327 · David Capablanca - From Skid Row Showers to Short Selling Master

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[00:01:18] In late 2018, I had moved into my office, a shared office space and I started driving Uber. And yes, I did. There was a moment for a few months I did live in my car and when my lease ended and I decided, okay, I'm actually going to sell my car. I'm tired of driving Uber. I got enough money now to stabilize myself and pay the credit cards off at the minimum payments. And what I'm going to do is I'm going to rent a WeWork office for $250 a month or so, a shared. And I was like, but where am I going to sleep? I'm like, oh man, because you can't sleep in a, it's a shared office.

[00:01:48] And I was like, whatever. And I was like, whatever. I'll just sleep at the desk. This is how determined I was to change my life around. So coming into trading, I think forcing myself to take risk because I was in so much debt. We'll go into the brain operation I had later, but I had a near death experience too that kind of just traumatic.

[00:02:06] You know, in life, there's certain events that happen that just change you as a person. It took that like staples in my head, a hundred something, 150 staples or something like crazy. And all that is like force a change out of me. Cause I think I was 25. So maybe the younger you are, the easier it is to change. You get stuck in your ways as you get older. But that was like a pivotal moment. That changed me completely. I'll study all day. And then until I got so tired.

[00:02:31] And then I'll go again, skid row, shower, come back, trade, make several thousand in the pre-market 2020. It's 1am. And I timed it perfectly. It's like at midnight, the lady comes in to clean the skid row showers. Cause you don't want to shower in the middle of the day when it's like a hundred people have showered there already. It's very nasty, but it's crazy. But yeah, while waiting in line, I did see a couple of murders.

[00:02:55] I saw a lot of helicopters, body bags. It was pretty, skid row is, I seen the worst of the worst. I did not feel any pity for myself at all. You know, it helped that all that preparation, those four years leading up to it. I put my time in of study. And when I did start to make some money, you know, $900 here, a thousand there, 500 here. And it added up over a month or two.

[00:03:19] I, that was, it's interesting. Cause like later on when I'm making the big money, let's say I'm up over half a million, a million, I'm having different feelings, which is just like you mentioned before about like comparing myself to the Uber. It feels kind of dirty. But at that time I felt like I deserve this as like, it was like, it's about time. Markets, speculation and risk. This is the Chat with Traders podcast.

[00:03:45] Traders, welcome to another episode of Chat with Traders. Today's guest, professional trader, educator, author of short selling master and founder of Friendly Bear University. David first appeared on Chat with Traders back in episode 257 with Tessa and Ian, where listeners got an inside look at his approach to short selling and market psychology.

[00:04:05] But since then, his story and the markets themselves have evolved dramatically. Before becoming a trader, David was pursuing architecture when a life-threatening brain tumor, mounting medical debt and student loans forced him to completely reevaluate the direction of his life. What followed was an all-consuming pursuit of trading mastery, one rooted in obsession, sacrifice and what he describes as burning the boats.

[00:04:30] Inspired by Hernán Cortés and the Spanish conquistadors who famously burned their ships in 1519 as a symbol of total commitment and no retreat, David immersed himself fully into the markets. That journey included sleeping in his office, living out of his car, showering on Skid Row. Now, this is before 4 a.m. You know, this is when he was trading his pre-market strategy, 4 a.m. on the West Coast.

[00:04:55] He isolated himself entirely from society, renounced material comforts and even traveled internationally to investigate pump and dump schemes firsthand.

[00:05:03] So, traders, in this conversation, we're going to discuss why speculative bubbles repeat throughout history, the psychology behind short selling, the dangers of social media-driven market mania, surviving black swan events and violent squeezes, manipulation in modern small cap markets, the rules and discipline required to survive as a trader, and why one single trade can threaten your entire staying power in the markets. So, traders, please enjoy this conversation with David Capablanca. David, welcome back to Chat with Traders.

[00:05:33] Thank you, Kevin. Wow, what an introduction. That gets me just fired up and excited to talk about it. Those are some exciting topics. I love history. You just mentioned history and the whole journey. You know, it's just incredible. So, I'm here. Thank you for having me. And yeah, you know, let's get let's let's do it, man. Let's dive in. We got so much to talk about. I mean, we can take this in so many directions. Thank you again for the book that you sent that the short selling master incredible rate and a lot of your story in it that I found very fascinating.

[00:06:02] Now, one thing, David, that really stood out to me, it resonated with me was your commitment. I mean, we read in the introduction, you you were living in your office. You were I think at the time you were you were driving for Uber as well, making some money and showering on Skid Row. Now, why why not just go to the next street? Why Skid Row? This place is dangerous, David, as you're aware. I'm sure I mean, one hundred and forty eight percent violent crime rate above the national average.

[00:06:31] So tell us a little bit about that. Yeah. And Skid Row is nowhere where you want to be. And, you know, the whole trading journey for me personally, it's just I've been at the absolute lows, rock bottom and discovering new levels to rock bottom. You know what I mean? That's that's like when you're at rock bottom and then you get another level to rock bottom lower. It's pretty it's pretty devastating. But like, yeah.

[00:06:54] So, you know, the covid was was it was was a roller coaster for everybody, you know, for the whole world. But for me in particular, I had it was like bittersweet at that time because I had my first profitable month, my first ten thousand dollar plus month. And at the same time, I'm showering in Skid Row. So Skid Row during covid here in Los Angeles, especially all the all the everything was closed.

[00:07:22] All the gyms, all the hotels, hotels weren't taking anybody. The hotel actually the hotels here in downtown had the National Guard. You know, the National Guard would go and camp out in the hotels. And it was it was crazy. You got like hazmat suits and all that stuff. And then on top of that, there was a lot of protests here in downtown. So it was. And at the same time, I'm having my first profitable months, life changing amount of money that I'm making during those months because I'm digging myself out of a hole.

[00:07:51] And but leading up to covid, you know, it's it's it's a journey, you know, you know what I mean? It's preparation meets opportunity because for me, I started in 2016 or late, late 2015. I didn't make any money for up to leading up to covid. It was like for more than four years. But I was still like trying to I was on my own.

[00:08:18] I was trying to figure out trading like I didn't know when I first signed up for trading that I would have to develop into a whole new person. I didn't know I was going to have to change all my habits, all my routines. I thought it was just I think a lot of traders come into it thinking that they think it's just some skills that you need to get and just follow follow the rules, follow your system. That's it. But yeah, there's more to it than that. It's like I had to stop going out on the weekends.

[00:08:43] I like I had so many. I knew it was going to take a lot of studying and I didn't know what I was studying. I was just devouring any material I can get and just going down rabbit holes of what I thought was real material. I was trying my best to avoid the bad material because there's a lot of bad information out there. By the way, thank you. Chat With Traders for for always having good material, you know.

[00:09:05] So this is one of the go tos early on in 2016, the very few one of the few back then that was like real stuff that you can actually learn from. Because with trading, you can listen to a whole podcast and maybe there's stuff that doesn't apply to you. But there's little nuggets of information in their little takeaways. It's all about the takeaways in these podcasts that you can apply right away. And it's a compound effect.

[00:09:32] You do that with everything, with books, with audio books, with the right YouTube videos, audio podcasts. You just take takeaways and just compounding. And that's what I was doing from 2016 to 2020. And in my, you know, and slowly developing all the habits that I needed to change. Like, you know, for example, I stopped drinking alcohol. I stopped going out. I stopped associating with certain people that were just getting me nowhere or just bitter.

[00:09:59] In my previous career, there's a lot of various architects are held with prestige, you know. It's a nice career. But I noticed it's like when you're in a corporate environment or you're in, you know, in the real world, unfortunately, people get cynical. They get sarcastic. They get bitter. They don't, you know, it's a different, like the nine to five. It's like the dreams start fading away.

[00:10:25] And it's, you know, so like it just, you know, I slowly started to separate myself from those people and to become because basically I was in the journey going through the journey of an entrepreneur, you know, like starting from scratch. And, and I had no, I had barely any guidance, you know, so yeah, you know, in 2020 hit COVID happened. Market went wild, but everything shut down.

[00:10:53] So 2018, in late 2018, I had moved into my office, a shared, a shared office space. And I started driving Uber. And yes, I did. There was a moment for a few months, I did live in my car and when my lease ended and I decided, okay, I'm actually going to sell my car. I'm tired of driving Uber. I got enough money now to stabilize myself and pay the credit cards off at the minimum payments.

[00:11:19] And what I'm going to do is I'm going to rent a WeWork office for 250 a month or so, a shared. And I was like, but where am I going to sleep? I'm like, oh man, because you can't sleep in a, it's a shared office. And I was like, whatever, I'll just sleep at the desk. This is how determined I was to change my life around. I was, at the same time, I was drowning in student and medical debt. So like, I'm in a way grateful for that. Yeah. Yeah.

