UltraCrepidate

Flexing my fingers

There are 4 months in a year where I become a hermit and simply stops all social activity. If anybody asks about the strange behavior my usual truth reply is: “It’s earnings season” with an It’s-so-obvious-that-I-am-surprised-you-asked look. I guess, for non financier types, they don’t understand why. I’ll let the picture speak for itself.

Performance analysis

Starting balance: $3000

Closing balance: $5149.48

Trade carrying over to next week: $2160.5  (41.96%)

Derivative risk: $12000 (233.03%)

Increase from opening balance: $2149.48  (71.65%)

Cost of capital: $272.52  (12.68%)

Earnings excluding one time lucky shot:  -($1429)

Successful bets: 5/13 (38.46%)

Failed bets:  3/13 (23.08%)

Carryover bets: 4/13 (30.77%)

Why I am doing this

I have tried day trading before on numerous occasions and one thing that I noticed is that it has as much to do with emotional management as well as statistical analysis. To be able to trade and profit, a person need to be completely emotionless. The first roadblock to entry lies in getting past the sinking feeling of taking a loss. No matter how much you read, meditate or reason, you can only improve on this by taking actual losses in your portfolio. I have done just that throughout the past 4 years of my investment. I was able to take losses, change my position and ride the flow to profitability. It is by gaining that confidence that I am able to take losses with sound reasoning and proceed to repositioning.

I am doing this in order to be truthful to myself in order to evaluate if such a life style is possible. I post it for everyone to see to force the truth and prevent myself from pulling a Madoff. On top of that, because I am using only $3000 as a basis each month, I am not disclosing the full extend of my net worth. Which was the biggest argument against showing anything financial previously. In anticipation to the eventuality of doing full time trading, I have started learning Technical Analysis (Trading based on psychology) and options strategies. It took me around 10 months to fully explore the core of the ideas as well as utilising the platform that I will be trading on. It is not something meant for the faint of heart and learning the trade from what I remembered, is an exercise in losing money. Only once you understand and experience the complete wipe out of your capital will you be able to truly trade daily.

Strategy

A wipe out will happen eventually, therefore I have concluded that the only way to mitigate the risk is from the way I allocate capital in a way to limit the risk while maximizing the gain. The chance of meeting a consecutive series of bad bets increases as time goes by without meeting any setbacks. That is the basis of chaos theory. Therefore, it is important to reset the capitals at a predetermined time so you only lose what you’ve put in for that period, while leaving a long enough time frame to profit from the full effect of a swing trade. So here are the conditions that I’ve set for myself for training.

-Reset to $3000 capital each month
-$2000 allocated to weekly trading
-$500 allocated to LEAPS with 1 year time frame
-$500 allocated to write options with 1 month time frame
-Sell all positions allocated for weekly trading.

This way, if I make catastrophic mistakes in a month, the most I stand to lose is $3000 but stand to gain from the profits of $3000. The amount of allocation will remain until I am consistently in the positive for 3 month while getting a 70% or above in terms of correct bids. At which point I will move on to increase the trading capital to 10% of my total net worth. All these numbers are taken based on experience and calculations. I still have to perform some frequency analysis on the stock market in order to fine tune the risk profile.

Reflections

Because I am still working full time, I do not have a chance to trade during day time. All my orders are inputted in the morning before I go to work and adjusted at noon during my lunch hours. This kind of arrangement presented several inconveniences and losses because I cannot nurse my trades and react in real time. Sometimes, only have of a trade in a complete strategy gets executed, resulting in the loss of the partially traded order. Other times, people take advantage of my market order, resulting in a buy or sell out of whack to the actual value. If I have to estimate the loss due to this type of limitations, I have to place it at 30% of my net earnings.

Of all my working years, the tech industry which I belong to are mostly in recessions. The high tech bubble along with the fall of Nortel have shattered most engineer’s dreams in Canada. Still I plowed through, never thinking much about the adverse conditions that I am facing.

