…and I wasn’t allowed to trade at all, it’d be TEX, and HEK. HEK is more risky, well actually really risky, but hence the upside. TEX, can’t figure it out, they just blew away the numbers tonight, I don’t know why the stock isn’t up 50% right now.
Long HEK from $8.27 and $9.95.
Long TEX from $44, $50 and $52.98.
That the pollution haze, alt. energy phase, banking craze, water ways, derivative maze, urbanization blaze, crop yields on maize and inflation daze…have given me too many ideas to throw money at, I just don’t know which ones are best.
Pollution and energy are two big problems, combine that with urbanization and CVA is likely to prosper. I think FAN, and TAN, are both good bets. Good banks will be fine, and it’s time to start buying value. Mind you, 300 out of the 8000 will fail, or more, but the rest will be ok and prosper on the new standards and previously failed bank clients. PHO has too many starting points to ideas for stocks…I still haven’t found the best ones. Combining the emerging growth with rising middle class, and world water problems HEK is likely to prosper. Urbanization has many vehicles, but right now I like TEX…can’t get enough cranes, etc. Crop yields are amongst the few things in the world that have risen nearly linearly for decades, that’s a good thing for planet earth and investors. Isn’t it ironic how every country in the world seems to have +5, 6, 7%, 2,2000,000% inflation…and the US is only just now starting to count it. Rising middle class in other parts of the world, SDA is likely to prosper. I also see CL doing well for the same reason. I like the new AFK/PMNA/FRN ETFs too, these are where tomorrows money will come from, get long these names and short the S&P, dollar for dollar.
This market has me second guessing myself, and every move I make. I’m not alone, that’s why it’s been volatile, and that’s why it’s will keep being volatile. Learn to Buy-Write. Short-to-Own.
Disclosure: I put my money where my blog is, when the timing is right.
I was listening to an audio version of the economist, when I had to drop what I was doing when I heard them mention Prediction Markets. A quick google search pointed me to intrade.com. Very cool. People bid on contracts that expire at either 100 or 0. It’s a market for a betting pool as to the outcome of any event.
Check this out:
Now I’m no expert, but get long Obama, get long McCain that seems like a 3% yield arbitrage. One of them is going to win.
Stock Market participants are more likely to dig these insights:
I took the data from their “probability of a US recession in ‘08″, made a moving average, then took a derivative and smoothed that out too, then mapped it to the S&P.
It’s interesting to observe the causality get weaker as the contract gets closer to expiring.
Check out the earlier surges in the derivative, they appropriatly correlate, a bit at least, to the market then a reversal in the derivative means a local max or min - in some cases - in the S&P…it’s a stretch.
How do I get long Prediction Markets? I want to invest, in the actual exchange. What a cool system, I am enthusiastic about it’s growth and want to see it succeed.
I am an equity/derivatives guy - I think I always will be, but, I KNOW I need to expand my knowledge of how the bond market works, and the signals it gives off. I’ve been reading one of Bill Gross’s book, you know the manager of PIMPCO, “The Peter Lynch of Bonds” according to the cover. He called Treasurys the “most over-valued asset class in the world, bar none” in April of this year. It’s sentiment like this that I’m pretty sure why ProShares created PST, and TBT; leveraged ETFs that short the 7-10 year, and 20+ year, US Treasury Indexes from Lehman brothers. I started learning about the bond market back in ECON 101, but have relatively ignored learning more. I have been smacked in the face with it over the last six months in the news, and ramped up during this recent GSE debacle. From what I can tell, the upside for TBT is much better than the downside, at this point in time. Do you concur, or disagree, why - or why not? Any insight from any expert macro / bond guys would help. I am new, and learning.
Speculation ramped up on Friday, as investors hypothesized that the GSCs would need help, thus hurting credit rating of the U.S. As such, TBT had nearly it’s second highest trading volume since it’s launch. PST actually did set a record for trading volume, since it’s launch.
Interest rates are bound to tick up…I mean, they almost have to.
