Daytraders battle market for quick profits.
He doesn't need to drive 150 miles to gamble anymore. He takes all the risks he wants on the computer in his west Little Rock office.
Of course, Lieblong doesn't consider his job gambling. Few of the rising number of 20-somethings seeking their fortunes over the Interact do. He is a stock trader, buying and selling sometimes as many as 1,000 shares a day.
"I'm watching my stocks 90 percent of the day," Lieblong, 27, says. "I could do this all day if someone would bring me a Slim-Fast to drink occasionally."
It's a high-pressure job with high-dollar stakes. Lieblong has lost as much as $9,000 in a single day. But, he has made just as much and more on other days.
"It depends on how much nerves of steel you have," he says. "You learn to deal with it."
Daytrading is transforming the stock market. Entrepreneurs are opening daytrading brokerage firms in some of the nation's larger cities. Traders rent a desk - by the day, of course - equipped with necessary equipment and software to compete with the most experienced professionals.
Stories abound of traders earning the equivalent of the national average annual salary in a day of buying and selling stocks over the Internet. Yet, statistics indicate that about 50 percent of daytraders don't last six months. They either can't handle the stress, or they go broke.
Daytraders thrive on volatility, and the difference between profit and loss can be a moment of hesitation during active periods of a stock's trading. Daytraders like to either "bottom fish," which is buying a stock they think has bottomed out and is on the way back up, or invest in a momentum stock, which means buying it as it increases in value and selling when it reaches its peak.
The popularity of the two investment techniques can drive individual stocks up or down by the sheer volume of daytraders handling it.
"It has increased the volatility of the market," says Brad Eichler, a vice president with Stephens Inc. of Little Rock and head of the firm's Internet research group. "The rise of Internet trading has caused more buying of stock based on stories than the fundamentals of the company.
"It is never a good idea to buy a stock in hope that someone else will pay more for it. That's not investing. That's speculating."
Eichler's sentiments are shared by most brokers in established firms. They object to the daytraders' tendency to ignore the indicators and analyses that traditionally have controlled investment decisions.
There are no daytrading brokerage firms in Arkansas yet, and maintaining a properly equipped office at home can be expensive. The software alone, which is continuously updated by the manufacturer, can cost more than $5,000 a month.
That isn't a problem for Lieblong. He has all the resources in his office at Lieblong & Associates Inc. of Little Rock. His father, Alex Lieblong, has made a fortune on the stock market and serves as his son's closest adviser. The elder Lieblong founded the company and has an office across the hall from his son.
"I'm over there three or four times a day," Jason Lieblong says.
He has no formal training as a stock trader and no college education. Lieblong was working as a laborer on a 2,700-acre farm near Scott before trading his jeans for khakis.
"When I started, I was scared to death to press the Enter button," he says. "It's quite a cultural change."
But, he is learning, he says. Lieblong avoids the first and last hour of trading each day, the period he refers to as "amateur hour" when stock prices are most volatile. And, he avoids the infamous daytrader chat rooms that have flooded the Internet the past couple of years.
"I talk to the traders on the floor," Lieblong says. "You never know who is in the chat rooms. That's like playing with fire."
Lieblong says he has increased his initial portfolio by about 15 percent since he started daytrading. He controls his risk of losing money by concentrating on stocks priced at about $20 per share and limiting his trades to between 500 and 1,000 shares each day. He handles fewer shares of the higher-priced stocks.
Like many of his peers who have ventured into daytrading, Lieblong has no dependents whose welfare is determined by his performance.
Voice of Experience
But, daytrading isn't limited to 20-something speculators. Martin Northern, 42, of Benton, was a daytrader before the word entered Webster's dictionary.
Northern was classically trained as an investor. He studied finance at the University of Arkansas at Little Rock and received his MBA from the University of Central Arkansas in Conway in 1984. He joined Merrill Lynch & Co. and received more training at Princeton University.
He left Merril Lynch in 1989 to open his own business. Northern manages the portfolios of hundreds of people in addition to his personal investing.
He is decidedly more conservative than his younger counterparts. Northern has seen a bear market, something most daytraders have only heard about, and it makes a difference in how he views the market. He knows the risks intimately, he says.
Northern still buys and sells the stocks in his personal portfolio on almost a daily basis, but he is more concerned with the traditional economic indicators of the companies whose stock he handles. He sometimes holds stocks for several days, an unthinkable thing for most daytraders.
"Most daytraders are speculators," Northern says. "I'm an investor. I'm very conservative with clients' money, but I do things in my account I wouldn't dream of doing in my clients' accounts."
