Wednesday, May 10, 2006

May 2006 Journal Musings

I picked up Tool's new record "10,000 Days" this weekend and I've had it playing non-stop since. While there isn't as much philosophically interesting lyrical material to comtemplate as their previous record "Lateralus", there is an amazing track towards the end of the disc titled, "Right In Two." The chilling story that unfolds over almost a full nine minutes is told from the perspective of angels who are puzzled and amused as they watch the monkeys that they blessed with free will, logic, and opposable thumbs use these gifts to kill each other in a battle over resources, all while there is plenty to go around. "Monkey killing monkey, killing monkey, over pieces of the ground."

Not a lot has changed over all of history. Bloodshed over resources is still common to this day. Meanwhile, guys like me sit in our ivory towers while manuevering for more pieces of the pie. When is enough enough? Bud Fox posed this question to Gordon Gekko in the "Wallstreet" movie. Gekko is correct that it isn't a question of enough, it is a matter of monetizing the wastefulness and carelessness that inevitably results from humans being humans. Laws are levied, wars are fought, and lines are drawn for the rights to the spoils of any given group of people.

I too am puzzled and amused by this seemingly fundamental human character trait because it is both the holy grail and golden goose. Occasionaly I concieve some darwinian experiment that I can program into the computer and tweak, like Maynard's angels have done. What else can be their motivation? Are they not like me, selfishly curious? As for my more wasteful and not so curious fellow human beings, well... perhaps they might be interested in trying their luck at a game of chance. I'd be glad to arrange something ;)

I got caught in my first nasty gap down for 2006 this morning. On April 17 I bought a small "probe" position in AVII @ $6.73. AVII opened about 25% down this morning. I got out right at the open @ $5.22 for a 23% loss realized on a little more than 1/30'th of my buying power. Despite this loss in AVII and moderate pullbacks in a few of my other positions over the past few days, my account is up 61% overall for 2006 (no deposits or withdrawals). I've got 10 long positions on right now, some of them I've had for about 6 months. It's nice to think that a few of my big winners are half way to being long-term capital gains. Those who are quick to take a loss, but not so quick to take a profit are probably enjoying similar performance this year.

I had a really interesting conversation with my friend Jared earlier this week. I should begin by telling you that having Jared around is like having my own "market wizard" to talk to. The other day, he said that when a stock is late in an extreme move, most of the people who are getting into it are making a poor risk/reward decision and if you own that stock it is important to get some of your shares into their hands because their buying is incorrect. While this goes against pure "trend following," I believe Jared is absolutely on the money here. My response to his statement was something like this, "Well, most people aren't going to hold for more than one leg of a move either, so there is an exploitable niche managing that risk too." Pretty obvious I'm more in the trend-following camp than Jared is even though we came from a similar background. Regardless of the differences in our outlooks, we both agree that the psychological component of trading is the most important.


At 3:30 PM, Anonymous Eric said...

Don't worry too much about it - chimps encounter about 90 times more violence during their life compared to humans. I think we (we, being the humans reading this - not your chimps!) are moving in the right direction.

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