"Those who do not remember the past are condemned to repeat it." -- George SantayanaIn January 2004, Boca Biff made his debut in my diary. Boca Biff is a real person. He is not a composite of individuals I have met over the years. Boca Biff's investments (described in today's and previous columns), both in name and in dollar size, were all actually made by him. It is fair to write that Boca Biff lives by the investment credo that man's greatest glory is not in never falling but in rising every time we fall, because fall is Boca Biff's middle name. No character (and there have been many characters!) I have written about has elicited such a response from so many subscribers and contributors. Over the past 15 years, Boca Biff has embodied the mentality of the daytrading and speculative community who worships at the altar of price momentum in the church of what is happening now. As such, Boca Biff has become a better market/sector/asset class barometer than the put/call ratio, Investors Intelligence, mutual fund/hedge fund exposures or any other sentiment indicator. The Boca Biff indicator has become a wonderful measure of the very embodiment of speculation during Mr. Market's frequent speculative bouts. I suppose we can say is that what Boca Biff has learned from history is that he hasn't learned from history. But let's begin by framing Boca Biff's speculative diary of trading over the past 15 years.
1998-2000: The Daytrading OrgyIt all started with that once-in-a-generation orgy of speculation in the late 1990s as a new class of investors emerged on the market's stage -- namely, daytraders. The 1997-2000 time frame held a historic precedent that took daytrading to a new art form. As most recall, the bubble began to burst in the first half of 2000 -- almost, it seemed, as quickly as it surfaced. In time, the Nasdaq fell by about 75% from its highs. Over nine years ago, I introduced readers to the true story about my favorite daytrader, Biff Marksman. I subsequently changed his name to Boca Biff in order to protect his anonymity better and in order to protect our innocent Real Money subscribers from him.
Biff Makes $15 Million in 1997-1999 Then Loses $20 Million in 2000As I mentioned previously, I first wrote about Biff in 2004. I hadn't heard from him Biff since 2000, as I thought that he was cured from the leveraged daytrading influence that took the U.S. and the markets by storm in the mid to late 1990s, contributing to a mushrooming in margin debt, the ultimate speculative rise in our markets and the eventual -- or should I say inevitable? -- piercing of that bubble. Of the daytraders, there were few that played as intensely as my friend Biff. Biff's first plunge into daytrading was in early 1996 with Iomega. Biff became a certified Iomegean, as Iomega became the "it" stock back then with a market capitalization that peaked at $6 billion as investors believed it was the future of digital storage. The shares peaked out at over $100 a share in 1996 and sold down to $2 a share by January 2000. Biff didn't play hard at that time, but he clearly got the speculative fever. Unlike most daytraders in the late 1990s, Biff had a real job -- he owned a high-end window and door company -- but as stocks mounted their speculative (but short-lived) ascent in 1998, his primary gig took a back seat to trading stocks.
From Iomega to Taser: Biff Repeats His Mistake in 2004In 2004, I received a telephone call from Biff, as if nothing had happened and as if we had maintained a dialogue over the previous four years. (We had not!) Biff was back daytrading in force, seduced back by the emerging speculative forces (and his animal spirits) and the rewards he reaped from them. The emergence of "worldwide liquidity" and low interest rates were the watchwords of his faith in the U.S. stock market. Back was Biff, touting those four- and five-symbol stocks sans business models and purpose -- except possibly to briefly enrich the daytraders and reward the insiders who were selling their holdings to the daytraders. At that time, in my numerous conversations with Biff, it was almost as if he believed that the 1990s was a dress rehearsal for the mid-2000s. In 2004, his stock du jour, Taser ( TASR), replaced his infatuation with his original spec venture in Iomega in 1996-1997 and then the Internet stocks back in 1999. (Most of his holdings back then went to zero.) He more doubled his money in Taser, which climbed from $15 to $35 in 2004 only to fall back to $5 a share later that year. From Taser he parlayed his profits into a package of homeland security stocks. Here is what I wrote in 2004:
Unfortunately, the outcome was the same. The air fell out of Biff's speculative homeland security universe as the year came to a close. Very soon thereafter, all of these plays disappeared from the face of the stock pages. Biff made a slight recovery in Google's ( GOOG) shares after the homeland security debacle, but forays into crude futures, Overstock.com's ( OSTK) shares and a large investment made in Pulte Homes ( PHM) and some other tertiary homebuilders were his undoing. By the end of 2005, he was wiped out again. His cumulative loss from 1997-2004 now stood at about $15 million.
