Saturday, August 2, 2008

The Weekend Trader (Saturday Edition)

A few thoughts come to mind on a HOT Saturday morning, triggered in part by traderboy's heartfelt comment in the last post.

During a summer week in 2007, I had an atrocious two-day period. I don't remember the exact dates, but vividly recall it was a Monday and Tuesday after a weekend during which I had been shopping for a car to replace my 2000 Tundra pickup. Interestingly, the two days were not too different from this year's early July blunder in terms of magnitude. Now for the last twenty years, my car-buying strategy has consisted of buying clean vehicles that are about three years old with about 50K miles on them -- as this is often when the warranty expires and the previous owners trade them in. I've found it to be a great niche market where I can get great value (heck, I'm a trader).

Anyway, I had been looking for a particular model which would likely become my main mode of transportation for the next ten years, and I wanted to get both a comfortable car and value. The car I'd selected was a BMW 3-Series E46 which had been in production from 1998-2005, and it was now a matter of finding one that had all-wheel drive and was in decent shape. And believe me, that model isn't easy to find as it's one of the most popular and highest-rated models ever produced by any firm. And during that weekend, I'd looked at a couple that didn't quite fit the bill. BUT -- and this is key in terms of a misstep -- I was feeling good about ultimately making the purchase as the year was going well, life was good, and trading had been consistent at the time.

Then Monday & Tuesday "happened" which seemed to come out of nowhere. Looking back, I know I fell into the "Gee, if I can have a great Monday, I can pay for it in one day" trap. Then Wednesday came and I found the car I wanted listed on the Internet -- a black 2003 325xi with about 46K miles in very good condition at an acceptable price. The problem was that given the last two days, I had a huge pit in my stomach and felt I no longer deserved it. And even though it was a used vehicle and the net purchase cost after my trade wasn't that bad (the Tundra held its value well), it was still a significant purchase in my mind. Yet I was continually bothered by the events of the previous two days and wondered whether I really deserved any car with the letters "B-M-W" in it, no matter how old.

Frankly, as I drove the 90 miles to look at the car, I was actually hoping I wouldn't like it. Then when I saw the car and test drove it, I thought ... "Damn, this is the right one". The internal struggle was enormous. I then called my wife and told her I really liked it but wasn't certain about taking the leap. And while she wasn't fully aware of the extent of the prior two days, she knew me well enough to know it was a tough couple of days for me. Yet when I asked for her advice, she said "Do it. You work hard enough and deserve it." Those comments immediately put me at ease, I felt a burden lifted, and I made the leap and completed the transaction over the next hour.

Yet, before I made the purchase, I had to translate what my wife told me from "you deserve it" to "you don't deserve it", because I didn't. We rarely deserve anything we get. Yet I bought it anyway on the leap of faith that it was still OK to treat myself to something that I would enjoy. On the way back home, I named my car "Grace" because she wasn't deserved, yet I was allowed to have her anyway. And yes, I love the car.

Grace has some years on her and if you look closely, you'll see several nicks, scratches, and other imperfections ... just like her driver :-).

And I had no clue that the next day would be the day when my Bamboo Tree would finally break the ground's surface and begin its climb. Through all the years of toil and frustration, I'd frankly forgotten I'd ever planted the seed.


Willtamtell said...

Truly a great story of patience, frugality, and humility. And yes, you deserve to be called humble.
On an other note, our wife's know us men I think better than we do ourselves.


traderboy said...

The two rough trading days you spoke about prior to making the BMW purchase remind me of the “fur coat” trade mentioned in the stock market classic book, “Reminiscence of a Stock Operator” by Edwin Levere. The fur coat trade basically was a trade in which a floor trader put on at the end of the day where the profits would go towards the purchase of a fur coat for his wife. This floor trader had an excellent trading day & week up to this point so he figured he’d put on just one last day to cover the expense of the fur coat he was planning on buying for his wife. As you guys have probably already guessed, this fur coat trade was put on for the wrong reasons & ended up costing this trader all of his daily & weekly profits.

As you’ve already mentioned, once one has a sound trading strategy/approach the mental aspect consists of 90+% of the rest. This “fur coat” trade fits right in there w/ the mental side. BTW, when I was a professional trader I remember my brother’s wife (who was trading w/ me at the time) telling him when he was walking out the door (I picked him up so we could ride together on our way to the office) to make lots of money. When I heard this I subtly suggested that she replace the make lots of money comment w/ trade well. I’m not sure if she got the point but the key was to take one’s thoughts off of making money & to just focus on the set-up, money management, etc. Also, I remember on the days that I was blessed w/ making large amounts of money that I tried to do something similar to what Don does & get my mind in a trading from behind mentality so as to not get overconfident/cocky for fear of getting sloppy & giving it all back & then some.

I’m thankful to hear you got the car & the tide changed for the better w/ regards to your trading performance soon after. BTW, I love the name for your car. I always told myself, if I ever had a daughter (I have a young son) I’d consider naming her Grace.

Hope you enjoy the rest of your weekend,

Don Miller said...

Yes. I believe Lou Borsellino employs a related concept as he tries to buy something nice AFTER he's a bad day.

btw, for me, it's why I choose to trade without interaction with anyone during the day, even traders who may trade similarly. I remember when I was doing public columns or teaching live years ago, I felt pressure to have to live up to something, and that definitely impacted my trading to the downside. Now, it's just me isolated against the market with the only pressure coming from myself.

That's not to say there's anything wrong with a business plan that consists of writing or teaching if it's truly high quality and based on personal experience -- there's some great stuff out there amidst the abundance of chameleons -- it's just a different plan and for me, there are too many challenges remaining in my personal trading for me to ignore pursuing them.


Trader Kevin said...

On the way back home, I named my car "Grace" because she wasn't deserved, yet I was allowed to have her anyway.

Our pastor had a great analogy today regarding grace.

You get pulled over for speeding and get a ticket. That's justice. You broke the law, you deserved to be punished, and you were punished.

You get pulled over for speeding and the cop lets you off with a warning. That's mercy. It's not fair, because you deserved the ticket and fine, but the price went unpaid.

You get pulled over for speeding, the cop writes a ticket, then pays the fine himself. That's grace. You deserved a ticket and you deserved the fine, but someone else paid the price.

(I noticed that one of your favorite books is The Purpose Driven Life. Good stuff.)