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"Learning the Bottom Line"

Now that I'm putting a lot of my energy and enthusiasm into stock trading, I've taken a step back to look at how my perspective on things has changed.

Before a year ago or so, I was wildly optimistic about the Internet and the companies that would spawn from it. The low barriers to entry, successful economy and stock market, and new technology would all allow new companies to find a niche to fill, a service to provide, etc. In the back of my mind, I still have a dream of finding that one killer idea and starting a company from it.

But after I became alienated from the web design industry -- a result of stagnation in the tech and in the possibilities arising from it -- and after I started looking at more and more companies' fundamentals and their correlation with stock prices, I became far more critical.

The web design industry is turning to shit. It's gradually becoming what everyone knew it would become: a consolidating industry with lower salaries, less prestige, less innovation, and fewer players. I'm sure you could still become wildly successful doing independent contracting, but it's a major pain in the ass. I got into it because of the creative aspect of it. Then I realized there was little creative about it. It's just marketing.

You couldn't throw me back into that arena with a tazer pressed against my genitals.

Stock trading meant I was exposed to companies' financial sheets, figuring out how much they were growing, how much cash they had, what their stats were compared to their peers, etc. Having some knowledge of companies before they IPO'd, since I'd seen or used them in my own explorations on the 'Net, it was obvious most would fail.

The fact is that most of these new companies are fucking scams. They offer nothing original that a bigger company could not enter into, plus they are run by young people who have no concept of company efficiency and conservative money spending. Venture capitalists fly out of the woodwork to throw hundreds of thousands up to millions of dollars at them as motivation.

Scores of college kids are being sucked in right after college into these startups. The temptation is so great many don't even decide to graduate first. The IPO market has been doing so well (except for lately) that everyone wants to get those IPO shares or options. It's a digital environment inhabited by gold-diggers and thieves.

What was scary was seeing signs posted outside the computer lab at school that say something to the effect of, "Are you part of an Internet startup? Then DON'T distribute your advertisement flyers here!" Also scary was walking into the undergrad library and having some guy ask me if I wanted to make money online. I said no and he said, "Okay, someone else will win." I found the irony highly amusing, particularly since he had no idea of the circumstances.

And I really feel for the people who blindly go into this stuff. Now that it's summer, the recent IPOs have been getting hit hard. Everyone is selling their shares, employees are leaving once their options become strikable, no one wants to hold these vapor companies any more.

The junk sinks to the bottom and only the consistent, adaptable stuff stays afloat. What I fear may happen to a lot of people I know is that they will work at these companies for a little while and then succumb to what eventually happens: the company burns so much cash on looking hip and hiring people that it begins to get strapped. Employees come and go because there's always an opportunity somewhere else. Management sells its IPO shares or whores itself out to an investment firm to underwrite them. Business turns out not to be as successful as hoped. Wall Street decides the company's concept isn't that unique or profitable any more. The workers lose the feeling of novelty and working for a startup that they begin to get bored or unhappy. The company fails and the people involved are left to come up with some better idea or find some other slightly more successful company that would like their experience.

As it goes, startup employees work their asses off, all for a lot of money. It can't really be all that fun after a while, because reality catches up. Unless the company just really has an expandable, imaginative, successful idea, the malaise and mental drain just kick in.

And these rich people with their stock. Are they selling? What if their company's stock crumbles like has happened recently and they lose all their paper worth? While I am a bull for the overall market, I do feel that most of the recent wealth is built on air and could disappear instantly, as has much of it just this last month. I am not very impressed with these companies anymore, as I used to be.

Being a trader hardens you. It makes you more alert of the bottom line. Sure, you're looking for the most volatile stocks to trade, but you never become loyal to them. A trader who's loyal to a stock can get himself in a lot of trouble. Granted, I'm fiercely loyal to AMD's stock right now, but that's only because I have utmost confidence in the company's fundamentals and officers. If they start failing or doing things wrong, I will change my mind.

There is no room for fucking around on Wall Street. All these retail investors who bought stock in companies that they didn't really know much about are paying for it now. Easy money may come for a while, but it can disappear even faster than it came. And many don't realize this. Or at least, they didn't.

