***Taken from my previous post***

Karl Denninger and his site, “The Market Ticker” is quite popular amongst the investment community.  With over 75K monthly unique visitors (source: Compete.com), Karl Denninger certainly gets his voice heard to the mass.

So who exactly is Karl Denninger?  Well his credentials are pretty extensive:

Author of “The Market Ticker”

Former CEO of MCSNet

Operator of TickerForum.com

Full Time Trader since 1998

Seeking Alpha Certified

Recipient of 2008 Reed Irvine Accuracy In Media Award

So without further ado, here’s Karl Denninger and his take on the future outlook.

“Karl, can you tell us more about your background and the roadmap to your success today? Knowing some of your credentials, your past experiences must have been diverse and interesting.”

I’ve been an entrepreneur since leaving college.  The most-noted part of my professional experience is probably running MCSNet in Chicago, a large regional Internet Company in the 1990s that was ultimately sold to Winstar in 1998.  I have been actively trading since that time, and have been around and in the market in one form or another since the late 80s.

“Why did you start your blog and the Ticker Forum? How have they impacted you?”

I began publishing The Market Ticker in 2007 due to what was clearly the same sort of outrageous BS that occurred in the 1990s.  We keep repeating the same mistakes and frauds – only the names change, not the fundamentals of the game.

In the ’90s the dominant “investment meme” was to hype companies based on “EBIDTA”, ignoring the fact that the “IDTA” was big enough to make sure that “E”, after subtraction, would never be positive. That didn’t stop many of these stocks from selling for $100, 200 or even $500/share.  Most were ultimately zeros and the entire scam was to suck in another fool to sell your shares to – before it all blew up in your face.

The 2000s were the same game, writ larger – suck in another idiot to buy your house, your CDO, your worthless debt securities.  All in the name of so-called “growth” – and all fraudulent.  When I caught WaMu paying dividends out of capitalized-interest (that is, negative amortization promises to pay in the future) on bubble houses in California where defaults had already started to ramp I decided that I had seen enough and that the public deserved to know – before they got robbed again.

The last time (in the 1990s) only a handful of people went to prison even though there were literally tens of thousands that conspired in the frauds that ripped off America.  This time the cast of evildoers was even larger, and so far, we’ve jailed one (Madoff) for real and have one more (Stanford) in the dock awaiting trial. I believe there should be literal thousands under indictment including the people at the ratings agencies, all the major bank executives and others, but unless the American people wake up they will never understand why their job is gone, their wealth is gone, their house is gone and none of it was an accident or “random” – it was all a premeditated and outrageous fraud.

“I believe you have been trading full-time since the late 90s. Is your current “job” trading and managing your sites? What does your day look like?”

I’m generally awake by 6:00 Central to scan the news flow, put finishing touches on various articles for The Market Ticker, get some breakfast, see my daughter off to school and pull myself a couple of espressos.

The day is spent with my face buried in four monitors hooked to a bank of computers and a “back office” cluster system built on Unix that runs basically everything (including my home, where all of this is centered) during the trading day.  I watch a wide panoply of market indicators, including interest rates, FX, market internals, a passel of proprietary indicators of my own design and a handful of individual issues, and post and follow the forum (at http://tickerforum.org) through the day.

After the market closes I typically put out a 15-20 minute technical analysis video on the day’s action, transcode and upload it, and then go about my evening, usually finishing up around 6:00 pm or so.

“I personally admire the work you do for your blog, especially the amount of data packed contents that many will not find via a typical financial media. What are some of the resources and tools you use for your extensive research?”

I have a “deck” of information sources, all boosted with technology; I make wide use of RSS along with contacts developed over the years and am a voracious reader.  God blessed me with the ability to speed-read material to discern whether there’s something of value to be delved into at a later time; those items get filed away for TICKERS throughout the day, and either get dispatched during the day or occasionally written “for tomorrow” in the evenings.

“Now anyone who follows you will agree that you’re not the most bullish guy when it comes to today’s economy.  You cover various topics such as housing, debts, government, corruption and the financial system that all lead to subpar data.  Of all things “bad”, what scares you the most in today’s environment?”

Debt – and our nation’s refusal to deal with the fundamentals of exponential growth functions.  Mathematical functions are immutable – you can argue with them all you want and paper over their effects for a while but doing so only makes the eventual outcome worse.

