Confessions of a Day Trader

By Lloyd Free

Main Street grabs for the brass ring. Wall Street snatches it away. The Yin and Yang of trading the Stock Markets. Investing, daytrading, gambling. Based on a true story, Jay and Stevy, retail investors, outsiders, battle the insiders, the wolves of Wall Street: The Market Makers, the smart money, the front running brokerage houses, lying Talking Heads, brazen stock manipulators. Against all odds, will they succeed?

“This is the incredible story of precisely why human nature is the ultimate enemy of any investor desiring success. As the new millennium approached, the main character was drawn in by the biggest bull market in US history. The magnetic draw of the stock market was at a historic peak, yet in the twilight zone manner, our unsuspecting hero was drawn into the absolute worst time to be an unseasoned investor as the worst-performing decade for equity performance in US history was about to unfold right after he ‘placed his bet’. The story takes you through his incredible journey through the minefield of the financial investment arena and provides a step-by-step horror show of how one man received a priceless education . . . At a remarkable cost.”
Garrett Jones-- 40+ year Money Manager/Trader. Affiliate with Peter Eliades (Stock Market Cycles Management, INC.) And author of Observations.

“Free’s incandescent novel, Confessions of a Day Trader, drew me into its crazy world of stock market finagling just as surely as it does his characters. Ever wonder what makes the market tick? Free’s been there, and he’ll show you--in the most revelatory and, indeed, frightening manner possible.”
Jake Fuchs, Novelist: Death of a Dad: The Nursery School Murders; Death of a Prof: The Nursery School Murders; Conrad in Beverly Hills.

By Bill P, Corralitos, CA
“From Hawaii to Wall Street, parallel games of chance occur over a rocky road. Confessions is a glimpse behind the curtain, a fun, informative and easy read.”

By Ronald T, Santa Barbara, CA
“Beyond the fascinating, insider details of gambling in Reno and on Wall Street, Confessions of a Day Trader is the detailed and compelling portrait of an addiction that still holds its subject beyond the last page. Recommended reading for all adults.”

By Derek B, Oceanside, CA
“Great story about the wild and crazy times in the stock markets from the late 90's until now. Has anything really changed? The market makers are still toying with all of us just like puppets!”

By Craig M, La Paz, Mexico
“Great story well written. It was worth the time to read and I couldn't put it down. I highly recommend this book.”

• Language: English
• Publisher: Lloyd Free
• Release date: Sep 11, 2016
• ISBN: 9781370736539

Lloyd Free

If it had not been for the temerity and/or desperation of Michel Martin, you would not be reading this biography. Had he not caught the gold bug in 1849, this writer would not exist. I will not amplify the long chain of events leading to my existence beyond the following. Michel Martin left Bordeaux in 1849 to travel to the California goldfields. His wife and son embarked a month later. As their ship rounded Cape Horn in the midst of a howling storm, Michel Martin, who had discovered a rich gold claim, was murdered by rowdy and violent claim-jumpers.His wife, Jeanne, and son, Charles, had a rude surprise when they debarked in San Francisco in 1850. With her husband dead and no money for return passage, Jeanne Martin opened a French boarding house whose kitchen delighted the starving throng of would-be gold miners (an egg cost five dollars if you could find one). Within a short period of time, she amassed enough money to send her son to be educated by the Jesuits at the Santa Clara College (the precursor to Bellarmine College Prepratory and Santa Clara University). Charles Martin excelled and went on to become a wealthy, San Jose land owner and, eventually, mayor. During his tenure, he welcomed President McKinley to the Valley of Hearts Delight in 1901.Charles Martin's granddaughter, Elizabeth Wilson, married Gerald Free, son of the well known politician, Arthur M. Free, a Stanford graduate, friend of Herbert Hoover, and U.S. congressman from 1918 to 1932.From their union, Lloyd R. Free was born on Novembver 28, 1939, in San Jose. He attended Bellarmine College Preparatory, Santa Clara University, The University of California at Berkeley, the University of Dijon, France, and Kansas University. He received a BA from Santa Clara University and an MA and PhD from Kansas University. Upon gradution, he was hired by the University of Michigan to teach the French Age of Enlightenment, specializing in the French licentious novel. His scholary work is found in many of the top libraries throughout the world.Lloyd wrote his first novel while a freshman at Santa Clara University and a second, The Recidivist, while attending the University of Dijon. His novel Confessions of a Day Trader is based on his experience as an online retail stock trader. He is currently finishing a new novel celebrating the beatnik jazz and poetry scene in San Francisco and Paris, circa 1960.​He lives in Reno, Nevada, and, occasionally, in Santa Cruz, California, with his wife Sylviane.

