Sunday Rock & Reminiscing

How did I get into this deal?

It’s funny because, when people ask me how I got into the business I do, and have been since 1993,  I don’t have a definitive answer. I originally wanted to be a Navy jet pilot, ended up driving Navy ships instead, got lots of experience managing lots of people, turned up happy for it, and have since flown power planes, sail planes and especially hang gliders. But before fore that, I got out of the Navy, and eventually quite accidentally fell into what I do now and is the source of my income (a business opportunity direct mail card deck, at root — still amazes me and the guy who sent it out is now a long & dear friend).

But now my prime attentions are focussed almost exclusively on this, health & fitness. Why?

I was doin’ good. Having flown the HGs for a number of years and having the income from the business, I embarked on learning to fly tail draggers (nothing like Cessna trikes). I did, but at the same time, being freed from daily management of my business, I decided to learn how to trade options in the markets, full time.

Did that too; two years straight, full time, including getting up at 3am to get a bead on European and Asian markets. In the first eight or so months after learning the basics, doing some "paper trading" and then putting significant dollars into the market, I turned $60,000 into nearly $1/2 million in a matter of months. If you’re interested, my monthly profit reports are in the blog archives, back around 2006, or use the search. I’m not going to link because it’s better you not get seduced by 20-30% compound gains monthly. Really. Stay tuned.

I’m telling you this, because this is what got me here. After that great feat, over months and months, I lost better than $300,000 in a single week. Attention! Sobering, eh? Well, first thought is that I’m still up a decent amount, eh? Calculate yearly gain! But, what if I’m just fooling myself; perhaps this is a prelude to much worse… Then I stumbled onto Nicholas Nassim Taleb, Fooled by Randomness, and then, The Black Swan. I blogged about it (look those up too, if you like). In short, I decided I needed to wind down and do something else.

I could and maybe will, someday, write a whole book about that experience; but, the essential thing is that I came away thinking that I was just lucky. I traded credit spreads, which are like crack. You get money for the trade. The goal is to keep it while risking a 10X loss (depending on the strikes & spread). But, still, money in hand. The truth is that I entered the market at the prime point for that particular options strategy (actually 1-2 year before would have been better — it was a very long run). I could even "roll" trades at a loss over months and months, like doubling down on a bet, and I would eventually win — even rolling losing trades 4-5 months in a row. I was wholly seduced. I was invincible!

I don’t know if it was Taleb or not (I’d like to know), but a few years before I was listening to a guest on Bob Brinker’s Money Talk radio show and he, options expert, said that "many options strategies let you win over a long period of time and then, you lose big." That too kept ringing in my head, throughout.

Yep. And here was the deal for me: after reading Taleb and thinking about my own experience, I could not distinguish between luck & smarts in the market. And if you can’t do that, you have no business fooling around with your nest egg and your wife’s money. So, I wound it down. Now, I just buy a few Spiders (SPY) at selloffs, and I hold. And I do a few ProShares on the S&P too (2x leverage), but very modest.

In the whole process, I got profoundly fat & unhealthy. That’s where you pick up the story I’ve told before. And the rest is happy history, for me. Even in the face of a few unexpected issues with hypothyroid, I was able to figure it out within a few weeks and fix it. Never felt better. Riding sky high, now.

Another important thing. I had already, as I said, blogged about Taleb a few times, and I had previously taken the trouble to look him up, let him know about the blogs, and I got a couple of cordial email responses in return.

So, how do you suppose it looked to me when I discovered my now good friend — who’s willing to wrangle Der Spiegel interviews for me — Art De Vany was a fan & buddy of Taleb, and way at the outset?And, Taleb is now fully in the EvFit / paleo camp and has impressive results of his own. No coincidence, I think. It was either resign, or have a number of other things finally come together, and then stick with it. I stuck with it. paleo / EvFit is principles based and can work for every intelligent and health conscious person to get there, eventually.

A small world. I can’t say whether learning of that coincidental connection early on is what kept me on the EvFit / paleo path, or not, but I would never mind thinking so. Bebe, I dumped all that. I’ll never look back.

