Quill, Your Trade on TLT

Investing Strategies Technical Trader's Sanctuary
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Quill,

I told you that buying TLT was a bad idea, that you didn’t understand its fundamentals. You replied that you didn’t want to understand them, because you didn’t need to. Now, you’re either seriously underwater on your holding of roughly 778 shares, or you did honor your mental stop of $103 and change and got out yesterday for a loss. So, which is it?

Yes, anything can be traded as if it were just flickering lights in an arcade video game. But serious investors or traders --instead of just pretenders and wannabe’s – pay to fundamentals, because it’s fundamentals that make charts, not the other way around. Not necessarily in the very, very short term. But sooner or later, their impact gets manifested in prices. Period. End of story.

Secondly, you claim you bought TLT --and some other equally bad choices --for its dividend. But TLT’s yield is a pitiful low 2.70%, or just 45% of what the short end of the yield curve has been offering lately. But because you don’t understand how bonds are priced, you bet on the long end of the curve. Not smart.

In sum, if you’re going to make bets on bond derivatives --which is what TLT is-- then it makes sense to understand what its underlying is and how that is being priced. But you scoff at “fundamentals”, and you’re now suffering the consequences. Not smart, and not very “professional”. And, No, I’m not being very nice about this, because I’d like you to succeed.

So, here’s what you need to do. Get a hold of a copy of Sharon Saltsgiver Wright’s book, Getting Started in Bonds (any edition) and work your way through it, pencil in hand to underline key points and calculator at your side to work through every example. Once you’ve done that, then work your way through Barnhill’s book on high yields, as well as Graham’s book on value investing. Then hop on over to E*Trade and teach yourself how to use their bond seach engine.

What you’re going to discover is this. Your so-called ‘divvie program’ is high-risk, low-yield nonsense compared to what you should be doing if you were really serious about constructing income streams for yourself in a disciplined, professional manner.

Spoiler Alert: We’re in a recession and headed for a depression. Understanding the fundamentals is going to become more important than ever.

Arindam

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re: TLT
re: Berating

Your absolutely correct, I don’t know what I am doing, and I don’t understand what you are saying.

However, let’s review

Tetter Tottering

TLT / TBF

Zero losses since 8/3/22 to present as an example @ 1000 shares bankroll and using the power of compounding.

Earning a substantial amount of money 'tween Tettering and Tottering. Who needs Divvies.

If found, show the time stamp.

Divvies are a bonus. Owners of Treasuries might not get paid around June 1st and Social Security checks might not get issued as well.

Thanks to the President if you have been following him this past week.

Most popular beverages at the juice bars at several gyms ( eg… LA Fitness Center ) is that they sell PRIME Hydration Drink Sports beverages to there customers.
For some strange reason PRIME is the one that is in big demand by the customers.

However, I currently own 150,000 shares of CELH all together a different company since October of 2019 with 150,000 shares. This reminds me of the days of owning GMCR (Green Mountain Coffee). GMCR was sold to a private German company and I had wished KO bought GMCR. KO wasn’t fast enought.

Loading up on more KO and PEP. For some strange reason snacks such as Potatoe chips are getting to be in high demand lately accourding to an article in the WSJ this week. Look at PEP’s chart and you tell me Simon is not making money. KO and PEP are perfect for folks who want to retire on.

TLT
TLT1144×805 86.8 KB

TBF
TBF1144×805 85.9 KB

CELH
CELH1144×805 94.8 KB

PEP
PEP1144×805 125 KB

KO
KO1144×805 141 KB

Again, divvies are a bonus.

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Three for me and one for you.

giphy

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Quill wrote: “However, I currently own 150,000 shares of CELH all together a different company since October of 2019 with 150,000 shares.”

Quill.

It’s getting so that nothing you claim can be believed any more.

150,000 shares of CELP --your supposed position-- times its present price of $132.75 is a one-stock position of (roughly) $20 million and change.

Horse feathers. You don’t have that kind of money. A million or two --total assets under management --is believable, because that’s what I’m working with, and I was trading roughly the same years as you, though in different markets.

Arindam

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I came here to teach as best I can based upon my 48 years as a Swing Trader experiences and not to be berated constantly.

My wife said to move on.

I will now be leaving and moving onto other projects including Crypto and be a Care Giver to my wife 24/7. I am tyred.
Have not been on a vacation since 2010. Looking for a new home in Sagaponack NY Real Estate - Sagaponack NY Homes For Sale | Zillow but my wife says improve not move.
And a winter home on a golf course in Isleworth, FL

I wish everyone the best.

Stay Healthy Wealthy and Wise.

