ROAD TRIP WITH MARTY 'THE PIT BULL' SCHWARTZ

MrTopStep.com

I was very excited to finally get to see how the Pit Bull started and hear him tell his story of borrowing $30,000 and turning it into over $100 million.

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Amherst Investment Club

Subject: THE PSYCHOLOGY OF TRADING AND INVESTING-----MARTIN "BUZZY" SCHWARTZ, CLASS OF '67
SYLLABUS: SECURITY ANALYSIS----GRAHAM AND DODD; TECHNICAL ANALYSIS OF STOCK TRENDS----EDWARDS AND MAGEE; REMINISCENCES OF A STOCK OPERATOR----EDWIN LEFEVRE; ONE UP ON WALL STREET----PETER LYNCH; BEATING THE STREET----PETER LYNCH; PITBULL-- LESSONS FROM WALL STREET'S CHAMPION TRADER----MARTIN "BUZZY" SCHWARTZ

As a handler of futures buy and sell orders I have dealt with a lot of tough cookies, but none as tough and smart as Marty "The Pit Bull" Schwartz. I knew I had a live wire on the other end of the phone nearly 25 years ago, but I never would have guessed that in 2013 he would still be doing what he does best—making money.

Road Trip with the Pit Bull

While I have shared many experiences with Marty "The Pit Bull" Schwartz, this particular experience was one I will always remember best. I have always considered myself a "street guy" and I have been around some smart cookies, but none can compare with the Pit Bull.

Over the last 25 years the Pit Bull and I have gone head to head but we have always kept a mutual respect. I think this developed from him acknowledging that I always put my best effort forth and if on those occasions I did not succeed, he knew I gave it my all. After many years most well-known traders just drift away, but not Schwartz.

A few weeks ago the Pit Bull invited me to his talk at his alma mater, Amherst College, so I flew into Hartford, Mass., to visit the school. I was very excited to finally get to see how the Pit Bull started and hear him tell his story of borrowing $30,000 and turning it into over $100 million. As I listened, from time to time he would refer to his wife, Audrey, as the backbone of his fairy tale of 37 years. I may not want to admit it but in my later years I am 100% sure that for every great man a great woman stands beside him.

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Amherst

The Pit Bull has always had a high level of energy. I am sure it has been with him his whole life. He credits his mother for making sure he went to college, but from that point on success was up to him. At Amherst he was given all the right tools to take on Wall Street. As he drove me around the campus there was a sense of melancholy in his voice as he looked back over his life and reminisced over all that transpired in the nearly 50 years since he left Amherst. We drove past his old rooms, where he played sports and where he studied. As we drove around I asked him a simple question, "What was your goal when you got here?" And he flatly answered, "To be wealthy." I myself did not get to go to college and after watching the Pit Bull reminisce on this road trip I wished I had.

Before we arrived at the auditorium the Pit Bull expressed that he was a little nervous, anxious because of his need to be a perfectionist. After he started to speak the room went quiet. Sure, there may be richer men in the world but none that have done what he has, and without that special seat that many of his old Wall Street friends had. He never got "the call," he did it all on his own, and for this he has my utmost respect.

As he spoke he explained how he started on Wall Street, and he reiterated to the group exactly what he has told me for the last 25 years: "You can't make the money unless you do the work!" After several jobs as a Wall Street analyst flying around the country he knew that that was not his calling. At his last job on Wall Street, the firm did not want him to leave so they gave him his own office, but again, that was not where he wanted to be, so he went down to the AMEX with a loan from his wife's parents of $30k. He explained that in the beginning he just started "drawing lines" on charts. He found different periodicals that he incorporated into the trading tool box and marched down onto the floor to trade options. In his first year he made $600,000; from there he went on to the Norm Zada trading contest, wiping out every other contestant by hundreds of percent. He knew IBM was the bellwether of the S&P, and when he saw the correct patterns in IBM he would rush into the S&P futures. He told me many years ago that when he got nervous on the floor and had a big position he would put a brown paper bag on his head. Those that did not know him thought he was nuts, but those that did know him knew he was working a big winner. I always wondered about that and when I was on the NYSE floor on Tuesday a few guys that knew him confirmed it.

Once he warmed up during his speech he got right into the groove of talking about fundamental vs. technicals. He said that if you trade the fundamentals it's more of a longer-term trade whereas using his own technical analysis he could get in and get out in short-term trading. He said he used to do hundreds of charts back then but even today he still keeps up 50+ charts a day. Even at 66 years old Schwartz is physically fit, and while he may complain about his knee he has not lost one step. He credited me for stopping him from trading the S&P. As the level of program trading increased it threw his timing off and at one point he was going to take out a $1 million ad in the Wall Street Journal condemning the practice. He has said hundreds of times that the people who create algorithmic trading programs are not traders and could not trade on their own if their life depended on it. He told me for years that program trading would "kill the game" and talked about all the program trading that goes on today and how it makes it hard to trade.

Talking markets is the Pit Bull's first nature. He captivated the room as he talked about his experiences in the Marines and also about breaking some of his own trading rules. But he always went back to praising his wife for being there for him. He has always respected Peter Lynch and also spoke about Dodd-Frank and how it has changed the game.

After the Pit Bull spoke he opened it up to questions, and the best question asked was, "What was your greatest trade?" And the Pit Bull stunned the room by saying it was getting out of the losers. That's when people get caught up and they let their losses run. He said that all his work pointed to buying when the big selloffs come and that he went long on the Friday of the 1987 stock market crash, but when the stock market was down sharply on Black Monday he took a big loss but had he not gotten out it would have cost him several more million. He has always taught me about self-preservation and how it helps keep you in the game.

As I look back on my own career and the nearly 37 years on the trading floor, doing business for all the big hedge funds, professional traders and prop trading firms, none have affected me as much as the Pit Bull. His trading methodology has been instrumental in both my trading and my life. In the next few days I will convert the video to a YouTube format and share the experience so you can see what a real pro in action looks like.

Thank you Marty,

Your friend Danny Riley

Our view: Sea change, price action change? Does any of it really matter when almost every central bank in the world is printing money? Yesterday Wayne Whaley from Witter Lester did a big piece on "Sell in May and walk away" and it seems that is not always the case. Over the last few days the ESM has sold off from new contract highs at 1593-1594 down to 1531 and has staged a 48-handle rally. Can you say downside false start? Our view is to sell the early rally and buy weakness. As always, keep an eye on the 10-handle rule and please use stops. https://mr-topstep.com/index.php/equities/2521-wayne-s-sell-in-may-study

  • It's 7:15 a.m. and the ESM is trading 1581, up 7 handles; crude is up 30 cents at 91.73; and the euro is up 68 pips at 1.3095.
  • In Asia, 7 out of 11 markets closed higher (Shanghai Comp. -0.86%, Hang Seng +0.98%, Nikkei +0.60%).
  • In Europe, nine of 12 markets are up (CAC +0.27%, DAX +0.67%).
  • Today's headline: S&P Futures Seen Higher, Gold Climbs"
  • Total volume: 1.42mil ESM and 6.7k SPM traded
  • Economic calendar: Jobless claims, EIA natural gas report, Kansas City Fed Mfg Index, 7-yr note auction, Fed balance sheet, money supply.
  • Fair value: S&P +7.81, NASDAQ +14.68

MrTopStep Closing Print Video: https://www.mr-topstep.com/index.php/multimedia/video/latest/closing-print-4-24-2013

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.

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