That’s probably why I am irritated at all the finger pointing that’s going on right now. Hindsight is 20/20, whoever is wielding it and pointing fingers right now should be taken down by a llama and spit on. On the other hand, all the ego trips and chest thumping by our elected political elite makes for a great movie. Even though the stupid dribbles that comes out of their mouth infuriates me to the point of giving up hope on our government.Then again, the dribbles and foams are probably what we wanted to hear.

What seem to skip most people’s mind right now is that the depression is not caused by bankers, predatory lenders or any political party. It is the pure consequence of you and your greed. It all started with a bunch of people defaulting and then gets exacerbated by a bunch of bad choices. What is it with people who sits on the sideline and vent their anger? Criticizing any and everyone who took what they believed at the moment to be necessary action?

If you don’t like it, do something about it. I am doing everything I can, are you?

The benefit of dancing lies in its hidden ability to pick your mood up and make what would otherwise be a very shitty day the happiest day of your week. The adrenaline rush is a double edged sword though. For there exist events in life where no amount of dancing can improve your mood, especially when you’ve come to rely on dancing for happiness. It is not the be all and end all of picker uppers.

Just like any substance abuse, the more you consume, the stronger the dose you’ll need until one point, you come down from the high the moment the music stops and you feel just as shitty if not shittier as before. That’s when you realize that the supposed happiest thing in your life did jack to improve your feelings of well being and that the event that is stressing you out is THAT serious.

I believe that I am supposed to learn an important lesson about my dancing. There was a reason why I stopped so suddenly, along with a feeling of in adequacy in terms of skill, I’ve always had this weird feeling that I am lacking something in my dancing and that something is from within. I have a feeling that I am going to find this something in my journey through the world of Salsa. It is similar enough to ballroom in style that I feel completely comfortable with the flow while at the same time providing some challenges because I know none of its steps. This gives me the time to ponder through the beginner’s journey with an expert’s mind eye for retrospection.

Before we start, my core beliefs

Politics will make or break the economy. I will go deep into this today, but before we start I just want to let you know the core beliefs from which my views come from. I am part of the minority who believe that less people with higher quality of education is the correct path for the human race instead of the model of bigger population with lower quality per person. Most of you agree with this, but please keep in mind that by agreeing to this, you also agree to a world that not every person deserves a chance and that the world is headed into an unsustainable spiral of over population.

The example for context

I wanted to write about this ever since the US government pay czar announced that he’s limiting the pay of the top executives at 7 bailed out firms. I laughed because it is the equivalent of the government shooting themselves in the foot. Politicians are hired by the ideals they sell, but when they are in office, their actions are dictated by the population’s rage. The population’s rage is not usually a good thing because on average, we cannot see what needs to be done and the underlying consequences of what we are demanding.

What happens when you do this

Here’s a short version of the money flow in a pay limitation discussed in the headlines.

On the first layer, which is what most of us sees, when you limit top performer’s pay that present itself at the company’s balance as a reduced cost of capital. Which means more profit. Investors are happy, tax payers are happy and everyone’s happy except for the top performers. Since they are rich, it shouldn’t matter.

At the second layer, things aren’t so simple. Banks have two choices about this extra cash, either they keep it in their coffers or they lend it out. Keeping it in their coffers is a bad choice since it doesn’t stimulate the economy so they usually lend it out. However, at the current point in the crisis, the borrowers that are requesting a loan are mostly ones on the brink of bankruptcy and ones with credit score that are equivalent to that of a sub-prime borrower.  Since the government owns your nuts at this moment, you lend to them like you are forced to. Congratulations! You have just taken someone’s hard earned money and created more debt for your population. Bad debt at that too. Not to mention that rich people have a better tendency to spend lavishly in the depressed economy and invest wisely. (unless of course, you are the inherited type, then it’s a 50/50 chance)

On a third level, from the point of view of the top performer it only make sense if your compensation is linked to the amount of revenue you bring. Granted, the current system doesn’t reduce your pay if you fail catastrophically, but limiting the amount of gain effectively put a cap on how much a worker is motivated to earn for the company. Here, you are getting into the gray area where a worker has to weigh the pros and cons of just managing money themselves that has compensations that are equivalent to the gains or work for something that say: “Hey thanks for making us 10 million, but we are only going to compensate you for 1 million of the profit you make”. Keep in mind that these people don’t really have to work and from my experience, only 1% of the traders has the skills and the emotional maturity to consistently make money over a 5 year time span.