Quill -

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Hi Quill,

Please don’t leave…Arindam’s comments may have come across very harsh and acidic…I am hoping he did not mean it that way…May be he will re-read it later and do what he feels is appropriate.

Regardless, I think you have been VERY KIND with your time, and did a lot to help quite a few of us to try and understand some of the swing trading practices.

SO, THANK YOU FOR ALL THAT…And yes, please take a bit of time…Erase this off from your mind…and Come back!!

Charlie

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Thanks for your time Quill and I wish you and your wife the best.

Andy

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"Arindam’s comments may have come across very harsh and acidic…I am hoping he did not mean it that way…May be he will re-read it later and do what he feels is appropriate.

Charlie,

I did what was appropriate, namely, I proved that one of Quill’s endless claims of egregious outperformance is a lie that disrespects the members of this forum who expect better from him.

I have zero evidence that Quill isn’t a superb discretionary trader. Just the opposite is the case, as I know from years of private corespondence with him on trading matters. He’s a smart, savvy, experienced trader whom you don’t want to be on the opposite side of a trade with.

But what he might do --or might not do-- in his own account, with his own money, has to be distinguished from what might make sense to do in one’s own account, especially the small money accounts typical of beginning investors. And anything and everything he says about dividend stock investing is easily disproven nonsense.

Also, his constant retreat into ignorance about matters anyone who claims to be a “professional” should know is truly dispictable. E.g., pretending not to understand how to calculate ‘dividend yields’? Give me a break.

That he’s choosing to beat a cowardly retreat rather than make a solid, proven case for his performance claims is understandable, but regrettable. My bet is that he’ll be back, because he craves an audience, and there’s no other forum on the web where it’s so easy to post charts.

Arindam

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Quill,

You said you had a system for playng roulette and that you were making a killing with it. I called you on it, and you promptly dropped mention, because the claim wasn’t true --and it couldn’t have been true – as basic math suggests.

So this is my warning to you. If you make claims that can be easily disproven with basic, 4th grade math, I’m going to call you on it EVERY TIME.

I don’t own this forum any more than does anyone else. So, feel free to post --or not – as you choose. But stop with the tall tales or expect to be raked over the coals for it.

Arindam

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Arindam, I am calling you on this. You really have no clue of what you are talking about. Because if you did you would realize that Edward O. Thorp was able to beat the roulette wheel in 1961 wearing one of the first computers. I suggest you buy the book “A Man For All Markets” Instead of making such outlandish claims.

Andy

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Andy,

I’ve read Thorp’s book --and similar (E.g., those dealing with the Kelly formula more broadly.) What you’re failing to understand is the diff between the physics of a roulette wheel and the math of its construction that creates the house odds that no betting system can overcome in the long run.

Quill understands neither. He’s a one-trick pony who lies about his performance. In one version of his life story, he claims to have been “a professional swing trader” for 48 years. But we both know that is a lie. He’s 79, the same as me. So do some of that basic, 4th grade math that Quill fails to understand and do the simple subraction needed to prove that lie. 79 minus 48 is 31, right? You do agree on that?

At age 31, Quill wasn’t “a professional swing trader”. He was an employee at a tech firm doing something or other with computer chips and making a mess of the mutual fund options in his 401k plan. Then, in 2007, he was laid off and tried to find a job at Costco as a greeter. They knew a loser when they saw one --a middle-aged man with no education and no marketable job skills – and they turned him down the three times he applied. Then, his life story takes a huge and commendable upswing. He learns how to trade stocks, and he begins to earn a living from it. To that, I say KUDOS. DOUBLE KUDOS. TRIPLE KUDOS. That’s a remarkable, commendable achivement. Only one in twenty achieve it who attempt it. But just as obviously, it took him a couple of years to learn his craft. So that’s also when his career as a trader should be dated from.

What are Quill’s strengths? A curiosity about markets. An unbeatable work ethic. A willingness to help others.

What’s are Quill’s weaknesses? He know nothing about how to trade options or how to use them to hedge his equity positions. He has never sold stocks short. He has never traded futures or FOREX. He knows nothing about buying/selling individual bonds, be they Treasuries, Agencies, Munis, Corporates, or Foreign Sovereigns. In short, he’s a very effective stock trader, but a pretty lousy money manager whose advice on that broader topic no one should take seriously.

Arindam

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Arindam, Thorp did beat the Roulette wheel. In his book he tells you exactly how he did it. This is not theory, he and another guy, with their wives, actually proved that it could be done. So I can only assume you haven’t read the book.