The fact is that we haven’t grown our economy for the last 10 years and perhaps for the last 20 – we’ve instead blown debt-based bubble after debt-based bubble, but our productive output hasn’t kept pace.  GDP has been overstated for years due to intentional manipulation of inflation statistics (CPI) which has given cover to people to claim “growth!” when in fact what has really happened is fancy accounting games supported by off-balance sheet exposures and grade-inflated ratings.  This malinvestment must come out of the system for a sound economy to emerge, and the longer we wait to do it the worse the pain we will suffer in the process.

“So in today’s market, what type of investments are you making?  Are you on the short side? I know you’re eyeing Best Buy (BBY) short for one.”

The market (since March 09) is currently engaged in what amounts to a liquidity-pumped blow-off and monetization of Federal and Agency debt – a continuation of the fraudulently-claimed “growth” of the 2003-07 period.  But the real economy says the “green shoot” meme isn’t just misplaced, it is an outright scam.  Our government claims 211,000 people lost their jobs in August, as just one example, but the household survey says the real number was nearly a million.  The difference?  People who gave up – the job market is so bad that nearly three quarters of a million working-age people simply stopped looking.  If you look at sales tax and shipping numbers – places where you actually count things instead of “seasonally adjust” them – you see a very different picture than what’s being shown to you on Tout TV.

All markets mean-revert over sufficient amounts of time.  Take the speculative froth out of the various markets and the S&P could easily trade under 400 in the next 12-18 months.  The spread between actual forward economic fair value and where the market is has never been higher in the post-war period where we have data solid enough to analyze.

“Any comments on your recent engagements with Dennis Kneale? I personally enjoyed the ‘debate’ very much. Any thoughts on the recent cancellation of his CNBC show?”

CNBC, like all major media outlets, is all about advertising.  In my opinion Dennis’ attack on the blogosphere was a huge mistake; the mainstream media has been absolutely derelict in their duties; it is the alternative media that has been pulling back the curtain of fraud for the last several years.  In 1999 and 2007 CNBC was unabasedly bullish and in fact in early 2000 Jim Cramer (before he was “Mad Money” on CNBC) made a famously-bad call that any company that wasn’t “new economy” was trash – he went on to put forward his “buy list” that, had you listened to him, flatly wiped you out.  In 2007 the number of calls for 1600+ on the SPX from CNBC were deafening.  How did that work out for those who believed?

Just watch CNBC’s ADVERTISING and you’ll see where their focus is.  Their advertisers make nothing if you’re not in the market in some fashion and their corporate parent (GE) will suffer horribly if credit expansion can’t be re-established.  Both are trying to fight the math as are Bernanke, Treasury and Congress – this can only be done through more bubble-blowing and lies, and eventually the piper must be paid.

“Pax Americana” and selling hope is a time-worn strategy that unfortunately for Dennis went beyond threadbare into the realm of willful ignorance of reality.  Being in a badly-handicapped timeslot certainly didn’t help; what CNBC needs in that period is someone willing to take the other side, but how do they put someone like that (such as myself) on the air given their corporate parent’s interest along with those of their advertisers?  He was given an impossible task that was destined to blow up in his face, and it did.

Here’s the actual clip of the debate.

[There is a video that cannot be displayed in this feed. Visit the blog entry to see the video.]

“Lastly, knowing what you know, what advice would you give to your audiences as far as investments in the years to come?”

Return of capital is more important than return on capital.  Put another way, the first rule of investing is “don’t lose money!”  Everyone wants to chase a winner; this, unfortunately, is why most investors lose compared to the markets over time.

It is fine to speculate with money you can afford to lose, but your core capital should never be exposed to a market that is trading on bubble economics unless you’re close to the door and can leave fast – and for most investors that’s not possible with their “long-term” funds.  The key to long-term outperformance (the real goal in any such portfolio) is to STAY OUT during times like this, and take advantage of long-term (and deferred) tax advantages during periods when the markets are trading on fundamental value.  I’m not interested in someone’s one-year or even two or three-year return – my interest lies in what you can do over decades.

I have to live on my portfolio; if I lose my core capital I get to hand out carts at WalMart or ask “would you like fries with that?”  So far I’ve got more than a decade under my belt since “formal retirement” with a portfolio beta around 0.5 and a total return that has utterly destroyed the S&P 500′s over that time period.  That’s the goal for any long-term investor, and in that I’m succeeding.

