[6:30am ET] Stephen Greenspan, emeritus professor of educational psychology at the University of Connecticut and author of the 2009 "Annals of Gullibility: Why we get duped and how to avoid it," has written an essay of substance on financial gullibility that ought to be mandatory reading by all students of the market.
http://www.amazon.com/Annals-Gullibility-Why-Duped-Avoid/dp/0313362165
Dr. Greenspan (no relation to former Fed chairman Alan Greenspan), despite being an expert on gullibility and financial scams, fell prey to the Bernard Madoff swindle. He now writes extensively on the subject. His words follow.
There are four factors in my explanatory model, which can be used to understand acts of gullibility, but also other forms of what I term "foolish action." A foolish (or stupid) act is one in which someone goes ahead with a socially or physically risky behavior in spite of danger signs or unresolved questions. Gullibility is a sub-type of foolish action, which might be termed "induced-social." It is induced because it always occurs in the presence of pressure or deception by other people.
The four factors are situation, cognition, personality and emotion. Obviously, individuals differ in the weights affecting any given gullible act. While I believe that all four factors contributed to most decisions to invest in the Madoff scheme, in some cases personality should be given more weight while in other cases emotion should be given more weight, and so on. As mentioned, I was a participant -- and victim -- of the Madoff scam, and have a pretty good understanding of the factors that caused me to behave foolishly. So I shall use myself as a case study to illustrate how even a well-educated (I'm a college professor) and relatively intelligent person, and an expert on gullibility and financial scams to boot, could fall prey to a hustler such as Mr. Madoff.
Situations.
Every gullible act occurs when an individual is presented with a social challenge that he has to solve. In the case of a financial decision, the challenge is typically whether to agree to an investment decision that is being presented to you as benign but may pose severe risks or otherwise not be in one's best interest. Assuming (as with the Madoff scam) that the decision to proceed would be a very risky and thus foolish act, a gullible behavior is more likely to occur if the social and other situational pressures are strong.
The Madoff scam had social feedback pressures that were very strong, almost rising to the level of the "Donators" cult around the Drake inheritance fraud. Newspaper reports described how wealthy retirees in Florida joined Mr. Madoff's country club for the sole reason of having an opportunity to meet him socially and be invited to invest directly with him. Most of these investors, as well as Mr. Madoff's sales representatives, were Jewish. The fact that Mr. Madoff was a prominent Jewish philanthropist was undoubtedly another situational contributor.
A non-social factor that contributed to a gullible investment decision was, paradoxically, that Mr. Madoff promised modest rather than spectacular gains. Sophisticated investors would have been highly suspicious of a promise of gains as spectacular as those promised decades earlier by Charles Ponzi. A big part of Mr. Madoff's success came from his apparent recognition that wealthy investors were looking for small but steady returns, high enough to be attractive but not so high as to arouse suspicion. This was certainly one of the things that attracted me to the Madoff scheme, as I was looking for a non-volatile investment that would enable me to preserve and gradually build wealth in down as well as up markets.
Another situational factor that pulled me in was the fact that I, along with most Madoff investors (except for the super-rich), did not invest directly with Mr. Madoff, but went through one of 15 "feeder" hedge funds that then turned all of their assets over to Mr. Madoff to manage. In fact, I am not certain if Mr. Madoff's name was even mentioned (and certainly, I would not have recognized it) when I was considering investing in the ($3 billion) "Rye Prime Bond Fund" that was part of the respected Tremont family of funds, which is itself a subsidiary of insurance giant Mass Mutual Life. I was dealing with some very reputable financial firms, a fact that created the strong impression that this investment had been well-researched and posed acceptable risks.
I made the decision to invest in the Rye fund when I was visiting my sister and brother-in-law in Boca Raton, Fla., and met a close friend of theirs who is a financial adviser and was authorized to sign people up to participate in the Rye (Madoff-managed) fund. I genuinely liked and trusted this man, and was persuaded by the fact that he had put all of his own (very substantial) assets in the fund, and had even refinanced his house and placed all of the proceeds in the fund. I later met many friends of my sister who were participating in the fund. The very successful experience they had over a period of several years convinced me that I would be foolish not to take advantage of this opportunity. My belief in the wisdom of this course of action was so strong that when a skeptical (and financially savvy) friend back in Colorado warned me against the investment, I chalked the warning up to his sometime tendency towards knee-jerk cynicism.
Cognition.
Gullibility can be considered a form of stupidity, so it is safe to assume that deficiencies in knowledge and/or clear thinking often are implicated in a gullible act. By terming this factor "cognition" rather than "intelligence," I mean to indicate that anyone can have a high IQ and still prove gullible, in any situation. There is a large amount of literature, by scholars such as Michael Shermer and Massimo Piattelli-Palmarini, that show how often people of average and above-average intelligence fail to use their intelligence fully or efficiently when addressing everyday decisions. In his book "Who Is Rational? Studies of Individual Differences in Reasoning," Keith Stanovich makes a distinction between intelligence (the possession of cognitive schemas) and rationality (the actual application of those schemas). The "pump" that drives irrational decisions (many of them gullible), according to Mr. Stanovich, is the use of intuitive, impulsive and non-reflective cognitive styles, often driven by emotion.
In my own case, the decision to invest in the Rye fund reflected both my profound ignorance of finance, and my somewhat lazy unwillingness to remedy that ignorance. To get around my lack of financial knowledge and my lazy cognitive style around finance, I had come up with the heuristic (or mental shorthand) of identifying more financially knowledgeable advisers and trusting in their judgment and recommendations. This heuristic had worked for me in the past and I had no reason to doubt that it would work for me in this case.
The real mystery in the Madoff story is not how naïve individual investors such as myself would think the investment safe, but how the risks and warning signs could have been ignored by so many financially knowledgeable people, including the highly compensated executives who ran the various feeder funds that kept the Madoff ship afloat. The partial answer is that Madoff's investment algorithm (along with other aspects of his organization) was a closely guarded secret that was difficult to penetrate, and it's also likely (as in all cases of gullibility) that strong affective and self-deception processes were at work. In other words, they had too good a thing going to entertain the idea that it might all be about to crumble.
Personality.
Gullibility is sometimes equated with trust, but the late psychologist Julian Rotter showed that not all highly trusting people are gullible. The key to survival in a world filled with fakers (Mr. Madoff) or unintended misleaders who were themselves gulls (my adviser and the managers of the Rye fund) is to know when to be trusting and when not to be. I happen to be a highly trusting person who also doesn't like to say "no" (such as to a sales person who had given me an hour or two of his time). The need to be a nice guy who always says "yes" is, unfortunately, not usually a good basis for making a decision that could jeopardize one's financial security. In my own case, trust and niceness were also accompanied by an occasional tendency toward risk-taking and impulsive decision-making, personality traits that can also get one in trouble.
Emotion.
Emotion enters into virtually every gullible act. In the case of investment in a Ponzi scheme, the emotion that motivates gullible behavior is excitement at the prospect of increasing and protecting one's wealth. In some individuals, this undoubtedly takes the form of greed, but I think that truly greedy individuals would likely not have been interested in the slow but steady returns posted by the Madoff-run funds.
In my case, I was excited not by the prospect of striking it rich but by the prospect of having found an investment that promised me the opportunity to build and maintain enough wealth to have a secure and happy retirement. My sister, a big victim of the scam, put it well when she wrote in an email that "I suppose it was greed on some level. I could have bought CDs or municipal bonds and played it safer for less returns. The problem today is there doesn't seem to be a whole lot one can rely on, so you gravitate toward the thing that in your experience has been the safest. I know somebody who put all his money in Freddie Macs and Fannie Maes. After the fact he said he knew the government would bail them out if anything happened. Lucky or smart? He's a retired securities attorney. I should have followed his lead, but what did I know?"