Andy

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Andy,

You’re right. I don’t remember the details and might well be confusing it with another group who used micro computers to predict the path of the ball. I do own the book, a tattered paperback that’s tucked away that I can’t find right now. I haven’t looked at it since I was into building mechanical trading systems some 20 years ago. But the adverse math of the game remains the same for them who claim they have a sure-fire betting system, namely, the 5.26% house advantage. That’s enough to kill a trading account.

So let’s broaden the disscusion. If you give a group of players a chance to draw --with replacement-- marbles from an urn and --unbeknownst to them-- the distributon is 60% white to 40% black, with white paying what they bet and black costing what they bet and a starting blance of $100 bucks, how many will walk away winners? Mind you, this is a game with a positive-expectancy. Therefore, there’s no reason --other than not understanding basic math-- why everyone shouldn’t walk away a winner. But when Van Tharp has run this experiment with 100 draws, the majority lose money, and something like one-third lose everything.

Now, apply those facts to investing and to managing a trading account, specifically to sizing positions, which Quill has never, ever discusssed in any meaningful way. Hence, them trying to follow his trend-following system(s) are more likely than not to blow up their account, due to the adverse math of trend-following systems whose right/wrong ratio across meaningful samples runs about 35% right.

So, How can money be made? By chopping left-hand tails, which is another topic Quill never deals with in any meaningful, realistic way.

Right now, we’re in a recession and headed for a depression, and the last thing a beginning investor needs is someone promising them a “simple” means to obtain sure-fire, low-risk, high returns in the equity casinos.

(Speaking of which, how’s ENPH working out for you?)

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The book was published in 2017 Arindam and I have the first copy. You must be thinking of some other book.

Enphase is working out Great Arindam and is doing exactly what I need them to do. But, like I explained to you it was an investment not a trade. Ask me in a year about Enphase again.

Now tell Me Arindam, if a system can only be correct 30 percent of the time, how can anyone that considers themselves intelligent even use that system to try to make money? That is worse than a coinflip.

Andy

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Andy,

Thanks for your follow-up question whose answer you already know. But let me walk you through it.

If pay-offs are symmetrial, then the R/W ratio has to be > 50%. But if pay-offs are asymmetrical, then R/W ratios can be exceedingly low, and the gig can still be profitable, even exceedingly profitable, as Taleb and others report from their own experience buying deep, OTM puts. Same-same in wild-catting, book and music publishing, etc. If the odds of success are small, but the payoffs are huge, one merely needs to do two things. #1, Don’t make too many stupid bets. #2, Stay liquid long enough for the strategy to pay off. Or as Taleb puts it, “Be prepared to bleed, but avoid getting killed.”

I don’t know the option world well. But I do know bonds. So permit me, if you would, to use an example from my own dealing with adverse right/wrong ratios. Bonds are rated* by agencies according to their risks, and those can be looked up, as can their 5-yr, historical, default rates. When that is done and the bonds are ranked by credit quality, the observed default-rates approximate a Fib series. If that is down-graded one notch, then a prudent betting table can be constructed that predicts expected pay-offs vs expected defaults.

In other words, if bonds are considered to be puts with a strike of 100 and whose price is the prem, how many can you buy, at what price, and how many can you lose and still turn a profit? Lower-tier junk bonds --which I was buying a lot of-- have actual defaults rates greater than 50%. But I was buying them and turning a profit, because the pay-offs were asymmetical.

These days, not as much, nor do I need to accept the risks I once did, because my current incomes are 4x my current expenses, and even if I assume an 8% inflation rate and a (-5%) capital loss rate --that’s an annual impairment, not a one-time draw-down-- I won’t run out of money until age 103 or so. In short, I’m not “rich”. I merely solved the “retirement income problem” for myself, because that is a common worry that I didn’t want to worry about.

Now, back to trading systems. What Quill has offered the community is ony a small part of a complete trading system, nor has he done any creditable backtesting of his Simon Sez versions. But anyone who cares to could do so, and what they’ll find is what I report, that ‘Simon Sez’ is a trend-following system and that trend-following systems have a typical profile of 35%/65%, right to wrong. Hence, left-hand tails need to be chopped.

( *Agency-assigned ratings are often at odds with their ‘market-implied’ ratings, which is a post for another time.)

PS If you call being underwater on your orignal entry into EMPH “doing well”, you’ve got a strange sense of what it means to be “doing well”, never mind that most of what is touted as “green energy” is a very environmentally destructive scam that only survives with money extorted from tax payers.

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Quill, I’m sorry that I have just now read this. I’ve been busy with other things and not trading and reading as much. I really hope you come back. I very much appreciate all that you have shared with us. You’ve been a huge help to me! Thank you!