In the early 1990s I took advantage of those who had to “puke assets” at a nickel on the dollar to build a business.  Severe economic dislocations bring these opportunities with the really big events like this happening only once in a lifetime.  I believe we are in the early stages of this sort of event, and you will be able to buy hard assets – land, buildings, machinery – for a nickel on the dollar or less in the coming years.  If I’m right, and you are liquid and have funds, you will over the next decades be able to capitalize on this and make a fortune.  There were thousands who held their cash tight to the chest during the early parts of the 1930s and when the opportunity arose bought for cash, then sat patiently and waited for the money to come to them.  That’s not “get rich quick” but it IS “get rich certain” over the course of 20 or more years.

Remember that it is risk-adjusted return that matters, not “pure alpha”, especially when the market is trading on hype and hope.  Until and unless we see the fraud outed and credit contracts to a sustainable level you’re not investing – you’re gambling.   In my opinion core capital should never be deployed in such a market – wait for the better opportunity.

Thanks again for the participation Karl.  Definitely enjoyed the responses.  Hope the readers enjoyed it as much as I did.

In this interview, he shares some of his personal investment strategies which incorporates the best of macro, fundamental, and technical analysis.  He also attributes “desire” as the one ingredient for success.  This is another great interview so hope you enjoy.

“So Jay, can you start out by telling us a bit more about your background? You have a degree in communication and economics.  That’s a pretty interesting combination.  Did you have a specific career map in mind?  Also how has that evolved throughout the years to arrive at where you are today?”

Right, I initially started obtaining a degree in Economics but then also found that I was close enough to receiving one in Communications as well so I figured “why not both?” It ended up working out well now that I have the blog, but I had wanted to pursue a career in financial markets practically my whole life.  I actually spent a lot of time in college investing and trading in order to have a viable track record to showcase to potential employers.  And that is actually how I landed my first job at a long/short equity hedge fund.  I was naturally drawn to hedge funds in particular because I would read about various fund managers and realized they were some of the smartest in the game.  So, I set out to learn from them in whatever way I could and that’s a large part of why I created MarketFolly.com, which centers around our hedge fund tracking series.

“You currently manage a very popular blog with thousands of visitors a day while maintaining a full-time day job.  Knowing from my personal experience, that is no easy task.  What drives you?”

Yea you’re right about that, it’s like having a second full-time job.  More than anything, I’m just passionate about the subject and am always looking to learn and gain whatever insight I can.  Financial markets are by far some of the most complex things out there because no two days are exactly the same and no two investments or trades are exactly the same.  It challenges you constantly and so I’m driven by my desire to learn and become a better investor and trader.  MarketFolly plays right into this as I have been tracking various hedge funds for quite some time now and finally decided to start posting it up publicly.  I’ve gotten so many compliments about the resource I’ve provided and it just keeps me motivated to fill a specific niche in the financial blogosphere.

“What do you enjoy doing in your free-time?”

Well when I’m not analyzing financial markets, I’m tracking hedge funds on MarketFolly as that’s a full-time hobby in and of itself haha.  But no I’m a big believer in taking time away from the markets on the weekends and separating yourself to re-charge.  I’m a big traveler and love to head all over the world when I find the time to try all types of different food and to sample various cultures.  Oh, and I’m also a massive supporter of Manchester United Football Club and have been for 15 years.  Football (a.k.a. soccer) is another one of my big passions.

“Market Folly is now housing 5,000 subscribers with nearly 1,000 posts posted adding value to all of us every day.  You are also recognized as a Seeking Alpha certified contributor.  While it’s an astonishing accomplishment, it’s a daunting challenge many will not dare to seek.  What has been your journey like?  Challenges? Rewards? Learning?”

It really is amazing when I sit back and look at it.  I started actively posting to the blog in July 2008 or so with zero readers and zero subscribers.  The evolution has been amazing and I have all the readers to thank for that.  I think the biggest challenge was just getting noticed to begin with.  There are so many great financial blogs out there already and it’s definitely tough to start from scratch.  I’m a big believer in the notion that good content will spread itself around.  I think I had an advantage in that I came in with a specific niche that was really untouched in the space.  Don’t get me wrong though, you definitely have to work hard to succeed, just like any other venture.  One of the biggest rewards has just been the massive amount of people I’ve been able to meet and interact with.  It has been a true pleasure and an invaluable resource.

“As a ‘hedge fund guru’, what does your portfolio look like? Which hedge funds are you paying more attention to lately?