I have to give a hat tip to Joe Dowling, for pointing these vehicles out on twitter, I didn’t even know they existed before Friday. I did something impulsive and after only an hour or so reading about TBT, Dan Conway can contest, I bought some…early in the day. Every conversation I’ve had with Joe, he has left me with nothing but a good impression of intelligence. Plus, I think he’s likely the second richest guy I’ve ever talked to. So yeah, I have no shame in cherry picking his ideas, making some money, and learning along the way. The way I see it, win or lose, I’ll either pay tuition to the market, or make some money. I’m young, and need to learn. I applied the exact same logic, that new derivative traders should use - you learn allot faster with skin in the game. Maybe this is reckless, I dunno. I know I learned really quick when my first derivative trade fell 100%, and my next one doubled, that was almost 4 years ago - I have no regrets over losing ALL the cash on that first trade.
Disclosure - like this matters…I AM short 20+ year Treasury Index via TBT.
P2P file sharing still dominates bandwidth usage in North America, consuming 75% of the upload stream and 35.6% of the download stream. According to this short study/report on Trends in Broadband Traffic Demographics.
This study is done by a company, I own shares in, Sandvine. They are basically trying to help ISPs, prioritize packets and handle traffic on their networks, in the face of difficult bandwidth trends (Online video/media, P2P file sharing, etc.) The company’s revenue has been explosive quarter over quarter, with a stall in last two quarters. The stock chart is ugly, but I think it will be a great 10 year story. After buying this stock over a year ago, I went to my first annual share holder meeting, in May. I left the meeting more than doubling up my position.
They announce earnings early Tuesday A.M.
Long Sandvine.
RIMM announces tomorrow.
It has become, a deal stock. Everybody talks about it, everybody has traded it, everybody has a story about making huge bucks or losing some coin (mainly the shorts).
See, same applies to GOOG. Remember when GOOG announced, everybody had ZERO expectations, people were buying puts, and selling calls, scared it was going to tank…and then…and then…they blew away every-body’s guesses out of the water. That’s all they are, guesses. Look back at the twitter tape, there was only one bull in my twitter circle, who was long and proud. Me. Andy wrote a straddle, and got owned. See, you can look at the chart and see the pansies and bears sold all their shares or went short ahead of the CC. That’s causality at work.
The market anticipated so much bad news, it priced it into the stock. This happens, especially to deal stocks. You know the ones, AAPL, GOOG, RIMM etc.
This is how you tell a deal stock, from not a deal stock: Find an idiot, and ask them, if they know what a PE ratio is. If they don’t know what a PE ratio is, you can use them as a test subject for your stock. Ask them what the ticker is for company ABC. If they know it, it’s a deal stock. If they don’t, you guessed it, not a deal stock.
It’s also why, you don’t always have to chase smart money, you can chase dumb money too. Deal stocks, they go up, higher and faster than anybody with a brain could anticipate. Because these are the only stocks idiots know about. Idiots find out about them, and think, ‘maybe it’s going to keep going up…I better buy some’. Self fulfilling prophecy. So, there are more buyers for those stocks as opposed to the other, non deal stocks.
HEK is not a deal stock. Will it one day be a deal stock, I hope so, but doubt it. Because deal stock buyers, laugh in the face of multiplier expansion.
I am going to be off playing Tycoon in Toronto tomorrow…so I’m going to predict, my prediction. Since RIM has become a deal stock, it’s going to go the opposite direction of the color it trades tomorrow. If we see red ahead of the CC, look for springboard action in the AM, and get long at the end of the day. If we see green, well, look out below. Unless the chart looks like something leaked, don’t be stupid here.
I’m long either way, and I know I’ll do something dumb if I watch in real time. I’m long, and I plan to hold right on through the worst of any possible sell off. See, see right there, what I said, that’s me worrying. A little light in your head should go off - that’s a bullish tell, that I’m worried about a sell off. I don’t know anything anymore than the next guy does.
But I do know, markets are causal. Fickle too.
Yes I am however, long a bunch of deal stocks…trying to quit…but they are just such quick fixes, you know?
