I have to admit, I really have little to no respect for scalpers. I view scalpers as the scavengers of society, those animals that must feed off the remains of others or else, look for the uneaten pieces of food that others have left behind. They are the ones who would readily accept sloppy leftovers, cheat on their wives and husbands with their wives and husbands' best friends, and never contribute anything meaningful to society except to look for opportunities into benefiting from someone else's misfortune.
There is a psychology to scalpers- which is dog-eat-dog world which I never took to heart. Why would I sell 100K shares of a stock I hoped would fail then buy it back 2 cents later?
I suppose at heart, I prefer to watch those equities when they fail, I never short them in options for obvious reasons. In options, it is much easier to be bullish on particular stocks. Buying and selling puts were for losers. People who accumulated a lot of puts were basically people who decided that a stock was at a long term high, and then short them. They were short term thinkers, these people who believed 2008 should be a recurring year every year because they liked it when companies failed.
Scalpers were men who typically didn't care now know much about the stock they were shorting or buying at all, they only cared about the 1 cent. They were Wall Street's hangers-on and leeches; but thanks to algorithms, they were now replaced by automated programmes that would buy at the bid and sell at the ask.
And ironically scalpers' stories were all the same: They eventually burnt out; blew through their accounts, were addicted to meth and adderall, and decided to either go traveling around the world on a boat or go into real estate.
What is nice about options, is that one has options. Like a potential lover, you choose which ones catch your mind's eye, and then you strategically think of a way to seduce them. When they're pulling back, or at a dip, is when you go in for the kill. Or else, you make love to them while they're in consolidation mode, and then analyse them for short term or long term. Is this who I want to be in a short term or long term relationship with? The numbers by themselves, are for fools. The potential for a beautiful long-term relationship was always in the fundamentals and the technical charts of a particular equity.
I fell in love with AAPL because it made beautiful, efficient, machines that were pleasing both to the eye and to the wider demographic. I fell in love with CMG & WFMI because people wanted to be healthy and eat well; I fell in love with TIF because young men will always want to woo women with beautiful shiny things. With options, you never really had to buy the stock, you simply rode on its bullish trend, then exited, simply without putting in much risk aside from your premium. That was the beauty of long calls on options. You saw a talented person you could fall in love with, made a bet that this person would be successful, then simply banked on it before the expiry of your options contract. You never lost more than what you initially put in as your downpayment, but the rewards of that relationship were far more bountiful, if you set your eyes on someone whom you found worthy of your attentions.
You weren't actively looking for failures, which could be costly in options, and your losses unlimited, you were looking for successes.
Men who were bulls had entrepreneurial spirit. Men who were bears were looking for a quick buck.
In options, buying long puts were for losers who were looking for losers. But why focus on the negative? We were in a bull market in this year 2011. Why not simply capitalise on it?
Tuesday, February 15, 2011
Friday, February 4, 2011
The Emperor's New Clothes
There are two aphorisms one should consider when working in finance:
"Money is the root of all evil."
"A lack of money is the root of all evil."
Perhaps these seemingly opposing views are really complementary, such as Epictetus ' virtue in self-discipline and acceptance in living simply, not being ruled by one's lack of control of events; and Epicurius' discovery of pleasure in the simple things in life and the fulfillment of one's duty. The definitions of stoicism and epicureanism have become perverted throughout the ages to refer to ideals that were the polar opposites, but at their inception, their views of the world were altogether rather similar.
So now we have come to a point in our history which represents the changing of the guard, when we must redefine ideologies once again.
In our society, the greatest virtue is to be "rich"; to amass great wealth, to have the kind of freedom and power which money can only bring. We worship not deities, nor ourselves, any longer, but in money. In Money We Trust. Wall Street is our religion, it is the powerful entity in which we bow down, and are envious of its all-encompassing power. No one cared about nobility any longer or the sacrifices made by the creative force in our society. Money was the one thing people would always admire.
Since we worship money, we must then examine how money is created, and how the illusion of money creates more money.
