Death to a ‘Tape Reader’ with a Happy Ending!


I dropped out of the ‘technology race’ in 2001. I couldn’t do it any more. I was on the edge of total mental and physical collapse. Or let me put it this way, either I was going to have a nervous breakdown or my office was going to look like this.


Hum…Certainly NOT the way I wanted to spend my working days in front of!

Hum…Certainly NOT the way I wanted to spend my working days in front of!


I needed to rethink how my company and I were doing business and how future gains would accrue to new and future clients.


The Art of ‘Tape Reading’ Dies


I used to be a ‘tape reader’!


All of us in the equity business who were any good – back-in-the-day – were, so called ‘tape readers’.


What is a ‘tape reader’ you ask?


Long before computers, stock trades were recorded on a long paper rolls about 1” in diameter. As an equity trade occurred the transacted price, number of shares and a company’s stock symbol were electronically sent to a mechanical printing type of machine that would sputter ‘clickety-clack’ sounds during market hours. Brokers would spend hours reviewing this long piece of paper looking for patterns in individuals stocks. Yes, one had to have a good memory but substantial gains could be deduced by looking for trading patterns especially when thousands of shares would trade in a ‘block’, suggesting either accumulation or distribution of shares by a large trust company or pension fund. This was laughingly an old fashion version of ‘front-running’ that Michael Lewis writes about in his book Flash Boys.


Alternatively if I were pressed we – ‘Tape Readers’ – were mentally connecting the dots or doing simplistic forms of Technical Analysis.


This paper tape was replaced with a wall mounted faux-digital tape that measured some 15 feet in length. During market hours as trades were displayed, men – never women (at least I never saw any), would sit for hours looking for trends – price movement – and block trades on hundreds of stocks with a transacted price. They would mentally piece together whether a stock was being accumulated or under distribution. Over a period of a few days one could get a feel of the market as a whole. If the equity markets were being accumulated all observed stocks would have positive price movement. One could ‘feel’ how ‘healthy’ or ‘sick’ the stock market was by observing individual trades.


I would make it a point when walking home from high school (early to mid 1970’s), unfortunately the long way home (when I didn’t have much homework) to pass by the picture window of a large storefront location where a brokerage firm (A.E. Ames) operated a wall mounted ticker tape with about twenty chairs positioned theatrically for their clients. Anywhere from 5 to 10 old men would sit transfix to the fast moving lime green letters and numbers moving right to left ignoring a curious passerby looking on with fascination.


Jim Cramer – ‘Tape Reader’ in Action


Want another example of ‘Tape Reading’?


The best example I can give is Mr. Jim Cramer on his CNBC television show Mad Money. When Jim does his ‘Lightening Round’ segment that’s a ‘Tape Reader’ in action and reminds me of the old days.


Jim has a prodigious memory (like all ‘Tape Readers’) combined with lots of energy to try absorb each and every trade. Jim regales his audience with theatrics and bluster but after 2000 – 2001 the equity market trading internals changed and his (and my) acquired skill of ‘tape reading’ went the way of the Dodo bird.


What Changed?


Two forces came together in 1998-2000 that rendered the art of ‘Tape Reading’, that ruled Wall Street for over 100 years, meaningless. The first was computer technology, fiber optics and instant mathematical analytics. The second was the frenzied volume and the hundreds of new companies ‘IPOed’ in the technology bubble of 1998-2000. If there was an old fashion wall mounted ticker tape the symbols, price and the amount of shares would zip by at such a lightening speed I doubt that any human being would be able to discern any information.


Like a proverbial caged hamster on his running wheel and unbeknownst to the hamster no amount of running speed the animal could ever expel would allow for the animal to keep up with the increasing speed of the wheeled contraption.


Jim gave up managing money and went into show business. I walked off the trading floor I built at Acker Finley and moved into a small office exhausted. All I had was an Internet connection and a burning desire to start over.


Starting Over or Act II


I like to compare the investment business to that of a miner. Everyone in the trading and equity analysis business tunnels down the same mineshaft. I reasoned back some 15 years ago this metaphorical mineshaft would lead to its ultimate conclusion. Where millisecond algorithmic trading by the fastest and most expensive technology wins at the end of the day. In this world, today’s world, first place wins everything second place goes bankrupt (Yikes!). As for Fundamental and Technical Analysis, nothing has changed in these two fields since the mid-sixty’s! Yes, you read this right.


As a miner – keeping with my analogy, I gave up digging where the rest of the industry was tunneling. Picked up my shovel and digging materials and started tunneling a new mineshaft of my own. We at Acker Finley just completed our math on Model Price Theory (MPT) about this time – 15 years ago – and I jumped in with both feet. What you see today on our Facebook App ‘Model Price’ is what I started with back in 2001.




All industries including the financial industry are impacted by technological change. Wall and Bay Street lived in a cloistered world for over 100 years where the ‘inmates’ tightly controlled everything to do with equity trading. This all changed in 2000. What is amazing and what I ask myself daily is did anyone notice this transition? Certainly by watching financial professionals on television I doubt whether substantial intellectual career transitions were made. At least Cramer is honest enough to know his market edge disappeared and transformed his career as a showman and NOT an investment professional.


Which mine shaft are you mining for your investment ideas or strategies? Today’s CFA or MBA and CMT (Chartered Market Technician) investment professionals think the road to riches is paved by relearning past financial concepts either in Fundamental or Technical Analysis. Really? Is there any more ore to be found at the end of this long and well-mined mineshaft? What is your advantage trading and investing in today’s equities?


(I write this blog NOT to be ‘preachy’, but if you are suffering from a string of investment and trading losses maybe this blog will give you something to think about.)



P.S. I thought I would include a picture of my trading station in 2014. What does your trading station look like?

I feel better sitting in front of this computer screen, anywhere in the world!  You?

I feel better sitting in front of this computer screen, anywhere in the world! You?

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