Book preview

CHAPTER ONE

SUNDAY

SEPTEMBER 16, 2001

Never mind the calming effect of the gentle, swaying sea grasses, the lazy, trolling, bright-yellow angel fish, and the stream of hypnotic bubbles aerating the great saltwater aquariums dominating the bar at Trader Dick’s. Never mind that dulling effect from the one hundred-fifty-one-proof rum in their second round of grogs. The tension was electric. Bodies had fallen and hit the pavement splattering like rotten pears. The stalagmites had collapsed in a roar of fire and toxic dust. And worst of all, Wall Street was shuttered.

Mike stared gloomily at his grog, twirling the swizzle stick to make the ice swirl and clink.

He turned to Stevy and said, Hey, chief, how bad you think it’ll be?

Stevy stared at an eel popping its head out from behind a rock. Kiss-my-ass bad. That fucking Peter should’ve let us sell our shares when we had a chance. Before Ariel got involved and screwed the pooch.

Mike twirled the ice cubes again to give himself some time to think.

Before he could opine, Wolfie whined, Geez, stop scarin’ me, boss man. You’d think shit was rollin’ down the pipe. Like turds away or somethin’. We’re not talkin’ about any old shit. He reached up and grabbed the bill of his striped engineers hat pulling it down over bristly, short, salt and pepper hair. We’re talkin’ about DNSI.

Mike jumped back into the conversation, I’m margined out. He turned to Stevy, Hey buddy, you told me it was going to four dollars, so I scarfed up ten thousand more shares.

I spoke up. What d’ya think will happen tomorrow when they open up the exchanges?

Mike piped up, Okay, DNSI closed on Monday at two dollars twenty. He grimaced as he reached up to swat a tangle of raven hair away from his eyes. Eyes that were dark pools of pessimism. It’ll tank. Below a buck. We’re gonna get scalped.

Wolfie groaned and tugged at the strap of his oily bib overalls. I’m maxed out. A margin call will cook my goose. Dead. Shot in the head. A turd in the bowl. Better not go down the shitter. He belched and drained his glass of grog.

Stevy looked grim. He was the insider with information from the top. He promoted the stock and cheerled. Yet tonight he looked peakish in the green glow of the neons and the backlit aquariums. In spite of his sour mood, he articulated every syllable and hammered words with subdued energy to make his point. He was intent on displaying the gravitas of a battlefield commander.

Quit your yammering, Mike. What a killjoy. A buck! Utter balderdash. His right fist thumped on the bar. They have state-of-the-art patents on streaming video and audio. No way this thing’ll drop to a buck. I see about a dollar eighty. DNSI is the real deal.

Stevy’s comments made me feel better, but deep down I knew Mike was probably right. What had led me from Paradise to this house of pain? Then I remembered the phone call.

CHAPTER TWO

MARCH 21, 1999

I was asleep dreaming of riding my boogie board on a monster wave. A jet ski had towed me beyond the vicious whitewater where I caught a fifty footer and was barreling down the liquid face when a mermaid popped her head out of the water, turned toward me, kissed my cheek, and pulled me away from the danger of the wave’s curl about to collapse upon me. The obnoxious and persistent ringing of the telephone jolted me out of REM. I opened my eyes and looked through the mosquito wire covering the opening between the wall’s top plate and the roof. It was still dark outside. I looked at the clock. It was 5:30 A.M. Hawaii Standard Time. The sun had yet to rise above the roiling surf pounding the shore of Kapaa. Who the hell would be calling me in the middle of the night? I struggled out of bed, bleary-eyed, slightly hung over, walked to my desk, and answered the phone.

Kauai Jurassic Ohana.

Jay, it’s Stevy.

Holy cow, what a surprise. Are you in Hawaii?

No. Lake Tahoe. But I’ll be in Hawaii next month with my chums, Mike Pelosi and Wolf Haber.

What island?

That depends. You still got that B&B?