Unless CCJ hits $55, or ENER hits $70, or CSIQ hits $45 (these are all >10% moves), and I take profits as planned on the July FSLR’s…all before tomorrow, and since I closed a 3 week trace on FCX…then I add 1.4% to my bottom line this month, or generated 5.7% on cash tied up…however you want to look at it.
All from shorting puts, for less than a month.
Which is why, I started http://FivePerFive.wordpress.com …read my logic on the ‘about page’.
And this doesn’t even include my buy-write retirement account where I was short puts to aquire RSX, and never got hit…or wrote out of the money $36’s holding HXU.to
booyah baby.
Investors & traders can now use real-time (Ok, 20 minute delayed) data from google finance, in google spreadsheets. Maybe this is nothing new, but I just jumped on it last night, and played around. I added all the US tickers I have positions in to a spreadsheet, then also added either my own weighted cost of capital present ‘fair value’ or morningstar’s ‘fair value’, along side the real-time quotes. I calculated what percentage they were away from the fair value. Here is the chart, I believe this chart will be dynamic, that is, it will change as market data does, and as I change the chart. For now, google spread sheet doesn’t let you play with a legend, so I couldn’t label the stocks. But in order on the chart below from left to right are:
AAPL, CCC, CLC, CL, CPA, CVA, FCX, GOOG, HEK, FSLR, ITU, JCI, MA, MFC, NTDOY, RIG, RIO, TTEK, UNG, V, VE
So you can read, AAPL, is about 4% below my fair value. I should be adding to CVA, JCI, RIO & VE (the four lowest bars) and FSLR is the highest above it’s fair value estimate so, investing via shorting puts seems like the right way to play it, for now.
I’m going to see what else I can cook up, or maybe i’ll go to sleep instead.
Note: UNG obviously doesn’t have a ‘fair value’ estimate. It’s the spot near the right with no bar.
I’m younger than most people into stocks, as such, there seems to be a demographic boom of sorts of my friends wondering about getting started. I have brainstormed, regarding 18 valuable concepts. Some are obvious, some are not. All seem simple, most are not.
Stocks anticipate good news, and bad news. So, if you’re buying something, because of some event in the near future, the market may or may not have all the upside/downside calculated into the stock already. This is sometimes referred to as sentiment. It’s the reason a company can release record profits and the stock fall, or the flip side is, if a company doesn’t lose as much money as the street expected it will go up. This applies to all sorts of news.
Stocks are the present value of the cash flows associated with them. If the cash flows change or are expected to change, the stock moves. This means that target prices are dumb, and investors need to decide for themselves, if the current market price, is a fair price to buy or sell at.
If investment A is likely to return 10%, while investment B is just as likely to return 20%, investment A will fall in value, the yield on it will rise as people sell it, and the yield on B will fall as people buy it. This is the main reason stocks movement is correlated. Equilibrium is constantly chased.
Two reasons stocks appreciate in value: 1. People bid up the price, essentially a supply & demand problem for a finite number of a certain stock. 2. Time slips by and the present value of the growing cash flow that the company generates increases as well as produces a yield on equity. Both of these have a reciprocal for why stocks go down.
A good business plan will fail if trends are not on the side of the investor. A bad business plan can succeed if the trends are on its side. Basically, trends are the wind that can either power the sail, or rock the canoe
You own the good times and the bad times associated with a company, after you purchase stock. Deal with it. Become a client if you’re not already. Refer a friend if appropriate. Check in on the company however you can, get creative. You now own parts of that business, a business you want to see do well. This advice, is just so that you get into it, and have fun.
Only thing guaranteed on Wall-Street. Both directions. The market will stay irrational longer than you can stay rational.
Understand the difference, and risk associated with them. Value stocks are generally safer, with lower yields, while growth stocks are riskier and more volatile.
Companies write reports for reasons. Read them all, if possible. 100 times better than internet forums.
Anybody who calls the market a ‘gamble’ couldn’t be more wrong, or stupid. Luck has nothing to do with profits, I suppose with the exception of factors driving you towards the purchase or sale. I’m talking about, people who “hope” their stock will go up, or maybe they will get “lucky” with this one. Luck is to casinos what intelligence is to the capital markets.