I suspect that one reason why psychologists and other social scientists have avoided studying gullibility is because it is affected by so many factors, and is so context-dependent that it is impossible to predict whether and under what circumstances a person will behave gullibly. A related problem is that the most catastrophic examples of gullibility (such as losing one's life savings in a scam) are low-frequency behaviors that may only happen once or twice in one's lifetime. While as a rule I tend to be a skeptic about claims that seem too good to be true, the chance to invest in a Madoff-run fund was one case where a host of factors -- situational, cognitive, personality and emotional -- came together to cause me to put my critical faculties on the shelf.
Skepticism is generally discussed as protection against beliefs (UFOs) or practices (feng shui) that are irrational but not necessarily harmful. Occasionally, one runs across a situation where skepticism can help you to avoid a disaster as major as losing one's life (being sucked into a crime) or one's life savings (being suckered into a risky investment). Survival in the world requires one to be able to recognize, analyze, and escape from those highly dangerous situations.
So should one feel pity or blame toward those who were insufficiently skeptical about Mr. Madoff and his scheme? A problem here is that the lie perpetrated by Mr. Madoff was not all that obvious or easy to recognize. Virtually 100% of the people who turned their hard-earned money (or charity endowments) over to Mr. Madoff would have had a good laugh if contacted by someone pitching a Nigerian inheritance investment or the chance to buy Florida swampland. Being non-gullible ultimately boils down to an ability to recognize hidden social (or in this case, economic) risks, but some risks are more hidden and, thus, trickier to recognize than others. Very few people possess the knowledge or inclination to perform an in-depth analysis of every investment opportunity they are considering. It is for this reason that we rely on others to help make such decisions, whether it be an adviser we consider competent or the fund managers who are supposed to oversee the investment.
I think it would be too easy to say that a skeptical person would and should have avoided investing in a Madoff fund. The big mistake here was in throwing all caution to the wind, as in the stories of many people (some quite elderly) who invested every last dollar with Mr. Madoff or one of his feeder funds. Such blind faith in one person, or investment scheme, has something of a religious quality to it, not unlike the continued faith that many of the Drakers continued to have in Oscar Hartzell even after the fraudulent nature of his scheme began to become very evident. So the skeptical course of action would have been not to avoid a Madoff investment entirely but to ensure that one maintained a sufficient safety net in the event (however low a probability it might have seemed) that Mr. Madoff turned out to be not the Messiah but Satan. As I avoided drinking a full glass of Madoff Kool-Aid -- I had invested 30% of my retirement savings in the fund -- maybe I'm not as lacking in wisdom as I thought.
Comments
Big Banks - More Trouble - $50 Billion
MarketWatch reporting this morning:
"... Deutsche Bank, JP Morgan Chase, UBS and Dublin-based Depfa -- involved in helping the local government manage repayments on bonds bought to finance public spending, according to a report in the Daily Telegraph on Monday. Italian authorities are potentially facing 35 billion euros ($48.7 billion) of liabilities related to those bonds ...."
And the beat goes on.
http://tinyurl.com/7oxa25
Edit: Here is a better link with more info:
http://tinyurl.com/76sh7f
Cara 100 Ratings Changes
Good morning.
There are NO Cara 100 Ratings Changes to report at this time.
Nice Job SEC
Good thing Madoff turned himself in...
Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the U.S. Securities and Exchange Commission (SEC) and other regulators, who often came armed with suspicions, the Wall Street Journal said.
SEC officials followed up on emails from a New York hedge fund that described Bernard Madoff's business practices as "highly unusual," the paper said.
The Financial Industry Regulatory Authority, the industry-run watchdog for brokerage firms, reported in 2007 that parts of the firm appeared to have no customers, according to the paper.
Madoff was interviewed at least twice by the SEC, the paper said, adding that regulators never came close to uncovering the alleged $50 billion Ponzi scheme that investigators now believe began in the 1970s.
The SEC could not be immediately reached for comment by Reuters.
http://tinyurl.com/74poaa
Cara 100 Update
AMAT - Price Target Lowered from $19 to $16 @ Stifel Nicolaus
Volunterers
Bill,
Your suggestion that we monitor Cara 100 stocks is an excellent one. What I seek now are several volunteers to learn a trading methodology (real simple) and to alert the room when specific criteria have been met.
buy the dip in gold?
looks like the funny money dollar is strong today and gold down...is today the day to buy the dip or is this going to continue into the week?
Butchart Gardens
Thank you, Vad for sharing and lugging.
Visiting the Gardens was the highlight of my trip to Vancouver Island some 20 years ago, in late Spring.
Re: Volunterers
I agree that monitoring Cara 100 stocks is the way to go. For one, a significant amount of work has already been done to come up with a list of quality stocks. Also, because we follow these stocks regularly we are more aware of the rhythm (or dance as Bill calls it) compared to some other random list that the screen might come up with everyday.
Count me in as a volunteer. I am new to this (~ 6 months trading experience) but the motivation to learn is there. Look forward to this group experiment.
TBT
I sold a small amount of TBT pre-market at 39.89 for a nice profit and to free up some cash for some shopping in Singapore tomorrow.
Holding on for a continued run up.
DRYS looks like it's gonna
DRYS looks like it's gonna make a run for it.
BBY - Best Buy
GS issued a buy this morning, they must be selling this week.
re gold/gold stocks
gold was looking toppy on friday and the USD was looking to curl back upwards for a technical bounce. we all saw it.
considering where the stocks were just over 1 month ago its been a great rally in the face of a stalling broader market.
as ive said before the critical price pattern to watch will be how gold and gold stocks react during any possible market slide again. if they follow suit as they did in late 08 then we can be assured that gold and the market remain tied at the hip and any market panics will hurt gold stocks.
if they fall much less or even flatten out while the rest of the market slides, i suspect gold and gold stocks will explode on any upside rebound on good volume as people realize theres little else to invest in.
but looking at a gold chart for the year we can see it just bounced off a downward trend line despite some bullish positive divergences on the MACD, STO and RSI-(7)(9).
should gold quickly move back above the trendline, $1000 cant be far away,
should gold bounce around then move lower along w/ the stocks then $780 is near.
as per my comment on friday afternoon, i sold a small amount of the HGU and will reenter on any significant move up or down.
good luck!
PALM
Long Palm -
Why?
Jonathan J Rubinstein
Jonathan J Rubinstein (born 1956) is an American computer scientist and electrical engineer who was instrumental in the creation of the iPod, the portable music and video device first sold by Apple Computer Inc. in 2001. He was also responsible for the development of Apple’s iMac line. He has been elected to serve as a member of the National Academy of Engineering and is a senior member of the Institute of Electrical and Electronics Engineers.
Rubinstein left his position as senior vice president of Apple's iPod division on April 14, 2006. He became executive chairman of the board at Palm, Inc. after private-equity firm Elevation Partners completed a significant investment in the handheld manufacturer in October 2007.[1]
At Palm, where Rubinstein leads the company's research, development and engineering, his first tasks included winnowing the company's product lines and restructuring R-and-D teams.[2]
I also moved into DRYS Friday. thanks Sharkie
Bb squeeze
sold tim.to and bought opc.to for the bb squeeze and low adx and +di
Jr gold stocks are doing well as the majors correct, a sign of a sustainable rally ahead? I think so.
Usd is hitting resistence possibly setting up an hs top
http://img201.imageshack.us/img201/8114/usdcq2.png
Out of TZA
Out of TZA @ $47.60
Re: re gold/gold stocks
back in HGU @ 11.30!!!
am i crazy? i couldnt resist.
Re: PALM
PALM - Just changed to neutral from sell, I like their products. EPS = -$6?