Yeah.

Great. Got free room at the inn for three?

I fell silent. Free? Hell no, I needed cash.

Jay, you still there?

I held my peace digging my heels into the sands of silence.

Stevy filled the void, Didn’t I show you how to forge signatures using a photocopier? How much have you made off of that little trick?

You collecting a marker?

If that’s what you want to call it.

I rubbed my forehead to wipe away the cobwebs, but I drew a blank. This was no contest.

I’ll take that as a yes, he said. I’ll email you the travel dates.

Clearly, Stevy had not lost any of his chutzpah. I had first met Stevy Stanford in early 1980. He was called the Bill Gates of the design and construction of clean rooms and computer rooms. Yes, he did look like Bill Gates. Yes, he was a narcissist with a slight dose of Asperger syndrome, but whatever he lacked in social skills, he more than made up for with the sizzle of his brain. His ideas popped and burst like a fireworks display. His mind worked day and night focused on a single object: money. His Holy Grail was what he called the real deal: any shortcut that swelled his riches. He frolicked in the gray zone between the licit and illicit. He understood the wealth effect: spread a few shekels to multiply the Benjamins.

Early in his contracting career, he established himself as a generous player. Mindful that naked bribes were illegal and that the FBI operated a group to sniff out such activities, he found the solution in the word vacation. In 1981, he borrowed against his line of credit to send a commercial real estate broker to Paris for two weeks, all expenses paid, including dinners at three-star Michelin restaurants. He did not complain when the final bill from Taillevent included six bottles of Dom Perignon.

The commercial real estate brokers were a tightknit group, even though they were aggressive competitors. Rumors of Stevy’s largesse spread far and wide, like a windblown wildfire. Within months he had graduated from bidding projects to negotiated, cost-plus contracts. From that point forward, he found ways to disguise his real profit, and was free to roam in the lucrative world of change orders.

I hung up the phone and went back to bed. As I lay in the dark, at first, I kicked myself for being such a pushover. After all, I wasn’t running a charity ward. Then my mood began to lift. Maybe fate was bringing Stevy to Kauai’s shores. My curiosity caught fire. What were his latest scams? Would he fire up my laid-back Kauai lifestyle and flood my imagination with fascinating possibilities? My heart jumped a beat at the prospect.

CHAPTER THREE

APRIL 9, 1999

They sat on the lanai in the midmorning sun and watched the water flow down the lava stone waterfall into a large pond sporting water lilies and displaying the darting orange and red flashes of Japanese koi. The red trunks, yellow-green stems, and featherlike fronds of lipstick palms traced the northern perimeter of the pond. The surrounding garden was landscaped with exotic plants: birds of paradise, heliconias, hibiscus, blue and red jade vines hanging from African tulip trees, red, orange, and pink bougainvillea. A wall of giant bamboo, the stems green, striated with gold lines, stretching fifty feet into the sky, isolated the garden. I walked from my makeshift living quarters through the forest of bamboo toward the steps leading to the lanai.

Mike spotted me as I rounded the pond. He looked like a 70s rock star: diamond stud earring in the left ear lobe; straight, shoulder-length, jet black hair; a turquoise T-shirt imprinted with the image of an 18th-century pirate ship and the words Grateful Dead Ship of Fools; cut off blue jeans hanging from chubby hips to his knees; and cheap rubber flip-flops.

Mornin’, Jay. Great place. Where the pterodactyls? Mike asked.

I looked at him quizzically. Then I caught on, Oh, the Jurassic thing. Publicity. Spielberg filmed the entry gates to Jurassic Park just up the road.

Stevy stood up. He was wearing a Tommy Bahama silk shirt, crisp, pressed linen shorts, and imported Italian leather sandals. His short, copper colored hair and designer, rimless sunglasses glowed in the morning sun. His cheeks were spotted with rusty freckles. Forget the trivia. I’ve the most important damn question of the day. Stevy’s eyes danced with anticipation. Give me the lowdown on the real deals on Kauai.

I looked at the lipstick palms, variegated with light and shadow from the bright morning sunlight shining through the bamboo, and thought for a few seconds.

Stevy, you’ll never change. Always chasing deals.

I paused and thought some more. Go native. Get kamaaina rates. Discounts, like half price.

Bingo, that’s my kinda’ deal.

