August 5, 1999
As the subtext of Mark O. Barton's Peach State short squeeze quickly makes the transition from "day-trading massacre" to "real-life Stepfather," you may find yourself in need of a top-down analysis. If so, tune in tomorrow for our special team coverage of the tragedy. In the meantime, we'd sooner bring sound man Mike on our next camping trip than test the market's new volatility. But an interview with Tokyo Joe's Societe Anonyme, the polyglot investment guru whose advice for individual investors has made him one of the most sought-after bons vivants in the world of finance, helped dispel our fears. Joe spoke with us from his vacation spot in Milan:
Suck:Are you at all concerned for your own safety?
Tokyo Joe:Not really. I think there are other people who are more worried than I am, because I've always been straightforward. There are other people who probably prefer not to be named, but they should be more worried than I am.
S:Barton was doing his trading at a trading room, rather than from his home, where he presumably wouldn't have been able to find as many victims. Do you think some of the killing might have been averted if he'd just been trading from home with RealTick software and following your investing principles?
TJ:I thought about him quite a lot, and I think his problem wasn't really trading. It was something besides trading. And even though he used that as an excuse, I don't think his actions proceeded from what he went through as a trading person.
S:Well he had lost a lot of money, apparently....
TJ:How much did he lose? Did they prove how much he lost?
S:According to Newsweek, he lost $87,500 in June. And Momentum Securities refused to reopen his account because he had to cover $100,000 on margin.
TJ:So that just proves the point that day trading's not for everybody, doesn't it?
S:Well that's my next question: Do you think people who are potentially dangerous should be day trading?
TJ:No, if you go to my Web site, you'll see my post that 99 percent of new day traders lose money their first month. Besides, we're not really day traders. If you look at our past performance, we don't really go for half points or quarter points like these boiler rooms, where they get a commission from the trade. We go for a gain — from two or three to maybe 50 points.
S:Do you think there are more people out there who might be dangerous now that the market's in trouble?
TJ:I'm sure there are, but it's my job to make sure people don't get hurt. (!!) That's why I've been telling them to go into cash for over a week now. I'm telling people to sell everything. I make no money by having people trade. I'm not a brokerage.
S:What are you basing your market advice on?
TJ:Momentum, the market sentiment, the charts. Common sense, basically.
S:When somebody goes crazy like this...
TJ:I have no interest in this guy, and I have no empathy for him. I don't see why you're doing this interview with me in the first place. You should talk to people like active traders, those scam people in the chat rooms, market makers who buy zillions of shares and then pump it up in the chat rooms. Talk to them.
S:So would there be less physical danger if people were investing more responsibly?
TJ:We're very responsible: That's the point. The success of Tokyo Joe's is because of that. That's our advice — go into cash, be defensive.
S:You mentioned market sentiment. Does something like this have any impact on market sentiment?
TJ:Every August sucks. Experienced people know that every August sucks. All the market makers go on holiday: They go to the Hamptons. All of Europe shuts down for one month. There's all this window dressing coming up end of the summer. You go cash, especially after what happened last year — Asia in July and South America in October. Rising oil prices, weakening dollar, inflation worries ... you go cash! Why's it so hard?
S:What should I do at the end of August?
TJ:We always look ahead. We're going to make some buys after Labor Day, but nothing's really happening until late September or October. But I think we're calming down from the madness we've had over the last three years.
S:Chairman Greenspan is considering raising interest rates again. Since that might push some people over the edge, should he take enraged day traders into account before he makes his decision?
TJ:How much can Mr. Greenspan make it more clear? He talks about the irrational exuberance index. You had the biotech hype 10 years ago; you have Internet hype now. It's going to become more evaluation based. People are going to want to know where the beef is.
S:Would you see any way of keeping crazy people from trading?
TJ:Yeah. Day trading firms should be more honest. (!!!)They should have more strict screening procedures, more responsible asset management in terms of making sure the people are as risk tolerant as they claim to be. Ninety percent are not. Some people even use credit cards; some people even borrow off their mortgages. It should not be gambling.
S:Do you see a regulatory solution? Should we pass NAFTA regulations so that crazy people can't trade in Mexico and Canada?
TJ:There should be more regulation. I think the SEC is already going toward more regulation. And the market makers don't want to have their business taken away. It should be more systematic.
S:Should dangerous traders occasionally be allowed to win, say, $100,000 in cattle futures to calm them down?
TJ:No, that's stupid. You're going to have nuts in all sectors of society. There were more nuts in the post office, right?
S:But there's a great deal of volatility in the day-trading environment....
TJ:Only if you become a day trader of the gambling kind.
S:Do you know what the "O" stands for in Mark O. Barton?
TJ:What?
S:Orrin. Do you think the media keep calling him Mark O. Barton to give his name a Latin flavor?
TJ:I have no idea. All I know is he was a nut case. He was not a typical day trader.
S:What are you doing in Europe?
TJ:Every year I take a month, month-and-a-half vacation in Europe. Play golf, relax.
S:Well enjoy your vacation.