We had an email exchange recently with a Lockheed Martin employee. Many people think that trading properly requires vast intelligence, but here is a viewpoint from a man whose firm is filled with brilliant people:
You guys are ridiculous, there are good stock tips, I’ve had many and made thousands…guess your theory is wrong. And in case you missed it, the reason for the crash 2000-2002, we didn’t expect the WTC to crumble. Other than extreme terrorism where people panic, tips are good. You guys should get out of the financial world….really.
TurtleTrader® comment: You don’t think your tips could possibly be sheer luck or random chance? Do they ever give you tips to sell? The equity market tanked in Spring 2000, not starting with September 11, 2001.
I was mainly focusing on where you guys say there is NO good stock tip…You said it doesn’t matter if you research their business plan, potential to make money…Those are things I do research and I make money, you say I’m a fool then huh?…you’re right…a rich one. What the hell, since you don’t believe in stock tips, I’ll give you one…You don’t have to invest a penny, just watch it and it’ll grow. Then you’ll be upset that you didn’t…watch these and learn SGI and NT.
TurtleTrader® comment: When do you sell these? Researching business plans is the work of fundamental analysts, not technical trend followers.
Depends if your greedy or not. If it goes from $7 to $11 or $12, sell. Or if SGI goes from $4 to $7. It’s greed that makes you lose, minimal gains have made me rich. I don’t go for the big enchilada day trader crap.
TurtleTrader® comment: What if SGI goes from 4 to 20? Why did you pick to get out at 7? We want to follow the logic in play. But what’s greed — how are you defining it?
Ok, looks like I’m gonna have to spell it out. Ok, Johnny has 10 stocks of ABC, at a dollar each. So…Johnny has 10 dollars in the market. Johnny did some reading about the company and really thought the widget was a promising item that a lot of households were going to love. Johnny sees it grow to 12.50 in 2 months. Johnny says wow!, looks like I made 25.00 dollars. Now Johnny’s portfolio is worth about 35 dollars now. Johnny only bought these stocks originally just to save up for a Cal Ripken baseball card that costs 25 dollars. So now Johnny can get the card, BUT wait…There is also a better sought card of Ripken card worth 45.00…hmm what does Johnny do? Should he be greedy and wait for it to climb above 12.50 or Should he be GREEDY (are you with me?), and hope that it climbs to afford the better card? Or should he get out now and get the original Ripken card he wanted. Now you know what greed is. Do you take a nicety [sic] with your gains or do you go for the bigger and better…That’s the greed. The end, Johnny lives happily ever after with his Ripken card, since he wasn’t greedy.
TurtleTrader® comment: Isn’t this the same logic that millions of people followed during the dot com bubble?
Yes, it was a horse race on technology. There were going to be 1-2 winners only, the rest popped. I made over XXX,XXX bucks, others made millions…I got out. My friend paid cash for his home and got a new 2002 Viper out of it. He grossed over 800K, he was greedy, it paid off. Yeah, I could of stayed in and made another XXX,XXX, but I didn’t. I was satisfied with what I got.
TurtleTrader® comment: There is a price target that you are you shooting for as you buy? That can be different for different people? What if after you buy, the market goes against you? How and when do you get out?
Fair questions. Yes, I normally have a predetermined amount that I bail out at. Example if I buy something at $5 a share, I normally buy 1,000 shares. Ok since I have 5K wrapped up in it, I would bail at $7-8. I’m happy with a 1K-2K take. Even if I saw it slowly grow, I get out, don’t want to get bit. If at anytime I see…say its 5.50, then 5.78, 6.12, 6.38. And the trend goes up in those increments I can see the pace that it’s doing. If I see it in the 7 range, say 7.12, then 7.24, 7.56, then 7.42, then 7.18. When I start to see a little decline in my target area then I get out. If the same scenario where I have 5K in, if it goes up to 5.12, 5.75, 6.33, them goes 5.08, 4.75. 4.64 4.52, I do a little research to see what’s happening in the company, look for minor reasoning, who’s buying in volume, did some one dump a load of shares?…Rule of thumb for me is if I have 5K in, and am down 1K, I get out. I normally buy chunks of 5K worth. So in my mind when I’m in the green by 1-2k, I’m out. If I’m down 1K with 5K in, I’m out. Not much of a greed factor with me.
TurtleTrader® comment: The Nasdaq went down 77% at one time. We are not seeing what separated the winners and losers by following your logic other than pure luck or random chance. You made XXXK doing exactly what? In what markets how? We have not heard a plan that sounds remotely repeatable. We all know there were plenty of dumb luck winners in the dot com bubble.
When the market went down 77%, I was already in conservative mode. There was some dumb luck winners and some just saw what was happening. I bought XXK worth of Ebay in Jan 01, for about 15 bucks. Bought at ton of Amazon at 21 bucks. Bought a lot of AOL stock in the summer of 97 and sold in 2000. With the money made from AOL stock, I bought LMT (Lockheed) at 21 bucks, it’s over 48 now, another XXK made there. Did a lot of selling short too, little stressful there. Luck and timing I guess.
TurtleTrader® comment: We would like to know how a switch to “conservative” mode was made. Do other readers have feedback for John?
Feedback from Readers for John
“So John invests $5,000 and is willing to absorb a 20% drawdown before he bails out – and John doesn’t get greedy so if his $5,000 reaches $7,000 then he gets out – but he bought Lockheed at 21 and he is still in at 48 – guess he bent the rules a bit – but that’s OK, because there’s “not much of a greed factor with” John. If John makes 10 investments of $5,000 each and each hits his 20% stop – is he objective enough to get out of each one, and then is he trigger shy on the next potential investment, or maybe he figures I lost 10 in a row, no chance of losing again let’s put in $20,000. I really like the way this guy thinks, he obviously has a lot of great experience and has really learned the rules of the street, plus he puts you trend guys to shame, he must be booking triple digit returns each year since ’97, forget Paul Tudor Jones, I want my money with Johnny Lightning”.
Michael A. Marchese
“I would also tell the Lockheed engineer to do an analysis of his tip performance, relative to the market. What are his returns, net of commissions? How well has he performed relative to his chosen index (Nasdaq or SPX)? What are his risk adjusted returns like?”
405 Lexington Avenue
New York, NY 10174
“John really doesn’t have a plan. He talks pretty, but nowhere does he indicate his rules. Approximate target numbers are for fools. Sooner or later, he will pay the price for thinking he knows more than the market and can successfully time it. As I read John’s email, I am reminded of the gamblers that always tell me of their winnings, but conveniently forget their losses. The brokerage houses live on people like John. There are plenty of analysts, newsletters, and hot tips to fill their need for complete information.”
“Seems that John from Lockheed Martin is on a crash course for eventually blowing up. If he were as smart as he thinks he is, he would have ridden the Nasdaq’s demise down like he claims he rode it up.”
“Lockheed is a ‘firm filled with brilliant people’ I am sure. But, this man is not one of them.”
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