Just get a Hawaii driver’s license.

You’re joking. Stevy’s eyes sparkled with interest. Show me the way to the DMV.

Mike laughed and hooted. Stevy, you’re too much. What a conniver. You’ll do anything to get a deal.

Wolfie popped out of his chair to grab a beer. His very short, salt and pepper hair stuck out of his scalp like bristles on a scrubbing brush. His narrow face was bony. In fact, his entire body was tight skin stretched over muscle and bone. His wiry torso was bare. His grungy skivvies hung loosely off his hips and his feet were bare except for two bunions. He guzzled half the bottle then stretched and belched. Hey, boss man, I’m with you. What the hell? Go native. Do they have hula dancers on the Hawaiian driver’s licenses?

The trio soon left in their rental car and returned six hours later.

What happened? I asked.

Wolfie laughed and rubbed his belly. What a riot! Easy as flushing crud down the toilet. Took the money and gave us Hawaiian licenses.

Cool, I responded. So what else did you do?

Stevy answered with enthusiasm, Checking out houses and property.

You wanna buy a house here? Thought you were flippin’ homes in Lake Tahoe?

Where’s your noggin, Jay? Up the old wazoo? Stevy’s words flowed in a torrent as his mouth raced to keep up with his brain. Yet he never glossed over a vowel or consonant and never sped up his delivery. The muscles operating his tongue and lips moved intensely to enunciate every syllable. He hammered a word here and there to make his point. Screw the houses. Just show me the dough. I take the pulse of a place by the real estate activity. Just check out the housing prices and how fast homes sell. Tells you everything you need to know about the economy.

Mike piped up, Hey, bro, forget about real estate. That’s passé. Besides coke, the hot money’s in stock options. My buddy who works for Cisco made a bundle. One of the first twenty employees and now he’s worth ten million bucks. He’s going to retire and go travelin’ in a million-dollar motorhome.

Your talkin’ Martian to me, I said. Never dabbled in stocks. What happened in ‘29, really scares me.

Stevy lifted his glass filled with a mai tai and bellowed, Ho, ho, ho, ho, the boy is full of fear. Poor little Jay, curled up like a fetus. The queen of chump change.

Stop with the histrionics. I meant leary.

Woo hoo, big words for a beach bum. Read my lips: stocks’ll make you rich. Get in on the ground floor, before the IPO, and get rich quick as greased lightning.

Mike added, You got that right, Bro. I did great with my Atari options. I’m no millionaire, but I made enough to pay off my mortgage. Just sold the house. A two bagger. Four hundred thousand bucks. Not bad for a guy who had to sell coke at Atari to make ends meet.

So what you gonna do with the Dinero? I asked.

Galaxy, of course.

What the hell is Galaxy?

What, the chief hasn’t spouted off about the deal of the century? I’m shocked. Mike said.

Stevy put his finger across his rounded lips. Ssshhhhuuush…remember, it’s an exclusive deal, pecker head. Only friends get in on this deal. A chums’ exclusive. It’s going to make us fortunes. Read my big, fat lips: we’re going to be billionaires.

Yeah, like pigs can fly, I said.

Stevy’s face flushed, Cut the sarcasm. You’re talking to a millionaire.

The truth weighed. I fell silent and looked out at the garden where the heliconias, the birds of paradise, the bougainvillea were luminous, backlit by the sun setting behind Mount Waialeale, wrapped in a mantle of rose-colored clouds.

I got up and went to the kitchen, where I got out the Captain Morgan rum, the tangy orange and mango juice, and a half empty bottle of curacao. Following a secret local formula developed by a mixologist I knew from the Lizard Lounge, I blended a heavy-duty batch of mai tais. Maybe a little more alcohol would open sesame and let me in on the secret that had the trio riding so high. I returned with the pitcher filled to the brim and refreshed the glasses. Mike was standing up looking at the misty fringe of clouds forming a fluffy crown around the peak of the volcano. The clouds had taken on a reddish hue as the sun began to set in the west dropping into the sea off the Na Pali Coast.

What a gorgeous sunset, Mike said and took a swig of his drink.

Who cares about the view? I’m getting bit by mosquitoes, Stevy complained. Got any bug juice?

Yeah, the mosquito repellent is on the kitchen counter.

