Living With Ed Seykota ft. David Druz

[00:00:00] Dave

“What’s your biggest drawdown?” You know, like in his trading, and he thought for a while, “Well…,” that’s how he would talk, “Well, I don’t think I’ve lost more than 50% in a day.”

I mean it’s like, WOW!

I mean, this is a guy who probably has made more money trading, return wise, and it’s like he knows if you want to get the optimal return, you have to push that bet size. And the heat has to be high. And most people can’t do it. But if you’re wrong, and you’re too far, you’re going to wipe out. It’s like, ‘don’t do this at home, kids’, kind of thing.

[00:00:50] Intro

Imagine spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world so you can take your manager due diligence or investment career to the next level.

Before we begin today’s conversation, remember to keep two things in mind. All the discussion we’ll have about investment performance is about the past. And past performance does not guarantee or even infer anything about future performance. Also, understand that there’s a significant risk of financial loss with all investment strategies. And you need to request and understand the specific risks from the investment manager about their product before you make investment decisions.

Here’s your host, veteran hedge fund manager Niels Kaastrup-Larsen.

[00:01:45] Niels

Welcome to another episode in the Open Interest series on Top Traders Unplugged, hosted by Moritz Seibert. In life as well as in trading, maintaining a spirit of curiosity and open mindedness is key and this is precisely what the Open Interest series is all about. Join Moritz as he engages in candid conversations with seasoned professionals from around the globe to uncover their insights, successes and failures, offering you a unique perspective on the investment landscape. So, with no further ado, please enjoy the conversation.

[00:02:21] Moritz

Hi everyone and welcome back to the Open Interest series on Top Traders Unplugged. This is part two of my conversation with Dave Druz. This is the bonus part where he speaks about his time with Ed Seykota, and a couple of other things – some really interesting stories there.

I hope you’ll enjoy that. I thought it was really great. We appreciate any feedback you have on this, so please let us know. You can always send us an email. It’s info@toptradersunplugged.com, but let’s get into it. Here is part two with Dave Druz

So, we’ll keep it trading focused. Just speaking about how you designed the system, what’s important to you, how to trade, emotions, things like this.

[00:03:07] Dave

I could give you some anecdotes here and there about my apprenticeship with Ed Seykota, if you’d like. Some people find that interesting. You can ask me some questions about that. He’s sort of a private guy in certain ways.

So, it’s not like I can tell you everything, but I can give you, from my perspective, some of the things that I picked up from my six months living with him.

[00:03:31] Moritz

Oh, you lived with him. You mentioned that, in Tahoe.

[00:03:34] Dave

I was his first apprentice back in. It was ‘91 or ’90, somewhere in there. He had several after that. I don’t know what he’s doing now. We’ve fallen out of touch in the last several years.

But yeah, I was fortunate enough to be his live-in apprentice, and I lived with him for six months straight, and traveled with him wherever he went, and just picked up what I could and what he shared. And there’s some pretty interesting things that he had to share, that are different than my approach, that some people might be interested in. A lot of the things that Ed does, no one else can do, and you might as well… don’t even try.

[00:04:26] Moritz

So, what is this? What do you mean by this?

[00:04:27] Dave

So, you’ve read the Market Wizards, the original book, right? In 1980s? Anyway, wasn’t it Jack Schwager? Was he the author? I can’t remember for sure.

[00:04:37] Moritz

Yes, yes, he was.

[00:04:39] Dave

But anyway, you know, he gave a beautiful chapter on Ed, and he was, you can tell he was absolutely astonished by Ed when he went to visit him. He visited him in Tahoe. And he saw Ed’s computer on his desk and all the programs Ed was doing.

And at the time, you know… It was quite advanced. Now, anyone can just download an app and do these things. But Ed had written all his own programs.

So, Jack assumed that Ed was a systematic technical trader. That is absolutely the most incorrect assumption about Ed that I think most people take away from that book.

You know, you use a computer for your trading, if I glean from what you’re saying, and we did, and we had algorithms that we follow strictly, and backtested everything before we would implement anything. So, this is what we think of as a systematic trader. But Ed isn’t that at all. Not even close.

