I’ve learnt now, is no answer to the impact you have on your long-term portfolio. Like your MCD and TRIB, which you sold yesterday came up very nicely and I am happy for you, but you must have realized that you’ve been through some trying times when TRIB was at $32. You yourself told me that you would have jumped ship then and bought Techs had it not been for my posts on market direction. So let’s take you as an example, and let’s take your aunt as another, who keeps calling me when the market is down by 100 points as if the earth is falling. In the last five years, she has tried to ditch her portfolio nine times. I’ve calculated for her that had she done that she would be off 50% instead of the +200% in five years.
This is the thrust of IDEA. It is not like we coming out and talking about oil and the changed circumstances of geopolitical and geo-strategic oil reserves. Okay, so no-one seems to care about that kind of post; it’s buried within five minutes amongst 200 other posts, which are more timely in nature, but realize how I feel about it; that someone who has nurtured this thread in the last four years to keep people abreast of the real reasons and changes happening in the world is left in appalling circumstances as not only market events take over the posts but extreme emotions and trading activity destroys the essence of this thread.
I have never in the last four years barred anyone from posting. Although people have abused me, short of as much manhandling as possible on cyberspace, I have always welcomed most of my critics and encouraged them to post until they get tired of their criticism and leave me alone.
Zain, you should realize that this is a thread, as I’ve explained to you before, where I talk about things that I never would at the dinner table as your mother won’t allow it. To train you and your two brothers like a professor father requires a skill where I have to maintain the direction of the thread and keep the education going at the same time, plus keep weaker hands like yours holding the stocks through turbulent times. This is a job I do and have done with the best of my ability over the last four years. This is the kind of work I would like to do continuously. I am not a migratory bird. IDEA is my home. I live in it and welcome anyone who takes IDEA as his home and posts as much as he/she wants, but keeping in mind that not everyone around is that skillful and people are reading us as professional and competent traders to get some kind of hand-holding help in turbulent times.
Most people don’t even have the ability to get out of stocks so fast and many an immature who does that will end up holding nothing in the end as market hits supports and roars back up. The sideways-moving market within supports is the worst kind of market. It kills many a trader. Go back to my posts of 1997/’98 when we were trading between 890 and 1000 SPZ and see in that period how much backing and filling was required by the market. Similar phenomenon is happening here between 1350 and 1527 – the range has widened, volatility has increased, but non-inflationary growth is still helping the US economy. The hold of the US economy is still greater on the world; their productivity is still increasing and stocks that had charged ahead on the base of earning momentum have been cut to size, like CSCO, TXN, INTEL, MSFT, LRCX. Tell me one person who could have thought that with MSFT at $60, CSCO at $55, TXN at $47 and INTEL at $41 the market would still be at 1436 – a very important support again just below 1444. APPL was cut down to size yesterday but market distribution could take that loss.
I’ve been trying to highlight discrepancies between DOT and IIX. Last DOT was at this level IIX was at 250; today, IIX is at +500 – both are internet indices. Why is IIX at 500 when it should be at 250, at similar levels as DOT’s? The reason being that, yes, there are issues like JNPR, GDSU, BRCD, BRCM, IDTI and ENE, which are reflective of the new economy and represent that economic core. The bears have been calling this a bear market since 1995. What kind of bear market is this where we have moved up 600 points from where we were last in 1997?!
For a good balance, what we need to do is to describe subtle changes within the market, comprehend that at this high level of consolidation we will have very high volatility and a wall of worry to climb whenever we’ve needed to climb. Although recently in a post, I made remarks contrary to this “wall of worry” thing and challenged the established opinion that in a market as broadened as this we might see that even lower volatility and low put-call ratio may not break the market. When I wrote that post we were at 1490 – we are at 1436 today. It looks like my judgement was wrong but I am testing it.
Same is the case in my post regarding oil. Today the new industry, like SUN Microsystems in SI valley are consuming equivalent amount of energy as any other major plant of old economy was consuming. That led to my thinking that maybe my view on energy losing importance due to new economic models is flawed. I read that report just yesterday, but at the same time, I read another report that by year 2004 the amount of possible oil discoveries may increase to 3 trillion barrels because of 4D graphics. The hit chances are becoming higher and higher, on the other hand, more and more gas is being used to produce power, so all these factors combined where we are getting information everyday, we need to judge it nicely, make a balanced viewpoint and present it on the thread for your education and for all the other posters.
It’s not about hitting the “ignore” button. I think everyone is a selfless and dedicated poster here, motivated by his/her own trading style, thinking and patterns. I, as a host, can only request one thing: Post as much as you like, but let’s inundate this thread with knowledge and reasons for our trading directions. Let’s not follow on how many number of posts we see, or how high we are on the Hot List, because to be high on the Hot list, I’ve seen in four years, is a recipe that there is some problem going on in the thread, that there is some foolish quarrel or argument in progress.
