A short blog here.
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i've been doing some more reading and sentiment sampling on HIG over at yahoo boards. man, those folks really hate shorters! but that doesn't bother me and, btw, i am still holding HIG puts... from my examination over several hours (i don't usually hang out on yahoo), it seems that, besides the conspiracy theories i mentioned in the previous blog, folks in particular just don't understand why HIG tanked so hard this past week.
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so let me explain- my version anyway. for HIG, it's all about retail. their overweight investment in commercial mortgage backed securities, whether directly as cmbs or as cds (credit default swaps), makes them HIGhly sensitive to retail sector weakness because so much of their paper is tied to whether or not retailers will or will not default. (hope you liked my little play on words- "HIGhly").
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so, very simply, what happened was, when the December retail sales numbers came out, the big institutional traders saw catastrophe on the horizon and began shedding HIG shares at warp speed... since then, of course, cooler heads have prevailed, but only for the time being and probably only under considerable duress from those who fear a HIG meltdown could take down the whole market. i'm speculating about the "duress" thing, but it seems likely to me that the so-called "plunge protection team" (PPT) must have collared a couple big institutional players and promised to backstop them if they played along. and so they did. for now.
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up next, this thursday 1/22/09, is the housing starts report for December. actually, that's not expected to be too bad. but if worse than expected, HIG will take another hit because this implies that people still aren't buying new houses, and they aren't buying new houses because they haven't got any money, and if they still haven't got any money they'll spend even less in the retail sector this month than last, and, well... connect the dots.
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adding fat to this fire is the Circuit City (CC) debacle, with them announcing friday just five minutes after the closing bell that they're totally closing up shop and will be liquidating about $1.8 billion in inventory over the next few months.
http://biz.yahoo.com/ap/090116/circuit_city_bankruptcy.html
adding yet more fat to this fire was this week's BK announcements from Goody's and Gottschalk's. in each of these cases, there are two very serious consequences for CMBS and CDS holders.
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first, it means these chains will by definition default on their leases, and in turn the property owners will increasingly default on their mortgage notes, triggering massive demands against the CDS holders, and greatly reducing (or largely even eliminating) cash flow for CMBS holders. second- and to look at Best Buy's (BBY) 8.11% gain friday you might doubt this-- it will mean heavy liquidity pressure on competing stores. why? because as places like CC, Goody's, and Gottschalk's begin unloading existing inventory at fire-sale prices, their former competitors will have to cut prices too or suffer a long sales drought. so competitors' earnings will go down. BBY's friday gain was just an emotional reaction to CC going under. the market will soon wake up. and, as competitors' liquidity dries up, they will begin to be late on their lease payments, and some will out and out default, and that kind of stuff hits HIG hard again.
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so i'm hanging onto my HIG puts, and when they expire, i'll get more. actually, though, this coming week kinda scares me because i think the market makers have set up a massive fakeout on HIG, running it up to kill the shorts and puts before dropping it like a rock the following week.
Saturday, January 17, 2009
Friday, January 16, 2009
The Hartford: The Truth About HIG
i don't want to make the people who've lately lost money in HIG feel bad. in fact, i'm hoping this will make them feel better by understanding what's really happening with HIG.
.....
tonight i was on yahoo message boards and that's what's sparked this latest blog. i saw people screaming and complaining about daytraders and shorters and how they're killing HIG. like it was all some dark conspiracy... gimme a break! you can't down a company this size with some lightweight pinksheet-style attack. yes, once blood is in the water, the sharks do come out-- but first, blood has to be in the water!
.....
so here's the deal. HIG was not brought down by a conspiracy of daytraders and shorters. HIG was not brought down by lifting the one-tick rule. HIG was brought down by some very bad bets its management made. they not only insured against a ton of defaults on commercial mortgages, but they did this with terrific leverage, which on one hand meant it could make a lot more profit with a lot less cash reserve, but on the other hand meant that if those bets went wrong, it could wipe HIG out in a hurry. and now, those bets have gone very, very bad indeed. an example is helpful....
.....
once upon a time, there was a savvy entrepreneur named janie. janie noticed that stores and factories near her sometimes couldn't make the payments on their lands and buildings, and sometimes they even went out of business. she learned that this is called a "credit default". janie began to wonder how the banks could stand it! it didn't happen that often and this gave janie an idea.