[00:11:44] Because while I was reading too, I mean, you spent 10 years studying architecture, but it was after that. And you could have had like a career there, right? But your passion was trading 10 years with architecture and now 10 years pretty much with, with trading. So I want you to reflect on those two careers because again, you were all in. Now you sold your car to, you've sold everything, given up on the architecture. You said you had these mounting bills with student loans, medical debt.

[00:12:13] Now, most people would say it would advise when you're in those financial situations, not to pursue trading. But you said, David said, I'm all in. Tell us about that. Yes. So it comes down to betting on yourself. So previously in my life, I, I was good at architecture. I played baseball before architecture. I was pretty good at baseball. I like, I wasn't good enough naturally and I got injured, but like, I had a good work ethic.

[00:12:41] I had, I did the best I could with everything I've ever done, you know, like architecture, baseball, school, you name it. So like, I just, um, I just wanted something real. I was like, if those wall street guys can do it, I can do it. And I knew nothing about trading. So I think that helped me. I think some people that I've encountered over the years, they know a little bit of the interest rates, the fed and all this stuff. And they think they know more than what they really know. I came in right away. Like, I need to learn this. Like I learned architecture.

[00:13:10] How do I learn this? Like I like for real. And I'm willing to spend another five. I didn't think 10 years, but I was like, I could spend like five years giving this my, my all. And because if not, I'm going to have regret that I didn't try. And if this stuff is real, I'll figure it out. And, uh, I wasn't in, um, a position. I didn't want to make money right away. I just wanted something to substitute for architecture. So it's, it's all about the mindset, like how you come in.

[00:13:37] I wasn't expecting, uh, to get a nice car right away or anytime soon. I wasn't expecting to have fancy things. I just wanted something to take the place of architecture and, uh, and give me a chance for, to dig, I wanted a high income skill, put it that way. And, um, and I was right, you know? So recently, uh, on Facebook, one of my old classmates that went to an Ivy league school for grad school, I went to UCLA. It's pretty much on par as far as costs.

[00:14:07] UCLA grad school for architecture is very expensive. And so he just finished, he's my age 42. And he just finished, he put it on Facebook. Like I don't bear, I barely go on Facebook, but he put a, a post saying, I just finished paying the last bit of my $100,000 student loan. Um, I'm so proud and he's working at a decent firm. And I was like, man, so actually that would have been me. And I have more, I have, let's say three times more loans than he did.

[00:14:35] So I would have taken another 10, 20 more years. So I was correct at my assessment to leave architecture because I would never be able to achieve my dreams due to debt. Unfortunately, you know, money has a big factor in the way our lives work. Um, you know, you can't just be a starving artist. You know what I mean? You have to, to do architecture, you're going to need, uh, the right firm. You need to start your own firm to take a risk to start your own business. You need to learn the business.

[00:15:04] You have to have like, uh, you know, when you, when you're in debt, you're not thinking freely or like as clear as you should, you know? So all, all the famous architects that I studied under and stuff, uh, they didn't have, uh, they didn't come from debt, like massive debt, you know? So, um, and medical debt too. So I did the right thing by, um, choosing a high income skill and I'm trading resonated. So I, I did trading. Yeah. Yeah.

[00:15:32] And there's, so there, you said there's risks also to take with architecture. I was wondering how that translated over for, because some will say like there's certain skills, uh, or professions, let's put it where it's like, if you're a mechanic or you're a doctor or even architect, you have a certain outcome that, that you need as for example, if you're a surgeon and you're removing a gallbladder, like you can't remove the heart. And so you need a specific outcome and it's like a hundred percent, it has to be this, but

[00:16:00] in trading, there are no certainties, there are no guarantees. So does that translate over from architecture where you're like, I have the blueprint here and this is what I have to build. But in trading, there's no certainties when I'm trying to build, you know, that's where the risk comes in essentially where you have to, the risk management. Yeah. Um, you know, it's very interesting. It's being, uh, coming from the architecture world to trading, it benefited me tremendously.

[00:16:30] It gave me a tremendous amount of edge, uh, with the, the pattern recognition skills, the risk management skills, the creativity and you know, the, the structure and, and, uh, imagination you have to use. It's all, all, it's like an art and a science. Now, unfortunately I've been trying to, to recruit architecture students to friendly bear university. What I, what I have for my mentorship program and a lot of architects, I think school in

[00:17:00] general, they teach you too, too much how to be risk averse because architects are also very risk averse. Like I'm in a skyscraper right now, an architect, I am pay. He, he designed the Louvre in Paris, the new, the new version of the Louvre, the pyramid in front and all that. One of the last modernist architects, he designed, uh, his son and he, he and his son designed the U S bank tower where I'm at right now.

[00:17:24] And, um, it's no one's thinking that distinct once in a while, like a couple of times a year, there'll be an earthquake and it'll kind of like shift a tiny bit. It's like, Oh, that was an earthquake. It's like a blip. Uh, it's like, wow, did you feel that? And like, Oh, you have to really think and concentrate to like, I think that was an earthquake. So the buildings are just sold well done, uh, you know, through science and data and just upgrades to like manage, uh, the worst case scenarios.

[00:17:54] And, um, no one's thinking when they go up an elevator, 70 floors or whatever it is at how high as you want to go, that something bad is going to happen. You know, it's like, when was the last time an elevator just free fell, you know, like from 90 floors up, it doesn't, it doesn't happen. It just never happens. Um, and when like, uh, you know, this building is, is, is, uh, made to withstand like 9.0 earthquakes.

[00:18:19] I think it was designed like up to 1991, uh, earthquakes and then they retrofitted it. So it's often like the latest, biggest earthquake in the world. So anyway, with that, just architects are very risk averse the same way engineers are that design planes. And, uh, like no one's thinking that something's it's such a small percentage of something that happens on an airplane. So, you know, that gave me an advantage.

[00:18:44] So coming into trading, I think forcing myself to take risk because I was in so much debt and I had, I had, we'll go into the brain operation I had later, but, um, but I had a near death experience too. And, uh, I, I, I, I, I got like the, the gift of urgency, you know, that wake up call after that near death experience.

[00:19:13] So as opposed to most, uh, young architects that just stick with their career, they spent 10 years doing something. They're just going to stick with it. Like, Hey, I just did 10 years of this. I, I invested in it. So might as well just keep going for me. I, I looked at my life, the future and said, okay, I'm not going to be on this planet forever. Do I want to live my life in depth and not realizing my dreams? And do I want to live with the regret that not?

[00:19:39] Now I'm aware that there's a high income skill, high income skills out there that you can acquire and get out of debt and then live the life that you want to live. So I had to like reanalyze my, you know, and it took that brain operation. It took me changing into another person to like have that. Cause I think if that doesn't happen, I think I'm just working. I'm just accepting my, the, my situation. I'm just going to accept it.

[00:20:05] Maybe I just end up like another bitter architect, another sarcastic, cynical architect, you know? And, you know, it's a, with a lot of respect and stuff, but it's just like, I'm, most likely in another universe, I'm an architect working nine to five and I will never be able to start my own firm and take, and maybe I'm risk averse. Like I already took, I already took a big hit with the student loans. I took the risk with the student loans and medical debt. Well, medical debt wasn't even risk.

[00:20:32] So, you know, it's just, um, it's just life. Yeah. Did you think, I mean, after that near death experience, the operation you had, did that just give you that borrowed time or help you just take on the risk? Say, you know what? Life is worth pursuing, you know, your passions, not just going down that nine to five rabbit hole. Yeah. I think, I think it, it, you know, when, um, when I woke up from, uh, the coma after the

[00:21:01] surgery, I was in a coma for like, I don't know, two or three days and I was intubated and I, they woke me up out of the coma and I heard my mom and my, the doctor, the surgeon arguing and the surgeon was like raising his voice. He was, uh, he was frustrated. And I was there, uh, staring at the wall with intubated. They didn't know I was, I was, uh, I was paying attention. And the doctor yelled at my mom, like he said, I just gave your son, David 50 years of life.

[00:21:29] And I was 25 years old and a quick calculation in that situation. I was like, okay, two more 25. So I got two more 25s left. And, uh, I think, you know, now it's going to be more than that. But like at that moment, that's like, that was, uh, the, the, the, what do you call it? The estimate, uh, you know, so, um, what year was that? That was, uh, 2010. So I, I think that woke me up.

