Docs Who Cut Back #22: The Stock MD

crispydoc Uncategorized 20 Comments

The Stock MD is a relative newcomer to the virtual doctor's lounge of physician finance bloggers, but you won't mistake his voice for any other doc out there. He did not so much cut back from medicine as cut it out completely.

A not insignificant number of physicians describe choosing medicine over an equally attractive alternate career early in life. Once committed to medicine, they display the limiting belief that they can never return to the other career. This interview debunks that myth.

TSMD is an unapologetic day trader with a contrarian investing strategy full of risk and complexity. That's not to say that he is condescending toward index fund investors.

He's just found an alternate path to wealth and has decided to share how it paved his exit strategy from medicine with a most valuable variety of yellow bricks. If a few of us get excited hearing his story, and possess the temperament and aptitude to pursue it with similar success, all the better.

Take it away, TSMD.

1. What is your specialty, and how many years of residency/fellowship did you complete?

Let's call it surgery for now. I'm not sure if anyone in the physician blogging community has opened their financial books as much as I have, and for that reason, I'd like to remain anonymous for the time being.

Residency/fellowship was over 5 years. I was 40 when I retired. I didn't cut back. Rather, I quit cold turkey. I was over 5 years out when I retired. I also retired without a stable or traditional side gig. I decided to start a blog over 10 months after I quit.

I’ve been planning for an early retirement since college. I think it predates that FIRE movement.

[CD: The Early Retirement Dude might suggest otherwise, citing media references to FIRE from the 1940s-50s.]

That’s when I started to learn about day trading. It was convenient because we were in the middle of the first dot-com boom. Making a million dollars trading from your computer was not unheard of. But you needed starting capital, and I didn’t have it. I also didn’t know what I was doing. As a college student, I made over $200,000 trading, and then proceeded to lose $150,000.

[CD: That's one expensive learning curve.]

2. What did your parents do for their livelihood?

I wasn’t born here. We were immigrants from a third world country. We started with almost nothing. Our first home was a studio apartment above a gas station. My mother was a homemaker and my dad ran his own import business.

My dad was smart. He taught himself English and spoke it as fluently as the locals. He became a market leader in an industry dominated by a single ethnic group that we did not belong to. I would say my parents are well-off at this point.

My dad worked hard. Really, really hard. But he was not investment savvy. He did not invest his money. I have zero similarities with my parents with regards to money. I am the polar opposite. I am a measured risk taker. They like pure safety. I honestly think they have been in T-bills for the past 30 years.

3. What motivated you to cut back?

I think I disliked my job, passionately. It was changing me as a person, which also changed who I was at home. I was tired, but I wouldn’t necessarily call it burnout.

4. What were the financial implications of cutting back?

No tradeoffs. I paid off my mortgage after I retired. You can argue all you want about low interest rates and whatever. But I love that I don’t have any major recurring expenses. Basically tax, utilities, food and travel. We do travel a lot.

5. How did colleagues react to your decision? How did you respond?

I never told anyone that I retired. I quit, and that’s all people know.

[CD: I had imagined a scene like the flight attendant who grabbed two beers, announced he was done over the PA system, and memorably exited the plane via an emergency slide. I guess leaving them wondering makes for a classier, more psychologically provocative exit.]

5b. Was your family supportive or critical?

My wife was actually the person who told me to quit. How amazing is that? She could see how the job was affecting me. We didn’t need the income.

My parents do not know! Nor will I tell them. I send them on nice vacations every year and they don’t ask questions. Deep down, I am pretty sure my mom knows. My kids are 5 and 3 and don’t understand what is going on. All they know is that their dad will never miss another birthday again.

[CD: Fascinating not telling the parents. Perhaps your way of assuming an emotional burden so your parents don't have to?]

6. What have been the main benefits of your decision to cut back?

SLEEP! I get to sleep every night. I can get healthy. I can go to the gym untethered. No phone, unless I want to trade from the elliptical. I put my phone on silent at night time. I don’t have to miss my son’s peds appointment, or Christmas show at school.

7. Main drawbacks?

Trading at home has been somewhat of a solitary existence. One of the reasons I started my blog was to allow me to reach out to other humans. I also worry about how my children will gain a strong work ethic without seeing their parents working hard. We will figure it out.

8. Did you fear your procedural or clinical skills might decline?

Sort of. I did renew my license. I might do a locums gig at some point.

9. If you are honest, how much of your identity resides in being a physician?

Almost none. I’m coping really well, actually. When I was working as a surgeon and people used to ask me what I do for a living, I would tell them I was in data entry -- you know this is
the truth! Now I tell them that I am self-employed.

[CD: When I was an eligible bachelor and emergency medicine resident, I used to tell women I met that I was in crisis management. I like your data entry line better.]

10. If you had not gone into medicine, what alternate career might you have pursued?

Investment banking. No doubt.

11. What activities have begun to fill your time since you cut back?

I have a routine. I go to the gym in the morning and I am home by 9:15am before the market opens. I tend to trade between 9:30am and 11:00am, but if I reach my goal early, I am done for the day. Starting a blog has filled some of my time in the afternoon. I go skating with my kids a few times a week. I am also the family travel agent. We tend to go somewhere new
every month.