Fourth layer, the people who got their pay limited have all left in doves, my approximation is that half of them will defect. And here lies the real kicker. They are going to defect to foreign investment banks, such as credit swiss and HSBC where US government can’t impose limits. Guess what they are going to do there? Make money for foreign firms from American clients and American capitals. Yep, all your profits goes to foreigners from now on, leaving the worst of the under-performers for yourself.

End

In the end, this move is mostly politically motivated. A swift action like this is more a show of force to whip people around. It shows that the government is in control to ease the outrage of the general population.  Real legislations that will correct the problem are usually passed with as little fan fare as possible. Because publicity will only bring oppositions from the industry. The recipients of this whipping isn’t even the right firms that are being lavish on their compensation too. So in essence, they are whipping the wrong person just because the person is ugly. What they need to do is give Golden  Sachs a big lashing. They are the ones giving out $16 Billion in compensation for 3 months of trading.

• Lunch with Christophe and Mayira. I can tell that his mind is open and non judgmental. A lifetime worth of experience with all the cultures. #
• You can be perfectly bilingual, but you can only express emotions with one language. #
• As time progresses, the fact that my company is still stuck in the web 1.0 mindset on communication is irking me more and more. #
• Time and money are the ultimate road block. #
• Just realized that my blog to twitter link has been broken for 2 months. #
• The banker's pay cut is ridiculous. I say the politicians are paid too well and need pay cuts. #
• There you go. Loonie headed past parity again. I am sooo going to be pissed. #
• Just realized why I can't make my ideas materialize in code. It's 9:45pm. I've been working since 8AM. #
• Damn Jim Flaherty is patching that TFSA loophole. #
• Rediscovered the comfort of coding that the Financial Crisis took away. #
• Going Salsa. #

It was an impulsive decision. A colleague at work was contemplating taking the lesson and I was extremely bored with my life outside of work that I just want to do anything. That’s how we end up at Salsa etc, 6 hours later, at the beginner’s level. I know you might think that’s overkill for a person who’s been dancing as long as I do, but that’s actually the level that the studio owner told me to take after watching me dance with his wife.

So since then, I’ve been just tagging along and showing up to class late 4 times until one day, the teacher finally had an eureka moment and said: “Vous faites de la danse sociale!!”. Yes, he had been looking at me with a puzzled look on his face because I can miraculously catch up to anything that they show me while asking all the newbie questions. Yes, I did try to dumb it down a bit to look clumsy, but that’s because I don’t want the rest of the class to feel bad.

I think I was dancing up to 10% of my usual full performance at class 4 and I let slip a few pointed foot here and there as well as some really sharp spins that newbies can’t do. Put two and two together: someone who can dance a new move like he’s been doing it for his whole life on top of someone who is completely oblivious to salsa moves and you got a ballroom dancer.

The reason why I only dance at 10% is partly due to not wearing my dance shoes, the rest is because I don’t want to discourage new comers. Especially guys, since they are already rare enough in dancing. More importantly, I don’t want to discourage my colleague. There’s a line that dictate whether or not a guy continues dancing, it’s the difference between seeing someone who’s good and think you can catch up and seeing someone who’s so good that it devastated your confidence. I know because I’ve been there and that’s why I am being extra careful.

The other part is because losing my colleague would mean losing the reason why I took up salsa for now. I wanted to see what it’s like to see dancing as an activity to build relationships, instead of one where you compete with your fellow classmates.