Ed is a technical discretionary trader. He wrote all these programs to support the data presentation that he then used to make discretionary calls about buying and selling. He does have… I don’t know what he’s doing now. He did have some very specific, general rules that he followed, that he felt were sacrosanct to trading. And these are the general rules everybody follows: cut your losses short, let your profits ride, diversify, and so on, and so forth.

But he did not have a computerized system to do this at all. He would look at the charts each day and then decide what he was going to do the next day.

[00:06:41] Moritz

So, he was looking for setups, chart patterns and stuff like that.

[00:06:43] Dave

Yeah, I mean, he is the best trader the world has ever seen in terms of being able to make money in the markets. Now, no way is he the kind of trader any institution would want to invest in, because his equity swings can be gigantic. And his job, in his mind, was make as much money as I can in the markets.

But he would look at the charts each night and then decide what he’s going to do. And it was absolutely amazing. I remember one time, this was back when they were called German bunds, the German bund chart. And we were looking at the charts, and these are chart programs that Ed wrote. This was way before you could buy a chart program and just have the thing chart. And we wrote some of our own, in-house, before you could get them commercially, too.

But Ed had written his own chart programs, and he had the ability, in his chart programs, to use his mouse and draw, hypothetically, what the market might do or what patterns might look like. So, one day we’re looking at the charts, and we’re looking at the German bund chart.

And my favorite part was looking at charts with Ed, to see what he was going to say. So, we’re looking at these charts, and I said, “Ed, what do you think is going to happen with those bunds tomorrow?”

And he takes his mouse, and he draws a bar, you know, with a high, low, and a close. Okay, the next day bunds did exactly what he drew. I mean, exactly what he drew!

So, he just had this amazing ability to anticipate what the markets were going to do. And this is something that you can’t program. You can’t teach somebody directly.

And when I visited him, right off the bat, when I’m starting out to be his apprentice, he gives me this little teeny book that he wrote. And I can’t remember what it was called, maybe I can, The Trader’s Window. And this book has nothing to do with trading.

He wrote this little book called The Trader’s Window. And in it, it talks about a jade master, and the jade master… Somebody comes to the jade master and says, “Master, master, teach me about jade.” And the guy doesn’t say anything. And the guy comes back and, “Teach me about jade.”

And the guy gives him a little rock. And the guy looks at the rock and, you know, comes back the next day and the guy said, “Well, you know, this doesn’t look like jade to me.” The jade master doesn’t say anything, and he gives him another rock. And this goes on forever.

You know, it’s one of these Zen kind of teaching things. And then, after a number of years, the guy that’s been coming and sitting with the jade master, he knows what jade is, he knows everything about jade. And the master has basically told him nothing. They just sat together. Okay?

So, he gives me this book, and little did I realize this is Ed’s teaching style. You know, you just hang out with the guy and you see what he does and see if you can do it. So anyway…

[00:10:14] Moritz

So, what was it like on a day-to-day basis? Were you sitting next to him at a desk, like chair by chair, and watching him?

[00:10:20] Dave

No, no, no, no, most of the time it was just whatever Ed was doing that day. It was like, “Hey, Dave, let’s go down the hill to Reno and go to the grocery store.” Okay, so, we’d go down to the grocery store. And we’d come back, and then Ed would play banjo. You know, he’s a great banjo player. And then, at the end of the day, when markets closed, we’d look at charts. It would take about, maybe, 10 minutes. That was my favorite part.

And then I said, “Well, Ed, what do you think about this?”

“Well, I think I might buy that.” And I said, “Well, where are you going to buy that?”

“Well, you know, somewhere around here.” And he’d draw a little. He’d never tell me exactly.

“Well, but where are you going to put your stop?”

“Somewhere around here.”

And that’s it. That’s what we’d do.

And I’d just watch him do this. And he is very, very big, very big on psychology. And his idea was, for Market Wizards, everybody gets what they want from the markets. And markets are a vehicle for people to work out their psychology. And if they have any hidden psychological kinks, they’re all going to come out in the markets. This is his idea. And if you’ve got anything that’s screwing you up, inside, you’re going to bring it out of the markets and you’re going to screw yourself up.

So, he was very big on trying to understand your own psychology, but it wasn’t like he sat down and gave you a shrink session. But he did have these sessions where traders would come together, and they’d talk about their problems, and stuff like that, just to try to get it out so that it didn’t come out in the markets.