Well since I actively track hedge funds I’ve actually created a specific Market Folly portfolio that is based on the stock holdings of various hedge funds I track.  I created the portfolio with Alphaclone and am seeing over 20% annualized returns since around 2000 or so.  It takes various holdings of 3 prominent hedge funds and combines them with a 50% market hedge to generate some solid returns over the long-term.  I’ve been really pleased with the performance thus far.

In terms of specific hedge funds, I’m actually adding to my focus a bit by also researching smaller, newer funds with less than $1 billion under management. The funds we track now are pretty prominent and there have been studies in the past that show smaller funds actually outperform, mainly because they can be more nimble and are eager to prove themselves by establishing a solid track record.  Specifically, I’m looking at managers who have previously worked at the prominent funds and have now started their own funds.

“For your personal investing, what investment strategies do you employ?”

Well as mentioned above I like to use the MarketFolly portfolio as it mimics the long portfolios of some of the most prominent hedge funds in the game.  In terms of investment strategy, I definitely prefer a hybrid approach.  Firstly, I like to look for macro themes to play.  Once identified, I’ll drill down the fundamentals on a sector in order to find the best long and short candidates.  Lastly, I’ll use technical analysis in order to help determine logical areas where buyers or sellers are coming in.  This hybrid approach has served me well as I like to use various tools in the investment toolbox.

“If you must choose one ingredient that is vital to successful investing, what would it be?”

I’d say desire.  Anyone can just go out and invest, but to be successful you need to be driven and passionate about it.  Firstly though, you have to find what works for you.  Some people have plenty of time to devote to researching while others don’t.  Some like value investing with long timeframes while others focus on shorter term plays.  You have to identify what you’re comfortable with as well as your risk tolerance and go from there.  But in the end it’s all about desire and effort.

Jay, thanks for the participation.  Keep up the great work at Market Folly, and we hope you keep on pumping out good contents for many more years to come.

Having been exposed to what trading is like since 8, he now has plenty of credentials including SeekingAlpha certification.  In this interview, he shares his background along with some insight on how to gain an edge in trading.  Enjoy!

“Phil, correct me if I’m wrong, but you are best known for the investment

site you manage (Phil’s Stock World).  However, you’ve had quite an

interesting background and experience, especially from your entrepreneurship

aspect.  Can you give us your career roadmap?”

Once upon a time I was Director of Network Sales at Intelligent Electronics, who were acquired by IM back in 1997.  I was there in the 80s, when you actually had to be quite a geek to design a computer network and I was a real technophile back in the bad old days of computing.  I left that job to start Delphi Consulting with my father, who was a Systems Analyst and in the mid 90′s I started a Real Estate Data company called Accu-Search which grew big enough to be acquired by DataTrace (a division of FAF) in 2004.  After that I concentrated on General Corporate (sales, efficiency) and M&A consulting and, of course investing.

“What led you to starting Phil’s Stock World?”

As an investor, I had tried many different stock and options newsletters and found them lacking to say the least.  I already had people asking me for market advice all the time due to my consulting work and my tech background was invaluable helping me sort the wheat from the chaff in the dot-com era so I was already a known stock picker and before I knew it I had thousands of readers.  What started as some postings on Blogger in 2006 turned into Phil’s Stock World and gained a life of its own.  I think we fill a real need in the marketplace for real information without all the BS – people really respond to that.

“With the emergence of new communities like StockTwits, the exposure of

trader web sites and blogs are increasing.  Now, as a seasoned player in

this field, do you have any tips for the new comers, or even the experienced

ones?  What helped you get to where you are today?”

LOL, that’s a tough one as I’ve had several marketing consultants tell me we’re doing everything wrong.  We don’t advertise, we don’t go for promotion and we give away free trials of our newsletter because we don’t want people to sign up for a Premium Membership UNLESS they are sure they want it.  Our site is very different as we (Optrader, David and myself) are on-line chatting directly with our members during most trading days.  We don’t make calls and run off to do a TV show, we’re there following the markets with our readers, adjusting strategies, commenting on the news and answering questions live, when it matters.  I can’t help other stock guys if they aren’t ready to make that kind of commitment to their members – that comes first.

“How long have you been trading?  What is your main trading strategy?”

I’ve been trading since I was eight years old.  My grandfather in England was an investor and he would sit down with me on weekends and go over his portfolio and we’d read the paper and he’d tell me about what companies he liked and didn’t.  My job was to circle all the stocks that were nearing their 52-week lows and he would go over those to see if there were any “values” to be had.  The first stock my Grandpa Max bought for me was Cadbury’s, who I had been pestering him to buy and had come down sharply as there was a sugar shortage driving the price up.  My grandfather and I agreed that it was a short-term issue and not likely to affect their long-term outlook so it became my first stock.  I’ve been a value investor ever since and I use option strategies as a way to both leverage and hedge my investments.