[00:21:56] I was like, even then in that state that I was in with, uh, Seroquel, Trazodone, Morphine, these are crazy drugs to, you know, sedate you. Um, and intubated with staples in my head. Like I'm staring at like that is going. You could probably find that stuff on Skid Row. Yeah. Oh, for sure. No, you can find more than that. So, um, but, um, but yeah, uh, that, that woke me up and it took, it took that like staples

[00:22:25] in my head, a hundred something, 150 staples or something like that's crazy. And all that is like force a change out of me. Cause I think I was 25. So maybe the younger you are, the easier it is to change. You get stuck in your ways as you get older. But that was like a pivotal moment that, that changed me completely. When I went back to school, uh, a year later or so, just taking some classes, the, the, my colleagues, the classmate, they like David's changed.

[00:22:52] They didn't know it came comes, but you know, it's like the reputation goes around. They're like, David's changed. He's not, he's not the same anymore. His designs are not the same because my designs became all minimalist. Cause I didn't want to waste time. Uh, I used to spend so much time on every single detail that didn't matter at the end. It was just like all ornamentation. You call it ornamentation, all ornaments. And like, why? I guess I just liked drawing. Now I was like, okay, this is a, let's get this, let's get more minimalist.

[00:23:21] And, uh, why was it the urgency? And, and also I didn't want to spend all night in the studios. I would spend all night in the studios. So five in the morning and inhaling all the sawdust and the fumes and all this. I just wanted to get out of there. So I became minimalist. Um, but yeah, it just changed me dramatically, man. And, uh, so for everybody, you know, it's like certain people, they can, they go through that and then that forces the change.

[00:23:48] But like you, if you are aware that you need to make a change and you can, you can tap into something similar for yourself. You don't got to go through a brain surgery to kind of like be aware and make, and make a change, you know? Cause like a lot of people that come into trading, they need to change certain habits and routines and, and behaviors. And limiting beliefs, which I'd like to segue into. I've heard you talk about those and, you know, I, I've certainly struggled with those as well.

[00:24:15] And I mentioned, I heard you mentioned them on a separate podcast and you were talking about how, look, you were, you were driving for Uber or, and whatever you were making 15, 20, 25, let's say an hour. And then you come to trading and you make a, let's say you make a thousand and it almost feels kind of dirty because you're like reflecting on your past. And so how do you, how do you just ascend to the next level where you're not always reflecting on, man, I worked a job for minimum wage.

[00:24:45] Like this doesn't feel right. How can you elevate yourself? Yeah, that's, that's, um, very good question. So the sooner, once you become profitable and are in that profitable mode, a version of your, of profitability of yourself and being profitable, I say for a solid six months, a year now, you need to break out of that. A lot of people stay at that, that same. I know people that have stayed at the same level for, and they're doing well, they're profitable, but they haven't broken, had a breakthrough.

[00:25:14] So a lot of this is that, and, um, you know, it's crazy. I thought about this the other day and I was like, I don't get that anymore at all, like at all. Wow. So it's like, I'm just a new person. So you're constantly evolving. And, um, you know, how do you break out of that? It just takes, it takes a little bit of time and it takes awareness. It's, it's like, okay, you know, like, like I am worthy of success. Like I don't got to feel ashamed, you know? So I worked hard for this. Everybody has free will. They can decide everybody.

[00:25:43] You got to make the right decisions in your life. You know, so everything has to be, I've always prided myself on making the best decisions I can for, especially when I was starting out, I made such good decisions. And I, I, I'm so proud of that version of myself back then. Cause I, I knew less than I knew now, but I somehow was doing my best to make the pivotal decisions that were important. Like for example, sleeping in that office, which is still my same office. I just decked it out now. It's just like, but it's crazy how that same office that I was living in that I, well, I

[00:26:13] got upgraded from the shared office is in COVID. Uh, nobody was occupying the office. So they upgraded me for free. And, uh, well, now I pay more than the upgrade price ended, but like it's, I'm still in the same office, but that same office became my podcast studio, became my hardcore trading office, became everything. And that was, that's because I decided to live in the office and selling my car. My car was holding me back with trading in Los Angeles. Oh my God.

[00:26:41] It was, uh, the parking, the traffic, the tickets, uh, everything gas is like a mess. And, uh, you know, quitting drinking. Oh my God. Completely game changer. Cause now I could study like double time. Most people think they justify, oh, I only drink once, twice a week, a beer here, beer there. That slows you down. I'm trying to, you know, for trading, it's so hard. You got to change up these little things that'll give you just a little bit of a chance, more of a chance to get profitable. A little is trading to get profitable is so hard.

[00:27:10] You need to align yourself the best to like, you need to do all the little things that is going to give you the better chance to be profitable. So for me, that was an easy decision. I was like, okay, I, I don't drink any alcohol, nothing. Um, getting my health on point, getting books, audio books, you know, it's like, uh, just all good habits, all good people in my life, you know, that, that encouraged me. And, and, you know, I changed my phone number in the beginning.

[00:27:38] So I did all these little things that were like so pivotal, all these little decisions that added up, compounded, compounded, compounded. So, but, um, but yeah, man. Uh, and then COVID happened and I was positioned perfectly. And even though I was going to, there was nowhere to shower and I had to go to Skid Row. Um, you know, at that point, like when I, when I lined up at the showers for Skid Row and all

[00:28:03] these, the, the grimiest people of the earth are in the, in the line, people from just got out of prison. They have nothing left and they're nowhere to shower because they got out of prison. Uh, big drug addicts, you can name it every single drug, uh, gang members that they have nowhere to go. Uh, now like they're like retired gang members, you know, like when a gang member gets older, there's like, and it gets out of prison so many times.

[00:28:32] They just end up in Skid Row. I've seen this so many times. So like I was, I was there a lot, you know? So I saw a lot, but at the same time, my identity was, uh, a trader. And, uh, in my mind, a millionaire trader as I'm lining up in the line of Skid Row with a bald head, by the way, in COVID, I shaved my head and, um, I didn't say anything to anybody. I didn't say hi to anybody. I must've went there at least a hundred times. I don't know, maybe like 50, maybe like more than 50 times. And I never said hi to one person.

[00:29:02] I never said one word. I just kept my mouth shut because you don't want to make friends in Skid Row. It's like, it really is like prison. Um, I don't know how prison is, but I imagine it's like that. And, uh, and I would just be so focused. Just go in, run straight, not run, but like what beeline straight back to my office, trade the pre-market, make several thousand, uh, sleep on the floor. Go do it again. Your study, I'll study all day.

[00:29:29] And then until I got so tired and then I'll go again, Skid Row, shower, come back, trade, make several thousand in, in the, in the pre-market 2020. It's 1am. And I timed it perfectly. It's like at midnight, uh, the lady comes in to clean the Skid Row showers. Cause you don't want to shower in the middle of the day when there's like a hundred people have showered there already. It's very nasty, but, um, it's like crazy. But yeah, while waiting in line, I did see a couple of murders.

[00:29:58] I saw a lot of helicopters, body bags. It was pretty, it, Skid Row is, I seen the worst of the worst throughout, in my trading journey. And it did not like change my mentality at all. Like I was so focused. I was listening to like David Goggins all the time back then. And I was just on a mission. I was not there to, like, I did not feel any pity for myself at all.

[00:30:23] You know, it helped that the, all that preparation, those four years leading up to it, I put my, my time in of study. And when I did start to make some money, you know, $900 here, a thousand there, 500 here. And it added up over the month, over a month or two. I, that was, it's interesting. Cause like later on when I'm making the big money, let's say I'm up over half a million, a million, I'm, I'm having different feelings, which is just like you mentioned before about

[00:30:52] like comparing myself to the Uber and it feels kind of dirty. But at that time I felt like I deserved this as like, it was like, it's about time. It's about time. The market gives me something. And I took the risk by trading it for real. Cause like for four years, I didn't really trade that much. I was just studying. Well, it sounds like we got a Netflix documentary on our hands with, with this story. It was an incredible story. And the fact that that was your breakout year too, right? 2020. I mean, what was the catalyst there?

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[00:33:12] Find select shelving and totes storage up to 15% off at the Home Depot to organize every room in your home, from your garage to your attic. Visit homedepot.com. How doers get more done. Yes, COVID. So COVID, the first thing to go with COVID was all the biotech stocks. So with manias, and the thing is, so I studied manias,

[00:33:36] even though like back then I would say I had like 4,000 hours of aggregated study time. Now I would say it's got to be like over 25,000 hours. I know what I'm doing pretty, really well right now. But back then was like, it was still kind of rocky. I kind of knew, but it kind of didn't. But I had history to guide me. And I was like, okay, so 99.com, boom, tulip mania, roaring 20s. I had all these bubbles to go by. And in 2008, the market crashed.

[00:34:04] And I was like, okay, this is a mania. And uncertainty, black swan events, uncertainty, black swan event, COVID. And the biotech stocks. And this is nothing new. Like I had studied the pandemics of the past with Ebola. I know Ebola, some stocks went crazy. And the monkeypox in the past. Monkeypox, every decade or so, it comes back or something like that. But it came back.