Cara 100 Update (Final)
BBBY - Downgraded at Goldman Sachs to Neutral from Buy. Shares are up 29% since being added to Buy list on Nov. 12 and are now nearing $28 target.
vinod: -SLWCA
opened a few contracts at 1.85
GIX.V PNP.TO
These are two of my dogs, but they are climbing on a down day for most of my PM's--any ideas?
PCX
Coal stocks going nuts this morning, expecially PCX.
David, that ACI must be looking pretty good right now!
Re: re gold/gold stocks
am i crazy? i couldnt resist.
I'd be cautious about trading like this. It has gotten me into a world of trouble in the past. One of the things I'm trying to do myself is find a good reason to execute every trade, including an entry and exit strategy.
FWIW.
S&P at 1000
People here think we may hit 1000 this week
Something to keep in mind....
http://slopeofhope.com/2009/01/04/current_bear_ral...
Calvin and Hobbs - saying it like it is
tooearly posted this comic stip of Calvin and Hobbs on Mish's blog that's right out of a crystal ball. Says it all, and so accurately:
http://tinyurl.com/7nnyqg
Refiners showing
Refiners showing strength.
TSOAY sold Jan 10 calls for a double . . . always nice to get that first trade of the year positive.
Patience. Looks like you can swing trade some issues as currently retaining TSO long position, but monitoring closely as RSI 7 daily now at 80 . . . posted Friday on skype unusual high volume of @ 2500 for Feb 15.00 TSO calls.
VLO, HOC actually better companies (debt, etc.) IMO and also looking good this a.m.
(No position, however have VLO shares in managed account)
Re: vinod: -SLWCA
will buy later on
still holding TBT/TNA/FSA 1000 each
I think I will keep TBT untill it hit over 50
I missed out uso when Bill mention about it last week
Thanks Bill for TBT. so far its rocking
TCK / Coal Stocks
Nice thing about this one now you can catch the up days on coal and when that aspect isn't clicking it might be running on base metals or the next day on gold, or I guess when they all aren't in cycle you go down. Happy Trading
Re: re gold/gold stocks
Since gold stocks bottomed in November, they've had a pretty solid run-up, in some cases intermediate shares went 400%!! This trade has probably seen its day, unless you are willing to hold until spring and had bought during the onset of winter. Shorting the long bond through an ETF is probably a good trade going forward, but so would some of the usual suspects in the forex such as dollar vs. euro.
Looks like there might be some selling the long bond, so this will inevitably bolster the $US. It was running 169 points this morning. This is a very unusual move, as oil is up along with it.
Some of the very small cap illiquid mining shares (or just about any share on the venture exchange who have fans) have been rallying. I would suppose the gold based projects will see some strong appreciation in the ensuing weeks. The gold price should remain a steady average of ~$850, but with the caveat that the spring rally will see that $100 higher.
That being said, the HOU.TO => Horizons Beta Pro Oil Bull will probably see a trade, as the oil market seems to have bottomed.
RML, GRZ, KRY
RML down 5%, GRZ up 9%, KRY up 18%,
It looks like the curtain has been drawn back on Rusoro Mining in regards to their bid on Gold Reserves. The shareholders are voting and it looks like Rusoro better find an "investor" very soon since they will be out of operating capital without the GRZ cash position of over 100 million. KRY responding as well. Hugo may have to deal with the cards on the table; GRZ and KRY if he wants to start any form of mining in Venezuela this year to offset his losses in crude oil sales.
iPod / iPhone / iTunes
A note from the trenches ...
I get a nice monthly check from Apple, Inc. for iTunes sales.
I felt wrongly that iTunes had peaked a few months ago after nice, steady sales increases for the past 2 years or so.
Now I am getting data on December sales and boy, am I being proven wrong.
Sales for Christmas week, ending 28 December, EXPLODED to the upside from already healthy levels from the beginning of the month. Either a lot of my customers received iTunes giftcards or new iPhones under the tree.
My in house producer swears by the iPhone but still thinks it's a lousy phone!
He loves it as a mobile internet device and music player/recorder.
As for the bricks and mortar and silica based music industry, it died a long time ago.
Oil Curve Steeper Than '99 Shows Possible Gain in '09-Bloomberg
This downdraft in crude pricing is setting us up for a real snap back in prices. The primary driver is not OPEC et al but the lack of investment by Government owned oil co's who own the majority of world production. Their inept management and reinvestment will provide a fertile space for higher pricing. IMHO
http://tinyurl.com/7ext3r
Re: TCK / Coal Stocks
I've got some TCK and this is great! If it would just pull back some I'll really load up... but it hasn't. Looks like I'm not the only one who wants more...
50 day MA
So some large number of my stocks/ETFs are either touching or have gone through their 50 day MA on their daily charts. From you charting wizard types, what does this mean? Examples: STX, SLB, TCK, APA, BNI, GE, IEZ - it's absurd really, it has to mean something that they're all doing this! :)
RE: EDV.TO
Endeavour Financial is advising Rusoro on its hostile takeover bid, so it might be affected by the transactions to take place. I wonder just what the plan is why there is so much attention focussed on Venezuela, when Ecuador may repudiate some of its obligations.
Just the same EDV.TO can rally from here. In fact, the whole merchant banking sector can see a rally from here, EDV.TO, PNP.TO(already started), QC.TO, NFC.TO(already started).
Re: TCK / Coal Stocks
Chicken,
I BOUGHT 50 TCK $36.07 $1,810.50 CASH 9/22/2008 . This was one of bill's favorites and so I bought for a 3 year turnaround without stops.
I have learned since then Always to put stops in and to rebuy later when the price goes down. (I did that with SLW and have done quite well).
I would consider buying more TCK now to average down my costs on this but do not know if this company is solid. I would appreciate your (and other's thoughts on this).
thanks so much! I have learned so much here.
VB
JCP Pullback?
Still strong, no pullback in sight yet. On my watch list.
Re: PCX
BTU also had a nice jump, up some 9% early.
Re: TCK / Coal Stocks
vanillabean - Don't take my word for it, just look at how it's moving... Looks like I'm not the only somebody who thinks it's a steal.
Yes, you've got to let go... I'm still trying to get the hang of the concept although I've gotten better.
From a TA perspective, TCK remains a buy, not a strong buy yet. I'll post any changes if/when I see 'em...
Re: The Story On EDV.TO
Endeavour wants to raise $100CAD(mid dec):
Financial Post
Re: 50 day MA
I also wonder how sustainable is this pop in energy. While it was fairly easy to predict it, this is way more than I expected. Even my dog PNP went up 50% today and it's up 300+% from it's low.
I guess markets were very suppressed in December by loss selling (promoted on all TV channels). The lesson is that traders should watch TV to fade the advice, but the timing part is the tricky part to figure out (as usually).
Re: Refiners showing
They've been strong for a couple weeks now - unfortunately I sold my TSO, VLO, and FTO a little early, albeit with a profit. SUN and HOC also strong (SUN looks a little over-bought to me actually).
No position in any - what do you think about WNR?
RE: EDV.TO
Assuming Endeavour Financial does not get caught up in the Gold Reserves lawsuit against them maybe your comments are valid. Enveavour was GRZ's financial advisor as they are now with Rusoro. A conflict of interest in regards to Endeavour having inside information on Gold Reserves being shared with Rusoro.
RE: EDV.TO
aha!
ABB
ABB remains in buy status too, has pulled back but just slightly. I'd like more of a pullback for entry....
Looking for some entry opportunities this week.
Re: TCK / Coal Stocks
Took a small position when it got knocked down - wish I'd bought more, but I'll take what I can. Holding til it hits double-digits, will re-evaluate.
If you look at what DRYS did - all the way down to $3 and change and now sitting around $13+ a month later, I think that's very possible for TCK...
I don't know about seeing anywhere close to $36 again - that'd really be reaching... but who knows.
Re: Out of TZA
Great move! I was traveling on Friday that prevented me from selling TNA and buying TZA. The good news is my TNA rebounded. The TBT trade rocks! My take is that this equity/energy bear rally will not die until bonds and yen revert back to mean.
