It was the late 90’s and I was fresh out of college, hard at work (and play), and excited to make a buck or two in the tech fervor. I remember coming home from a trip to Costa Rica to celebrate Y2K, and overhearing my parents talk about their Munder Tech Fund and how much it was up. My mom said something to the effect of, “It’s just amazing! We must be up 50-60 percent in a matter of months.” And my dad followed, ” Yeah, it’s pretty awesome.” I was still [very] green, but wanted to sound cool, so I gave them a few crappy stock picks and told them to enjoy it while it lasts. I’d heard my brother wax conservative on the market a couple months prior, and being that he had just received his JD/MBA, and was sharp as a knife, it felt like the right thing to say. I didn’t know what it meant at the time, but the world would soon find out. From 1999 to 2001 I honed my skills trading speculative tech names like Brightpoint, Inc. (CELL), Texas Biotechnology, and Cybercare. Yes, there we’re ups, there we’re downs, and there were lumps. But, all the while I became more interested and fascinated by the markets, weaving my way from a passive investor to an interested investor (continue reading for more color). In early 2001, I remember staying up all night exploring mutual funds one by one, attempting to land the best of the best. And, even though this wasn’t going to get me rich, I broadened my investment terminology and learned a lot about asset allocation in the process.
The markets were structurally weak when 9-11 arrived, so a 10-15 percent flush came quickly upon the markets reopening. I remember bracing for that moment, not realizing how fortunate I was to be early (i.e. young and dumb) in my investment career. I didn’t realize that the tumultuous period that followed combined with my undying passion to learn anything and everything about investing and surviving the markets, would benefit me so greatly down the road. In 2002, I cut ties with my broker, understanding (and accepting) that accelerated learning would come through personal experience. I became obsessed with saving, investing, and trimming debt. This led to a few sleepless nights developing an extensive net worth and money management tool, which, to this day, I update nightly and log monthly for historical and charting purposes.
From 2003-2006, I shored up my investment knowledge while riding the markets higher with a diversified 401K and a more involved approach with my Traditional and Roth IRAs and non-retirement brokerage accounts. I began trading popular index funds like the SPDR S&P 500 (SPY), Powershares QQQ Trust (QQQ), and SPDR Dow Jones Industrial Average (DIA). And I watched and read everything I could get my hands on. CNBC, Bloomberg, Minyanville, MSN Money, and TheStreet.com became daily staples. As my investment activity increased, I added a “traders diary” tab to my money management tool. If nothing else, I wanted to be accountable for my actions. My parents always said I was stubborn (smile), yet honest, persistent, and hard working. Better yet, I was passionate about markets and investing. I knew there was a lot to learn, but I thrived off the light bulb effect. I was involved.
Throughout 2005 and 2006, I read a lot of Todd Harrison, Doug Kass, and Bill Fleckenstein to name a few. They all warned of something larger on the horizon, and having bought and sold a home, and bought again, I was keen to the burgeoning housing bubble. I quickly took to their words and ran numbers in my head, over and over. I remember telling my family and some friends that it did not add up nor make sense to me. And, in general, when things don’t make sense, then, well, they generally don’t make sense! And they didn’t. It was only a matter of time before the collection of bloated over-priced real estate assets and derivatives would catch up with global investment banks… and boy did they ever (see: Bear Stearns and Lehman Brothers).
In early 2006, I remember tuning into CNBC and Bloomberg listening to varying fund managers find new ways to wax their arrogance on TV. I was disgusted at times, but always left wanting more. To be honest, I was probably a bit envious, because they had gobs of money and media gigs to support and validate something that day in and day out I was passionate about — and, I felt I belonged. So I saved and invested more. I followed existing approaches and developed my own, all the while understanding that accountability would lead the way forward. I grounded myself in technical analysis, options, and currency and commodity correlations. And I took to macroeconomics and socionomics (thanks to Kevin Depew). Unbeknownst to me, I was transitioning from an involved investor to an active investor.
In 2007, CNBC broadcast the Dow 14,000 countdown. At the time, I knew, but didn’t know, that the housing fervor and market bubblemania had hit the mainstream in full effect… and the meltdown was nearing. Nobody knew exactly what it would look or feel like, but in hindsight, I would say it was similar to Todd Harrison’s penned denial-migration-panic continuum on steroids! From late 2007 through 2009, the market was gripped with fear and volatility. Day after day. Solid mentors like Doug, Todd, and Bill are the reason I made it through this period mostly unscathed. Yeah, mostly…albeit for a few days I dawned the “eye whites” or flashed the “pearly whites” on stocks like Bank of America Corp. (BAC) or double funds like Proshares Ultra S&P 500 (SSO) and UltraShort S&P 500 (SDS).
But, I choose to revel in the tough times. Moments where the lights go dark. It was, and is, during these times that I bear the burden of my passion, accelerating my understanding of trading and psychology. And, more importantly, understanding of myself. Moments like these are why I incessantly talk about having a plan and working within your risk management parameters. Stops and limits define a true pro, while allowing for a few extra zzz’s at night.
With investing, we all have a story to tell and a journey to carry on, whether we are passive, interested, involved, or active investors. With an ever changing investment landscape, there is always more to learn and adapt to; change or be changed. One size doesn’t fit all, so find your groove. Know yourself and set realistic goals. And enjoy the journey. It’s your journey.
Previously published as a blog by Minyanville.
No positions in any of the securities mentioned at time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.