I just picked up the telephone to hear the shrieking, hysterical voice of Boca Biff, who is all over the homeland security rage.... His stocks ( IPIX, Mikron Infrared and Mace Security International) all sounded like he was bellowing about his speculative choices of yesteryear.
2006: The Return of Boca BiffBy December 2006, an unrepentant Boca Biff returned to the markets in force for the third time in nearly a decade. During that time, I wrote the following on these pages:
He's back! Last night, here I was, minding my own business on the cold linoleum floor, drinking cheap tequila, when the telephone rang. It was Boca Biff!Boca Biff has been licking his wounds....He promised his family, which apparently could no longer tolerate the ups and downs, that he wouldn't again venture into the stock market. Nor would he speculate in homes and land. After casually responding to one of those spam emails to refinance his home, however, from an eager mortgage broker that was about to go out of business -- he's got a beautiful old Mizner-style home in Boca -- he found himself very soon thereafter (in early 2006) with about $1.5 million of loose change.His wife forced him to give the proceeds of the refinancing cash out to a mutual friend (Baron Von Broker) who dutifully put these monies in a money market account and far from the hands of Boca Biff. When the market bottomed in the spring, Baron Von Broker turned bullish and encouraged Boca Biff to buy conservative oil and large gold mining stocks (two sectors that he correctly felt had promise). True to his promise to his wife, Boca Biff demurred and kept his monies in the money market account.As Boca Biff related in our telephone conversation last night, he watched and watched the market's unrelenting rise through the summer and into the fall until he couldn't take it anymore and finally made the plunge last week -- on margin! Stated simply, Boca Biff is trying to make back his accumulated $15 million-plus -- this is the truth! -- by purchasing a package of out-of-the-money calls on a group of high-beta stocks that recently have made a 52-week high, including Apple Computer (AAPL), Goldman Sachs (GS), Merrill Lynch, Google, First Marblehead (FMD), Fairfax Financial, Research In Motion (BBRY), Allegheny Technologies (ATI), U.S. Steel (X), Baidu.com (BIDU) and Las Vegas Sands (LVS).He tells me the notional value of his calls (if exercised) exceeds $30 million! When asked why now, Boca simply said, "Don't be a moron, Dougie: It's global liquidity. Don't you get it?" And then he actually said to me that he heard from his driver that General Electric (GE) will receive a bid by a private equity firm sometime in the next six months.I should add that Boca Biff transferred all his money from the money market fund from Baron Von Broker (who being a conservative and intelligent fiduciary, refused to accept Biff's aggressive strategy) and purchased the call positions from a newly formed, Boca Raton, Florida-based brokerage, Penny, Shark & Oakmont.I should also add that Boca Biff is currently being divorced by his wife.While this venture back into stocks (and call options) proved profitable, he recaptured only about one fifth of his losses as his capital base had been depleted and limited his exposure. Fortunately, sales at his window and door business collapsed a few months before the Great Decession of 2008-2009 became a reality, and with that warning sign, Biff cashed out well before the collapse in the U.S. stock market. His cumulative loss from 1997-2007 now stood at about $11.5 million.