There is little incentive for them to do stick their neck out, the majority run with the heard, and do their job so that they can go home when they are done. There are good ones, and bad ones. Dumb ones, and smart ones. Just like any other employee.
Just like everything else, they can be used as an indicator of the future, as well as are available if needed. Investors should understand them, at the least, and use them when appropriate like tools – not toys. Leverage is a double edged sword, and time pushes that sword against your neck if you’re long plain vanilla.
These are the history of the company, the stuff behind the scenes, that most retail doesn’t understand. Learn about them on your own, and use the companies’ numbers if possible, because the quality of free data often reflects the price of the data.
And you’ll go insane with paper draw downs if you hold only one or two stocks. You’ll make less irrational emotion based decisions if you do.
Many dorks all around the world have spent allot of time perfecting some fancy mathematical models to prove that emotions effect wall street. I’m in the camp that believes news and fundamentals will trump technical analysis, and thus, put very little emphasis on using it. While it’s true, the technical analysis seems to work, it’s not smart to scale it’s application as well as time consuming to apply with short term trading strategies.
If you ever find yourself saying “I think it’s going to keep going up/down”, and you have no reason why, you’re being silly. You’re under informed, you should do more homework. I recommend 26 hours per day.
Big things move slower. Realize what the market capitalization of a company is no exception to this rule.
If you see a stock running at all time highs, and upon a 30 - 60 minute inspection you want to buy, do it. Buy a little. Then, read up, learn more, follow the company and add or sell if appropriate.
Colgate baby. Growing world-wide middle class will likely enjoy tooth-paste, just as much as the rest of the world. I’m leveraged with a SWEET 2010 call spread. ~0.9% in time premium on an effective $65 call with capped gains at $80. 74% returns expected within 20 months. Check out my write-up, over at Blue Moat.
Mad Hatter wrote a post and Ross has covestor. I know my friend Thiago is more informed than I, with a better memory, but a bit of a cowboy, and Howard likes to see all time highs and good price action, and Joe told me a while back that he reads and buys quality. Any time any of them say they are buying something I get a better picture of what that means, how much work they’ve done, etc. Its useful, to me at least…sooo…here’s my story:
I buy on 1. ideas/trends 2. fundamentals 3. momentum 4. recommendations. 5. volatility/liquidity of derivatives
My ideas come in the form of trends and observations I read about happening all over the world. Fundamentals are a high priority, I use morningstar premium to help me with that, I find their research great and useful. Momentum is great, and can be scary, I won’t touch momentum if it’s in a field I don’t understand, nor stupid high PEs, but ~25 and under - I’ll look at. Recommendations are high on my list, that means managers of hedge funds, money managers, friends, family and reader(s?) all get a high priority in my infinite search for good stocks. If a stock is trading with liquid options, it will get a higher priority than the one without, especially if implied volatility is generally higher - I like writing calls / shorting puts. I rarely ever use technical analysis, although I probably should. My holding time frame plans range from weeks to 50 years. Once I buy, I feel committed and prefer to hold through anything. Like my AAPL buy at $178 a few months ago - held right on through. I don’t use stop losses, I get that from my dad, he retired at 42. “If you liked it at $40, you gotta love it at $30″ is what he’d say.
I have a checkpoint set at 18% a year, but a goal of 26% per year…after taxes.
I currently have two accounts. The first holds positions in 19 tickers, right now. The only tickers where I’m not long the stock is FSLR and FCX I’m just short the $210 and $90 puts. I have 6 other open option legs where I offset the downside of my long positions by writing out of the money calls. I’m doing this to CCJ, JCI, and ITU. I’m also long calls on JCI and short puts on CCJ, these are both separate legs, aside from a long position in the stock. Right now this account is 14% cash, and no holding ever gets larger than ~8%.
