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Monday, December 26, 2011

I could have been a stock trader. Part 1 (You can retire rich)

I wanted to be a stock trader, for twenty years I would buy and sell stock after my day job, sometimes on my lunch hour. I am a retail trader, an individual that trades from their personal account. I dreamed of starting my day by sitting in my night clothes, lap top in hand, trading equities. With retirement I was finally able to realize my dream. I traded stocks, options, commodities, derivatives, going long or short. This was not new to me, I had been trading part time since the late 1970s, and I had a strategy, discipline, linked spread sheets for analysis. I made more money than I lost.

I quit trading after 18 months. Trading is mind numbingly boring. I still invest but I no longer follow the market all day, day after day. I had spent my career interacting with people, working on teams, managing departments. Trading is sterile, lone ranger stuff, me and my computer. Eventually, watching numbers change on a screen is not exciting, not entertaining, not even mildly interesting.

I have all the basic tools needed to select an investment based on economic fundamentals. As a manager I had learned to read financial statements, profit/loss, balance sheets, cash flows, I would often volunteer to help the company’s auditors count inventory and comb through documentation. I am comfortable reading a company’s annual report. I am willing to do my homework. I fantasized about being a stock trader. I do not have the personality to be stock trader. One more dream destroyed by reality.

I listen to politicians extolling the virtues of every American accepting responsibility for their personal financial future, investing in funds, 401Ks, and stock trading their way to millions, finally retiring to a mansion on the beach. I now realize that this is a fantasy, a dreamed of paradise never to be. Few will succeed, many will fail. We are not a nation of stock traders. We are a nation of doers.  We do not like to work in isolation. We like to work in groups.
The joy of making a killing in the market cannot compare to the joy of actually building a well crafted product.

Our system gives outsized rewards to financial practitioners, who create nothing, while demonizing a teacher that creates prized students. We have breathe-taking financial inequality that is not based on merit or social contribution. There will always be some inequality in an open competitive system, by definition some will succeed and some will fail. Our financial system is out of control, the results are bad for both America and Americans.

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