[00:34:33] It's had a couple runs. So I knew. And then COVID, I was like, okay, so this is like another Ebola like on steroids. Because no one knows how long it's going to last. When it first started, we didn't think it's going to last years. You know, so. And then all. So I was already up at night doing all-nighters studying. So from like, I would study until I got tired and just passed out. Because I had nowhere to sleep, you know.

[00:35:01] So I would just study on my desk. And I would just pass out on my desk in the shared office. And I would wake up and look at my screen in front of me. I was like, wow, all these stocks are fading down. And I had no data back then. I had no software. I didn't know how to backtest. I didn't know like none of that stuff. I just saw, I guess my pattern recognition skills. It didn't take much pattern recognition. I was like, oh, this is a biotech stock. People are buying it thinking it's the next COVID one to run.

[00:35:29] And it just fades all the way back down to the market open. And I saw this over and over and over. And I was like, man, I could be making, if I put a thousand shares in there, I could be making some money and I can get myself out of this situation that I'm in. And like, it's been years. I got to trade for real at some point. Like, I got to try at some point. And then I saw some people that I would follow online. They started, they became like, they turned like 10,000 to 100,000 in like a few months,

[00:35:57] two months or 100,000 to a million. And I was like, and I've been following these guys for a long time. And I was like, okay, I think this is a mania. This is a mania. I need to put risk on. So that's when I gathered some funds together to get myself over the PDT. You know, now PDT is about to end, but back then, like, you know, so I had to get myself over PDT. And then I had like just that one pattern that I saw in the pre-market. That's all I did.

[00:36:25] Four in the morning to seven in the morning was like my window right there. And I changed my life with that alone. I took that all the way to $150,000 in profits. And then I went to go travel and then the meme stocks came in January, February, 2021. And the pre-market pattern started all over again. I made another 100 grand.

[00:36:50] And then, but you know, so that was like my starting capital to expand my strategies and further my education. So what I mean by that is when I made that initial amount, I knew I didn't know that much. I was like, man, if this pattern goes away, this one pattern, I won't have anything to trade, you know, like I'm not. And I was scared to trade because that's like, I didn't want to lose the only money I had, you know, and like I made a life-changing amount of money.

[00:37:17] Maybe it's not enough to pay all my bills, like my student loans off, but at least I can, I don't have to, I can get an apartment. I can travel a little bit. I can eat normal food, you know, so I can, I can survive like this and I can just build slowly. But I knew that I didn't know that much and I needed to learn more. I needed to. And then that's when you went to Puerto Rico, right? That's when I went there. And then the journey started too, because then that's when you did expand and you got your spy pin and went to, what was it?

[00:37:47] FLGC. Yeah, Columbia. Yeah. Columbia. And you started finding these pump and dump, just schemes. You would locate them, find out, hey, these, I mean, they're no good. But essentially the companies. And so, yes, absolutely. So while I was living in my office, like the shared office, I got obsessed with research and activism. And even though, and I spoke about this in the, on the last chat with traders podcast a little

[00:38:16] bit, but even though I couldn't short like an activist, cause I didn't, they have a fund. And I just went down the rabbit hole and like, I just loved the research. And I would use some of that for my pump and dump short selling back then. But in Puerto Rico, I didn't know this coming into trading, but I made some friends and I expanded my network. So the relationships and my network, like right away, like, because the real traders, the real,

[00:38:46] like they're kind of secretive. There's like a, you can't really find, they're not that, that public. So in Puerto Rico, when I went there for tax incentive and when I went there to just to find traders to be friends with, I just wanted to make friends, tell you the truth. And, and that woke me up. I did make friends. I made friends right away. Cause like I was there, I wanted to add value to whoever I was talking, speaking to. I wanted to show them what I knew with trading and help them out.

[00:39:15] How could I add value to the, to these people? And I traded out of an office over there. It was like a shared office for traders. And I loved it in there. I used to, I made a lot of friends and I even started my own podcast. Cause I wanted to have a, you know, it's like, it helps to have a reason to go approach someone and say, Hey, you want to come to my podcast? You can share your story. And I, I realized pretty, pretty quickly that people like to share their stories, you know? And, and I just expanded my network like that.

[00:39:45] And I met some short report activists and I started to collaborate with them and I would let them know, you know, through our conversations, Hey, check out this pump and dump. Check out, I got a text message. This company looks like a scam. And eventually that led to the Flora Growth, which is the, the weed company based out of Bucaramanga, Colombia. It's a city in the jungle in Colombia, the country. And I went there to go investigate it.

[00:40:13] And it's something I would never do now. But back then this was my mentality. Like I had that burn the bolts mentality is what you were saying for the introduction. And, um, you know, the first chapter of short selling master is burned, burning the bolts. That's the first chapter. And, uh, I have a painting of it here in my office too, still there for five years now. But, um, but I had that chip on my shoulder and burning, like I had nothing to lose. Uh, I had, I didn't own anything.

[00:40:43] I was living like out of a suitcase pretty much. Uh, and, you know, so for me to go there and, and I had, I was bitter too. I was like, man, I went to school for 10 years. And you're telling me that these scammers are out here running wild, you know, like, you know, it's like, like, so I had a, like a purpose. I had a, a, a drive to go find it. I read it was a three hour like hike. Oh man, it was, it was crazy. Yeah. Three hours up the mountain, three hours down.

[00:41:12] And I did that twice. And, um, but the first time it was like, I kind of had an idea of where they were. So it was like three hours, but it took longer because we had, we made some wrong turns and I was, it was a dirt bike for three hours. So now you were supposed to be one of their investors, but they, it didn't sound like they were, they were too thrilled to have an investor show up at their door. No, they weren't.

[00:41:40] Uh, they were surprised, you know? And, um, I was in there, my, my, um, my guide came with me and he was like, like affable. I think that's the word is like, he's like, Oh, happy, happy, go lucky kind of guy in Spanish. So he kind of threw them off like, Oh, this guy is like harmless, but they had no clue. But until the last moment, because they told me to come back the next day. And like, I can't argue. I'm like, uh, cause I didn't want to throw my cover. But yeah.

[00:42:09] So, so like I thought about it, I was like, I'm going to tell them, Hey, what are you talking about? I just came from Miami. I drove all the way up here three hours and you're telling me to come tomorrow. So I was like, if I start arguing with them, it's going to blow the cover. So I was like, all right, tomorrow. And, uh, another three hours back. And, um, and yeah, the, one of the Javier, the cultivation specialist, he's like a marijuana specialist. You know, he came out and he was angry.

[00:42:39] He's like, there's no tours, no tours. You're not allowed to come for a tour. And then like, at that moment I took out my phone and I just blew the cover. The cover was blown anyway. He's like, he, Oh, he said, this guy's not a investor. Look at the hole on his, uh, on his, on his pen. And I said, what is that hole? Why is there a hole? And I looked and I was like, Oh, like, uh, that I just took out my camera. I recorded it. And then I jumped on the bike and I left. Well, were you concerned they were going to chase you? Yeah. Yeah. No, for sure.

[00:43:09] Um, there was a moment. It's like a, like a, maybe like a three to five second pause. It felt like eternity. And they all looked at each other, all three of them. And they look at themselves. Like, think about it. And two, um, how do you say, uh, cartel guys wearing like camouflage and like skinny with tattoos. And then the cultivation specialist dude, which is like a front guy. And they, they look when he says, look, he's a hole on, on his, uh, on his pen. Un huequito.

[00:43:39] He's like in Spanish. Un huequito. You know what? So I understood. Oh my God. The hole. And he's telling them in Spanish. He doesn't know that I speak Spanish. Um, and then they look at each other. They look like, like that. They look at each other and they look at me and they look at each other and they look at me. What does that, what does that mean? That means that they're thinking like, should we grab this guy? And there's a shed in the back. Like I, I was at the shed the first day for wifi.

[00:44:03] They were like, um, they had me go in there for, to see, like I was showing them, uh, my IDs and stuff like that to come back. But, and I'm surprised it was so like, I definitely couldn't blow that cover the first day cause they could have just locked me in the shed. So when, when they were looking at each other, the first thing across my mind was, okay, they're, they're probably going to grab me. Uh, so I'm out of here. So I jumped on the bike and I left. And the whole time I thought like, they're going to come.

[00:44:31] But the thing is, so I thought about it afterwards, like in hindsight, hindsight analysis is like, oh, okay. It makes sense that they didn't chase me. Cause when they were looking at each other, they could have justified grabbing me and like locking me in the shed. It's like, I trespassed. Maybe I was trying to steal or they can make something up. Uh, so that was good that I left because, but now if I'm on the bike and I left and they chased me, now it's like they kidnapped me. They went and grabbed me. Right.