Re: Volunterers
I'd be interested, but I usually miss the first hour of the trading day (I'm in Europe and get home at around 11 AM EST). Would like to know more about what each member's responsibilities are. If I can contribute in some other capacity (research, whatever) I'd be willing to participate.
Just a thought
When gun-shy banks refuse to lend, even to consumers with good credit ratings, those consumers are turning to smaller financial companies for loans, despite having to pay higher interest rates.
BGZ
doubled down on BGZ at 52.60.
Re: TCK / Coal Stocks
RIO is another Cara100 issue that's behaved nicely lately and still has an attractive multiple.
Re: Volunterers
Shark,
Maybe it can be automated? Also, we could set up a database for comments, algo's, etc. Let me know what you have in mind. Maybe I can help?
Re: re gold/gold stocks
"as the oil market seems to have bottomed".
Looking at the 8 hr chart, I think oil will see some resistance at $48 level. I'm thinking oil will go down and test $42 again before any more upshot.
Whether it breaks below $42 level I'm not sure. Everyone seems a bit too bullish on this rebound IMO.
I will open a 1/3 position in USO at $42 oil
Re: re gold/gold stocks
Thinking of entering again in a few 2011, Jan Calls for GG/ GDX/ ABX.....possibly waiting to see where their support is....I'm still very unfamiliar with the junior miners....
RE: WHAT I LEARNED IN 2008...
1. I am very ignorant of how financial markets work, but after 3 mo's here at this site, less so...an educated fool is still a fool!....
2. I am very ignorant of myself as a trader (you know, those dishonest ways we think about ourselves that keep us in bad trades and cause us to exit way too early in the good ones), but less so, as I participate in this site...a self aware fool is on becoming less a fool?
discipline, self-honesty and more realistic objectives are a few of what I'd like to see improve this year. My thanks to you all...
currently up on TBT stock, and USO leaps....no other positions
Re: Just a thought
tango -
Yes. They're called community banks; however, one client is maxed at $20 million at these baby banks unless a clever loan officer orchestrates a participation loan and banks aren't participatin'. Period. So peanut commercial loans are the only kind possible at the moment.
Cheers.
Re: Volunterers
I would like to participate....please keep me posted
Re: Volunterers
Bill,
Korvus alluded to the possibility of this process being automated if he has minute by minute raw data. Since the objective of this process is speed, I feel like it has to be automated (at least to some extent).
Personally I would use the ACD method as one datapoint. I would like to confirm the signals with RSI/MACD. More the evidence , better it is.
Re: RML, GRZ, KRY
The interesting thing here is that only Gold Reserves has the resources to mine in Venezuela with a small share float that could be diluted without an uproar. Rusoro will most likely be gone early this year without the Russians giving them a cash infusion. But who would do that knowing this companies tract record of "absorbing" cash? KRY has the equipment but not enough cash to startup a mine. They just want the permit so that they can "payoff" everyone including the shareholders and then try to sell the business to whomever. It makes one wonder who is really going to mine this countries Gold?
Summary of Dennis Gartman's picks
Dennis is long: COP; DE; GE; NSC; X; GLD; ICE and FSLR
Also long China stocks, bank stocks and infrastructure stocks. Has indicated he is long gold 'again'he changes his posture on gold like most of us change our underwear, not a reliable gold indicator. BTW he uses indexes to buy the China and Bank positions. Short the broader markets.
Just a note but having had a fair bit of fun in US Steel in the past it is an interesting mix. Note FSLR is a recent pick by Bill.
SYMX
really looking closely at this stock. it has $110 MM in cash and is worth $40 Million.
Misc info.......
John Myrphy [StockCharts Jan 3rd]
"AS JANUARY GOES, SO GOES THE MARKET ... What the market does over the next week is important...... what the market does during the first week of the new year often gives a clue about direction for the remainder of the year. According to the Stock Traders Almanac, "S&P gains during January's first five trading days preceded full-year gains 86% of the time". The predictive ability of the month of January is nearly as impressive. "The January Barometer predicts the year's course with a .741 batting average. 12 of the last 14 post-election years followed January's direction" (Almanac). The market dropped during the first week and month of 2008 and correctly warned of a bad year ahead. The market good off to a good January 2009 start on Friday. It's important, however, that the market build on those gains next week."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Elliot Wave Followers:
"... we are in a multi-week rally leg within a primary Bear Market, a wonderful chance to raise cash, Supercycle degree wave (B) up. It could last several months from its start in November 2008. This primary Bear market should see three major waves. The first and third are down legs. The second is a correcting rally phase. The first Bear phase started in October 2007 and lasted just over a year through November 2008. It was characterized by a dangerous assault on the credit system, with financial stocks leading the plunge. Supercycle degree wave (C ) down, which could start in 2009 and last a year or longer."
Phi Mate Turn Date Groupies:
"Shorter-term, we had a phi mate turn date Tuesday December 23rd, and on Monday, December 29th. We saw a closing bottom in the Industrials on December 23rd at 8,419.49, and a minor bottom three trading days later on the 29th. It appears that both of these phi mate turn dates were pointing to the same turn, and that the precise turn started on the 23rd, with it representing the end of wave (B), a sideways correction of the rally that started on our phi mate turn date of November 20th. The December 23rd turn date has launched wave (C ) up. Tuesday December 30th was a 90 percent up day, which adds to the evidence that wave (C ) up has started. Our next phi mate turn date is not until February 18th, 2009, so this wave (C ) leg could have a nice future. We see a Bullish Head & Shoulders pattern that has an upside target of 10,500ish in the Industrials, and 1,050 in the S&P 500. Almost all of our short-term and intermediate-term indicators are on buy signals. However, the two long-term indicators, the Dow Theory and our Primary Trend Indicator are both on sell signals, suggesting we are rallying correctively inside a major Bear market."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
For those who slept through 2008:
Uncle Jay will sing it to you...
http://unclejayexplains.com/2008/12/21/uncle-jay-e...
Re: Volunteers
Actually the main issue with signal automation is the agreements under which the exchanges distribute their real-time data.
All "cheap" data feed options explicitly prohibit sharing the data itself or derivative works of the data, especially in real-time.
Even when there is a data redistribution agreement (say, StockCharts' realtime option), each and every data recipient who somehow receives the real-time information must identify themselves, declare whether they are professionals or not, sign (electronically) an exchange agreement and pay a small monthly fee to the exchange.
So it's a question of cost and for all practical purposes this can only be a part of a paid-for service.
I know that certain ECNs (BATS, i.e. the source for Yahoo! realtime quotes) freely publish their book in realtime; this may represent a way around the restriction mentioned above but In this case the price would be the ECN and not the exchange price (should be essentially the same during normal market conditions and normal market sessions).
Re: Out of TZA
I was anticipating a TA buy signal that never materialized, so took small gains. TNA still giving a buy...
CTAB SLW report
releasing tomorrow?
thx
Tomorrow evening I hope. But
Tomorrow evening I hope. But if not then, it should be on Wed.
Re: SYMX
SYMX changed from strong buy yesterday to buy today, from TA perspective.
patiently watching DRYS and SU
but there are a lot of setups right now. almost too many. Check out SOL. glad that made a comeback.
hoping another buying opp will come soon.
disclosure: holding slw at $2.86 usd cost basis and wondering if i got too greedy by holding. The daily are showing overbought. Weekly showing still some room to run.
GG
GG moved from sell to strong sell today.
SLW TA
Moved down to sell today from hold yesterday.
DZZ TA
Strong buy
DRYS/SU TA
DRYS - Moved from strong buy yesterday to buy today.
SU - Remains in buy status, same as yesterday.