Hey, we’re your guests. Get off your ass and go get the stuff, Stevy said.

His tone was more like a bark than a request. I didn’t protest as I got up and went to the kitchen. When I returned, I asked, So what do you guys want to do tomorrow?

All three chimed in: Golf.

Mike added, Jay, want to golf with us?

Not my game. Droppin’ a white ball in a hole doesn’t turn me on.

Will you drive us at least? asked Mike.

I’ll do you one better, I said. I’ll call Brian O’Brien, loves to play and has a buddy who works for the Princeville resort. He‘ll book you a tee time and make sure you kamaainas don’t get ripped off. You’ll just have to pay his green fee.

I went to the kitchen and called Brian. He was happy to oblige as long as someone else paid his freight. I returned to the lanai.

Brian’ll pick you up around ten o’clock tomorrow mornin’, but now you really owe me. So what’s the big secret you guys are so puffed up about?

Stevy looked at Mike and smiled. Should we let this poor bastard in on our plans?

We owe him now, don’t we?

Stevy smirked, I’ll tell you tomorrow after the golf game.

Ahh, come on, boss, Wolfie groused in his squeaky voice. Give the poor bum a break. It ain’t no real secret anyway. Why you always bug fucking with mysteries?

Just joshing, that’s all. Give me another mai tai to loosen my tongue. Fill my glass, sir, and shoot over that can of bug spray, then I’ll spill the beans.

I handed him the can of Off.

Okay, he said. Here we go. It’s a long story, but I’ll make it as short as possible.

That’s a laugh. The chief couldn’t make it short if his life depended on it, Mike opined.

Unabashed, Stevy tensed his lips and his mouth muscles, the better to articulate every syllable. He had learned this trick in his high school elocution class. It never failed to infuse him with a sense of command and control, but his throat was dry. He picked up the pitcher of mai tais and poured a healthy dose while holding back the ice cubes with his index finger.

I hope your finger’s clean, Wolfie piped up.

You should know all about clean hands and shit, you crazy plumber.

All I have to know is shit rolls downhill, and I stay uphill. Anyway, I carry a bag of hygienic wipes with me. So next time, I’ll put my finger in the punch.

Mike laughed. Yeah, the plumber who’s shit outta’ luck most of the time. How much have you lost at Harrah’s Club, huh?

Wolfie frowned. Why bring all that crap up? His hand stroked his bristly hair as if he wanted to wipe away the memory. Anyway, it’s the casino’s fault. Too many comps and too much booze. Booze, food, Dom Perignon, Chateau Lafitte Rothschild, and girls. All on the house.

Yeah, but how much did it cost you? A half million dollars?

Wolfie groaned and took a swig of his mai tai. Shut up. You’re making me sick. Anyway, I’m gonna make it up on Stevy’s deal.

The sun had dropped into the ocean behind the Na Pali Coast. Darkness had fallen. A warm tropical breeze was redolent with floral perfumes: the pikake dominated and was intoxicating. I drew in a deep breath and thought how lucky these guys were if they were not BSing me.

So what exactly is the deal, Mister Gold Pecker?

You want the long or the short of it? The ad part or the satellite part?

I just want to understand what you’ve gotten into. What the hell do you know about ads or satellites?

Well, I was the king of CCTV and communication wiring. And computer connectivity through the Internet. Made five million.

Yeah, yeah, Wolfie whined. We’ve heard it all before. How you made buckets of moola off high-tech stuff while the rest of us crawled around under houses smellin’ shit and fixin’ leakin’ pipes. You’re really one lucky son of a bitch. Just keep the autobio short. It don’t do me no good hearin’ ‘bout your millions. Just pisses me off.

Stevy puffed up his chest and continued, Granted, not the same thing as satellites but close enough. Anyway, I don’t have to know how the thing works. I just need to see it work and to know there’s a viable market. And, believe me, there’s a market for what Peter has come up with. Imagine transferring all the ads via satellite. The data is downloaded to a box, sort of like a cable TV box, in the TV studio. Then the data is electronically inserted at the proper interval into a TV program. Bye-bye, dub and ship.

What’s dub and ship? I asked.

Mike looked at me quizzically. You’ve been on this island too long. You’ve lost touch with what’s happening on the mainland. Everything is going digital. Everything! The old way of getting ads to TV stations was to duplicate the ad on a medium like videotape and then ship out thousands of copies to the TV stations. Peter’s invention does away with all that low-tech stuff.