[00:45:00] You know, so, and there's evidence that the bike would have flipped or something. I don't know what captured on your pen. Yeah. So what, I mean, where's that company at today? Have you looked? Oh, it's, it's, uh, in the gutter. It's probably like a dollar or something like that. But the thing is, it's, it's, it's like a dollar or so just to remain compliant on the NASDAQ. Uh, it's done many reverse splits. So the true value is like nothing. But, um, that gave me a lot of, uh, experience.

[00:45:30] I had a firsthand experience on how these companies work with the, with the IPO lockups. And in the book I speak about, I use the story of, of, uh, of that to describe fundamental analysis. Like how I go about the deep dives, like the, looking at the underwriters, looking at the, the, the, the players involved, the people involved. And like the lockup.

[00:45:52] Tell us how you sniff them out, uh, to get to that point where it's like, where you became that investigative journalist in which, have you pursued any other companies to that length? Yeah. Okay. Definitely. And in, in the book I talk about, uh, one or two of them, flora growth and another one. But, um, but yeah, you know, so first they got to get on your radar. It's like, it's like a policeman. It's like the policeman, but we're vigilantes over here, the short sellers. But the policeman pulls over someone with like a broken taillight.

[00:46:23] And then when he pulls them over, he discovers that like, it smells like a lot of drugs in there. And there's like a gun and it's like, maybe someone's kidnapping the trunk, you know? So it's like, so with short selling, it's kind of the same thing. Like a stock gets on my radar. Maybe it's going up too fast. It hits 40% up or something. Or in this flora growth case, it's, uh, I get text messages, compensated promotion text messages from very shady outlets.

[00:46:51] And then it also goes up 40% on an intraday scanner of mine. And I'm like, now I'm looking now it's like the broken taillight. I'm looking at, Oh, this guy. Now let's look, dive deep into it. Oh, I see this guy in it. That's been this financier. Stan Barty that's been involved with several of these in the past associated with this specific underwriter. And look at this. He has a photo with Jordan Belfort back in the nineties.

[00:47:19] Their buddies are all hugging and stuff, uh, with Larry King. And Larry King was an older man. It's like, Oh, it's pretty typical. They're trying to swindle the old guy, you know? So Jordan Belfort and this guy. So it's like, this guy's involved with a lot of penny stock pumping dumps. So then that red flag leads to like so many others. And I'm like, Oh, so what's the agenda? The agenda is the lockup expiration.

[00:47:41] So this specific underwriter, um, gets, he wants their, his clients, the insiders to be happy. So like they're somehow magically the stock is going, uh, to new highs on a daily basis. And then into the lockup and after the lockup, a few days later, just dumps, you know? So when I, why? Cause the shares unlocked and everybody profited from it. So, um, yeah. You mentioned red flags. There is a red flag I want to speak on.

[00:48:11] Uh, that is China stocks. And I mean, you've mentioned these plays in your book and a lot of traders have mentioned them. We saw one. I don't want to date the video, but even today with this ticker, I just want to bring up WOK. WOK. Okay. This ticker goes yesterday from $2.50 to $0.18 all the way up to $7, you know, back down, back up, left and right. So what, why China plays?

[00:48:37] You know, you say these plays specifically, you tend to just avoid. Yeah. It's, it's crucial. Um, and I've had some big losses in the past with the China stocks. That's why I don't touch them anymore. And it's all about longevity with trading. So if you want to make millions in trading, which is doable, you can do it, but like, you got to survive your learning curve. Like Dr. Breaststein Barker says. Right. And, uh, you know, you know, one trade is worth your career. Absolutely.

[00:49:07] You don't go a lot. But why, why are Chinese companies the ones that are so heavily manipulated? Do you? Yes. Uh, well during COVID and COVID lasted until like 2023, basically. Um, China was blocked off. Nobody could investigate these, these, uh, companies. And, uh, if you did invest, there's a, there's a documentary called the China hustle. I don't know if you've seen it. Um, it's very good. It's, it's from like 2016 or so. It's kind of dated a little bit.

[00:49:37] I need to do an updated version, which I want to do. And I'm working on that for the future, but that's, uh, that's pending. But, um, but yeah, so back then it's, uh, during COVID you couldn't enter China. And if you did enter China, like in the China hustle documentary and you investigated a company, they could potentially throw you in prison. So one investigator of a, of a hedge fund, he went to prison for investigating a company, um, for Chinese prison for a couple of years.

[00:50:06] And I met him, I met him in Dubai in the, in the book. I go over that, uh, that discussion I had with him. Um, but why is it China is they can get away with it. They have a lot of money. They they're very smart. Um, China at one point, you know, not too long ago, it was a very poor country. Now it's a very, it's, they have money now and they're, they're ruthless, man. You know, with architecture, with, with, with, with money and squeezing the stocks.

[00:50:32] So for example, the stocks, uh, American stocks have squeezed. There's a, at a certain level, the manipulators take profit, but the, the Chinese stocks, they have patience. So like they will let a stock squeeze thousands of percents before they let it go. And also what they've done, that's what I'm saying. They're, they're next level. So they started first, um, pumping and dumping the stocks, uh, dumping it onto the long traders.

[00:51:01] This is like 2021, 22. This is when I used to short it. They would have a lot of these WhatsApp groups and would tell gullible people to buy the stock. My uncle says to buy the stock and people would buy it. And then they would, uh, they would get some profits just like a normal pump and dump. They would get profit, uh, on a few. And then they'll, they'll just liquidate one like rug pull. And then everybody loses money, more money than what they gained, uh, before. And, you know, they lost what they gained and more.

[00:51:32] Now, when short sellers started to get, uh, involved, this is like 2022, 23. Like myself, I, like, I got note of this from some guy on YouTube that started a whole channel of, he infiltrated the secret groups of the Chinese pumpers. And I actually started to track all the data from every single Chinese pumper on Twitter at the time, like hundreds of profiles and what stock they promoted and the history.

[00:52:01] I was like, so not only was I doing this, but I got word like other short sellers were doing this. So it's like the word got out that you can make a lot of money shorting these Chinese pump and dumps. And there was certain indicators that revealed like they were going to dump it. So that worked until the Chinese reversed their strategy. They figured out that a lot of shorts are shorting this. So, and they realized that short sellers have more money than long traders.

[00:52:27] So they started to pinpoint the short sellers and, uh, and squeeze them. So these, these, these pump and dumps are specifically designed to squeeze short sellers. They're not something I read in your book. I found it so fascinating, David. It's not something I've really considered much, but it just hit me like a ton of bricks. Like, yes, this is absolutely being done. You were talking about how maybe just the manipulators in general on these nano flow, like sub one million

[00:52:57] that you avoid, um, there, they have some kind of algorithm. You said that's taken into account, locate inventory plus times and sale data and probably plus like what percent the ticker needs to move in order to halt it. In which case they get the gap up or gap down. Like it's a, it's an in-depth algorithm that's taken place and it, it absolutely makes sense. And like what you just said, where the big boys are traditionally are the short sellers.

[00:53:26] Now, maybe with PDT changing, maybe that evens the playing field a little bit. I don't know. But traditionally, yeah, the short sellers have had the bigger accounts and that's where the liquidity lies. And you'll see them, uh, with these play, with these tickers, you'll see them like they'll, they'll trickle them down and squeeze out, squeeze out the shorts, you know, with those algorithms. Yes. Uh, short selling predatory short squeeze algorithms. Yeah.

[00:53:50] So I gave a lecture on this in, uh, the university of Florida for the, the algorithmic club, the, it's like a hedge fund club, uh, over there. And, uh, yeah, so, um, yes, it's very predatory. So they're hunting down the shorts and it's not that hard if you, if you think about it, if it's like, that's why we're trading is a lot of creativities involves like, okay, what's actually going on here. And then you, I have conversations with people like the, the guy from the China hustle from

[00:54:18] the prison that he went to prison there with hedge fund managers, with short selling research firms that I've interviewed on my podcast and interviewed all the big players. It's to confirm all the theses. And I, it's like, um, reverse engineering how they're doing it. And it's not that hard. It's like, you need, you just need to get a, you know, an out, you develop an algorithm that aggregates all the locates from all the short selling brokers, which is doable. It's, it's, if you have the money to do it.

[00:54:47] And, um, yeah, then if you see 50,000 shares plucked out over here at this price, you mark it on the, on the map somehow. And, uh, on the chart, if you have a hundred thousand a year, 200,000 a year. So then they're, they got to calculate how many shares would it take to squeeze them? And what kind of a squeeze would be the most pain for this person? How much could they take? How much is, how much of the average accounts, let's say the average short seller has like a 50 K account and the big ones have like a million dollar account.