MDR
Sold at $12.03 that I bought at $9.52 a few weeks ago. Looking to raise some cash for SYMX, which is currently trading at 0.30 times it's net cash.
Re: SYMX
I like the cash levels too much. Plus, it is an alt-energy company that should get some notice under Obama.
Working assumptions and game plan
In his December 31, 2008 webcast, Don Coxe pointed out that major forward-looking indicators of market fundamentals have improved significantly in the past few weeks. The TED spread, the VIX index and $USD have all came down significantly. The investment-grade corporate bond index (LQD) rose from 81.70 on October 10 to 100.61 last Friday, and so the argument that no smart investor would invest money into stocks when investment-grade corporate bonds have such high yields no longer applies (the bond yields fall as the bond prices rise). I am not sure if TLT is an important indicator, but it seems to me that its drop last week indicates that investors are becoming more willing to move cash from the safety of bonds to the risky assets, changing the trend established in mid-November. The Canadian Venture board (CDNX) also had a great week, rising above the highest point between the recent triple bottom, and Bill mentioned a while ago that CDNX can be used as an indicator of the investors’ willingness to accept risk. All in all, this seems to indicate that we will have a rally that lasts at least a couple of months, which will be my first “working assumption.”
While John Mauldin (in his January 2 letter) also feels that we are likely to have a rally lasting until the Spring, he is still concerned about the high probability of earnings disappointments during 1Q09 and 2Q09 reports. If that happens, he thinks we can easily test the November lows on S&P 500 and possibly establish new lows. Since it is better to be safe than sorry, I’ll make this my second “working assumption.”
Based on the above two assumptions, my game plan will be to buy on the pullbacks until the end of February the stocks of which I am most confident and whose share in my portfolio I want to increase (which are WGW and UCO), to sell into strength some part of my portfolio in March, and to start buying again after a 10% drop in the S&P 500, whenever it occurs. I think the chance of at least a 10% drop occurring in March-April is very high, because either 1Q09 earnings do indeed present a major disappointment, in which case the market is very likely to drop a lot, or 1Q09 earnings come out “better than horrible”, which will seem good on the surface but the smart money will most likely buy the rumor and sell the news to the public, taking the market lower right after the earnings. The 10% drop can even occur in March, before the 1Q09 earnings season, because by then almost everyone should be onboard of this rally, and so very few buyers will remain. When buying after the 10% drop, I’ll space out my purchases and scale the new position sizes so that I will use up all my cash by the time stocks reach their “bargain” territory.
I would welcome any comments on my working assumptions and my game plan.
Re: patiently watching DRYS and SU
i have yet to lose money taking profits....but i'm not a good "timer" yet...
bought more WGW
This morning, a buy limit order that I was keeping open since last week was finally triggered for WGW at $1.48, "reloading" the 2000 shares I sold at $1.68 last week. As I wrote here in August, my plan is to buy 2000 shares of WGW mindlessly for each $0.20 drop, and then sell after a $0.20 rise, until WGW hits $2 (at which point WGW will not be SO undervalued). That is, I am "scaling in" at $0.2 increments as the price falls and "scaling out" at $0.2 increments as the price rises. So far, this strategy has been working great, and the collapse of WGW from $1.5 (which is where I started buying it in August) to $0.5 in October and its rise back to $1.5 now has been very rewarding.
At the same time, a sell stop limit order was triggered for 500 shares of SWC at $5.34 (I still have 2000 shares left), consistent with my intent to keep selling SWC on strength and moving the money into safer plays with a bigger upside (such as WGW and UCO).
3x ETFs
What's the deal with the bear funds being down, and bull funds being up when the market is down? What am I missing here?
Censoring Ron Paul
All three financial entertainment stations cut away the minute Ron Paul starts to speak.
We need to get the transcripts of what he says today. If it weren't so obvious...they really fear what he has to say.
coal stocks
The recent correlation between the price of oil and the coal stocks has been very apparent. Coal stocks have been on a tear since USO bottomed out and started to rise. I am glad I loaded on ACI (at an average cost of $15.75) before it started to take off. :) It pays to remember John Hussman’s words [quoting from memory]: “Historically, the strategy of buying gradually on weakness had
outperformed significantly the strategy of waiting to start buying until the favorable price action is observed.”
TBT
Massive volume today and controlled two-day climb. Thanks Bill. Stopped out of GG and SLW this morn.
"Steve Jobs has hormone imbalance, will remain CEO"
http://tinyurl.com/8t9tzj
"Apple Inc. founder and Chief Executive Steve Jobs, a survivor of pancreatic cancer, said Monday that a treatable hormone imbalance is to blame for the weight loss that has prompted worries about his health.
"Jobs, 53, said in a public letter that his thinness had been a mystery even to him and his doctors until a few weeks ago, when "sophisticated blood tests" confirmed that he has "a hormone imbalance that has been `robbing' me of the proteins my body needs to be healthy."
Jobs said he will undergo a "relatively simple" treatment and will remain in charge of Apple."
Please provide RSI App link.
I am getting following message when i click on RSI APP link.
Thanks
==============
This page will show the calculated RSI values for the ticker symbols listed in the text box below. The "Set to Cara100" button will replace the contents of that box with the Cara Global 100, for those who wish to track the RSI values of that index. The "Clear"
Re: Please provide RSI App link.
I assume you are seeing the input box and the button to the right which says set to Cara 100, just hit that button, Cara100 stocks are loaded into the box, then hit the "go" button. The table will then be generated, you can also clear the box and input your own set of stock symbols, just use the Yahoo symbol method.
working assumptions and game plan
David, are your two working assumptions compatible? IE, we will have a rally that lasts a few months but in the same period we might test the november 08 lows (2,000 points below where we are now).
I believe Bill Cara says he's inclined to sell rallies and buy dips for the time being, although that strategy could change on a dime. (hope I have that right - please correct me if I am wrong).
Although I'm an atheist, the Sermon on the Mount pretty well covers my comment: "Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof."
:-o)
Commodity Index Rebalancing & Possible Effects on Gold, TCK, etc
http://tinyurl.com/7jywz3
Jesse's post at "Jesse's Cafe Americain," linked above, may explain some of the recent basic material, precious metal, oil, etc. activity.
Re: Working assumptions and game plan
David - I like your assumptions a lot, although I'm playing a very short term (i.e., this week thru friday) 3x bear (BGZ) since the close of Friday.
ron paul
Craig, if you (or anybody else) finds a transcript of what Ron Paul had to say, I would be most interesting in reading it. Thanks in advance.
Re: Bob Hoye Comments On The Effects Of Conflict On Gold Prices
There was a small demonstration of the effect of conflict on gold prices, that we would see a decline in the aftermath, which is the reverse of the accepted wisdom that conflict will shoot gold price through the roof:
http://www.321gold.com/editorials/hoye/hoye123108.pdf
Re: TBT
ditto on TBT,
thank you Bill....
Question.. will a pull back in TBT simply be a response to the buying of treasuries??...or possibly a slow down of the selling? someone enlighten my thinking please...
Re: Please provide RSI App link.
Thanks for the response. It was my browser that is causing it, recent update of firefox. After closing the browser was able to access RSI APP. Good tool.
TSO
From Bill's WIR: "Watch the Daily RSI 7’s on the Cara 100 stocks. Don’t let the unrealized gains go to your head."
TSO Have held it for awhile building position. Seven out of eight days up, daily RSI7 with an 80 handle.
Taking profits, out of TSO a few minutes before the close @ 14.36.
BAC TA
BAC Changed from buy to neutral.
Community's thoughts on commercial REIT's ?
http://www.iht.com/articles/2009/01/04/business/re...
