Forum Archive Index - July 2001

["Dick O'Connor" <callme_nz@hotmail.com>]

      “The bull run on the internet produced an obsession with speculation 
that has had no equal since 1929. Across America, people of limited means 
and intelligence got rich buying and selling shares in companies like Yahoo 
and eBay and Amazon.” So writes Joey Anuff in a book called Dumb Money, 
about his experiences over some months as a day trader.

    “It’s 5am and I put on a pot of coffee. After the third cup comes the 
high point of my morning. I open the friendly white box and chew a tab of 
Nicorette.” This is usually used by people trying to quit smoking, but in 
his case it delivers him two milligrams of nicotine which gives him a 
feeling of  “sensual, reflective pleasure as profound as any experienced by 
poets or mountain climbers.”

   This relaxes him so he can close his eyes “and I imagine myself rising 
out of my body, through the 24-foot ceiling of my loft and into the sky.”  
After a pleasant float above his neighbourhood, he feels even more relaxed 
and able to return home to his three computer monitors and get on with a 
day’s trading.

    “People of average and below-average intelligence won’t plunge into a 
stock until there is clear evidence that prices are going up. Slow, careful 
accumulation by cautious fund managers dosen’t make any stock quadruple over 
a few weeks. For that kind of action (his kind of action), you need Mr Smith 
to come home from work with a little brain fatigue and sit down in front of 
the television set and hear for the millionth time that the Dow has broken 
through to a new high and that the leading gainer for the day is some 
little-known internet stock that does something earthshaking like selling 
dental floss on the Web.

    “Eventually, all the Mr Smiths will pile in. My goal is to beat them by 
a few seconds. It’s not just Mr Smith I’m playing against. There are also my 
fellow day-traders who are themselves trying to get on the bus ahead of Mr 
Smith. I have to beat them all on board and when the dumb money interest has 
waned, I’ve got to jump off before the bus slows down to less than 50mph and 
then explodes.”

    Trading for this guy is often hectic…..he sometimes enters a buy, starts 
to worry before it is fully executed, the rushes in a sell. Starbucks have 
difficulty understanding him when he orders a triple-double. He understands 
why a trader who loses all his money goes along to a brokerage house and 
shoots several people. His bathroom cabinet is full of drugs, some to wake 
him up, some to calm him down.

    He starts with $50,000, turns it into $100,000 overs some months, can’t 
stand it any longer and stops. The book was published last year and most of 
his trading seems to have been in 1999. It sounds like he was lucky he got 
out when he did and before the sky really started falling.

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