The Story of The Daily Dirtnap

How I found my calling

When I took over the ETF desk at Lehman in 2004, my boss took me aside and whispered something to me (paraphrasing):

Your job is not to trade. Your job is to market the business.

I didn’t really know what to make of that. Market the business? Was I supposed to take out TV commercials? Billboards? I assumed he meant going out to steak dinners and strip clubs with clients, and while I liked steak dinners and strip clubs, that seemed to be a pretty non-scalable way to market the business.

So I don’t know where I got this idea, but I decided I would write.

I started writing market commentary on Bloomberg messages. The Bloomberg text editor is a little more sophisticated these days, but back then, I was writing in all caps because I couldn’t figure out how to turn the all caps off. I went around the trading floor and got about 20 people to sign up. And I started writing.

Now, it isn’t like I invented market commentary. Sales traders were doing this all over the Street, but the difference was, for them, it wasn’t a creative endeavor. They were writing about how vol was cheap in March or about flows in GE or earnings in XYZ butthead company. Like I said, I didn’t invent market commentary, but I might have been the first person to inject a little personality into it—and do it well. So 20 people became 40 people, which became 100, then 500, and at the end, thousands of people were reading my notes. All in the span of four years.

So in 2008, when Lehman was circling the drain, I started to get the idea that I could do this for a living. I could start a financial newsletter. There is nothing new about financial newsletters—they have been around for almost 100 years. At the time, everyone was getting Gartman. And I would catch a bootleg copy of Grant’s from time to time. My boss was getting 13D, and I’d purloin a copy of it when he was away from the desk. I found that was a lot more interested in investment writing than I was about trading. Meanwhile, I had done an admirable job of marketing the business—top-line revenues for the ETF desk went from $22 million in 2004 to almost $90 million in 2008. Also, I was a big housing bear, and I was right, which helped.

I started doing my due diligence. I looked up as many financial newsletters as I could find, and emailed the proprietors and interrogated them about their business, what to do and what not to do, compliance stuff, and anything I could think of. The response was interesting. One guy told me to abandon all hope ye who enter here, that the financial newsletter business was a graveyard, that he was making just enough to pay his bills. Nothing could have served as a better motivator. Do hard things, remember.

Still, the decision wasn’t easy. On the day of the bankruptcy, I yanked off my tie and was prepared to walk away. But there was a chance that the Lehman broker-dealer could be bought out of bankruptcy. And it was, by Barclays. I could potentially make a lot of money if I stayed. But I was massively burned out by trading—I was a complete stressball. And I knew that Lehman wouldn’t be the same under different ownership. And I had a sense that Wall Street writ large was due for a reckoning. So I quit, and walked out of the building for the last time.

I moved quickly. I rented some office space on Third Avenue. You should have seen the office. It was about 60 square feet, with no windows—basically a closet. I bought a computer. I got accounting software, a bank account, and insurance. With help, I built a website—which is the same website that I use to this day, with not much in the way of updates. I created a logo—a crude drawing of a stick figure jumping off a cliff. And I got an email system. The nice thing about financial newsletters is that there is not much in the way of overhead.

Those early days were tough. The stock market was getting annihilated. I looked up on my screen one day and saw Bank of America trading for $3 and Citigroup trading for 99 cents. I started to think about what a fool I was for walking away from what would have been a seven-figure payout, and I would come into work in the morning and puke in the trash can. Every morning for about three months, I would come in, sit down, and puke in the trash can. Then I would throw in a dip and start writing. I wrote, and I wrote, and I wrote.

It was tough at first. The Bloomberg messages I wrote were only about 300 words. I had promised people three pages a day, which came out to about 1500 words. In the beginning, it took me pretty much all day. This is before Twitter, so I spent a lot of time scouring financial blogs for ideas, and practically none of those blogs are around today. I didn’t have an online payment system. People submitted orders by fax, and mailed in checks. I actually didn’t get an online payment system until 2011. I was doing essentially no marketing whatsoever. But like the Bloomberg list, the business grew, and grew, and grew—all through word of mouth. This is broadly true to this day, going from a few hundred subscribers to 4,000 subscribers with not much in the way of marketing. It has never been my ambition to be a media personality. I’m publicity shy, and I’m content to write my underground newspaper in relative anonymity. But after 16 years, The Daily Dirtnap is now a Wall Street institution.

In 2010, my wife got a job offer from Coastal Carolina University. I could work from anywhere, so we moved basically sight unseen. I got office space downtown, in Myrtle Beach’s largest office building. I stayed in that building for 14 years, until just a few days ago, where I moved to an office in my new house, the new Daily Dirtnap World Headquarters. I found that being outside of New York was a huge advantage, not being surrounded by the hedge fund wiseguy groupthink. Instead of hanging around with the fleece vest crowd, I was hanging around with real estate folks and insurance folks and blue-collar folks, and I found that their perspectives were a lot more meaningful to my process, outside of the Wall Street bubble. So I became this mythological figure, this weirdo newsletter guy typing these low-tech issues in Courier New font amidst the con men and hucksters of Myrtle Beach. I rather liked the characterization.

I will confess that I am not the sharpest financial mind in the world. I doubt I’m even in the top two percent. I consider myself to be a writer first, and an analyst second. I’m a communicator—I may not have the best ideas, but what I am best at is communicating those ideas. I have a lot of subscribers who say they pay no attention to the trade ideas—they read it strictly for the writing. But the market views overall have been very good. Not batting 1,000—nobody does—but if the recommendations were really terrible, then I wouldn’t have 4,000 subscribers. 2022 was a tough year—was ice cold for most of it, and I did have some pissed-off customers. I made a hash out of the Canadian housing short, but in spite of getting the thesis totally wrong, that trade ended up being the biggest winner in the history of the newsletter. Today, I am as bearish on private equity as I was on housing back in 2006. We’ll see how that plays out. Basically, what I do best is sentiment—how people feel about the market, which I believe has more predictive value than fundamentals or technicals. That is my competitive edge, and I am the best at it—nobody does it better.

I do a lot of different things these days. I have published four books, with a fifth coming in November. I have written for a bunch of websites, including Bloomberg Opinion for over five years. I teach finance at Coastal Carolina University. I do a fair amount of public speaking. I am on the podcast circuit. I have worked with Mauldin Economics for 10 years. I had a radio show for two years. I went back and got my MFA in Creative Writing. I’m a DJ. I do philanthropy. But The Daily Dirtnap is my first love, and I look forward to writing it well into old age, like Richard Russell. Hopefully some people will stick around.

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