Hopefully this will start a discussion on possible trading opportunities down the road.
covered some short put options
Given the huge rally in TCK today, I decided to buy back at $0.10 the January 2009 $5 puts on TCK that I sold two weeks ago at $1.05. I also tried to buy back at $0.85 the January 2009 $35 puts on ERX that I sold at $3.80 a few days ago, but the limit order I placed was not executed because of the low volume and a wide bid-ask spread in the ERX options. I am almost certain that both of my ERX and TCK puts will expire worthless, but I have only a limited amount of money to be used for "backing" all the put options I sell, and so instead of waiting for two weeks and receiving only a small benefit between now and then (these options are so cheap already that they have very little to fall in absolute terms), I would rather buy back the cheap options and sell now the more expensive higher strike February ERX puts, which should have a much bigger time decay in absolute terms if the market keeps going up. Hopefully, I'll be able to do this switch tomorrow.
Re: working assumptions and game plan
tango6, I meant that I am assuming a rally for the next 2-3 months, and THEN a possible decline to the November 20 (which might be reached during the summer). Naturally, if we have a HUGE rally in the next few weeks or a HUGE decline, then I'll adjust my assumptions and game plan.
COMEX will not deliver e-mini sized gold bars
From Jesse's blog: COMEX said to refuse delivery of e-mini sized gold bars, delivering paper (Warehouse Delivery Receipt) instead.
http://tinyurl.com/fractional-gold
So it appears it's only 100 oz. physical or paper.
GM pipe dream.
General Motors Corp 7.375% debentures at $145 per $1000 - so for $145K I can have a million bucks worth paying $73,750 annually, and if GM survives and recovers, sell them off near or as close to par as possible.
Or hold til 2048, I could retire nicely on almost $80K a year...
Re: Community's thoughts on commercial REIT's ?
Comm RE was fine before Sam Zell invented a way to securitize it (REIT) back in the 1980s. It was Wall St jumping into the pocket of dirt - a truly vast hard asset far greater than gold - and turning much of it to muck. Zell saw the runaway train coming in 2007 and sold the largest office portfolio in the country at the height of the bubble. REITs have been overbuilding CRE now for decades using securitized equity with 90% leverage and inflated appraisals.
Since RE is highly illiquid, unlike securities, it will take several more quarters for leases/debt to turnover; REITs will start by cutting dividends and then we watch the redemptions force them into failure. Too unstable (default!) and slow-moving to short, IMO. All REITs and Hedge Fund models set to collapse in 2009-10 ... zero equity, collapsing demand, can't refi even with cash flow. Only solution is a quadruple pike into an infinite twist out the top floor!
Know your history.
Re: Working assumptions and game plan
David,
I think you have articulated what a lot of us are thinking so to me it seems like a good plan. However I do not see any contingencies, eg what to do if the market takes a savage twist down in the next two months. What risk management tactics will you employ on the way up? Hopefully many of us have learnt the value of getting out 'too early' vs 'too late' over the past year so to me a disciplined sell strategy would need to be part of the plan. I'm sure you have one but didn't include it in your discourse. All the best for success in 2009.
Re: Community's thoughts on commercial REIT's ?
Cohen & Steers Qual Inc Realty RQI
Several years ago when I used a full service broker he suggested RQI as a closed end REIT in the high 20's back then. In late October I purchased several thousand back under $3 a share. They have done well the last week up 20% and are paying out once each three months as conditions dictate (new plan for this year). This first distribution is set at .1325 cents for the first quarter. This attracts money that is looking for a fixed income and stocks that might become valuable when property turns around.
MorningStar: http://tinyurl.com/7hkpud
Re: Working assumptions and game plan
seadog, writing about contingency plans is difficult because many different contingencies can arise. For example, an hour after my first post I noticed that TCK had a huge rally today, and so a thought had occurred to me of covering early my short puts on TCK and ERX as a way of taking some profits now. If the market keeps rising, I will be selling some shares that I purchased on the way down at lower prices so as to book some profits. If the market starts falling now, then I'll start buying slowly the stocks I want to have more in my portfolio (WGW and UCO), and my risk management will consist of using small purchase sizes and large spaces (in percentage terms) between purchases, so as to use up all my cash only when S&P 500 hits the November 20 lows. Also, I have just placed another sell stop limit order on 500 shares of SWC (stop at 5.39, limit at 5.35), since it can drop to near 0 if GM or Ford go bankrupt.
I now know that Scottrade (and other firms) abruptly decrease my buying power as stocks in my portfolio go from $6 to $4, and so the maximum margin I can have decreases MUCH faster than expected. I did not take this effect into account in October as I was buying on weakness (I did not expect SLW, ESLR, SWC to go from $10 to under $3), and so I exhausted my margin much faster than expected. This time I already know that I can use only 10% of my current margin (if I want to avoid margin calls), and keeping this in mind is another part of my new risk management policy.
Re: COMEX will not deliver e-mini sized gold bars
Case, if this true, doesn't it eventually result in a short squeeze for the price of gold?
Energy Stocks Get Energetic
TAN/PBW/KOL/XLE
http://tinyurl.com/9lsysp
Putin Cuts Natural Gas Supply Across All Europe
This should heat up energy prices...
Europe has been plunged into an energy crisis after Vladimir Putin ordered Russia's state-run gas company to cut supplies by 20 per cent.
As temperatures dropped below zero across much of Europe, the Russian prime minister instructed the head of Gazprom: "Cut it - starting today."
EU countries are dependent for one quarter of their gas supplies on Russia, of which 80 per cent comes via pipelines that cross the Ukraine.
Some, such as Poland, depend on Gazprom for over three quarters of their gas supply. Britain receives up to 15 per cent of its supply from Russian sources, mainly channelled through French pipelines.
The Czech Republic, Poland, Greece, Romania, Bulgaria, Slovakia, Croatia and Hungary have already reported problems with their supply.
http://tinyurl.com/8vvhxp
help with put selling
Hello everyone,
I'd like to present an idea for a trade here, but I must be missing something because it seems too easy.
Again this time, COP last trade= 55.47
May 09 $55 puts COPQK bid = $6.20
sell 1 contract, earn $620 less commission
scenarios:
1) COP rises, pocket the $620 for a tidy gain above 10%
2) COP falls below $55, COP gets put to you at $48.80, more than 10% below market, you turn around and sell immediately for gain, or hold.
is the only risk that the stock gaps way down below $48.80 in this example?
otherwise, these returns annualized are nothing to shake a stick at.
Am I missing something here? Do any of you follow a put selling strategy ( I know Bill has mentioned it, anyone else have some experience here with this strategy?)
PCU
Any comments on this company (Southern Copper). I have been holding it for a while now. I mainly bought it for its yield (10.72% / US$1.94/shr).
http://ca.us.biz.yahoo.com/ap/090105/southern_copp...
Re: Working assumptions and game plan /contingencies
David- I think the process of putting your thoughts down on paper (as it were) is invaluable in and of itself. Even more so when you post it in the public domain on a blog, as it forces you to organize your points into clear and concise statements. Whether or not the market follows your game plan is irrelevant, as you have a 'handle' on your outlook/interpretaion, and can easily make adjustments. This is a huge advantage over the trader who comes to the market each day with no working assumptions and no game plan-> once those are in place, the contingency plans tend to take care of themselves.
Re: Censoring Ron Paul
http://www.youtube.com/watch?v=Xir5j8SjVlI
It's on youtube
My portofolio makeover
Prior to reading this blog (August 2008) and reading a couple of good books, I was all over the place in my investments. Initially I was hot and over confident (beginner's luck) sustaining 75% gains in 2006, Stupid in 2007 0% gains (following friends tips without research), Shocked in late 2008 (peaked at -45% losses. But luckily I had already started making over my portfolio. I am now at about 25% loss. I am still young (early 30s) so I am still very optimistic and eager.