[00:55:17] How much pain can they take before they got to tap out? So usually a 50 K account, what is that like a 10, $15,000 loss? They got to tap out, you know? So like they send it there, but the Chinese ones do it more than usual. They will send it like two, three X that pain threshold. Yeah. With the wash trading, you call it right in the back where it's like, they're creating that artificial demand on the bid and ask. Yeah. And I think they're, they're doing it with algos and without.

[00:55:45] So like the rules don't apply overseas like they do here. And especially during COVID when nobody could enter China. And it's just the beauty about this though. So in my book, I have a chapter. It's called, I think it's chess games with the boogeyman or, you know, that's the title. So the beauty about this is that it's, and hopefully they don't listen to this podcast and maybe they're going to change it.

[00:56:12] But, but the beauty is that it's contained to just Chinese stocks and also Singapore. I've noticed Singapore as well. So it's, it's like, if you cut the whole category of Chinese out, Chinese stocks, I love Chinese people. I have in the book, I have a nice, good things to say about Chinese people. I love Chinese people, but in Chinese stocks, they are, they get hijacked and they have these crazy squeezes and they can cost you your career. And I never want to go to Skid Row again.

[00:56:42] I haven't been back there. It's not too far away from here. I don't ever want to go there. Sometimes I walk by like, nah, I don't even want to see it for reminisce. There's nothing to reminisce. So, so. You also say, you know, that sub 1 million afloat are tickers that can be manipulated to this degree. What are some other, I guess, avoidable things for the traders listening? That's part of your checklist. Uh, so no sub 1 million.

[00:57:09] And if you really want to take, I think really, it's really responsible to do no sub 1.5 million floats because also a lot of traders lose sight of how they're going to perform in the future. Like you're not just trading for now, you're trading for the future. You want to, that millionaire version of yourself in the future. So in the future, if you have, if you're trading with more money, you can't trade the 1.5 million floats anyway. They're going to destroy you over the long run, over the short run, even just after one out of 10, it will destroy you. So no 1.5 million floats.

[00:57:39] No, no, uh, Chinese stocks. I would throw the Singapore stocks in there too. Um, no high institutional ownership, biotech stocks. You got to enter over the dilution prices. This is an important one. Uh, and, uh, yeah, what else? Uh, no high debt stocks. I don't like high debt stocks. Um, yeah, uh, there's a few other top of my head. Yeah, those are good. Well, market cap, no market, no over 250 million market cap is a good one too. Okay.

[00:58:10] Interesting. Now I want to revisit some of the, some of the tickers you've taken some losses and some of your wins on as well. Cause a lot of the rules you said you learned where it was hitting that rock bottom. Um, and I know you've mentioned too, it's good to hit rock bottom when you have less capital versus entering the market. Oh, of course. Yeah. Yeah. Yeah. Yeah. When you have little, you have little to lose, you know? So was HKD, was that a Chinese? No, but, um, that was Chinese. That was insane. I did not trade that one.

[00:58:39] Thank God. So that went from $7 to like 2,500. Now I knew a guy that blew up on that one. You, you, as well. I know one too. I know a couple. Yes. Knew a couple. That was, uh, I mean, that was unprecedented. We haven't really seen anything to that degree. I mean, percentage. Uh, no, I, I, I didn't mention it in my book. So the reason why I mentioned it is because that was my first. So HKD was the first New York stock exchange, Chinese stock to do that.

[00:59:08] By the way, there, there hasn't been any New York stock exchange listed stock to do that since. So I think after that one, the New York stock exchange changed their, their, uh, they've been more strict historically. They're more like a prestigious exchange. So they tightened up after that. But HKD, when that went, that was more like, um, you know, short sellers, if it's not like

[00:59:33] vertically squeezing, like, uh, aggressively, sometimes short sellers get in and they're like, Oh, it's 300% up. This is too high. It's going to go down. And then they get boiled like a frog. You know what I mean? Like they stay and it's just like grinding them out slowly. And that's what HKD did. Just, it was floating up. The spread was so wide floating up and up and up. And, um, and I heard, uh, that some of the locates were like ghost locates.

[01:00:01] Like the, the, some, uh, brokers had trouble locating the shares. And even when you covered, it still like had extra fees to it. It was all sketch. And, um, I think that was a Cayman Islands Chinese one. Those were even more sketch during that time. We, we haven't seen, uh, the Cayman Islands too much since then involved with these nasty squeezes. But the thing about HKD, what was like a big learning experience for me was, um, I was invited

[01:00:29] to the New York Stock Exchange, uh, to go visit while HKD was at all time highs. I was there. And, uh, I asked around, I was like, Hey, look, HKD, what's going on? And they were all, the market makers were just laughing about it. Hey, nobody was doing anything. It's like, they were just laughing about it. Like, yeah, some guy is, uh, I heard some guy is high in Singapore and he thinks it's, uh, it's the Hong Kong dollar and he keeps buying it and buying it. He's just really high. And, and they were all just laughing. I was like, man, so they don't.

[01:00:59] So like that told me as a short seller, like you can't depend on anything to save you with the exchange. Like you have to come in, like this is, everybody knows there's a lot of scams going on and I guess there's not enough police enforcement. Some people did get saved the other day. I was going to ask you about this. I was, I just thought of that. We think alike right there. Yeah. Yeah. So I saw this ticker and it's like 50. Yes. Uh, oh man. I'm excited to get your thoughts on this.

[01:01:29] So from 50 cents to like $24 within a minute. Now I had never seen this before in 10 years of doing this and pursuant to rule 11890B from NASDAQ in conjunction with a New York stock exchange, they canceled all the trades in that timeframe. Any, any trade above 58 cents executed between within this minute where the ticker went from 58 cents to $23, those trades were canceled.

[01:01:58] And they said, this decision cannot be appealed. What happened there? Yeah. Okay. So this is why experience matters a lot with trading. So early in my career, I remember 2021, I shorted something at one in the morning here in the West coast, four in the morning. It was probably one of those days that I came back from Skid Row. I don't even remember. And, um, it was a recent, it's a, it was a stock that like a four, eight, no, 4am Eastern. It was reverse splitting.

[01:02:28] They were putting in the reverse split and I had shorted it as the stock was splitting because I used to be really quick. Just like this one that happened that was like really quick. I used to be so quick to, to nail these spikes. And I, I, I was like, Oh, I was like, there's no reason for the stock to go up short. Boom. And the stock reverse split like, uh, like five times up or whatever. And, uh, it was, for me, it was like a $25,000 loss. I was like, I was devastated. I, I was under PDT again.

[01:02:58] And, um, you know, with trading, you get some, sometimes you need some luck on your side. And, uh, I had, I was devastated. I remember like, I don't think I mentioned this one in my book though, but, uh, I was passed out on the floor over here and I was like, Oh my God, what? It's like, I didn't, I didn't know it's a reverse split. What am I supposed to do? So then I called the broker and the broker was like, Hey, you know, actually that's a mistake. And they refunded me. I was like, wow, I got, I'm back to life. I got to life back in. And they were like, Oh, but it's going to cost 500 bucks.

[01:03:27] So I don't care about 500 bucks. I got my 25 K back. But, um, and they said, Oh, that's called a trade bust. And because that stock was supposed to split before the market opened. So it's, we're trade busting that five minute window. And I, they said, well, you have to write, write what happened and submit it. So that was a learning experience for me. I didn't even know you could do that. You can actually request a trade bust and it might, it's like a Hail Mary.

[01:03:53] Um, now in this case, ENSC, this is, um, this is, this is messed up though, because there was like two other ones, PLYX, um, CII something recently, two of them that did the same move and no one got bailed out of those. So what happens if you blow up on those? By the way, I stopped trading pre-market for a long time. I haven't traded pre-market in like two years at all. Zero. So, uh, this is one of the reasons among many reasons.

[01:04:22] I don't, I don't see an edge to it anymore. Um, but like, man, like what about those two other times that you don't refund those guys, but you refund this one. So what, you know, so the trade bust, it's just, uh, what happened was probably someone complained or, and someone with, uh, with, you know, with Wall Street, a big boy, maybe a big boy. With, with Wall Street, you know, when I first got, uh, I, I, I understood after like my first

[01:04:49] year of profitability, I was like, oh, so this is a game of favoritism. You know, Wall Street is a game of favoritism. It's like the people that get margin called, for example, there's like a priority who gets margin called first and who gets margin called last. That's why you want to have relationships with everybody. If they don't, if the broker or whoever doesn't know who you are, doesn't, you never have a conversation with them. By the way, there was a podcast on chat with traders that speaks about that. It's like have a relationship with your broker.