According to my backup logs, this is the 11th day that I have been working on the game called Zania. No thanks to the financial crisis, I had to put this project in limbo for a while, no more. Wow, it seems like only yesterday that I was still struggling with the physics engine, today it has expanded to involve so much. At the latest tally, I am at around 5000 lines of code.

A lot of thinking went into the architecture of code, interaction between classes, but more time is spent on the art direction. I have an idea of where I want to go, but I never put anything down to say that this is it.

Graphics

Graphical style is going to be a very colorful background in combination with a black foreground. This frees me of the pain of drawing everything in detail while leveraging my already existing skills in photoshop. I can basically just convert photos of real life objects into pure black instead of drawing them. Of course, the style is still steam punk, but drawing inspiration from Braid and this picture.

Voice acting

I think I found a quick, dirty and cheap way to get voice acting in the game to move the story along. The result is something like this:

Transcript: Scanners indicates an energy build up near the last known location of the alien vessels. Dispatching scouts ..

It was a great learning experience playing around with voice. It’s not as straight forward as I thought. Of course, you can probably tell that Karen Sjet’s voice has severe influence in the voice acting. It took me several tries and rewrites to get the tone and feeling right. Who knew that a slight difference in grammar structure can convey a different personality.

Contents

I will have to cut down the content of the first release significantly.  Although the underlying architecture and design choices are made to be able to  scale up to a massive world, I decided that it’s best to test out the idea  first and see if it catches on. On that note, I am at a loss as to what part of Zania I should be presenting.  Preferably the combats, but what type of combat will catch the audience’s  fancy? I am not sure. That’s the part I have to leave to the audience to decide.

Music

I’ve made no progress in music so far. Kind of sad. Hopefully next time I update, I will have a playable demo. A playable demo will include graphics, music, sound, working physics and a functional ship that can be blown up.

Following yesterday’s rambling about growing up, I realized that my current definition of what life is have also evolved. The last definition that I thought was a pretty good one revolves around the constancy of change as life. Simply put, to die is for everything to be the same. Looking at it from the point of view of the universe. When every single molecule in the universe degraded to the same one at the same temperature in the same energy state, nothing will happen anymore. We then achieved death in our universe. You can project the same about human lives.

So since that realization, I’ve tried everything I can to live everyday differently. But there’s something else…

At one point in my spiritual growth, I stopped asking people what they thought life is for. I stopped asking when everyone started giving the same answer: “I don’t know.” Then I met a few people who actually have incomplete answers and what they told me was pretty interesting. There is no complete answer to this question, only partial answers. You must have one if you are alive, otherwise, you’d see the pointlessness of living and just die. So I got curious again and started asking the same question in a different way…

Myself, I noticed that life is like an avalanche. Things pile up until it reaches a critical state like in the chaos theory. You see this in traffic patterns, in the stock market, in crowd movements and basically everywhere you go. Our brain probably function the same way as a critical yes vote by all the neurons in our brain decides our action.

It does not completely rebuff the change theory, but acts rather as an evolution that gives more insight into how the “gray” area of life behave. Nothing and nobody is purely bad neither can they be purely good. That’s just your perception.

Only recently do I have the unmistakable feeling of being an adult. To find myself such an alien from ideals of my brave young self. So, what happened? Realization happened.

Perhaps the biggest one of them all, is the realization that the ideals of my younger days are not ideals at all, but an imposition of the controlling group to extract work out of members of the society. Knowing how money work and its sway on our lives definitely didn’t help either.

The whole time while I was young, I was acting out someone else’s desire. To those of you still reading and still young. No, those thoughts of yours aren’t original and yes, you are there to profit somebody else no matter how much you believe you are your own boss.

The fact that I get lazier as I get richer, presents another blow to my original image of my self proclaimed honest character. In the end, I am just like any other corrupted adult. Jaded and without an aim in life.

Some days I disagree with these thoughts, some days I agree. The fact remains that I am thinking these thoughts and that alone probably places me in the jaded department. You can only get jaded about life when you’ve grown up right?