Here are some of my key holdings: (Any comments or constructive opinions much appreciated)
My present strategy is in holding higher yielding companies (i.e. T,AET-UN.TO, BOM, KMP,VGR, DXS, PCU, ECA) (60%)(most bought mid/late October at lows), trading (i.e. G/SLW/DEE/GO/WFMI) (30%) and cash (10%). I am at a decent average 8% yield plus capital gains. December's dividends brought in enough cash to make another trade. But today, I enrolled in a dividend re-investment plan for all of them. I know I should be more in cash but you know how it is....
I read the "Single Best Investment" by Lowell Miller. It was a great and easy book to read.
I am also reading the Trading Wizard... though it is taking me longer to read.
Re: My portofolio makeover
Northern Otoko- That still puts you up 32% over 3 years, which is about 10% a year compounded...not bad, really...
Nikkei breaches 9100
haven't seen these levels in two months..
Re: My portofolio makeover
Thanks for the comment. But if you consider my portfolio is now more than 4 times bigger than what it was initially. My loss is now bigger than my initial portfolio. I pumped a lot of money into my retirement and non registered accounts over the past 3 years.
But like I said I am stronger for it. No pain no gain!!!
Re: re gold/gold stocks
As I enter the 2009 investing environment I remind myself of the 4 stages of learning:
Unconsciously Incompetent
Consciously Incompetent
Consciously Competent
Unconsciously Competent
Now if I could only get out of the second stage.
Re: help with put selling
Eric, I think you have accurately described the scenarios that can happen if you sell COP puts. As long as you put aside the required $5500 and do not use it for any trades until the options expire, you should be fine. The risk is that COP can go down to $40, and you will be WAY underwater. However, the chance of that happening is minimal in the current environment, IMO. The other "risk" is that of not participating in a huge rally that we may have in the energy sector (if such a rally takes place, you can make much higher percentage returns by buying stock shares instead of selling puts). Overall, you should choose the type of trade for which the risk/reward profile matches your degree of desired risk taking. As some other possibilities, rather than using a low-risk/low-return strategy of selling COP puts or the high-risk/high-return strategy of buying COP shares, you can sell puts on a more volatile stock or buy shares of a less volatile stock. For example, as opposed to making 11% in 4.5 months by selling at-the-money COP puts, you can make 15% in 1.5 months by selling out-of-the money ERX February puts (with a strike of $45). Personally, I am planning to do the latter.
Re: help with put selling
Eric,
Scenario 2 is not quite correct. If COP is at or below 55 on expiry, you'll get assigned at $55 per share. Therefore, $48.80 is really your break-even. Your worst case scenario is that COP is below $48.80 at expiry.
Since this is a MAY contract, don't forget the lost opportunity costs of tying up the margin for this trade.
Re: re gold/gold stocks
kar- LOL...there are drunk drivers who could be described as consciously incompetent, and those who are (almost) unconsciously competent...
Re: My portofolio makeover
I like your portfolio. The trading account needs specific sell guidelines. The dividend stocks is a good strategy in this environment. Hey 10% a year. You could of invested with Maloff and got that return.
Bob
Re: Nikkei breaches 9100
2nd
Order did not fill for slwac at 1.80 (40 contracts) still it is open
Plan to write call on TBT/FSA/TNA tomorrow if we go up or I am closed to stopping out
Will buy GG if it drops under 27
Will put order to but TAN, no other plan
Re: re gold/gold stocks
Think I'll go pour me a tall one. Maybe if I drink enough I can reach stage 4. LOL
Re: COMEX will not deliver e-mini sized gold bars
ALOHA !!
WOW ... I am indeed shocked! HA!!
What's next no GLD gold?
Re: My portofolio makeover
with Maddoff you won't get the principle, only 10% profit, until he run out of money :(
Re: Volunterers
Shark,
I'm new to the community and I would greatly appreciate the opportunity to volunteer my time to your project, it would be my token of appreciation towards the members of this community.
Regards
WI
Re: Nikkei breaches 9100
vinod- looking forward to the CTAB report on SLW...eyeing calls on GG also...glad to see TBT moving up on above-average (as well as successive increases in) volume-> at some point, what do they say in Boston-> gone baby gone..
Re: help with put selling
Margin is actually quite low for put selling so if enough are sold it may actually have a better return than owning the stocks outright even if the stocks take off IMO. Margin is 50% on stocks and ~10-20% on put selling depending on how far out of the money they are.
This method is my preferred way of trading. If you like you can stop by my blog where I post all my trades and thoughts, etc. We are very supportive of this site there. http://optionpremiumcollector.blogspot.com/
I would also direct you to http://10qdetective.blogspot.com/ where the author discusses how COP is losing billions in the LUKOIL deal. It's the 2nd article on the page and it caused me to take pause.
I agree with David that ERX is worth a look. The option premiums are great from the seller's standpoint. XLE and OIH are also great ETF's to trade IMO. XLE is cool because it has strike dates more often than just once a month. Good luck to you.
gas supplies to europe
as per the prior reports about %20 of gas supplies are cut by a company that supplies about %25 of western europes gas.
thats a reduction of about a %4 reduction in gas supplies, easily made up from other areas and other fuel sources. most of western europe's largest population centres are located in temperate regions and do not suffer the kinds of winters that ukraine, and scandanavia do. their supplies are more heavily affected by this russian cut, but it is difficult to understand why ukrain which suffered almost 100 million of its own citizens killed by russia in the last 125 years would rely so heavily on an unfriendly neighbour for energy supplies after prior winter time interuptions. while no easy task to import energy from other places it is a failure of the ukraine's current government to fail to secure adequate emergency supplies.
Ukraine's failure to build any reasonable oil reserve w/ proper placement in the event of energy shortages only exacerbates the problem. many will likley die in the cold as they did several winters ago if the situation is not dealt with swiftly.
Re: Putin Cuts Natural Gas Supply Across All Europe
Might this increase demand for LNG? GLNG or TGP?
Re: help with put selling
While I agree with blue buff that much larger percentage returns can be obtained by selling more puts than can be guaranteed by free cash, I should also say that this strategy requires one to place a stop loss order for each trade. Otherwise, if the underlying stock declines and the shares are put to you, then a disaster will occur if there is not enough cash to buy the puts. I prefer to fully back my puts with cash and not worry about stop loss orders. With ERX, one can get a 200% annualized returns by selling at-the-money month-long puts that are fully backed by cash -- why engage in a more risky trade that can potentially cause a disaster?
Re: Volunterers
Great. We are all working toward our goal in bits at this point. Tomorrow I will again try to find object lessons from the real world with which to demonstrate the power of this technique, which didn't work too well with DRYS today but has worked fabulously in the past. Jeff and other tech minded people will determine the extent of automation that's possible/desirable.
You don't owe this community, to which you are new, anything. The reason to do this isn't for the community but for yourself, as our enlightened self interest will hopefully allow our combination to earn profits and avoid losses. Take care of yourself and the community will be that much the stronger.
Once you guys feel you understand what we're looking for (email me for an explanation) we can divide up the Cara 100 stocks and begin.
Re: PCU
I wouldn't pay much attention to CITI (ignore), but can they keep paying that div?
Re: Community's thoughts on commercial REIT's ?
Commercial isn't looking too good from what I've been hearing. Are you thinking maybe the damage is already priced in?
Portfolio Rebuilding
This seems to be a common theme in many of the posts recently - how to reenter the game and manage the risks. Of course, this coincides with the improving markets lately. I have a confession to make: I'm mostly a closet investor, not a trader. That's by necessity because I have a job which prevents me from babysitting my holdings 24/7. Nevertheless, one of the things that I have learned here is that the categorizations - trader and investor - are not entirely incompatible. If you pay attention to Bill's Daily and Weekly Reviews, you will notice that he is focused on many time frames simultaneously. I think it was disheartening to many of us to come to appreciate that much of the action, over the last year, made this mostly a "day trader's market".
