... for old times sake, Mike ... and how are you?
... if anyone is interested, an excerpt from an e-mail to friends tonight ...
... re Jesse Livermore ...
Livermore says, “It took me five years to learn to play the game intelligently enough to make big money when I was right.” ... also, "I can’t tell you how it came to take me so many years to learn that instead of placing piking bets on what the next few quotations were going to be, my game was to anticipate what was going to happen in a big way.”
Exactly, Jesse and thank you.
When I simply 'lunge' or 'guess' as I did when I was long dollar futures a year ago, or short ND futures not long ago, I invariably lose money. But when I have done the proper and thorough research and gradually become convinced that I am right, so that I can taste it and feel it in my mind ... and I enter a position with strength and commitment, I make a lot of money ... almost always. Abiomed is the only example I can think of that has not worked that way ... and it taught me about limiting losses which I badly needed to learn. Good lessons are expensive. Abiomed was part of my tuition in becoming a successful trader/investor/speculator.
I am not totally there yet.
But when I am sure I am going to be right and that I will make a lot of money ... and I haven't been sipping scotch for two hours - <g> ... I am right and make a lot of money.
Sun Microsystems - I studied investing almost constantly from August of 1996 to May, 1997 before I bought my first stock. I knew what I wanted to do, and when a friend gently poked me out of the nest, I started to fly. Every penny (excluding our house) that Jan and I had went into Sun. It was a lot of money, and I do not recommend what I did to others. 18 months later in October, 1998, we were even money and frustrated. But I believed I was right ... I knew I was right. Seventeen months later, In January/February, 2000 - just before the markets topped - Sun was up 650% - and we were up about 650%.
January/February, 2000 - I got uneasy and nervous then. There was craziness in the market, but I did not see it. All I could think was that we had made all this money, and technology stocks were do for a rest ... I was not going to lose that money ... I sold everything. I was not bearish yet - I did not foresee what could/would happen.
Summer of 2000 - Another friend introduced me to trading futures that spring, and in June I opened an account with Jack Carl (now Man Financial) in Chicago. I gradually became convinced that stocks were in trouble, and with the beginnings of an understanding of what the position of the 'commercial traders' could mean, I started buying S&P 500 options, betting that the markets would continue to decline. Based on my accumulative readings, I became convinced in my own mind that stocks were in deep trouble. I knew they were in trouble. So I bought lots of S&P puts, betting the markets would continue down. And I was right. I knew I was right.
When I told a close friend that I had paid $24,000 for just one S&P option, he said, "You know Ken, you could lose all that money." I knew that. But I just knew the markets were going to continue going down. They did.
Just after 911, a broker friend told me about Invision, Inc a small industry leader in baggage x-ray equipment for airports. I checked that out. How could I lose money there, I thought. It had already moved from 3 to 9 before I bought, and I ended up averaging into a big position at 12. Nine weeks later, I sold it all at 34. I mean, why be a pig? $102,000 in profits in 9 weeks ... that still makes me smile. A close friend also made a killing on that also. I was right ... or more correctly, my broker friend was right.
So what do I believe strongly now? A few things.
The thing I am most sure of is that the value of the U.S. Dollar is going to continue to fall in 2003, and probably beyond that. I am heavily short dollar futures. I think it is like buying Sun Microsystems in May of 1997.
We are also in the early stages of a bull market in gold. I am heavily long gold futures. And I own a large position in the world's largest gold mining firm, Newmont Mining. I am not as confident in gold going up as I am in the dollar going down. But, I believe that gold and the dollar are joined at the hip. As the dollar declines, gold will go up.
I am also strongly bullish on Valence Technology. I am convinced that the new management, mostly from Dell Computer, knows exactly what they are doing and that is why they left Dell to go to Valence. I am heavily long Valence.
Lastly, I do not believe this rally in equities will last long term. If you are a short term trader, you can make money in it. The U.S. economy is headed for trouble, and we remain in a long term bear market. Be careful. Jan and I are 50% cash in short-term U.S, Treasuries.
Of course, everyone has opinions and I could be completely wrong.
But you know what ... that is not how I am playing it.
Why ... simple ... I am right! ... <g>
... and an important last thought ... ALWAYS USE STOPS. |