So, he was very big on psychology, and he spent a lot of time with his programs to display different things, but it was mostly just charts, things that we can get easily today. But it was not easy back then. And you just didn’t spend that much time looking at markets at all. And during the day, you know, it’s not like he had screens. He didn’t have live screens.

And anyway, it was an amazing experience to hang out with him. Not just to watch and trade, but he’s so perceptive about people’s psychology that you could not hide anything from this guy. If you had any psychological problems or things you were working on, he could see it instantly and he would nail you on it.

And it was very uncomfortable, actually, because, you know, most of us have these ego defenses and we walk around all day with them and we’re fine, but Ed would just nail right through them, because that’s how you get to be a good trader. I think it was his idea.

You have to make sure you understand your psychology as well as possible, because if your style of trading doesn’t fit your psychology, you’re going to fail. That’s his idea. And everybody has a slightly different psychology. You won’t be able to stick to your system if your psychology doesn’t match it.

You know, we’re computerized systematic traders. Well, you take someone who just doesn’t have a psychology that can do that, even if it’s a fabulous program, they won’t follow it. They’ll go in and tinker with it, or they’ll screw around with it, or they’ll do something. Anyway, understand your psychology well. Make sure your system is based on it.

Now, he always tried to encourage me to get away from systematic computerized trading because he felt that the returns on that were not nearly as much as you could get from discretionary trading, but technical discretionary trading.

In other words, never listen to the news. What does the chart tell you? What does the price tell you? And then make your decisions based on true factual information. He always tried to get me to learn to trade this way. And I said, I can’t possibly do that for my investors. I don’t have any backtesting. I don’t have anything to go on. But he’s always encouraging me to learn to do that.

Well, after I apprenticed with him for that time, I thought, well, all right, I’ll try it with my own money from my own account. And he always also said, you always have to trade with money that’s meaningful in order for you to learn and understand yourself. Like, if you’re a millionaire, you don’t put $10,000 in an account and trade, or you’re never going to learn anything because it doesn’t mean anything to you. So, you have to put something meaningful into the account.

This is very scary because if you’re wrong, you’re going to lose a meaningful amount of your equity, of your assets. But this is his idea. This is what you have to do.

So, after I apprenticed with him, I said, okay, I’m going to try this for myself. And so, I took, for me, what was a significant amount of money and set up my own account. And I let my investors know that I do have a proprietary account, and it has nothing to do with what we’re trading, and I’m not trading ahead, and blah, blah, blah, just to disclose.

So, what I did is I continued to run my systems for my investors, but I traded this account for a little over a year. And every day I would say, okay, pretend you’re Ed. Okay, all right, you’re Ed. You’re sitting with Ed. Okay, look at the charts. Okay, what would I do? Well, I’d probably buy it around here. I’d probably put a stop about here.

Okay, so, I did this for about 15 months, made 300% return, and absolutely went crazy because it was not my trading style. At the same time, my systems made 20% for my investors.

I closed the account, and I saw a psychiatrist for a year because I so messed up myself by pretending I’m somebody I’m not, even though I somehow was like the guy that went to the Zen master, You know, I pretended I was Ed for a year. I couldn’t do it. So, it’s just… He has a completely different style than you get from that book.

And I think that’s maybe one of the most interesting things that, you know, we could bring up, if people were interested, about it. But, you know, we don’t need to go into zillions of Ed stories.

If you’ve read all the things you can find on me online, Ed and I once wrote an article together on optimal bet size. Did you ever see that? It’s out there online somewhere.

[00:17:24] Moritz

There is heat distribution and these types…

[00:17:26] Dave

There is actually an optimal bet size if you have a system with a known edge per trade. Now that’s the thing, because systems don’t have a stable edge per trade. It varies depending on the period of time. And so, it’s only a rule of thumb. I mean, it is true that there is an optimal bet size. And so that’s the thing to take away from that type of a study.

You know, you do a backtest. You see what the edge is, what would have been the optimal bet for this particular system, on that particular portfolio? And this, again, this is a computerized systematic trading method. He knows how to do all this. It just isn’t the way he did it.

So, we wrote this article on optimal bet sizing, and the optimal bet size is a lot bigger than most people would want to use. You know, you go too far and your risk of ruin, it’s douche. You head right into it.