“Do you have any strategies you can share on how you screen the stocks and

determine your entry/exit points?”

As a fundamentalist there is no 5-minute guideline to identifying value but I will say that the simplest way to describe it is patience.  Find a stock you like, follow it long enough to get comfortable with it’s trading channel and, when the opportunity comes and they get near the bottom – BUY THEM.  When they move back up near the top of your value range – SELL THEM.  Investing is governed by greed at the top and fear at the bottom, if you can learn to play the middle, you can do very well for yourself.

“Do you have any big success/mistake stories?”

I called the top of this market too early.  In the summer of 2007 I thought stocks were way overvalued and the financials were in trouble and got a reputation for being an alarmist.  Of course no one was laughing by the end of 2008 but sometimes you can out-think the market when you focus too much on fundamentals and not enough on mood.  I did learn from that mistake and called a bottom to the market on a TV show called LiveStock on March 6th of this year, while the market was crashing and every MSM talking head was screaming SELLSELLSELL,  I laid out half a dozen bullish plays that afternoon, mostly in financials, that had huge returns – so now I’m a “guru,” go figure…

http://www.mogulus.com/livestock/ondemand/pla_6332938475165233151?initthumburl=

“What would be the key concepts investors need to learn in order to become a

successful investor?”

Patience and balance.  We assign all our new members to watch a film that (hopefully) teaches patience and just this Wednesday I had occasion to quote Mr. Miyagi, who said: ” Better learn balance. Balance is key. Balance good, karate good. Everything good. Balance bad, better pack up, go home. Understand?“  Substitute “trading” for “karate” and you can’t have a better summary of how important good portfolio balance techniques are to successful trading.

“Lastly, what are some of the investment resources out there that you use on

a regular basis?”

I’m a big reader.  I read the WSJ and the New York Times cover to cover every day and then I hit the web and read my own favorite bloggers, many of whom now reside on our site under a section we call “Phil’s Favorites.”  Seeking Alpha also has a great collection of writers and then I’ve got a pretty large cross section of the normal data providers I go to for research but for me, it’s all about the quarterly reports and the financial statements and those you can find anywhere – the rest is timing and, if you watch your news flow and pay attention to world events, you can get a pretty good handle on that most of the time.

Now living in Israel with his 5 kids, he manages a blog called New Rules of Investing and is working on publishing a book this coming Spring.  Enjoy the interview.

“So Zach, you’re a full-time dad (and let me underline, of 5 kids), an investor, an investment advisor, a blogger, and a consultant.  Now that’s a lot of different hats to wear.  What does your typical day look like? Or do you not have any day you’d classify as ‘typical’?”

I fashion myself a juggler.  As a child I always had lots of different interests from economics and math to sports and music.  I’m just trying to create a work/life environment for myself that speaks to that.  It took me about 10 years to realize that I don’t fit into a typical 9-5 cube.  So, I’m making it work.  I live in Israel which is +7 from NYC.  So, mornings are reserved typically for client activity, prospecting and writing (I have a book scheduled to come out this spring with Wiley).  The market opens at 4:30 PM Israel time which follows a couple of hours of trading.  I’m typically home for bed time and then hop back online until about midnight. It’s back to school time and I’m finding it’s hard to fit everything into one day.  I have to say that I like the lifestyle of being several hours ahead of the financial markets in New York. It’s almost like my life occurs in two shifts.

“You have a rather unique background having been involved in the growing stages of SeekingAlpha, which as you know is a powerhouse in this industry today.  I’m sure you’d agree SA has had a significant impact to the financial community.  What was it like working at SeekingAlpha? The good and the bad? “

I think Seeking Alpha changed and continues to change the way we look at financial content.  When we were sitting across the table with the senior staff of Dow Jones doing our first deal, we realized that we were on to something.  We helped legitimize non-traditional sources of financial information.  That trend is still so young.  In the early days, we had to convince our partners and prospective readers that contributors to Seeking Alpha weren’t amphetamine-popping, day traders living in the parent’s basements in the pajamas.  Now, Seeking Alpha is creating a unified communications platform designed specifically for the financial vertical.  I think it’s so powerful.

