DAYTRADING: The Highs and the Woes Jan, 4, 2003
Getting to doc Kronkite this morning was difficult. It was blizzarding. But stout fellow that I am, I sallied forth. The doc expects all appointments to be kept; especially mine, because the doc is not pleased with my progress.
But the devastatingly gorgeous Miss Tushbumper was pleased to see me. I received her hug and a wet smacker full on my quivering-like-Jello lips. Bliss was mine. And with this I was ready for the doc.
Easing myself onto his lumpy leather couch the doc began.
“I am not pleased with your progress,” he said.
I ignored this, thinking still about Miss Tushbumper.
“Are you listening to me?” the doc said, clearly miffed.
“Mmm. What?”
“I’ve been reading your columns. You hide behind humor. You have a severe and continuing psychological problem. You don’t impart helpful trading information to your readers.”
“I don’t?”
“You don’t. I received as letter from a fellow who calls himself Plugger. What kind of name is Plugger? In short, he asked that I prevail upon you to jettison all humor and get on with serious trading talk.”
“Gee doc, I can’t help it. I think maybe it’s a genetic thing.”
“Rubbish,” he snapped. “It’s a clear indication of laziness and a classic case of self-indulgence.”
“Ok doc, I’ll try to do better. Say, did you hear the one about the minister, the priest and the rabbi who were daytrading?”
“There you go again. I think you should listen to the experts on CNBC and pattern your patter on their presentations.”
“You jest!” I said.
“I never jest,” he retorted, “I’m a specialist you know.”
“I know doc.”
“Begin,” he commanded.
“Well the priest says to the rabbi, rabbi, have I got a stock for you.”
“Again with the jokes. Must we do the ink-blot test again? I thought not. Begin a serious discussion for your trading readers.”
“Ok doc. First, you have to have charts. Without charts you should not trade.”
“Mmm,” he said, “and why is that?”
“Because a chart, which is nothing more than a picture of a stocks’ movement, can tell you at a glance how the stock is doing. If the price is going down over time it’s a given that more selling is occurring than buying. Avoid it.”
“But Mendelbaum the fund manager tells me to buy stocks that are going down. He say’s they’re cheaper. Buy ‘em low, then sell ‘em high he says.”
“Wrong.”
The doc harrumphed, said, “Continue.”
“Always buy the company’s stock, never the company. They are two very different animals.”
“But Mendelbaum tells me to buy the company. He sends me research reports, annual reports, analyst reports. He’s very conscientious.”
“Forget Mendelbaum, throw away his reports. They cannot help you trade profitably.”
“Gee, I love to read annual reports. Especially the letter from the president or CEO of the company. They tell me how good the company is, how good their prospects are. And I love the glossy pictures.”
Ignoring this I said, “Never fall in love with a stock. A stock is merely a vehicle. Swap your capital for a stock for the length of time that you’re comfortable with: perhaps an hour, perhaps a day, perhaps several weeks or months. When you sell the stock, hopefully for more than your paid for it, the trade is done, your gamble is over.”
“Gamble?” asked the doc, “You call buying stocks a gamble?”
“Indeed. It is a gamble. The market is a big casino. And most of the gamblers lose.”
“You’re crazy!” he screamed.
“Gee doc, I didn’t think you fellows used that word anymore.”
“We don’t. I don’t. But for you, it fits. You’re crazy.”
“So the rabbi says it’s Home Depot, right?”
“Funny you should mention Home Depot. Mendelbaum put me into it at $30, sent me their annual report. Terrific report. I love the company. Buy all my paint there.”
“Home Depot warned yesterday doc,” I said.
“Warned? What warned, where warned?” he cried.
“They said that earnings would be lower doc. The stock was down 14% yesterday to 21.38.”
“But the annual report said they were opening new stores, adding new products.”
“Sorry doc.”
“Mmm. I’ll buy more, average down. It’ll come back. Mendelbaum says they always come back.”
“Mmm. Maybe so,” I said.
“You don’t think so?” he asked.
“I don’t know doc. But have you ever tried averaging up?”
“Mendelbaum says never to do that. And Mendelbaum is a specialist you know. He has 500 million in his fund, 500 million entrusted to him.”
“How’s he doing doc?” I asked, knowing how he was likely doing.
“Down a little last couple of years.”
“How much is a little?” I asked.
“Sixty-seven percent. But Mendelbaum assures me that he’ll make it all back this year and a lot more.”
“Mmm. So the minister says to the rabbi, ‘You think I should load up on it? And the rabbi says…”
Doc interrupted me by whipping a five pound paperweight. Such an arm! I ducked as it was heading for my head like a Randy Johnson 98 mph fastball. It made a rather large hole in the doc’s wall.
“Out, out!” he hollered.
“So the rabbi says, ‘I’m in already for 5,000 shares at 3.10’” I said as I scrambled for the door and into the arms of the concerned but oh so curvaceous Miss Tushbumper.
Lee Kramer
Copyright 1/4/03, LSK Ltd. |
