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Day Trading Stocks
The Smart Profits Report: Issue #113
Monday, May 24, 2004
Day Trading Stocks: Lessons From An After-The-Market-Closes Plumber
By Karim Rahemtulla
Investment Director, Mt. Vernon Research
While speaking in Vegas last week at The Money Show, I remembered to call Bob the plumber. I met Bob when I refurbished my house in Florida about three years ago. Since that time, I have referred him to a lot of friends and family. Why not? Bob is a talented plumber and with a 10% friends-and-family discount, his hourly rate is only $65.
The only problem with Bob is that he likes to talk. So, whatever discount I get is negated by the 10% longer Bob spends working and talking. But a good plumber is hard to find, and much harder to let go of. Bob is very smart, mathematically inclined and frustrated in his profession as a plumber. Instead of plumbing, he would rather gamble at a casino (he is a card counter) or immerse himself in day trading stocks.
Since trading (not day trading) is something I have grown fond of myself, these are the conversations I have with Bob.
Day Trading vs. Plumbing
You might be thinking, “When does Bob trade stocks or practice counting cards? After all, plumbers like him are busy all the time.” Well, Bob is an after-the-market-closes plumber. He starts his plumbing day at 4 p.m. and continues until 2 a.m. Some nights, he finishes by midnight.
I asked Bob why he bothers with cards and stocks when plumbing is a respectable, moneymaking profession? And, Bob being about 5 feet tall with small hands and fingers, has the ideal plumber’s build.
Bob confessed that after 30 years of plumbing he has very little to show for it. A house that is almost paid off, little in the way of savings (for 30 years of sweat) and a yearning to use his mind for solving complex issues like stock trading and winning against the house.
Plus, Bob says, he is so good at counting cards (illegal in most casinos and worth a swift kick out of the establishment if caught) that he can make more in a couple of hours of gambling than he can in a week of work… on a good night.
Bob: A Barometer For The Norm
You see, after paying taxes, workman’s comp and keeping his truck tuned, Bob really does not make very much. He is looking for the easy way out. Bob is a great barometer for the norm.
When I first met Bob, he had just finished losing his ass as a day-trader in the Internet bubble. So the next step was to recoup his losses by working more hours at his day/night job. But Bob has ambition. So just after he finished my project, he drove to Vegas for a three-month stint in a dealer’s school.
He lived overnight in Vegas at a campground patrolled by a retired cop from Michigan. I asked him how he could stand the heat at the campground. He replied that he was doing double shifts at the dealer’s school, which was nicely air-conditioned. So he got home at 10 p.m. when it was cool and left at 7 a.m. when it was even cooler.
Bob returned from Vegas a new man. He had been offered a job upon his return as a resident. He even made a down payment on a house. While in Vegas he scouted out a couple of places that were suitable for his family. He found that the housing market was booming and homes outside Vegas proper were selling for just over $120,000 for a decent three-bedroom, two-bath, newly constructed home with a view of the desert and mountains. It was now early 2003. Bob had sworn off day trading after the 50% swoon in techs.
Just before Bob left for Vegas, he came by to do a little work on a new project. He told me that his house in Vegas, which he had yet to live in, was up more than 20% in just a few months, and it was increasing in value daily. So much so, that he bought another house as a speculation in the same neighborhood. Why not? Everybody was doing it. Also, he asked me to call if I thought rates were going to move higher so he could catch the bottom and lock-in.
Viva Las Vegas!
Last week in Vegas, I called Bob and asked him to join me for breakfast, lunch or dinner. He said he could not make it because of his busy schedule, but he would try. In the mornings from 6 a.m. to 2 p.m. he is day trading stocks at a local brokerage house that also teaches day trading. After that, he’s at casino school until 10 p.m., learning how to be a craps dealer.
“I thought you were doing blackjack, Bob?”
“I was, but you are more employable when you can deal two types of games,” he said. He promised he would try to skip out of class early to meet me for lunch and give me a ride to the airport.
Bob came through and we met for lunch. He was very excited about the stock market. He was making a lot of money using this new system that worked solely by using standard deviations and trading in the first 10 minutes of the day. I pretended to care. I was actually upset.
“Bob, I thought you gave up day trading after getting killed in the tech bubble?”
“This time it’s different.” I asked him how he was making ends meet, considering he was going to school fulltime and not really working, other than day trading. He answered that both his houses had appreciated more than 40% each, so he decided to take out a home equity loan to make ends meet while he was in school. After all, home prices in Vegas have never crashed and the number of California plates were increasing daily.
What If The Housing Market Crashes?
That will never happen according to Bob. Is the second house empty? No, apparently it is being rented to a fellow member of his day trading group (month-to-month, of course). As I was paying the check, Bob left to get his car.
He swung around the front of the hotel in a spanking new Mercedes convertible and sped me to McCarran Airport for my flight back to reality… and sanity.
Good trading,
Karim Rahemtulla
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Today’s Smart Profits Cribsheet
- While today we focused mostly on Bob and his foibles, you may want to brush up on your options terminology for next time by visiting our free Smart Profits Glossary.
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