“MBA from Kellogg (Northwestern), B.A. from Harvard…talking about academic credentials.  Now what’s ‘unfortunate’ about your Economics background from Harvard? Can you elaborate on that for us?”

Unlike something practical like accounting, Harvard didn’t offer undergraduates access to coursework or majors that actually prepared you to do something with your life. In fact, to take an accounting course, you had to lobby HBS to let you audit a class.  I thought I would get a PhD in Economics but I felt that so little emphasis was being placed on real-life issues (this was back in 1996 and really predated today’s fascination with behavioral economics) that it just didn’t make sense.

“What type of an investor are you? Day trader? Buy-and-hold? Particular sector? What type of investments have you been making lately in this new market?”

If I had to pick a style, I’m closed to being a value investor but as I’m writing my book, I’m beginning to believe more and more in a more purely quantitative approach to investing — one that removes our personal predilections for stocks.  We all think we’re in the 1% that can truly deliver consistent and persistent alpha.  It’s just not true.

“I personally like the concept of your blog ‘New Rules of Investing’.  I mean I couldn’t agree more.  Now, you have been historically opposed to the concept of blogging.  You also argue that there’s no money in blogging for most cases.  So why blog now?  It’s hard to believe it’s solely for leisure given how busy you must be.  What are some of the drivers?”

I’ve never been opposed to blogging.  My stance, like the stance of the vast majority of people personally publishing online, is that you can’t make money off the blog.  The mathematics just don’t work.  But you can build a very valuable following of prospects and fans that enables you to monetize other things, like your core asset management business.  Like writing a book.  Like lecturing.  I think the blog is uniquely positioned to help asset managers build their practices.

“Lastly, what advice would you give to the young investors who have just witnessed one of the most historical years of Wall Street?”

History is not linear.  We’ve seen things that we’ll see again.  Most investor memory is short-lived and after a couple of years of growth, many of us will forget how tough this year is.  I don’t think we’re out of the trouble yet economically, but the stock market is telling us that we’ll make it out somehow.  Risk tolerance needs to be better fleshed out.  Investors who said that they felt comfortable losing money didn’t actually feel comfortable losing money.  Many investors don’t belong in the market.  If you’ve got a long term horizon, it’s still the best way I know to preserve wealth, build growth, and beat inflation.

With over 7500 Twitter followers and one of the first inductees to the StockTwits Premium network, Joe is one of the most popular technical traders out there.  I have been following him since he managed his own personal blog at blogspot.upsidetrader.com and watched him transform his blog into the premium site it is today.  What you really should know about him is that he did not become popular because of luck.  He did not become popular because of his savvy marketing skills.  He became popular because he possesses a skill that many find valuable.

In this interview, he shared some of key concepts we should grasp in order to gain an edge as an investor.  This is truly an awesome interview, so I hope you enjoy.

“So Joe, your background in investment career is clearly distinguished. How did it all get started? Even before you started your investment career with major firms like Smith Barney, Bear Stearns, and Lehman Brothers, what led you to your particular career?”

I started my Wall St career while in my senior year in college.  My school was literally one train stop from Wall St.  A friend arranged an interview mid semester at Bear Stearns as an intern; I got the job and immediately changed my schedule to evening classes so I could work during the day at Bear. The partner I worked for at Bear was a former partner at Lehman, and his stories blew me away.  I knew from the minute I got on the elevator that this was what I wanted for my life’s work.

“Can you tell us a bit about your blogging journey? Starting from a simple Blogger hosted blog to now a StockTwits featured premium service, has this always been your vision? Why did you start the blog?”

I started my blog on January 1, 2008. It started as a labor of love, and it was truly a work in progress. I just wanted a journal so to speak, something to describe my trades and opinions, and I felt like this kept me more honest with myself and accountable to others. I always liked the pressure of being judged by performance, and I knew people were watching and reading the blog. I also felt like it was a way for me to give back and educate, disgusted with the non-value adding financial media. I described and still describe my blog as “my calling to task of the financial media”.

I was very short in the beginning stages of the crash and all the way through, mainly the financials and materials. The de-leveraging of the market was an easy thing to piggyback on the short side in my view, and yet the media continued to tell people to buy, calling multiple bottoms along the way. Turns out they were wrong everyday, and they hurt people on a daily basis.

Sell side analysts, who never think outside the box, are rarely capable of original thoughts (herd mentality) in my opinion. They would reiterate buys on stocks, even while Rome was burning. Folks who were following my blog did well, and I felt like a voice for the little guy who tried to steer them as best as I could from the conventional wisdom and the herd mentality of the market.