But you go too little, and your risk of ruin is almost zero, but you’re not going to make a lot of money. And so, I was curious. I asked him, Ed, “What’s your biggest drawdown?” You know, like in his trading, and he thought for a while, “Well…,” that’s how he would talk, “Well, I don’t think I’ve lost more than 50% in a day.”

I mean it’s like, WOW!

I mean, this is a guy who probably has made more money trading, return wise. And you know, it’s like he knows if you want to get the optimal return, you have to push that bet size, and the heat has to be high, and most people can’t do it. But if you’re wrong and you’re too far, you’re going to wipe out. So, you know, it’s like a “Don’t do this at home, kids” kind of thing.

So, another really interesting thing that I got from him is, here’s a guy who actually made a lot of money in the markets, but he did it by, you know, the rule is, if you want to make a lot of money, you have to bet bigger than you think, but not too big, enough that you have to take a lot of heat. And most people could never, ever, ever do it.

And also, the other amazing thing is, you think about it, if you’re a discretionary trader, you have to learn to deal with what it feels like when you take a big loss or several big losses in a row. And most discretionary traders that do that, even systematic traders (I mean, I know I would feel it), you just feel awful. And it can make you feel down, and it can make it like you just don’t want to get up there and swing again the next day because you’ve just been hurt.

But a discretionary trader, just like a systematic trader, has to somehow cope with this and be able to get up there and still do the right thing the next day, even if he’s had a string of losses or one big loss just recently. And in this regard, Ed was absolutely flawless, flawless. He had no, like no memory of what had happened.

It was like every day was new. And every day was ‘do the right thing’. And he was never affected, at least outwardly. You could never see that he was affected by any losses that had happened recently. That was an amazing thing I learned from hanging out with him. I. He just never expressed anything other than the right way to trade every time.

[00:21:24] Moritz

Sounds like he didn’t take any of these losses personally. Like, you wipe them from the memory and you just rinse and repeat the next day.

[00:21:32] Dave

Exactly.

[00:21:32] Moritz

Did you also do this? Is this something that you learned from him, like, there’s no memory type of thing about the markets?

[00:21:38] Dave

You mean when I did my year of discretionary trading? Yeah, I just pretended. I just pretended I was Ed, every day. You know, I did it for like 15 months. But it was just so not me. I can’t tell you. It’s like, I can’t tell you. I don’t want to do that ever again, you know?

[00:22:02] Moritz

Yeah, you said this.

So then, when you had your own firm, did you feel that pain again? I mean, it doesn’t mean that you need to take it personally.

[00:22:09] Dave

Oh, systematic trading. Yeah, I’m not going to lie to you. Absolutely. When I would lose money for investors by following my system, it always hurt. But, you know, it’s like I’m doing the right thing. My research is really good. It’s solid. I have confidence long-term. But of course it hurts when you are in a drawdown. You know, how people handle drawdowns, I think it, makes some of the biggest difference in who is successful over the long run. During a drawdown, your psychology really affects what you’re doing. People question their systems. If it’s an algorithmic system, they’ll go, “Oh man, something’s wrong with my system. Maybe I need to change something.”

What a mistake. That’s the worst time to change something is in a drawdown. You have to make absolutely sure that there’s something wrong or you should never tinker in a drawdown. That’s not to say that you can’t improve your systems and it’s a good idea for people to always try.

But don’t let the drawdown psychologically affect your appropriate assessment of your research. So many people tinker with their systems in drawdowns and you can’t. You’ve got let the statistics play out.

[00:23:37] Moritz

Yes, which is a tough thing to do because it means that you have to trade at the appropriate size when you are in a drawdown. You can’t have a drawdown reduction rule where you, all of a sudden, are dialing back because it may take ages for you to come out of the drawdown, if you ever come out of the drawdown.

[00:23:51] Dave

Unless it’s part of your system. If it’s part of your system to do that and you’ve tested it, you should do that. But if it’s not part of your system, you should follow your system, whatever it is. There’s a problem with this too though.

If you remember John Henry, I’m sure you probably have heard of him, a famous commodity trader from the ‘80s and ‘90s, and then bought the Boston Red Sox and quit trading. Well, John, if I remember this right, John did not ever decrease his bet size when he was in a drawdown. And that does not work indefinitely. You get out of the drawdowns faster. But if you don’t decrease the bet size, as you draw down, your risk of ruin goes way up.