[01:05:16] So you have like five more minutes or something you can tell them, uh, you know, or like, for example, when I got invited to New York stock exchange, it's because I had a relationship with them. It was favorite. How come the, I'm sure there was more people that had, were making money on that, on in that brokerage to get invited to New York stock exchange, but I got invited. It's favoritism or I get a better, I get a better rate for most things is favoritism. So it's the same thing with the exchange. And by the way, the Chinese, the, I think that's why they manipulate too, is because they,

[01:05:46] they, they have relationships with the, with certain people, certain underwriters and underwriters have relationship with the exchange and they pay their way out of, uh, out of, you know, to not delist the stock or, or they're paid to this guy. Doesn't look at, doesn't look, turns the other way when he submits this paperwork. Cause one thing about the Chinese stocks, most of their, uh, finances are unaudited. So it's like, they're all just like fudged, you know?

[01:06:14] Um, they're all, for example, they, for there's so many of them, like 90% of the Chinese stocks and small caps, they all have an absurd amount of cash a lot of times there, you know? And then, you know, it's like all these companies are making money. I don't understand. So it's a lot of favoritism involved. So I'm pretty sure. Yeah. So somebody big enough or known enough, or what, maybe just the brokers is maybe it's

[01:06:41] not even the trader, maybe some broker, maybe some guy at Goldman Sachs or something got blown out and he has a good, it's like having a good lawyer. It's like having a good lawyer. Like sometimes the criminal, as long as he has a good lawyer, gets away with it. What, what an innocent person with the public defender, he's easy. He's in, he goes to jail. So I know the heart breaks, you know, for those other tickers you had, you had mentioned where, you know, you know, maybe after this podcast, traders are going to start requesting this trade bust from their brokers.

[01:07:10] They're going to say, look, that, that wasn't a loss. That was a trade bust. But it was so quick though. I don't know if that many people got involved because it was like a one within a minute. Yeah. In a minute. Yeah. Yeah. So let's talk about some of your, I guess, some of your starting trades, early losses that were pivotal for your trading career. The CYDY, PETS, PTZ, and then FNGR, which I believe you just touched on a little bit, I guess.

[01:07:40] What, Stan, when you look back at those, I know, you know, in the moments, those losses are, they're hard to swallow in those moments because maybe they were trade busts, you know, who knows. But, but for the, did you learn some rules in that, in that really were monumental moving forward? Yeah. You know, the, the PETS one in particular, that one stung, I think that one stung the most because that was my first big loss.

[01:08:06] It was $60,000 and my net worth, I had made like a, wasn't, I was still digging myself out of debt and I had made, I don't know, 150 grand. And then, uh, I, no, that's 250 grand and I, and I, 60 grand out of that, that's a huge chunk, you know? So, and my net worth was still negative. So, um. It was an offering play too that you shorted. Yes. That was, that, that was my, I think that was the first Chinese stock that I suffered big on.

[01:08:36] So yeah, they did an offering and I'll never forget, you know, it's like the thing with these losses, you get, they're ingrained in you. Like I'll never forget it. When I'm a hundred years old, I can recall it. So it was, they didn't, the stock was trading at like $1.20 and then, uh, in the after hours, they announced an offering. It was, and it went down to 80 cents and the offering price was like 60 cents. So I was like, oh great. I'm going to, back then I would chase down offerings. I don't do this anymore.

[01:09:03] But like as a newbie, you're like, duh, they did an offering at 80 cents and the stock's at a dollar, a 60 cents. And it's at 80 cents. Of course, that's like, I should wait for it to go down. It makes sense. But for a period of time, like stocks would gravitate straight to that dilution level, right? Yeah. I mean, this is before COVID. Uh, yeah, that, that was a decent, you know, a gimme. And, um, but yeah, the Chinese, they don't, they don't dump it. Like they don't dump that offering.

[01:09:31] So they, they were, there's a reason why it's, it's squeezing the way it did is because they didn't, because I look for, even now it's much more clear. I can verbalize it. Back then I didn't really know as much. I just was like shorting, uh, offering short. Well, now I understand the concepts that, oh, when they do an offering supply increases because they dump, they, they, they dump the offering shares into the supply and it's supply grows.

[01:09:57] And that adds selling pressure, downward selling pressure to the stock. And that's what makes it a good short. But if they don't dump that, then it's just, it just sells off because of quick panic, but there's not supply dumping. It's just some longs getting out, you know, some longs got out, they panicked out, but their supply hasn't increased. The amount of shares of the stock of the, of the float has not increased. So that's the problem.

[01:10:23] So that stock went from, it hits like 80 cents and then it jumped all the way to $9 in the after hours. And, and, uh, yeah. And then I covered like two days later for like a 60 K loss. Yeah. So what was the thing that you, did you learn just in that moment? I know you've said that with shorting, you're, you tend to be more reactive than predictive. Is that, was that a lesson learned? Yes. So just not to chase that, you know, price.

[01:10:54] So as short sellers, yeah. So that's the thing. So the big rule from that one was never, no more chasing offerings. I short on strength, never chase weakness. Um, and then, um, but yeah, short sellers gotta be predictive long. No, no. Long traders are predictive. Short sellers are reactive. So by me, uh, by reactive, you want the move to happen short on strength, wait till it

[01:11:18] confirms a backside and react off the backside is short, you know, not, uh, predict that it's going to go down. You don't short and predicting it's going to go down. You react off the move. So it's like, yeah, long traders got to predict because like long traders get rewarded for, okay, you see the stock going up. You don't buy it when it's up already. You buy it with looking to go up, you know? So there are long strategies that I like, like for example, the stuff that I don't short,

[01:11:45] you know, uh, when a stock is grinding midday and it's consolidating and it's holding the highs, that's recipe for a short squeeze. Now the long has to predict the short squeeze coming towards the end of the day, the power hour. If it's, if it's midday and the stock is holding the highs and you're predicting, okay, the shorts are going to get squeezed, then you buy it early and you hold it for an hour or so for, to your plan for the squeeze. That's a prediction.

[01:12:12] Now the short seller can short the same play, but like once the squeeze happens, you react off the squeeze, you know? So you short the squeeze. I like to call, I call it like mop-up duty. I'm doing mop-up duty from the shorts that get squeezed. Yeah, that's a great analogy. Now, you know, for these pump and dumps that you've been trading, one piece of news and aside from the offerings that you say is one you like to short is patent news. Yes.

[01:12:40] Why is patent news such a catalyst, do you think? This is Kevin. We hope you're enjoying this episode so far. If you are, take a second to leave a comment. We read them all and truly care about what you think. And if you haven't yet subscribed to our email list, visit chatwithtraders.com and click subscribe so we can keep you posted on information that matters. Now back to the chat with our guest. Yeah. So patent news, if you think about it, that's why I, this is comes from my architecture side

[01:13:06] too, like the concepts and the thinking like, okay, what's use your imagination. What is a patent? This is how you get like ultimate confidence, you know? So what is a patent? A patent is nothing innovative. A patent is to block others from taking the innovation and doing more with it, you know? So because like innovation, the person that events something, it can be improved on. So a patent stops the potential for improvement. It's just, it's stealing.

[01:13:36] They don't want someone to steal the idea and make profit from it, but it doesn't move the industry of the patent forward. It doesn't. So it blocks innovation. Um, Elon Musk, he mentioned this and Elon Musk is a, you know, he's a very, uh, how you say, uh, polarizing guy, but like at the same time, he is a, like a huge innovator and you know, he's, he's, uh, he's a trillionaire and he owns, you know, some of the biggest companies.

[01:14:05] So he, he's the one that, that said he has a quote, he has a video on that somewhere. He's like, patents are nothing patents. They don't, they don't do anything for us. It's just blocks. So when a company puts out patent news, it's nothing innovative. It's nothing like, it's nothing going to capture the imagination. And what I've noticed over the years and tracking and data, it's just, um, it's a, it's a version of a pump. It's a pump catalyst.

[01:14:31] And usually it's like, uh, it's like they're throwing someone, the insiders a bone to get out. It's a liquidity event for, for certain players inside to get out. Cause usually these patents, uh, the patent news when it, when they, and by the way, there's a game plan for it. They're usually released in the after hours, like five minutes after the close, you get a patent news and the stock jumps, let's say 80 to a hundred percent, sometimes more. And then it just completely fades back down.

[01:15:00] So what does that tell me? That tells me that some people are buying it. There could be manipulation, who knows, but then there's definitely selling going on and who's selling that quickly is probably someone that's ready to sell. It has his hand on the button. It's like a bag holder, a bag holder with a lot of shares of the company. That's probably calling the, the CEO and telling him, pressuring him, investor relations, pressuring him. Hey, I got to get out of the stock, man. Come on, man. What are you doing? Put some news out, do something.