“How did you find StockTwits and what’s your take on the concept? You clearly enjoy it given your involvement with the site, but love to hear more of your thoughts on this.”

I love StockTwits and I am truly passionate about the whole concept. I discovered Twitter about a year ago by accident. My blog readers were asking for a way for me to be more real-time. So I originally pasted the twitter code to my blog for real time updates there, and soon after the readers just started following me on Twitter for the day trade type ideas. Then they read my blog pre-open and in the evening thereafter. Twitter essentially took over as my micro-blogging tool.

Around this time I was approached by Howard Lindzon, the co-founder of StockTwits. I had been reading Howard’s blog for quite a while, so I knew who he was but had never met him. We had dinner in New York one evening, and I decided to move my blog over to the StockTwits community. It basically was a larger scale way for me to communicate to the readers. I’m still irreverent and skeptical of the media and always will be, so it allowed me to give more people what I view as the “real deal” about the markets.

We call StockTwits the “Human Ticker”, and I love that. It’s so apropos. I’ve met so many cool people on the stream: some of the best technical and swing traders, hedge fund dudes, writers, great bloggers, macro thinkers; it’s all there at my fingertips. I don’t think anyone expected the volume of positive coverage we have received, and I truly believe it’s still only the first inning for StockTwits.

“I believe your trading is primarily based on technical analysis. What is it about TA that works for you?” & “Do you have an argument against why fundamentals won’t be as effective as the technical aspect of trading?”

My trading is technically based. I like to say people lie, charts don’t. I am dead against buy and hold investing, and the fundamentalists that I have met in my life are basically clueless. They look at a balance sheet and make a call. When they’re wrong they hide and use “hope” as their new strategy. Hope isn’t a strategy and denial isn’t just a river in Egypt. Value player are worse. How do you find “value” at Dow Jones 14,000? Give me a break. Many thought they could, and they are now unemployed.

After a while, charting in technical analysis becomes nothing more than pattern recognition. I know which patterns usually work and which ones don’t, both from the long and short side. Don’t get me wrong, I have very strong macro views and believe it or not, that has helped me greatly in looking for set ups on a technical basis. I like to think that I think macro, but trade micro.

“What is your strategy on screening your next plays and determining the entry/exit points?”

I don’t screen like many traders do. I can’t get much
simpler. I look at three things:

1. The Market – is it in an uptrend, downtrend or neutral?

2. Sector – which groups look strong or vulnerable? Are
materials exploding off a weak dollar? Are the financials running higher from
good news or a short squeeze? Is money flow going into technology?

3. Individual Stock – after some due diligence on the first
two, I drill down into individual names to short or get long.

My entries are chosen in various ways, but I use the daily
charts to find the final candidate and wait for breakouts and breakdowns. I buy
strength and short weakness, the charts tell me everything.

“So you’re launching a hedge fund soon. You’ve managed one before. Why start again? Can you tell us a bit about it? What’s the scale?”

Yes, we’ve launched our new hedge fund Desert Shores Capital LP a couple of weeks ago. Todd Stottlemyre is my friend and is the other co-founder. It’s a long/short fund, and we are really looking forward to the
challenge. Todd is a phenomenal trader and we both caught the bug around the  same time to launch a fund. I ran a a successful fund from 2000 to 2004, at which point I sold my stake and decided to just trade my own money. I missed being at war with the market on a daily basis in an official capacity. Our plan
is to grow to $100 million over the next year. I’m glad I’m back.

“Lastly, what advice would you give to the current investors in today’s market? (Other than sign up to your premium service and gain great insights everyday, of course)”

The best advice I can give an investor in today’s markets is to block out the noise. Turn the TV off while you trade. You don’t need it. Anything that comes cross in the tube, for the most part, is rarely actionable and is old news, just regurgitated noise.  How can breaking news happen 12 times a day on the same subject?

Perfect ONE  strategy. Just because you had a bad week, don’t jump to a “better” approach. There are hundreds of strategies that work successfully for hundreds of traders. Don’t be the guy that keeps  switching. Be the guy that masters one strategy. If you don’t you are doomed.

This market will tax your patience. If you are wrong on a trade, don’t “revenge trade” the next name.

Trade small in a choppy market and sell your losers fast, and NEVER average down.

Avoid the pundits.  If they were any good, they would have there own money in the game.