Today, IDEA would be on the Hot List, for the wrong reasons. See the banality. It should be on the Hot List for some great post we have here, but that has never been the case. We will be lost in the sea of anonymity if we become sensible. Take the hype out; the more anonymous you are the more potent you will be. The other day I received a post from David from SI that he has been kind enough to use my Danish referendum post on SI Talks. It was the first time in the last four years that I’ve received such a post. If I’ve written something good over that many years, then it really is belated recognition, that at least they recognise we existed. From challenging Barrons and “Dow a steal at 8000,” the IDEA thread is littered with original posts. We talked of productivity revolution and breakdown of the inflation/employment curve back in ’97 when these ideas were new. We supported them but we weren’t quoted at any time. Does recognition mean anything? Its more! I was dejected, not elated, because so far I had always though that SI never considers serious posters as fanciful enough to be written about on SI talks. This kind of contradictions we have to live through and learn day by day – lack of self-importance, necessity of opinion-forming and a coherent consistent pattern of posting.
I think everyone here is a very successful trader, but that’s not the point. With mistakes, I’ve learnt over the past four years that being defensive is the worst thing to do on a public thread. Secondly, to beat about your successes brings no laurels as most people around you in the down market are suffering and we are suffering likewise in our core portfolio. We can’t just have a trading account – a trading account is just 20% of the core. How can we crow about our success in 20% when 80% account is suffering from 12% correction if it’s a market comp marked portfolio. Now I’ve realized after going through many retracements and corrections that our short-term trading is only a tool to limit the damage to our core portfolio. It’s a hedging exercise and that can be executed to perfection only if one is nimble-footed, the chances of whipsaw is 80%. Last two days of action where market moved from 1419 to 1462 on cash interday would wipe out every possible long and short twice. I know this well, I’ve worked with the pits long and short and I know that nothing is given on a platter, and not many traders would work with a stop-loss of 10-point move on futures. Anyone who claims to do that, even if he is correct this time, would lose all his money when market after moving against his direction 10 points without triggering a loss will move 31 points like it did on Thursday and that would wipe out most people’s profits made out of few points. That is a fine balance one has to create on this thread. On one hand, need of our nimble-footedness and the other using short-term trading as a hedge for your core, and then creating techniques to get into oversold positions – that is where you make your killing, but 3-entry point method, one-third each time with each 15% drop.
I don’t want to pick up banal arguments with people; I want people to understand the philosophy of this thread, and as much respect as I have for all posters, I would love to see lesser posts, more content and more reasoning. If the need is there, there are a lot of sites where short-term sides can be posted. An IDEA OF THE DAY II can be established, but the classical IDEA should be left to what it does best – to hold hands in difficult times and enjoy profits in good times.
Zain, it was a pleasure reading your post. It’s a pleasure to read the posts of hundreds of posters who happen to be the finest traders SI would ever witness. I hope that this post is taken in the spirit and context in which it was written and more than anything else it is a father addressing his son, trying to educate him.
Life is just not about trading, its far more than that. I look back at four years on SI. With all my weaknesses, lack of comprehension and weaknesses, I have been accused in my early days of trying to prove myself as some kind of a market demigod although that was never the intent, then or now. With the benefit of hindsight, when I read my posts of the past, I could well see the reason. To prove one to be a master of timing is self-fulfilling. But it does not stand the test of consistency invariably its human nature that the probability of self-flagellation is always less than tendency of heaping oneself with self-praise. We all can be equally accused of such tendency. The art is to overcome and empower this weakness, that is the effort. No market call is big enough or good enough to make it hyped up, crying “Eureka!”
Basically, what’s most important is how much benefit we can provide to each other. How much money I make is the least of anyone’s concerns. I have not learnt this because I was so nice; evil that I am and negative that I was, I’ve learnt the truth from my own failures. I would rather have poverty in life rather than poverty in thought. I want this thread rich in content and that is the ultimate wealth and success, notwithstanding the fact Zain that you perfectly know that God has not been that unkind to me in turbulent markets.
In time, I have blunted my sharper ends, increased my grasp and understanding, and have certainly become a better person by yielding to others’ arguments and comprehending other people’s opinions. Nothing but consensus-building and then opinion forming posts can make you a better person and a better manager of funds. This is what I want you to try to acquire. I learnt my lessons the hard way but don’t want you to go through that.
With this post I will make no friends, nor lose any either. Perhaps, chances are that the whole post will be construed with different colours of interpretations and mass migration may leave this thread like a Siberian wasteland, but does that really matter, or has it every mattered before? The self-confidence that you get after going through these training periods inherently makes you take a certain stand fully knowing that the result would not diminish your ability to analyze. You can be small but think big. Don’t be intimidated. If you’re working hard for a self-aggrandizement, then lack of attention will kill you. It would have killed this thread if I would not have this purposeful dialogue with myself all along. In the last four years, hundreds of times this thread was left deserted with just me to me. In future too, the test is simple. If the purpose is sharing knowledge and helping others, post or no post, you will continue hard work. That summarizes the reason I have been so consistent with this thread and I call this thread my home, and protect its integrity and honesty and its absolutely non-commercial approach zealously.
Zain, my parting advice would be: Challenge established positions and test them all the time with history – recent and past. You will soon realize the track you are on; the further back you look, further forward you will be able to read.
Love and regards,
Iqbal
PS: Ike had to dictate this post to me before he rushed out on his meeting as he lost his reply to Zain when he got disconnected by the ISP. I trust I have the gist right. Please overlook any errors in technical level. This was not edited as usual. Regards. Samira |