After the 2009 Generational Bottom: Boca Biff ReturnsWith more lives than an alley cat, Biff, the ultimate plunger and that paragon of speculation, was back, resurfacing in the early winter of 2009 as the markets rallied off of the generational bottom in March and began to stabilize. Biff and I hadn't spoken in a while; I think he was embarrassed to call me. He had been licking his wounds, which included unprofitable forays in the stock market, large losses from speculating on homes in South Florida, a collapse in his window and door business and, after all of this, a failed marriage. As Boca Biff related in a telephone conversation with me, he got remarried in 2008 to a woman who had received a reasonably large divorce settlement. Biff went on to say that he watched and watched the market's unrelenting rise through the summer and into the fall until (again) he couldn't take it anymore and finally made the plunge last week -- (again) on margin. Boca Biff was back in the game. "I asked, "Why now?" He responded, "Don't be a moron, Dougie. It's global liquidity. Don't you get it? Moreover, I am getting 11 basis points currently in my cash reserves at my brokerage account with Baron Von Broker." He went on. "Importantly, I have remarried, and my new wife not only comes with some money but she has no clue regarding my investing mistakes of the past. I managed to keep my Mizner home in Boca. She loves it here, and she adores me."
Boca Biff Finally Makes a ScoreI hadn't heard from Biff again until late 2010. I thought that perhaps his last unprofitable foray from 2004 to 2009 (and the credit crisis that stamped out his profits) coupled with a near-$9-million loss from an investment in Boca Industries that he purchased in late 2009 were enough to rid him of his stock market jones. After yet another divorce, however, Boca Biff, who obviously has a way with the opposite sex, married the young daughter of a well-known New York City real estate magnate who owns a professional sports team. In
Biffy the AngelLet's fast forward to March 2012 when I caught up with Boca Biff as his guest at a lavish dinner at Trump's Mar-a-Lago Club in Palm Beach, Florida. Twenty months ago Biff and The Donald became new BFFs and Biff became a new member of Mar-a-Lago; they initially became friendly when Biff's company provided the 145 doors and windows in a renovation of Trump's palatial estate. Our conversation went something like this: "My cancer is licked now, but it has been a rough road," Biff said. "Between the hospital visits and a debt restructuring at my window and door business
Boca Biff Does BitcoinWe didn't talk investments at all until I spoke to him last Thursday night. His door and window business he told me was expanding rapidly -- he was rolling up competitors through stock acquisitions (under the promise that he will go public), but he had recently decided to make the single largest speculation in his life. Boca Biff, he explained to me, invested $15.5 million in bitcoins. And he invested another $3 million-$5 million in a San Francisco-based company called Coinbase, a bitcoin wallet company that recently raised $25 million (led by the well-regarded venture capital firm, Andreessen Horowitz). As Biff reasoned, central bankers are debasing all currencies, and, with real interest rates rising, gold has little interest for him. Bitcoin will, according to Biff, become the only peer-to-peer payment network of digital currency in the world. "This is the ground floor," exclaimed Biff. He has not only done a great deal of work on his theory, but according to Boca Biff, "Satoshi Nakamato" (the pseudonymous developer of bitcoin) has been his house guest over the last few months in Boca Raton, Florida. During one weekend, Nakamato explained the "blockchain" to Boca Biff, a transaction ledger that assured the integrity of bitcoin as a digital currency. And that bitcoin has first to market mover advantage over other crypto currencies like litcoin, peercoin, namecoin, quarkcoin, megacoin and feathercoin. Citing his new consultant on his bitcoin investments, economist Dr. Tyler Cowen, the future of Bitcoin, Boca Biff explained, was in China, where the digital currency provides an easy path to avoid strict capital controls and the exportation of currency out of their country. Our conversation was cut short, as Boca Biff was off to have dinner at the Four Seasons Hotel in New York City with Cameron and Tyler Winklevoss and his daughter. His daughter, let's call her "Boca Lilly," in real life is currently a second-year student at Harvard Business School. She was introduced to the Winklevoss twins after they gave a lecture at Harvard.
This column originally appeared on Real Money Pro at 9:13 a.m. EST on Dec. 16.