It’s meaningless to listen to analysts; they are usually wrong. Many are young, very green and
never lived through or traded a bull or bear market. Traders make money, analysts and economists talk about it.

Joe,  thanks for the time and your thoughts.  This is certainly helpful to many who strive to reflect your accomplishments.  Best of luck in your newly formed hedge fund.

Not only did he climb to the top of the hill swarmed with competition to become one of the few Premium StockTwits Network members, he is also Nasdaq’s Top Data Junkies, has over 2600 Twitter followers, and owns his own TV segment on StockTwits TV.

Now that’s talent.

So how did he get there? Read on…

When people think “electrical engineer” they generally relate that to big complicated circuits and other hardware-related topics. But that’s not necessarily the case, as there’s different specialities you can go into with an EE degree. I focused on digital signal processing, random processes, and some statistics. Having that sort of background is very helpful, especially with options. Options add an extra dimension of time, so you have to consider the statistical distribution of a signal (stock price) over a certain amount of time as determined by the option contract specifications.

My career path has definitely centered around the social web– I’ve come into contact with a lot of really smart and talented people, and I would not have if I didn’t have the ability to socially leverage my “brand” through twitter, blogging, and comment reputation via Disqus and intense debate. All of the people I’m working with now have been the result of months of developing relationships with no real expectation of a business endeavor. It’s critical to develop relationships before there’s money involved; if you just go out to random people and start pitching, they won’t listen.

There’s a clear distinction between knowledge gained when it comes to trading. First is book knowledge– I went out and picked up books that I felt were relevant with what I wanted to do. The rule of thumb with trading books is that the uglier the cover is, the better the information. Books with a celebrity or flashy graphics on the cover generally will be tripe.

Second is practical knowledge, and this was the hardest to gain before this set of information permeated through the internet. The best way to get this is following successful traders online. Many have blogs that you can read– the ugly rule applies here too, but not as much. Approach any fancy sites with a dose of skepticism. You also want to watch out for “gurus” that have plenty of hindsight bias and a lack of transparency. The best finance bloggers are the ones that admit they have been wrong in the past.

Third is psychological knowledge. This only comes when you have skin in the game and have the ability to lose money. Until you’ve actually done that, you haven’t been stress tested. This is what separates true success and failure for trading and active investing. Learning about the natural bias that traders have as well as looking to overcome your own will give you a leg up on 80% of the traders out there. Keeping a trade journal is the best way to analyze oneself and is critical when starting out.

The goal of IWO is to Enhance returns, reduce risk, and print money. Options give you all that, but it’s going to depend on your strategy. If you want leverage, you can easily get that on the options market. Front month at the money options for AAPL are currently giving you a 19x leveraged return vs buying the stock in a non-margined account. But the trade-off with options is the extrinsic, or premium, you’re willing to pay for the added protection and leverage. So you can be a premium buyer or a premium seller, and it’s dependent on your strategy.

Sometimes, though, options just suck. If you’re day trading sometimes the options are less liquid and the market makers aren’t playing nice, so it just makes sense to play stock.

With each options trade, you need to come in with a clear idea of how much you are willing to pay for the trade. That’s your risk, and it’s what you’ll lose if you’re trading thesis is wrong. You can do that by looking at the delta of the option, which is the change of the price versus the change in the underlying, and close the position if the stock proves your thesis wrong.

You can also look at other fixed-risk plays such as verticals, calendars, and iron condors that can give you a better range of profitability without the risk of just buying options.

I started IWO around October-ish because I wanted to put my trade ideas out there in real time, and gain some exposure in the finance community. I felt that building a reputation was something I wanted to do, and I also wanted to share ideas with the community that helped me with the practical knowledge.

There’s famous, and there’s internet famous. Being internet famous means that noone knows who you really are except a core group of people that know you really well, and that’s what has developed with IWO. There have been people that were following me when I was just on my own video stream drinking beer Wednesday night and talking stocks.

I feel that we are really on the ground floor when it comes to a well developed financial community. Stocktwits has some great ideas coming out here soon that I haven’t seen anywhere else. We’re just beginning when it comes to the social aspect of finance, and online finance TV is just on the cusp of an emerging trend. I’m so glad I was able to catch the trend just starting, and I plan to ride it up until Oprah mentions it, then I’m selling out.

There’s a handful, if you go to my twitter page you can see who I’m following– that’s a good place to start.

I don’t make predictions like that! Instead, I want to keep a balanced portfolio where I make money over time by selling premium, and use that premium to make trades in individual stocks.