12. If approaching retirement, what activities have you begun to prioritize outside of
medicine so that you retire to something?

Too late! I’m already there.

13. Did you front-load your working and savings, or did you adopt a reduced clinical load early in your career?

I worked normally. A full schedule. I didn't volunteer for more shifts, but I did my fair share. I invested my savings early. I buy and sell stocks and options. Sometimes, I sell and then buy. I have for over a decade. I have never lost money in a calendar year since the first year I lost money as a college student. I beat the S&P 500 index last year by +78.62% (recall the index ended 2018 at -4.45%).

I realize this makes me a pariah in the financial blogosphere. But do we really need another blog that repeatedly tells you to buy a Vanguard index fund, avoid whole life insurance, and
to stay away from stocks?

I hope to help dispel the myths of stock trading and to allow my physician colleagues to explore an alternative form of income generation.

If I had a time machine, I don’t think I would have done anything drastically different (well, maybe I would have bought shares in Netflix). I had a plan and executed the plan ahead of schedule. I’m very pleased that it all worked out, and have to acknowledge that a bit of luck and hard work combined nicely to give a good outcome.

There are  fascinating nuggets contained in this unusual case study.

  • While a lucky few of us regard medicine as a calling, most of us would concur it is one of several careers we could have envisioned entering. Certain alternate careers retain a late on-ramp opportunity that we ignore to our detriment. It is reminiscent of my time as an undergraduate doing neuroscience research, when the prevailing dogma was that juvenile brains alone possessed the capacity to rewire dynamically while adult brains had fixed architecture. I worked in a lab that refuted such findings, documenting evidence of adult brain plasticity in response to changes in sensory input. It was sexy science, and I loved it.
  •  A career path need not be binary. TSMD continued to read day trading texts even as he pursued a career in medicine. Whether to hedge your bets, grow your expertise or follow a passion, there is no reason you can't continue to learn about more than one field of interest at a time. That secondary study may ebb and flow as time is available during your medical training, but the idea that medicine requires you to be uni-dimensional is a limiting belief worth overcoming.
  • TSMD fits into the narrative of origin stories about scrappy immigrant families that relentlessly pursue the American dream through the first generation raised here.
  • There's also the recurrent thread of a generational divide between the security and prestige that the immigrant generation values and the freedom and independence that the offspring values. Not informing your parents of your departure from medicine is a whole new level of don't ask, don't tell.
  • Independent of the immigrant narrative, the divergent risk tolerance between father and son is striking. Other interviewees in this series have accumulated wealth and become DIY stock market investors despite the prior generation selling at the bottom of the 2008 crash and never fully recovering.
  • Overcoming solitude by seeking out your tribe online, and creating a routine for life after medicine (or even as you gradually exit medicine) are excellent ideas that should be part of everyone's playbook.

Comments 20

  1. I would love to be fly on the wall for a conversation between TSMD and Gasem! I stopped by your site and plan to peruse it more thoroughly. While day trading usually has a negative connotation in this realm, I don’t doubt that a disciplined practitioner can do it successfully especially if you’re willing to “do the math”. As the son of a son of an immigrant, I understand not telling them. The pinnacle of making it is doctor, lawyer, engineer so they’re happy and proud. You know better than anybody whether or not they can handle “the truth”.

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      GasFIRE,

      That would be the financial equivalent of the rumble in the jungle!
      Despite the wide fascination with day trading, the child of immigrants aspect was for me the most illuminating detail in this interview, and the one I can similarly relate to. Money is money, but family dynamics – that’s infinitely nuanced.

      Hope to keep producing posts worthy of your attention,

      CD

  2. Haha. This is awesome. I only know that I can not do this successfully. But I certainly do not believe that it can not be done.

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      I’m in your camp Dr. MB. It’s by meeting people who are disciplined in pursuing difficult things few ever master that I learn, find amusement, and in the best cases both at once.

  3. I have been following TSMD’s blog for a while now and he has a knack for breaking down technical information into digestible pieces. I do believe his success is not by chance but for the amount of time and research he puts into it. Anyone who is at all interested in day trading should read his site. You will learn a thing or two (or as in my case, many)

  4. Wow. Bravo for putting yourself out there. This post would get eaten alive in the WCI or similar groups, where people are very close minded about stocks. Congrats on your retirement!

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  5. I’m one of those docs that tried and failed at day trading. But I don’t doubt that some, such as yourself, can be successful at it. I just never put in the time and effort to learn it properly. How did you find the time to keep reading, especially as a resident??

    Thanks CD for the interesting interview!