I’ve just recently opened up an account at Interactive Brokers. I added more almost immediately because I liked them so much. I opened it to program an algorithm to manage a buy-write for me, on several ETFs. That is going slowly, and looks like it might not work that well. Regardless, I’m going to manage a less complicated version of the algorithm, manually. I own four ETFs, that I actively trade the front month calls on. HXU.TO, SSO, VWO and FNI. I know HXU and SSO have issues with losses/slippage, but I’m sacrificing that slippage for volatility in the form of capturing option premium. I’m 103% invested right now, if you don’t count the fact that i’m twice exposed with the two double longs. I plan to keep this account nearly 100% invested running my buy-write.
Equity is broken up ~63% (Investments) /37% (ETFs/Buy-Write)…I plan on keeping a ratio close to this, and if I beat the markets in the “Investments” account - cool, but right now, if I lost it *ALL* my “Investments” account and never added cash to the other, so long as I get index like performance on my “ETF account”, I could still retire in less than 30 years…no matter what.
My current watchlist which basically means I’ll write puts out of the money on these stocks all day long (and hopefully get assigned) include: FSLR, FCX, JCI, VE, CVA, MIL, CCC, IBKR, MORN…as well as a few others I can’t remember right now.
So, ‘Blank Check’ Company, Heckmann Corp. (HEK) recently announced they bought a Water Bottling company in China. I’m like - wow - what a great business to be in right now. Probably a scam. The chart exploded this morning. Some heavy money traded the shares north of $8.50, then it pulled back to ‘pre-publicized’ levels of $8.25. I figure 1. What a scam, these guys are investing in a likely trend/shell company, which their brother in law probably owned. If it is legit, it’s likely a great investment - anybody in charge of a ‘blank check’ likely knows what they are doing. If their crooks - no way did they go to all that trouble for the shares to peak at $8. If they aren’t crooks, same holds. So since it went back to pre-publicized levels, I bought a few shares at $8.2799. I especially liked the fact that I could consume everything in current circulation, in english, in less than an hour. It has just become my smallest holding, my biggest gamble, and most un-researched purchase. According to Lindzon, due diligence if for underperformers, lets see if he’s right. I’m literally gambling with ~1.5% of my portfolio…so blow on the dice for me…I know it’s wrong…and I’d never do this with other peoples money.
Plus, the downside shouldn’t be worse than the lows during the chart where the company was just a blank check. That’s $7.22. Soooo…yaaah. D
In-case you can’t tell I have an incredibly amazing obsession with the capital markets. Passionate. I believe anybody else that blogs about stocks or the markets, does as well. Now what would happen if these passionate people all got together and used their powers collectively, to run a fund? A fund run by bloggers. The team would also have the added leverage of being geographically spread out, I think that’s good.
It could work like this: Every manager has the power to nominate a stock, as well as quantity, and limit price. Everybody votes, and unless it’s unanimous (or like 4 against 5) we don’t buy. We would have two choice how to run it, we could average the quantities in every-one’s vote, as well as the limit purchase prices, or we scale in using everyones votes as separate orders. Cash management and degrees of leverage (if any) would be continually taken into consideration of every vote we cast, Hypothetically we would end up only buying the best ideas and we would more able to pick a smart purchase price. There could be bonuses tied to the performance of your cumulative votes. This is all open to discussion, but the ironic part is, we could run this idea (either paper trading, or the real thing) through a blog. We all get a login and password, and write posts to nominate a stock, or a list of stocks. Then in the comment thread the other managers vote. With a committed team, we could easily test out this idea…so, I’m taking names of who is in.
With fund of funds out there, not that I’m positive on this, but a $20M fund, I want to believe is easy to get off the ground. Set a high water mark of like 18%, take 0.25% off the base and 10% of gains after that. We could easily afford a 5 to 10 person team, each could easily make $20K - $40K the first year, and well, 3 or 4 years down the line, let’s just say ~$30K quickly becomes negligible. The fund would grow quicker, because we have the power to get the word out about it. Social Leverage.
Not sure how many people are as crazy as I am, so, I’ll be taking names for as long as it takes - could be a month - could be a year.
So for now, who is in to at least try this out on paper? Reply to this post, if you’re interested, and make sure you have a link to your blog.
Recent Comments