Let's take for example, Enron, a company that for decades defrauded their investors by fabricating positive gains in their accounting department. People believed the hype of Enron to the degree that 65 billion was lost in a company that was quietly losing money year after year, while their company executives happily spent their investors' money on company jets and posh offices. This house of cards came down when it was revealed that indeed, Enron had defrauded the best on Wall Street; 65 billion dollars of investor money, lost.
But we have not yet learned our lesson. The second ponzi scheme infamous in the media, Madoff's evil, ingenius and brilliant scheme came by the way of 60 more billion dollars; this time using his pristine Wall Street reputation to defraud the clientele of the elite upper class with JP Morgan as his ally. Perhaps in prison, where Madoff is now, he might be known as Robin Hood, who stole from the rich, a kind of hero to thugs and murderers who believe that the middle and upper classes in America should be made to suffer the fate of con-artists. Still, our lesson was not over yet.
And then, came Facebook, evaluated recently at 40 billion and climbing. The problem with social media was that, of course, it never created any revenue. Facebook was a liability to most investors; it sucked up funds, but never made a dime. Then Bill Gates, the evil, brilliant genius of all time, came to publicly bid Facebook for 6 billion dollars. This shocked the venture capitalist world. No one wanted to buy Facebook for less than 5 million by previous companies, but here, Mr. Gates set a precedent by publicising his intent to purchase the company for 6 billion, a feat in which he probably never intended to do in the first place, but as Microsoft was already an investor in the company, wanted to raise its value in the public eye. In the 4 years it has done so, Facebook is now theoretically worth 8 times that initial bid.
Was Facebook worth 6-40 billion, when it had negative cash flow every year? So our dilemma continues. However, Gates was able to elevate Facebook from being perceived as a liability to a company that was now, an asset. He proselytized the Silicon Valley masses into donating their flesh and blood into the religion of the Church of Facebook. If he wanted the company for 6 billion, certainly, it was worth more than that now, investors were saying, impressed by the imaginary messiah clothes that Mark Zuckerberg wore. Indeed, it was the revenge of the nerds. Somehow, they were able to fool all the Silicon Valley venture capitalists into thinking this company with negative cash flow was somehow worth at least 6 billion.
But let us continue. Now Hollywood, then picked up on this ponzi scheme, except they idolised it within the context of a Don Quijote movie, full of clichés, deifying Zuckerberg into some sort of cool Geek status in which his ordinary self is immortalised as a kind of archetype of the New American Hero. Here was this likable nerd, socially inept and dorky, but cool, who steals an idea, makes a match.com site for Harvard students and becomes a billionaire. And he didn't even have to finish college.
But let's go back to the facts. Mark Zuckerberg might not be that cool guy in the movie; perhaps in real life, he was not a lovable nerd, but perhaps he sounded more like a conservative right bigot who had imbibed the politicial ideologies of half-informed posts on twitter, and sounded like illiterate college dropout he was. Who really knew?
The fact was, Zuckerberg, was smiling, perhaps with a contemptuous, comfortable smug on his geeky handsome visage, because he had pulled the biggest heist of all; more so than Enron, and Madoff, because Facebook was only profitable as long as investors poured in their money on a negative revenue company (especially with the help of Goldman Sachs, whose own executives wouldn't touch the Facebook stock but tried to push it onto all their European clients) but because in the process, the dorky Zuckerberg came off as some kind of cool hero for the population to be enamoured of.
The dorks shall inherit the earth, indeed.
"Money is the root of all evil."
"A lack of money is the root of all evil."
Perhaps these seemingly opposing views are really complementary, such as Epictetus ' virtue in self-discipline and acceptance in living simply, not being ruled by one's lack of control of events; and Epicurius' discovery of pleasure in the simple things in life and the fulfillment of one's duty. The definitions of stoicism and epicureanism have become perverted throughout the ages to refer to ideals that were the polar opposites, but at their inception, their views of the world were altogether rather similar.