Babe I’m Gonna Leave You – Led Zepp

The audio on this one is excellent; astounding, actually. That’s why I picked it above a few live versions from ’69. But if you want to explore…, and I recommend it.

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  1. Brett Legree on February 15, 2010 at 03:29

    Awesome pick this week.

    Yeah, though I’m only a recent convert, Paleo has given me a fresh start. I’m back on square one, physiologically and therefore psychologically.

    Of interest, for various reasons I had gone back to square one financially as well last year – at first, it didn’t seem a positive thing, but in retrospect it has given me freedom.

    And, around about the same time as I found Paleo, I finally (finally!) figured out where to go next with my career. One of those moments of clarity.

    It’s going to be big.

    I am sure that the mental clarity is linked to the changes in my body as I rid myself of that which was weighing me down.

  2. Marc Abel on February 15, 2010 at 10:48

    Here is a good article on cholesterol on MSNBC. Nothing you don’t already know Richard but I think it is good this stuff is reaching the main stream media.

  3. epistemocrat on February 14, 2010 at 22:39

    It seems the Taleb / DeVany intellectual link has resonated well form many people. It did for me, thankfully. Healthy financial and physiological results permeate from that foundational base. My “sugar is like debt” analogy seems to capture this bricolage nicely–de-leveraging nutritionally makes our bodies more robust to negative Black Swan health strikes.



  4. geekfish on February 15, 2010 at 14:25

    Actually I am a big fan of Taleb as well. Read Black Swan and then went back to Fooled by Randomness. Fooled by Randomness is much more compact in my opinion. Changed the way I looked at the world as well.

    Taleb expounded on his Ev/Paleo thinking in a couple articles I read about him. Surprisingly that led me toward finding out more about it. Interesting clustering of ideas around here.

  5. Gary W on February 14, 2010 at 23:34

    Funny, I also happened upon the Paleo principles after suffering a large loss from trading options. The loss gave me a new perspective on the value of money versus other things in life like family and health, and if it hadn’t happened I probably would still be merrily continuing my Standard American “healthy” diet, to who-knows-what detriment in the future for me and my family. In hindsight, the newfound knowledge about the Paleo principles was probably well worth the “investment”. It’s funny how things work out in life.

  6. Adam on February 14, 2010 at 23:56

    *Came across Taleb and DeVany independently. Taleb first, then DeVany. Initially, many thought that these ideas would go over like a lead balloon…

  7. Tami on February 15, 2010 at 02:47

    As wise men said; health is not everything but without health everything is nothing.

  8. Aaron M Fraser on February 15, 2010 at 06:01

    One of my other favorite bloggers/people in general is speaking highly of Taleb atm – Tim Ferris.

    The world is small indeed, seems the blog-o-sphere is even smaller. Definitely going to put Black Swan on my reading list.

    Another great song – been listening to Led Zeppelin since I was in the womb. Music today lacks so much of the life that they put into theirs.

  9. Vendo on February 15, 2010 at 06:47

    I discovered Art through an economics blog. Go figure.

    What a great song.

    • Tin Tin on February 15, 2010 at 16:04

      I found Art’s site looking for sites on motorbikes. Art used to be a bit of a biker. I think he’s since given up on them.

  10. JD on February 15, 2010 at 12:21

    Reading The Black Swan turned my worldview upside-down in more ways than one. His idea of different probability landscapes — Extremistan vs. Mediocristan — is illuminating. Also our evolutionary bias towards optimism … so many great ideas in that book. Picked it up at a garage sale for $1 — best purchase ever.

  11. StephenB on February 15, 2010 at 12:33

    Taleb recommends a strategy for taking advantage of beneficial black swans, and that is keeping most money in a hyperconservative investment (like short term treasury bonds) and investing the rest in a variety of hyperspeculative investments. No, not the lottery; investments that have unlimited upside. This approach takes patience, as it may be a while before it pays off. Normally, S&P 500 spyders for example would be expected to pay off in the long term, but there might be an unexpected calamity not accounted for in risk models. Taleb’s ideas have interesting implications, in any case.

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