  6. Very interesting. I started trading commodities when was in college in 1975. I made enough money that I could have purchased a seat on the Jackson Street market in Chicago. I traded sometimes using my buddy’s seat, but came to realize soon enough trading in those days was a burn out game. 1975 was effectively before computers. I applied to med school and got in and decided to do medicine instead. I day traded options in the late 90’s. I used a risk management system and made money. Options trading is a bit like gambling in that there is a winner and a loser in every trade. It is not “investing” but then neither is investing truly investing. To make money you have to scale in and out of a trade correctly (this would be like placing bets) and you have to win more than you loose. If you screw up the scaling even if you win, one bet can wipe you out. If you screw up the betting it will wipe you out PERIOD. I made money but it was a lot of work. My O/S on my computer was windows 98 and my processor was a 486 not exactly paragons of power. Trading was also expensive in those days so you had to take the not trivial cost of trading off the profit. The win 98 system was good enough to allow me to day trade from China in 1999 over a dial up connection and I made 50K in 2 weeks. It was actually night trading since China is 12 hours ahead.

    In the 90’s I was building a practice which went from solo to group to group plus specializations and I had to learn to successfully run a business so after the dot com bust I quit trading and went to more passive investments. While working on creating a successful business with partners and employees and writing contracts and compliance and staffing etc. Even in passive investing you still have to buy low and sell high to profit (or sell high buy low as was mentioned). So you do have to pay some attention. It’s like playing hockey. If you don’t skate to where the puck is going to be, you will never control the puck. Computers and internet were improving and the cost of trading was dropping dramatically so it became much easier to track and predict. I also learned about modern portfolio theory shortly after dot com and decided to give that a whirl while I was building a business. I quit 3 years ago. I had been planning Roth conversions for 15 years, the market was up, I was 65 and under Medicare so I cashed in my chips because it was time to implement my Roth conversion strategy. I don’t miss medicine one bit. I had a gas and I’m still having a gas being retired.

    I took some Roth money and started trading that. I found a system I like and am using that to risk manage my positions. It turns out Fido (among others) now has free ETF trading on certain ETF’s so I can trade to my heart’s desire as much as I like for free. I can buy something at 9:30 make $200 and sell it at 3:30 for free and since it’s in a Roth it’s tax free as well. I’m basically trading sector components against a projected economic future which considers growth, inflation and fed policy. It’s a very quant rate of change based system, right up my alley, and I’m having a blast. I’ve basically been making 1% per week front running the economy. It’s more of a hobby than deadly serious at this point. I’ll trade it for a year and see how it works out. I’m especially interested in how it will work in a crash. I think it will save my ass, compared to the buy and hold let the economy run you over like a freight train approach. It’s working out we are in a stagflation period so I’m back to owning commodities. I own cattle wood coffee sugar oil and gold since those go up in an inflationary environment. It’s 45 years later since I first owned them, which I find hilarious. They will work till they don’t and then I’ll sell them high and move on.

    My other tactic has been to diversify out of concentration in the stock market to other markets with my core holdings. This also takes me out of the way of the freight train. If you wonder where the inflation is, it’s in asset prices especially stock asset prices. Eventually things will revert and deflation will rule the day.

    1. Gasem – How do you manage the cash for trading inside the Roth account? The reason I ask is that many years ago while I wasn’t day trading I used a dividend capture strategy within my 401k to cycle through multiple stocks in a quarter to capture multiple dividends rather than just one per quarter. Eventually I was called for good faith violations and got dinged by the brokerage for making purchases with unsettled cash. If you close your position everyday, how do you avoid this problem?

      1. I’m not day trading per se’ My positions are across days, weeks, and months depending on their position within a given risk range. Example S&P is at 3237 and it has a projected band surrounding that price of 3199 and 3267. If S&P touches 3267 I sell if it touches 3199 I buy. If it’s somewhere in the middle I do nothing and wait for the opportunity to buy or sell. The range changes every day depending on price volume and volatility of the previous day so the forecast is a daily nowcast using the market statistics to set the probabilities. The other thing is none of my positions exceed 6% of the account value so the way I’m trading it is I pile into a position in thirds. I buy 2% add 2% and add 2%. If I’m at 6% I sell 1% 2% or 3% but I may sell all the way down to zero so it’s a bit complicated of a risk management scheme but it’s basically like counting cards at black jack. As you move in the range the probabilities of success changes. If the S&P were at 3266 and I bought it at 3199 the limit is 3267 and there is very little upside whereas there is a huge downside so I may decide to take 50% of my position off the table and book those profits, and leave 50% to try and realize the last bp. If the price falls I will simply hold the position or decide to cut in half again booking those profits on say 75% of the move. So it is a true multi duration trading system based on cycles and not a day trading system. The system tracks implied vol vs real vol to determine when to get out and go flat in case of highly expanding volatility. This way the freight train doesn’t run you over.

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          Gasem,

          I love to these investing insights, and appreciate your sharing them. “Gamifying” investing as you seem to have successfully done sounds like a fascinating pursuit. Alas, too many other interests outrank that one at present.

          -CD

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      1. I’m a friendly kind of guy tsmd. One advantage of being retired and not over levered is you spend you life enjoying the roses. Seems like you’ve found the roses as well

  7. crispydoc,

    Thanks for the opportunity to tell my story here. I learned something new too (the origin of the FIRE acronym in the 1940s).

    I look forward to reading more of your “Docs who cut back” stories.

    Best,
    tsmd

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