I am happy that I've been exposed to all this. I am glad that I have a deeper appreciation for what actually goes on in the business world and how investors and big money treat ideas and management and financials. I am happy that I realize that it's all a scam and an insider's game and that people will stop at nothing to make money. You just need to understand that to profit from it.

I THINK he's interested in what I have to say, but my roomie always puts up with my long tirades about this or that stock and how worthless it is. I think he understands that what we see on TV from the dotcom companies is a bunch of overpaid junk. He's seen from what I've shown him that those companies get fucked in the end.

So this is where it all gets interesting. The more I've learned, the more old-style I've gotten. While there ARE hot tech companies that are growing really fast, and I want to be a part of those, most of the companies I like are the established tech/net names like IBM and AOL. And while I still think we have at least a few years to go before the tech growth cools off, I'm still reserved when it comes to investing in the tech names.

Motley Fool I think is dangerous after a certain point to Joe Sixpack investors. They preach buying and holding technology. The problem is that tech changes so fast and companies can be overtaken virtually overnight. Motley Fool has picked some real lemons like Iomega and 3dfx and its followers probably won't sell them as easily as the MF owners would. There is no long-term loyalty in tech.

Investing just won't work with the new names now. At least I think so. The only way I would long-term invest in tech is through mutual funds. They are diversified and they are handled by someone who has it in his best interest to do well. They may become enamored with certain shit stocks, but the diversification will brunt the blow of any earnings shortfalls or whatever. Mutual funds are a good way to capitalize on the overall growth and not be put at too much risk from individual companies having problems.

Still don't believe me? The greatest stock of them all, MSFT, is killing its investors this year. Why would you put yourself in front of a government train, a highly priced stock, and, not to stop there, a company that in my opinion doesn't have that much room to go? People absolutely love this stock and I don't know why. They base it on past performance I guess. Same with DELL.

So now I trade. I look at charts of companies I like and try to figure out where they're going to go. I short stocks, which most people think is un-American because you're betting that companies' stocks will go DOWN, not up. Even the best stocks go down. Traders have a bottom line and not hope or optimism when it comes to the industry. If a stock is volatile, traders will be all over it. If it doesn't perform or if it hurts them, they move on. Any trader who had a clue what he was doing made a killing when the Nasdaq tanked last month. If he didn't, then he should have learned much from the experience and should make a killing every spring/summer from now on.

After a while, you begin to feel the flow of the market. Stocks have a current to them that makes them travel in one way or another more easily. You begin to have a sense of how tired or pent-up the market is, and what it wants to do. It indeed has its own feelings and tendencies and mood swings. You don't fight it. You begin to interact with it and work with it. Help it along, even.

This affects how you feel about everything in life. You feel whether there is resistance or ease, whether there is potential in something or not. Your gut tells you when something feels wrong or right. It must be instinctual. If someone doesn't seem to be opening up to you, you know they aren't interested. If someone comes too easy, they probably are looking for something that they aren't going to reveal to you. My monitors are full of lines and waves and numbers during the day -- to me, there are thousands of opinions, intense feelings of greed and fear, peoples' lives and hopes, everything that embodies who the people are who invest in the market, all coming through this data that's fed to me. When you read a book, you are looking at the sum of that author's experiences, it being a window into everything he has ever studied, every love he has won or lost, every success, every failure. The same goes with stock prices and charts. A word is not just a word. A number is not just a number.

And while I am happy with my success and education with trading, it was opportune timing, for in my personal life my gut is telling me that Anna and I have little hope for ever coming back together, and it has seemed that way for a while now. Although I've been told and I hope that it has much less to do with us than with the harsh trials of life, I still feel as though I should probably move on. The tragedy of course for my own sake is that no one understood and accepted me the way that she did. If no one else on this earth could do the same, then I will be a very lonely person indeed.

So in that way, trading kept me busy, and also kept me confident in my ability to learn from mistakes and keep pressing on, no matter how bad things can get. It is an occupation in which the mirror is pressed right up against your face so you cannot escape what you look like and how you react to certain situations. It is one of the ultimates in self-criticism.

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