[01:15:28] And then the CEO, after a certain point, he just gets pressured and is, all right, man, get this guy out of here to give him a patent news. Get him. So after hours, I mean, you think that's because of the illiquidity there? Yeah, it's a way to sneak it up to higher prices. Yeah, it's strategic. Like, why do all these biotechs put patent news 90% of the time they put it into after hours after the close?

[01:15:54] It's to sneak it up to higher prices in order to, it's like pump and dump, essentially. So have you, I mean, you started your journey, well, the 2020 breakout year for you was shorting and pre-market. The edge kind of maybe eroded there. You were finding other pump and dumps. Do you think then you shifted to after hours with some of these patent news plays? And I mean, the edge just constantly is evolving, right? Yeah.

[01:16:21] You know, I do mostly intraday, but having, I do have a few strategies in my playbook for after hours. Yeah. That's one. That's one. So let's talk about your biggest winner then. Was it FFIE? Yeah. Yes. That one. That's Chinese related, by the way, but not entirely. So they do like luxury vehicles, but they never really did it. They had like a prototype. So was that a pump and dump? Yes, it was.

[01:16:51] And that was, that one was, you know, now if you look at the chart, they changed their ticker, by the way, FFAI. But if you look at the chart, they've done so many reverse splits, it's hard to see what they actually did, which was when I traded it, it was trading, it was like on the fourth day when it traded like multiple days of billion dollar volume to be. And it went from like 11 cents to four or five dollars. Oh, so.

[01:17:21] Yeah. And by the way, you're speaking about WOK. That one went from 11, like 18 cents to seven dollars just yesterday. So it tells you these squeezes are getting more crazier. And what was unprecedented there was, you know, often you don't see the, I guess, those reclaims, like the reclaim back when you've already sold off, you know, from three down to 18 cents. You know, yeah, so much resistance there.

[01:17:49] But, you know, you've mentioned too in the book with, you said that that company changed their ticker symbol. You said that's kind of a bearish sign. Yeah, always. It's usually always like, why are they changing their ticker? Oh, now it's AI. Oh, so they're trying to jump on the AI bandwagon. Oh, so everybody's trying to jump on the AI. By the way, this happens throughout history. In the dot-com boom in 1999, a lot of companies were adding dot-com to the end of their company and the stock was sore in prices.

[01:18:17] And so history is great because human beings, we all have the same emotions, the same behaviors, the same, you know, we're human beings. We haven't evolved. Like we're not, it takes like thousands of years for us to actually evolve. The stock market 100 years ago, 200 years ago, it's pretty similar behaviors. You know, it's a good indicator to look back at 1999. History doesn't necessarily repeat exactly, but it rhymes. It does. Yes.

[01:18:47] Mark Twain quoted that. So, yeah, absolutely. So, yeah, when they changed to AI, I remember one company, NFTG. I think now they do AI. So they were doing NFTs in 2021 and now they're doing AI, you know? So like, what's going on here? Yeah. Over the years, I've seen a couple companies shift like that when blockchain, for example, was hot, you know, for years there.

[01:19:14] But okay, so, you know, recently I had the opportunity here. The last interview I did was actually with Jack Schwager. And you mentioned that one of the market wizards was very inspiring for you. In fact, it was the first one. Michael Marcus, you know, and with his journey, it took him, I think, what, 10 years to become profitable. What was it? You know, in reading the market wizards in general, but with him too, you know, what was it that inspired you there?

[01:19:43] Yeah, I love Jack, man. So Jack, he actually... He endorsed your book too. And he endorsed my book, him and Tom, Tom Hogarth. I've done a few podcasts with Jack and I've read all his books multiple times. It's one of those early books that I've read so many times. All of them, all of them. But yeah, you know, it's just Michael Marcus, he was the first one. So Jack spent a lot of time with Michael Marcus. I think that was his favorite one to hang out with, he said, in one of my podcasts.

[01:20:12] But Michael Marcus, you know, I guess some people just, it takes a while for them. You know, he started, I think he borrowed money from his mom. He lost it. Then he came back. It was devastating. So it's like, then he just trades smaller. Like no one really knows. Some people, it clicks, takes a decade. Took a decade for Michael Marcus. So when I read that, actually, I don't think it's in the book. I asked Jack and he mentioned it, that it took him a decade.

[01:20:41] I asked in the podcast, like about Michael Marcus. And when I read that, I was like, okay, I'm on the right track. When I heard that, I was like, yeah, I was on the right track. Because I was willing to give it a decade when I first started. I think a lot of people, they're too short-sighted. Like I wasn't looking to get to force anything. I'm like, I'm going to give myself, I started at 32 years old. And I was like, I'm going to give myself to 40 to figure this out.

[01:21:09] And then at 40 years old, which is eight years, at 40, I'll reassess it. It doesn't mean I'm going to stop. It means I'll reassess. So I'm just going to keep going. I think Michael Marcus, it takes that like, you're never going to give up kind of mentality to get it done. Do you think that there is a finish line? Because we've heard about traders that have, they've made a tremendous amount of money and then they've turned around and lost it all. I mean, do you think there's kind of like, I've made it status or do you always have to

[01:21:38] make it? No, I don't know. For me, I don't think, I already decided this is all I'm going to do the rest of my life. I'm never going to go away. I have, everything I do is trading related. I have, I wrote the book, trading every day. I have the Friendly Bear University. I even started, we didn't touch on this, it's for another podcast in the future, but I'm also the founder of Fugazi Research. I don't know, I haven't mentioned it too much in public, but I'll mention it here.

[01:22:07] So I'm the guy behind Fugazi Research. So, and I want to get into just bigger things, you know, with the skill that I have and that I love. And I don't think there is a finish line. And, you know, like I'm just chasing excellence. So it's like, you know. And that's what I've heard from the greats. It's like, they'll say, look, I'm constantly watching podcasts, no matter how many millions they've made. I'm just, I'm all consumed by it.

[01:22:34] I'm still, I still desire it just as much as when. And actually, yes, Steve Kalasian, who I interviewed, he's doing it for 43 years. He said, I'm more passionate now than ever. So I think it. Yeah. I saw an interview recently with Paul Tudor Jones. And have you seen this? He's like, he's got to be in the 70s or something. He says he wakes up every day at 2.30 in the morning, sees like the oil quotes or something like that, goes back to bed. And then like, and he says he's trading like he just, he loves, he wants to make more money to give it away. He wants to give more away.

[01:23:04] Like, so like, I was like, man, this is, this is the way. So like that, I resonate completely. Yeah. A lot of it's mindset, right? One of the quotes you used in your book from Henry Ford, whether you think you can or think you can't, you're right. I mean, it's so much of what you picturize is what you actualize. You pictured it. Now we're coming full circle here with this story. I mean, you were picturing this version of David when you were on Skid Row and here you are.

[01:23:34] And it's only going to get greater from here because, because it started in the mind, right? The mind is powerful. Very, very powerful. Yeah, absolutely. All right, David, this has been incredible. Thank you so much for the conversation here on Chat with Traders. I want to give you the last word here. Piece of advice for the guys just starting out their trading journey. What do you have for them? I don't think there's any better advice than survive your learning curve. Survive your learning curve and never risk ruin.

[01:24:04] No one trade is worth your career. In the future, you're going to make millions of dollars, but you got to survive to get there. You know, don't trade this super risky stocks that I talk about in the book. Yeah, perfect. And for the traders out there that want to get their hands on your book, when does it come out? When can they get it and where? Okay. So it's available on Amazon. And if you are in a country that Amazon is kind of is not there, then you can go to just type

[01:24:33] it in Google Books, has it on several different websites. Now it comes out August 4th. But those that pre-order it, I'm doing a lot of bonus materials. So I do webinars like once a month or so leading up to the book release. And I also give a bonus chapter. So those that show me a screenshot. So you just message me a screenshot on Instagram or X of the purchase of the pre-order. And I got you. I'll give you all the bonus materials.

[01:25:03] Oh, that's incredible. Well, David, thank you so much for joining Chat with Traders. Honestly, your journey is inspiring. Reading the book. It was fantastic. You're just the dedication. You know, that's really what resonates. You are all in, still are and still going to be. I'm excited to see where you're going to be in a few years. We'll come revisit, do another interview. David, thank you again for coming on Chat with Traders. Thanks, Kevin. Thanks for having me. You've reached the end of this episode of Chat with Traders.

[01:25:32] But rest assured, there are more episodes loaded with real market insight and zero hype on the way soon. So to stay updated with each great new release, subscribe to the podcast. And we'd love it if you'd leave a rating and review. We'll catch you next time on Chat with Traders.

[01:26:30] We'll be right back.