So now we have come to a point in our history which represents the changing of the guard, when we must redefine ideologies once again.
In our society, the greatest virtue is to be "rich"; to amass great wealth, to have the kind of freedom and power which money can only bring. We worship not deities, nor ourselves, any longer, but in money. In Money We Trust. Wall Street is our religion, it is the powerful entity in which we bow down, and are envious of its all-encompassing power. No one cared about nobility any longer or the sacrifices made by the creative force in our society. Money was the one thing people would always admire.
Since we worship money, we must then examine how money is created, and how the illusion of money creates more money.
Let's take for example, Enron, a company that for decades defrauded their investors by fabricating positive gains in their accounting department. People believed the hype of Enron to the degree that 65 billion was lost in a company that was quietly losing money year after year, while their company executives happily spent their investors' money on company jets and posh offices. This house of cards came down when it was revealed that indeed, Enron had defrauded the best on Wall Street; 65 billion dollars of investor money, lost.
But we have not yet learned our lesson. The second ponzi scheme infamous in the media, Madoff's evil, ingenius and brilliant scheme came by the way of 60 more billion dollars; this time using his pristine Wall Street reputation to defraud the clientele of the elite upper class with JP Morgan as his ally. Perhaps in prison, where Madoff is now, he might be known as Robin Hood, who stole from the rich, a kind of hero to thugs and murderers who believe that the middle and upper classes in America should be made to suffer the fate of con-artists. Still, our lesson was not over yet.
And then, came Facebook, evaluated recently at 40 billion and climbing. The problem with social media was that, of course, it never created any revenue. Facebook was a liability to most investors; it sucked up funds, but never made a dime. Then Bill Gates, the evil, brilliant genius of all time, came to publicly bid Facebook for 6 billion dollars. This shocked the venture capitalist world. No one wanted to buy Facebook for less than 5 million by previous companies, but here, Mr. Gates set a precedent by publicising his intent to purchase the company for 6 billion, a feat in which he probably never intended to do in the first place, but as Microsoft was already an investor in the company, wanted to raise its value in the public eye. In the 4 years it has done so, Facebook is now theoretically worth 8 times that initial bid.
Was Facebook worth 6-40 billion, when it had negative cash flow every year? So our dilemma continues. However, Gates was able to elevate Facebook from being perceived as a liability to a company that was now, an asset. He proselytized the Silicon Valley masses into donating their flesh and blood into the religion of the Church of Facebook. If he wanted the company for 6 billion, certainly, it was worth more than that now, investors were saying, impressed by the imaginary messiah clothes that Mark Zuckerberg wore. Indeed, it was the revenge of the nerds. Somehow, they were able to fool all the Silicon Valley venture capitalists into thinking this company with negative cash flow was somehow worth at least 6 billion.
But let us continue. Now Hollywood, then picked up on this ponzi scheme, except they idolised it within the context of a Don Quijote movie, full of clichés, deifying Zuckerberg into some sort of cool Geek status in which his ordinary self is immortalised as a kind of archetype of the New American Hero. Here was this likable nerd, socially inept and dorky, but cool, who steals an idea, makes a match.com site for Harvard students and becomes a billionaire. And he didn't even have to finish college.
But let's go back to the facts. Mark Zuckerberg might not be that cool guy in the movie; perhaps in real life, he was not a lovable nerd, but perhaps he sounded more like a conservative right bigot who had imbibed the politicial ideologies of half-informed posts on twitter, and sounded like illiterate college dropout he was. Who really knew?
The fact was, Zuckerberg, was smiling, perhaps with a contemptuous, comfortable smug on his geeky handsome visage, because he had pulled the biggest heist of all; more so than Enron, and Madoff, because Facebook was only profitable as long as investors poured in their money on a negative revenue company (especially with the help of Goldman Sachs, whose own executives wouldn't touch the Facebook stock but tried to push it onto all their European clients) but because in the process, the dorky Zuckerberg came off as some kind of cool hero for the population to be enamoured of.
The dorks shall inherit the earth, indeed.
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