Feed Stale Bread To The Black Swans

Dinosaur Trader is a stock trader. He writes about the daytrading lifestyle, parenthood, marriagehood and the often combustible mixture of the three. He created the stock blogosphere in 2007.

The other night I was sharing a drink with a friend. Two older women sat next to us at the bar and in a few moments, we struck up a conversation. They were both mothers and I guess, because they were older, they felt obliged to share some of the wisdom they had acquired about parenting.

I have a bad habit that I work to control: not listening fully. So when one of the women began to talk about her son out surfing in the winter waves and how this made her worry, I was listening less and thinking about my response more. What I wanted to tell her was that she should worry. I surf through the winter as well, and if you’re going to die surfing, that’s when it’s going to happen.

What I ended up telling her was that she should worry less. If there’s one lesson I’ve learned in life it’s that we don’t know what’s going to get us, our family our friends in the end.

We’re mostly swimming in uncertainty even if certain things – our shiny new iPads, our cars or our houses – make us feel rooted in something real. You don’t need an earthquake, tsunami or nuclear meltdown to tell you that, but they’re useful reminders.

Yesterday, Judy, my wife, told me about a little girl that she used to have in her yoga class. A healthy kid. Her mother took her to the doctor for a routine checkup. The doctor heard a little murmur in the kid’s heart, told her to make an appointment with a cardiologist. Not to worry.

The following week they took her to the cardiologist. The day after the appointment, she was having open-heart surgery. A 4 year old! A few months later, when she was fully recovered and on vacation, this little kid got attacked by a Man-O-War jellyfish and nearly died again.

Then, last week, that same family moved into their new house in Fukushima Japan.

Okay, kidding about that last bit… maybe that’s not funny. No, I understand that it’s not funny at all…  It’s just that this post was getting too serious too fast.

Anyway, back to the bar and the women have left. My friend and I are discussing the movie, “Big Fish”   and we’re debating the meaning of the ending. I like his analysis.  He tells me that the father cannot face his own death. To help him cope, he needs his son to make up a story, to shield him from reality until the very end. The son realizes that in the face of precariousness, fiction can be a comforting thing.

A story may impose order and serve as an escape, but death comes anyway.

We tell stories or stare into phones to try to bring some order to the chaos or avoid it altogether. But what kind of control can you really expect?

You’re a tick on a one minute bar on a stock chart that has a time frame of a few million years.

Here are some events from my life that I could neither avoid nor control. Nonetheless, in my messed up way, I tried to regain control because I couldn’t deal with the uncertainty. The mistake wasn’t trying to regain control, the mistake was believing that control really exists.

In 1999, my best friend died suddenly of sarcodeiosis.  Never heard of it? I hadn’t either. He was the most athletic and healthy person I knew. Never showed a symptom. Just collapsed while running, and died immediately.

In 2001, the building I traded from in the financial district of Manhattan shook when the first plane hit the World Trade Center. Moments later, as I stood on the street a block from the fire, the second plane roared only 100 feet over my head and detonated into the second building. I ran like a motherfucker, certain that a third plane was about to hit.

I then wasted a few years churning with anxiety while waiting for that third plane that never came.

In 2004, my daughter was born. It’s not that I never thought I’d become a parent. It’s just that even though I was told repeatedly, I didn’t appreciate what becoming a parent meant. What it means on many levels, is “surrender dude.”

So how did I try to regain control?

When my buddy died, I took up an old hobby that we used to share when we were kids. I started collecting baseball cards again. But I wasn’t really collecting them, I was protecting them. I spent thousands on baseball cards that winter and probably twice that on plastic preservers.

I ordered the cards. I slid them into their plastic cases, and then into another plastic case. And then I packed them away in another box. I did this for a few months. It was comforting. Judy watched me without comment. She let me try to find order. She has more patience than I’ll ever have.  The boxes still sit in my attic. I haven’t touched them since. But I know they’re there, and the cards are still perfect.

But baseball cards didn’t make me 14 again.

For the few months after 9/11 Judy and I renovated a room in my mother’s house that had fallen into disrepair. We scraped every chip of loose paint from the ceiling. We patched the plaster walls and repainted it all. I understand just now, that once again I was trying to preserve something. A memory or some sense of security. I was trying to get that room back to the way I remembered it when I was a kid.

Dad was there. Mom was there. And my sister had just “accidentally” pushed me into a radiator, cutting open my head.

Nope. Couldn’t bring it back. Gone. The only thing that remains is that scar on my head.

Finally, when my daughter was born, I felt this huge weight of responsibility descend upon me. All of the trading I had been doing, it now had a purpose. For the first time in my life I began to consider the future. I needed to save for college. I needed to save for my grandkids. I suddenly felt need like I had never before, and this crushed my ability to trade. I went into my first slump.

You can’t go back in time. the innocence of your memory is a mirage. And the future, as they say, is just a dream.   Wish I had just ceded control completely and realized that people come and go. Bad things happen without our consent. Good things happen too. Regardless, move on.

So how does all of this relate to trading and the market?

Last week I traded well. After Friday I told my wife. I was excited but she nearly cringed. This made me thoughtful.

Thing is, she’s seen me get to this point a few times over the past few years. I have a string of good days and I’m ready to put my demons behind me and get back to the easy days. But she’s smarter than I am. She realizes the demons never disappear fully, they’re always there, like terrorists, just waiting for you to forget about them so they can attack again.

She cringed because she didn’t want me to think I had “nailed the markets.” Better to be more humble, more uncertain, always. She could tell I was getting a story in my head and she knew the story was a lie. If I get hooked on a story of success or complete understanding, I’m setting myself up for a fall. As a daytrader it’s not my job to understand the markets. It’s my job to simply react.

You can’t impose order on something that’s essentially without order.

My worst smokefests have come when I have a story in my head that I can’t release.  “This stock is going to breakout, he’s just shaking out the weak hands.” Or, “This stock is going to bounce. They just have to clear out that one big seller.” Of course, it’s useful to have a strategy but only if you understand it’s merely a guide and not “The Truth.”

Best to know nothing, go into the day with a $0 P&L, and throw stale bread at the Black Swans. Fighting the uncertainty in the markets is like trying to beat up the air.

As professional traders, we must be chill at all times.

You cannot act rationally, or help a situation, by panicking or getting too excited.

In life and in trading, we’re in a constant state of flux. That’s the universal experience.  As humans, maybe we’ll never be able to deal with certain events with equanimity, and I don’t think we necessarily should. As traders however, it’s part of our job to get past the way things are and get to the way things could be. A more equanimous state, beyond fear and greed.

Anyway, anyone interested in some baseball cards?

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