So, you know, he eventually blew up after trading for many, many years. I don’t know why, particularly, he did, but perhaps this was one of the reasons. So, you have to have some way to manage your bet size in drawdowns or in gains. Because, you know, you start with US$1 million dollar account and your bet size is X. Well, when you’re US$2 million, it should be 2x or approximately. I mean, your bet size needs to change with your equity at some point. If it’s day to day or month to month, it does need to adjust.

And you can’t just, you know, as it goes up, increase and as it goes down stay the same unless you’re willing to increase your risk of ruin probabilities. So, just follow the system in the drawdown, whatever your system is, unless you’re absolutely sure that there’s something wrong with it.

[00:25:44] Moritz

That’s right. Like, when you go into a drawdown, with your example of the US$1 million dollar account, and you’re down at say US$500,000, your bet size should no longer be US$1 million. It should be approximately (depending whether you use close trade equity, open trade equity), but say it’s US$500,000. That’s, that’s the base that you’re using to size it. But it probably shouldn’t be US$250,000, which would be too little risk put on to get out of the drawdown. But, you know, a bunch of these drawdown reduction rules. I think they do exactly that.

The system goes into a drawdown, and they start putting on risk betting smaller than they should simply because they want to get out. We don’t want to get into more pain, we don’t want to get into more trouble. But, you know, there’s a price to pay, which means you’re not getting out of the hole.

[00:26:31] Dave

Right, and. statistically, it screws up all the statistics of how your trading system should work anyway. Yes, I agree with what you’re saying there. Your bet size should be proportional to your equity depending on how much heat you want to take in that particular system.

And somehow there should be an automatic adjustment within the system to change the bet size, with respect to equity fluctuations, and how you time that, and whether it’s based on open or closed equity. Open equity, it never works, really. People can try it. But closed equity or equity after everything would be stopped out, something like that, it’s much more stable. And there should be some type of adjustment rule built in. That’s my opinion.

[00:27:29] Moritz

Yes. Because the open trade equity is also far more volatile. It includes all these, you know, big open profits that you have. When you then use that capital as a base to size your trades, you have a propensity to over risk. Whereas the closed trade equity is more of a step function that’s supposed to go from the bottom left to the top right and therefore much more stable over time.

[00:27:49] Dave

I agree, I totally agree with that.

[00:27:57] Moritz

How does one get to be an apprentice of Ed Seykota?

[00:28:01] Dave

Yeah, well, okay, so I can tell you how I did. I don’t know if he’s doing it anymore. In fact, you know, I doubt he is. I mean, he did it for a while. You know, it’s like he tried it for a while. After me, there were a few other guys. I don’t know how long he kept it up.

So, this is how it worked. You know, I’d read the Market Wizards, and I got the impression that this guy is a systematic trader, algorithmic trader, like me, you know, and I thought, I want to learn from the best. Well, I didn’t realize, of course, he’s not that. But nonetheless, I wanted to learn from him.

And in the book, it doesn’t say exactly where he lived, but you got the idea that it was near Lake Tahoe, Nevada, from the book. So, one day I was in the Tahoe area, and this was in the days before cell phones, of course, and this was in ‘89, ‘90, somewhere around in there.

And so, I just stopped at a little 7/11 store and there was a payphone and there was a phone book. And so, I wonder if Ed Seykota is in the phone book. So, I looked him up and there it is, Ed Seykota, in public. So, I called him up on the phone. He answers the phone. He doesn’t have a secretary or anything.

And I said, “Hey, Ed, my name is Dave Druz and I’m a quantitative trader. And, you know, would it be possible to learn from you, or study with you, or have you look at my trades, or something?

And he pauses and says, “Send me your trades. Send me your trades and I’ll look at them and we’ll talk later.”

And I said, “Okay, okay, where do I send them?”

And he gives me some address. So, I go home, and from the previous year, I got all the charts from the previous year. And I marked down the charts, our exit, our entry point, the size, the stop point, where we got out, all this kind of stuff.

So, I express mailed or FedExed all my charts to Ed for the last year. And I put in there, “Okay, when you get these, give me a call, like you said you would, and I’m waiting to hear from you.”