As some of us "investors" struggle to redeploy back into the markets, it might be worthwhile to try and understand why that was so, and what it means going forward. The crux of the problem, as I now have come to understand it, is that the period of highest risk - for an investment in equities - is always at the moment when you first enter. The risk diminishes as your holding time increases (assuming you are not overly exposed to one company, or one sector, or for that matter to one asset). This is a generally understood truism that anyone who examines a long-term multi-year chart of any market index knows. The main source of that initial high risk in equities is the chance of a massive, debilitating, correction downwards shortly after you enter. We've all understood the idea that if your investment loses 50% it requires a 200% increase to recover - that's a number that most markets are incapable of achieving in short order. So, it will be a loooong time before an investor in that boat will be able to recover those losses, let alone achieve some positive return.
You might be thinking now, but the long-term investor has been similarly hit and damaged. Well, yes and no, I think. The problem with the way most people think of long-term investors is that they buy-and-hold, come hell or high-water. And this is another thing I have come to learn here: no matter what your "investing" time-frame, the good ones D'ONT. As I understand it now, proper money-management involves buying quality at a time of apparent undervaluation, babysitting the danger of early catastrophe (via options, hedges, position size, stops, etc.) and then skimming-off the profits if and when the position moves to a situation of overvalue. Rinse, Lather, and repeat - basically no matter what the asset class. Framing this idea for the long-term investor, if one does this, there comes a point where it doesn't even matter if the whole remaining principal position is lost (not likely, anyway) because the initial investment has achieved it's goal - providing superior REALIZED capital gains and perhaps dividends to boot.
One further comment about that initially high but diminishing risk in equity positions: that risk is - obviously - greatly reduced after a long and deep bear-market, like we have experienced. That's why some of us unsophisticated investors are so edgy now - I think we unconsciously realize that if ever there was a time to buy equities (and lots of other stuff), it was within the last few months. Wait for a year, two, or three, and the risks will be significantly higher as we move closer to the top of the next market cycle. At that time the only good bargains will be found in out-of-favor FI assets. Top that off with another thing I have learned here - holding cash also has its risks but, in contrast to equities, that risk is initially lowest and unceasingly increases as time goes on. We all know the reason for that risk - Inflation!
re: put selling
Thanks Blue Bluff and David for your responses, i'm going to look at the site and also ERX and hopefully you guys are around to answer some more inquiries i'll have as i learn more about this strategy. cheers!
Re: re gold/gold stocks
http://stockcharts.com/scripts/php/candleglance.php?abx,gg,nem,au,aem,kgc,gfi,auy,$usd,$gold|B|I8,3
http://stockcharts.com/h-sc/uiB|I8,3
Hope this helps Doc
Re: Community's thoughts on commercial REIT's ?
here is an article from this weekend's New York Times regarding the commercial real estate market http://www.nytimes.com/2009/01/05/business/05real....
WI
Re: Portfolio Rebuilding
You made a comment near the end of your post I heartily agree with.
What seems more risky often isn't, and what seems "safer" often isn't as well. It's the way humans miscalculate risk.
Re: COMEX will not deliver e-mini sized gold bars
So in order to smack POG, all that needs to be done is stop COMEX delivery? They must be running out of tools since Paulson's TARP is no longer sailing?
Madoff Still Hustling
Does this guy disrespect authority or what...
Bernard Madoff, awaiting trial for securities fraud, remained free on bail while a federal judge considered a request by prosecutors to send him to prison for mailing $1 million of valuables in violation of an asset freeze.
Madoff disposed of five items including “very valuable jewelry,” Assistant U.S. Attorney Marc Litt said today in Manhattan federal court. The government has three of the items, Litt told U.S. Magistrate Judge Ronald Ellis. Defense lawyer Ira Sorkin said the objects, including watches and cuff links, were heirlooms innocently sent to Madoff’s relatives. Sorkin said he told his client to retrieve them and alerted the government.
http://tinyurl.com/8rneeq
bay area fund manager commits suicide
http://tinyurl.com/7n4nf8
in his case, it appears the crash was a contributing factor, rather than the direct cause...either way, this market has taken its toll...
Buy a Hyundai then lose your job, just return car - program. wow
http://tinyurl.com/7c9z2w
01-05-2009
FOUNTAIN VALLEY, California — Hyundai Motor America has introduced what it calls an "unprecedented program" designed to take the uncertainty out of buying or leasing one of its vehicles during these rocky economic times. The program allows a consumer to return the vehicle if they suffer an "involuntary loss of income within 12 months of the purchase date."
Re: A Beellion Dollars Of Gold For Less Than A Meellion Dollars
Posted this by accident to Friday's chat a minute ago, but should be here:
Here's a mining story of interest to armchair gold miners of the 16 to 1 gold mine, a video with its long time CEO, and some history of the mine, its geology and prospects. I had been reading the book: "A Hole In The Ground With A Liar Up At The Top" and this mine story will bring mining history from way in the past to the present time. This mine has had a life of over 100 years.
The Geology Of The 16 to 1 Mine:
http://www.origsix.com/tmarticle.asp?id=123
Video
http://video.google.com/videoplay?docid=-351122229...
Now trading @ 7¢ on the pink sheets, OSTO.PK
"Incorporated under the laws of the State of California, October 6, 1911. Capital Authorized: 30,000,000 non-assessable shares of common stock. Shares outstanding as of March 30, 2008: 12,905,505."
~$1m. gets the entire float for you.
ref:
http://www.origsix.com/potential.asp
How to buy stock in the company:
http://www.origsix.com/stockinfo.asp
Re: COMEX will not deliver e-mini sized gold bars
>Case, if this true, doesn't it eventually result in a short squeeze for the price of gold?
I agree, but with all the machinations and rule-changing one can easily be burnt by making assumptions of whether it's going up or down based on such 'shortage' info. If this 'trick' is used full-scale, COMEX can in theory 'paperize' the full gold quantity supposedly backing the e-mini contracts. I wouldn't bet on what 'regulations' and 'clauses' can be still in the cards.
Plus, the story is anecdotal (source is not disclosed), but Jesse appears to be a very reliable and extremely well-thought-out source IMO.
Cara 100 Ratings Changes
Good morning.
GOOG - Upgraded to Neutral @ Merriman Curhan Ford
NUE - Downgraded to Neutral @ UBS
Re: Censoring Ron Paul
multitnx Milesquare
looks like equities short term overbought
Looks like topping point for short term. I love premarket, sold TNA for 37.7 and bought TZA at 43.3. Covered TLT at 112.2. But holding to TBT as perheps room to go up.
Oil Juniors
Based on the historical extreme we reached on the Gold/Oil ratio last week, I have been rotating my speculative interest from junior miners and into junior oil producers over the last few days. Part of my reasoning is that miners have benefitted from the continued plummet of oil prices but that may no longer be the case(since fuel is large expense for miners, margins were expanding rapidly). So I raised cash from selling some miners that were up nicely and rotated into junior oil stocks. I am still long term bullish (but short term bearish) on miners.
Friday and today I opened positions in NuVista(NVA.TO), HighPine(HPX.TO), AED Oil (AED.AX), ROC Oil (ROC.AX),Compton Petroleum (CMT.TO). Compton I bought based on RSI buy trigger alert.
The action I am seeing across the board in oil juniors over the last 3-4 days is reminiscent of the action in junior gold producer stocks about 1-1.5 months ago.
AA Alcoa
Alcoa Aluminum set to lay off 30k, cut capital spending 50%
http://finance.yahoo.com/news/Alcoa-to-cut-13-pct-...
High Techonolgy Metals--rare earths
An interesting article from Mineweb on rareearths--production of these is being shut down due to economy and due to many of them being byproducts of base metals. Tantalum, for instance, is used to make tiny motors such as for disk drives. The leading producer in Australia, Talisan, has just shut down its operations. Can we live without tantalum?
http://tinyurl.com/98rbj6