I looked at Stevy, Do you work for Galaxy?

Are you crazy, Jay? I’m retired. An investor. Working’s finito. Peter’s my buddy. It took a while for that to happen. I sold him my house, and, believe me, it was the real deal. You know me, nothing but the best. Real cherry wood floors in the living room and bedrooms. Granite counters and Crème de Marfil floors in the kitchen and bathrooms.

Yeah, Mister Perfection here overspends on every one. Have you ever made back the money you spend fixin’ up your real estate investments?

Great balls of fire, man, you just don’t get it, Mike. I got to like the end product. It hasta’ be perfect. People look at the place and say, ‘Wow, Stanford’s the real deal, the dude with aristocratic taste.’ Peter loved it and paid top dollar. So I made out just fine.

You always say that, but I have my doubts, Mike said.

Stevy continued without protesting, At first, Peter thought I was just another real estate hustler. Little by little, he warmed up. And then my big break came. An investor wanted to bail. Peter called me. Said I could get some shares of Galaxy. At first I wasn’t sure I wanted to.

Mike laughed, You sure didn’t hold out for long.

Frustrated, I stamped my foot, So what is the deal? I asked.

He got me one million shares at two dollars a share. I jumped at it, Stevy said.

Why the hell would you invest two million dollars for some crummy paper?

Because I know the real deal when I see it. This one’s a doozy.

Are you nuts?

Smart. Here’s the secret. I am having intercourse with the top of the food chain. The upper management plans an IPO.

Holy smoke, is that a microbrew? I winked at Mike to share the pun.

Damn jokester. You won’t make a shekel from India Pale, but a Galaxy initial public offering is money in the bank.

Mike looked at me with a smirk. Hey, Wolfie and I bought in too. The chief has hooked us up with some pretty sharp cookies.

Stevy continued, At Galaxy, we now have the right people in charge. Peter is smart about ads and the TV business. He has lined up clients, and the beta sites are already up and running. So the technology works. No question about that.

Mike took a drink and then added, And Ariel Levine bought a big hunk of the available shares. I think he got thirty-five percent.

I knew I was out of my depth. I had never heard of Ariel Levine. Who the hell is Ariel Levine?

He’s a billionaire. Stevy jabbed his finger into the air and raised his voice an octave. Made his money consolidating companies. Created a behemoth. He is the monster in the room. Peter tells me Ariel thinks the IPO will go for twenty-eight dollars a share.

You guys are pretty optimistic. Sounds too good to be true. How the hell did this Levine or Peter come up with twenty-eight dollars per share?

They looked at comps of IPOs that have come out in the last couple of years, Mike answered. Plus the potential earnings are humongous. Levine’s got the connections with investment bankers to make this whole thing happen. They’ve already started to line things up. SEC filings and all the other BS a private company has to go through.

Hey, I said, I’ve seen stuff like this before that really sounded great, and then it didn’t pan out. Sharks are everywhere when they smell blood or money.

This is a sure thing, Jay, Stevy said. Mark my words. He jabbed his finger at me. I know the real deal when I see it. As he spoke, Stevy lifted his glass and drained it. Time to go to the luau. You want to come with your billionaire chums? We’ll spot you.

No, seen too many luaus, and eaten too much poi.

CHAPTER FOUR

The three musketeers were on the lanai drinking coffee and eating mangoes when Brian O’Brien showed up the next morning, driving a typical kamaaina special, a 1970 Plymouth Fury Three with barely any green paint left and the vinyl cover over the passenger area in tatters; the entire body had turned to rust. The trunk bore a two-foot raggedy hole, revealing Brian’s clubs.

I introduced Brian to the trio, and they lazily rose to search out their gear. They brought it to the car and began to laugh.

Wow, what’s up with your trunk? Wolfie asked.

Mike chimed in. Anybody sees us in this rod will really take us for hillbillies. Where we going?

To the Princeville, Brian responded. It’s not raining, so we’ll take advantage of the weather. It’s a gorgeous course with fantastic views of the ocean and Hanalei.

Hanalei, like in Puff the Magic Dragon? Mike appreciated Peter, Paul, and Mary.

"You sure don’t know much about Kauai. The