So, about a week and a half, or two weeks go by, something like this, and I didn’t hear a word from Ed. And I thought, he had to get it because I know the FedEx people delivered it. So, I called him up again on the phone and he said, “Hello, Ed, this is Dave Druz. I talked to you a week and a half ago, or whatever, you told me to send you my trades. I did. I wonder if you had a chance to look at them.”

He goes, “Who?” It’s like, who are you?

And I said, “Well, I’m Dave Druz.”

“Where are you calling from?”

“I’m calling from Hawaii.”

“Do you have anything to do with my ex-wife’s attorney? She’s in Hawaii.”

“No, Ed, I’m just a trader.”

He’s yelling at me, and he’s like, “I’m tired of talking to attorneys!”

“No, I’m just a trader. I sent you charts.”

He said, “I don’t remember anything.”

And then I got sort of upset with him because I worked really hard on these charts, and he told me to do it.

I said, “Okay, look on your desk. Look on your desk. Do you have a FedEx package there?”

He said, “Oh, yeah, I got one here.”

“Ed, open it.”

He opens it and he says, “Oh, look at these trades. You trade a little bit like I do. He says, why don’t you come out here and be my apprentice? That’s how it was. That’s how it went.

[00:31:51] Moritz

Funny, I thought you were working together at Commodities Corp earlier. So, you didn’t overlap there?

[00:31:58] Dave

No, we didn’t overlap at all. Not a bit. Not a bit. No. That’s how it worked.

And I said to him, “Okay, don’t forget that you told me to come out there to be your apprentice, because I’ve to get a plane ticket. I’ve got to change my whole schedule. I’ve got to fly out there. And do not forget you told me to do this.” Because I could just see this guy, like, totally forgetting the whole thing. And so, I rearranged things, and I did call him back and said, “We’re still on for this? You know, I’m planning to come.”

“Yeah, yeah, I’ll come get you at the airport.” And so anyway, that’s how it started.

[00:32:44] Moritz

But funny, I didn’t know you were already in Hawaii back then. I thought you were on the east coast at some point.

[00:32:51] Dave

No, no, I was in Hawaii. Hawaii and Alaska is where my work was. And anyway, so when I went out to live with Ed, to begin with, living with this guy was… It was one of the most amazing experiences of my life. He had two places in Tahoe. One gorgeous, huge house, and then one condominium, both on the lake.

And so, he was staying, currently, at the condominium. And he had a big room, a big, beautiful living area that looked out over the lake with his main desk with his computer on it. And then he had this little room in back. And the little room in back had no heat, and it had a little bathroom, but it wasn’t heated, and the toilet seat was freezing butt cold. And anyway, so I got that little room and back. And my job was to clean data for him.

So, this was in the day when data, you’d get end of the day downloads and there was a lot of bad data. And so, each day I would look through all the data and try to see if that data looks bad, and then I would try to find the good data, somehow, and tell him.

And then he totally forgot about me, 100%, he didn’t even know I was there, okay. And I would have to come out from the back room, you know, to see him at his desk and I would come out and he’d go like, “Who’s this guy coming out of the back room?”

I said, “You remember me? I’m apprenticing back here cleaning data.”

“Oh yeah, how you doing?”

I said, “Ed, is there any food around here?” I hadn’t eaten for a day or so, you know, I was expecting he was going to come back and say something, “Is there any food around here?”

He goes, “Probably something in the fridge.” And then he goes right back to his… Yeah, it’s like, didn’t even know I was there.

And this went on for a while, you know. The whole thing is that you couldn’t make it up, you could not make these stories up.

But anyway, he finally realized that I was actually there and I did have some value at cleaning data, and anyway, we got to be good friends after a while, but it was quite the experience.

[00:35:10] Moritz

Amazing. Thanks for that, Dave.

[00:35:12] Dave

Yeah. Fun stories.

Let me tell you one final Ed story.

So, Ed has this idea that we limit ourselves in our success in the markets because we don’t believe that we are deserving of great success or we feel that we’re not worthy or that we’re not adequate or not good enough. We hold ourselves back. That’s one of his psychological ideas.

So, you’re always trying to clear our psychology and help us feel that we do have the ability to succeed. And if we have that mindset, we will attract the success. Without that mindset, it works very much against us. So, I got this. I understood this.