His father was a commodities trader, and Northern began trading while in college. He bought his wife's wedding ring in 1979 with money he made trading options. Today, they have two teenagers, another factor that tempers his willingness to take risks.
"I'm not a gunslinger by any stretch of the imagination," he says. "My investing is very unemotional. I look for high probability trades."
That doesn't mean he sacrifices profits. Northern has made more than $32,000 in a six-week period and never lost more than $2,000 in a single day. He uses a programmed safeguard that automatically sells a stock if the price drops by more than 20 percent. Overall, his personal portfolio increases at an average annual rate of about 22 percent, he says.
And, Northern doesn't suffer the stress that plagues most daytraders. He works from his home on a 10-acre horse ranch near Benton where he breeds quarter horses.
"I feel like I'm on vacation every day," he says.
RELATED ARTICLE: Daytrader Web Sites Attract Scrutiny of SEC
The proliferation of web sites catering to daytraders is creating some concern for the U.S. Securities and Exchange Commission.
SEC Chairman Arthur Levitt wants on-line trading web sites to include warnings about the risks of the stock marker. The SEC has been working with the FBI for the past year on "Operation InvestNet" in a nationwide effort to prevent fraud, and Congress has proposed adding $5.5 million to the SEC's budget for Internet enforcement.
The SEC also plans to introduce an investor education web site later this year with detailed tips about daytrading and create an advisory committee to study issues related to on-line trading.
One of the developments that concerns the SEC most has been the addition of chat rooms to many of the web sites. The chat rooms provide places where daytraders can gather and exchange information about investments.
Thousands of daytraders flock to the rooms daily and some experts claim the opinions formed in them can affect stock prices. A report on Internet commerce released by Stephens Inc. of Little Rock this month calls the chat rooms "an entirely new phenomenon that is having a profound impact on the market."
Already, the chat rooms are creating controversy. Earlier this month, Societe Anonyme, a popular chat room, closed for four hours because of problems with "cowboys and charlatans" who were "punching their own agenda." The Societe Anonyme web site was founded about a year ago and members pay about $100 a [TABULAR DATA OMITTED] month for access to the chat room.
Despite the controversy, web sites designed for daytraders have become popular enough to be rated among the Internet's most popular destinations.
Day Traders On-line (www.daytraders.com) has been named among the top 50 financial web sites consistently since its inception two years ago. A ranking provided by the Public Register's Annual Report Service, based on the number of people who visit the site, places the web site at 18th, just behind investor.msn.com and ahead of such traditional web sites as datek.com and cnbc.com. The web site also has been named Microsoft's Financial Pick of the Week and one of the Top 100 Hot Financial Sites.
Day Traders On-line provides subscribers with a daily e-mail report that is delivered before the markets open, real time news and quotes, nightly reports and intraday alerts.
David Cathcart, a spokesman for the web site, says the site gets about 13,000 hits daily and has "several thousand" members. The chat room has a monitor who controls the conversation and is available for questions from members.
The SEC estimates there are more than 5 million on-line accounts with about 100 on-line trading companies. Currently, the Internet accounts for about 30 percent of small-investor trading. The SEC has increased its scrutiny of the firms and filed fraud charges against several.
- JIM LOVEL
RELATED ARTICLE: Internet Transforming Brokerage Business
The Internet has forever changed the way people invest in the stock market.
"Today, the individual investor has more information than they ever had in the past," says Brad Eichler, a vice president at Stephens Inc. of Little Rock and head of the firm's Internet research group. "That information is power."
People are depending less on traditional brokerage firms and the advice they give to make trades on the stock market. Armed with information available from sources on the Internet, individual investors have a choice of more than 100 online firms for making trades. The cost of buying or selling stock has dropped by more than 80 percent in the past two years. An individual investor can trade up to 5,000 shares of stock for a fee of less than $10.
The result is declining commissions for brokers at established firms because less business is available to them. Many of the firms have adapted by developing their own online services. Earlier this year, Charles Schwab & Co. of San Francisco, one of the nation's largest on-line discount brokerage firms, surpassed Merrill Lynch & Co. of new York as the brokerage firm with the largest market capitalization.
Eichler recently published a report on the effect of the Internet on the stock market and traditional brokerage houses. In the report, he estimates the number of online accounts will increase at an annual rate of 4 percent to about 24.7 million accounts by 2002.
Internet trading is partly responsible for the recent volatility of the stock market, he says. Easy access to the market has created a lot of speculators who can inflate the price of a stock far beyond the true value of the company, which is what has happened to most Internet stocks, he says.
"Trading stocks is a difficult thing to do and make money," he says. "It's difficult to be right all the time."
- JIM LOVEL
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|Date:||May 31, 1999|
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