So, we’re now in Maui where he also had a house. And so I’m in the back room again, still, doing my stuff, getting Ignored almost all the time, but nonetheless I come out, look at the charts in the afternoon, go with him to the grocery stores, do errands for him, because he didn’t like to drive. So, I would drive, and he would tell me where he wants to go, and he would sit there and doze off.

Well, he knew that I liked cookies, to snack on cookies, because we would sometimes go to a grocery store, and he’d say, “What do you want to buy? Get some food.” And so, I would always get some cookies to snack on.

Well, one day after I’m sitting in back forever, and I come out, and he’d just been ignoring me forever. But still, we would go for walks on the beach. We’d talk about trading at this point, and we were getting to be friends a little bit, and he was trying to instill in me, he said, “You know, Dave, one reason you’re probably not as successful as you could be is because you’re limiting yourself.”

And I said, yeah, well, okay, if you say so. So, one day he said, okay, let’s go down to Foodland. And Foodland is a grocery store. So, it’s in the evening, and we take a drive down to Foodland, and I’m getting, like, perturbed that I’m with this guy now, like, for four months, and he just barely even recognizes me. So, we’re going to Foodland. He could tell that I was feeling a little miffed and a little discouraged.

He says, “Dave, why don’t you buy yourself some cookies when we’re in Foodland?”

And I said, “I’d love to buy some cookies, Ed. How many cookies can I buy?”

And he said, “As many as you want. Buy as many cookies as you want.”

I said, “Really? As many cookies as I want?”

He said, “Yeah, as many cookies as you want.”

So, it’s like trying to be my buddy.

So, we go into Foodland and as soon as I get in the door, I go up to the manager’s desk, and I say, “I want to buy every single cookie in the entire cookie row in the whole store. And this man’s paying for it.”

He (Ed) turned green.

And the guy, the manager says to me, “Are you serious?”

I said, “Yeah. He said he was going to buy me as many cookies as I wanted, and I want to buy every cookie in this store.”

And Ed lives by his word. He’s a commodity trader. If he says, “Buy a million beans at such and such a price,” he’s going to stick to it, because that’s what he said. And I knew that. And so, we bought every single cookie in the entire store.

And the guys brought these big pallets out and they put them all in the back. And when we left, there was not a single cookie left. It was an entire row of a grocery store, you know, all the cookies in the grocery store. Because he gave me his word. I thought, he’s trying to teach me to have no limitations. You know, he says, I could buy as many cookies as you want. You sure? I double checked it.

You’re paying for.

Yes, every cookie.

You know, and I don’t know what it cost him, like $10,000 or something, which might not have been, you know, not a whole lot for him, but still, he never expected that. But he was a man of his word. He kept his word. And then, you know, he said, “What am I going to do with all these cookies?”

I said, well, Ed, why don’t you donate them to the homeless shelter or something? I said, they’re shelf stable. Someone will probably… And so, he does, and then they interview him for the Maui newspaper, like, this benevolent guy donates…

He got the benefit out of it. Yeah, he got a big benefit out of it, you know, but ever since then, he never ignored me and And I gained his respect.

[00:40:13] Moritz

How did you put all these cookies in his car? What type of car?

[00:40:15] Dave

We didn’t. We kept them in back of the store, and the next day, the vans came from the homeless shelter, the church, or whatever, and picked them up and took them away.

[00:40:29] Mortiz

Got it. Funny story.

[00:40:33] Dave

There are two things, don’t limit yourself and always keep your word, you know, in that story.

But I don’t want to tell that story on the podcast. That’s just for you.

[00:40:41] Moritz

Perfect. Well, great, Dave. That’s going to be fun on Friday, 48 hours from now, you’ll be a great podcast guest. I can already say that now.

[00:40:51] Dave

Well, I hope that I can say something that will help your audience either trade better or not lose as much money or be a better person psychologically.

[00:41:07] Moritz

Thanks everybody for listening. This is the end of Part 2. I want to once again thank Dave for coming onto the Open Interest series. I know this has been a first for him. It’s been fantastic speaking with him for the first time. I really enjoyed it and I’m sure that you can learn something valuable about trading from the conversation that I’ve just had with Dave.

So, we’ll also include some of the most important points and summarize them in our show notes. As ever, if you have any questions, please contact us. We’re always happy to respond and we will.

I want to thank you again for listening and see you next time.

[00:43:48] Ending

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