.....
so she went to a couple banks and said, "i will insure you against these defaults and you just pay me a premium for doing so." and the banks agreed. and janie started making money because she had calculated carefully how often defaults happen. her business grew and grew. but not fast enough for janie! janie noticed that there was soooo much market and she had soooo little cash to back her bets.
.....
so janie went to the state and feds and said, "hey, you can see my risk is very low in this business and these people really need the insurance, so how about you allow me to sell 'way more insurance than i've got cash to cover?" and the state and feds said, "okay." and thus began the leveraging. pretty soon, janie was making money hand over fist, and she went back and got permission for more and more leveraging. and she prospered mightily and even issued stock and bonds.
.....
then one day, people stopped shopping so much, and the malls and stores and factories began to default pretty fast. at last, one morning, janie woke up and found all these bankers and bondholders at her door with their hands out. "alas!" she cried, "i'm almost out of money--- i'm down to my last $500 million in reserves!" and right about this time the Big People who knew her company's condition began selling off janie's stock. and then there was great blood in the water, and pretty soon the sharks came along and made matters even worse.... and that's the basic story of HIG. not dark and conspiratorial, just plain bad judgement.
....
disclosure: yep, i'm deep into HIG puts.
.....
tonight i was on yahoo message boards and that's what's sparked this latest blog. i saw people screaming and complaining about daytraders and shorters and how they're killing HIG. like it was all some dark conspiracy... gimme a break! you can't down a company this size with some lightweight pinksheet-style attack. yes, once blood is in the water, the sharks do come out-- but first, blood has to be in the water!
.....
so here's the deal. HIG was not brought down by a conspiracy of daytraders and shorters. HIG was not brought down by lifting the one-tick rule. HIG was brought down by some very bad bets its management made. they not only insured against a ton of defaults on commercial mortgages, but they did this with terrific leverage, which on one hand meant it could make a lot more profit with a lot less cash reserve, but on the other hand meant that if those bets went wrong, it could wipe HIG out in a hurry. and now, those bets have gone very, very bad indeed. an example is helpful....
.....
once upon a time, there was a savvy entrepreneur named janie. janie noticed that stores and factories near her sometimes couldn't make the payments on their lands and buildings, and sometimes they even went out of business. she learned that this is called a "credit default". janie began to wonder how the banks could stand it! it didn't happen that often and this gave janie an idea.
.....
so she went to a couple banks and said, "i will insure you against these defaults and you just pay me a premium for doing so." and the banks agreed. and janie started making money because she had calculated carefully how often defaults happen. her business grew and grew. but not fast enough for janie! janie noticed that there was soooo much market and she had soooo little cash to back her bets.
.....
so janie went to the state and feds and said, "hey, you can see my risk is very low in this business and these people really need the insurance, so how about you allow me to sell 'way more insurance than i've got cash to cover?" and the state and feds said, "okay." and thus began the leveraging. pretty soon, janie was making money hand over fist, and she went back and got permission for more and more leveraging. and she prospered mightily and even issued stock and bonds.
.....
then one day, people stopped shopping so much, and the malls and stores and factories began to default pretty fast. at last, one morning, janie woke up and found all these bankers and bondholders at her door with their hands out. "alas!" she cried, "i'm almost out of money--- i'm down to my last $500 million in reserves!" and right about this time the Big People who knew her company's condition began selling off janie's stock. and then there was great blood in the water, and pretty soon the sharks came along and made matters even worse.... and that's the basic story of HIG. not dark and conspiratorial, just plain bad judgement.
....
disclosure: yep, i'm deep into HIG puts.
Saturday, December 20, 2008
Dow is Not Going Up. Dow is Never Going Up.
For several days now, i've been confronted with a disturbing possibility, i.e., that the DOW might presently begin a strong and steady recovery. That notion conflicts with my basic bearish disposition-- my friends over at http://www.topguntrading.net/ have lately taken to calling me mean-spirited names like permabear, deservedly so, i suppose, though i insist that this is not a personality defect of mine, but rather a logic-based predisposition.
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Don't get me wrong-- that forum is by no means a bunch of market pollyannas-- it's pretty much high-class tech and quant traders who know their business. As such, the whole place is mined with tripwires to detect the slightest indication of market movements, and lately more of those indications have been turning up. I've steadfastly managed to ignore most of these signals but the other day i was browsing my copy of Futures Magazine and came across this--
http://www.futuresmag.com/cms/futures/monthly%20issues/Issues/2008/12/Editorial/Markets/Markets-Tech%20talk
And what that is, exactly, is a strange chart and brief discussion of DOW outlook using the CPO (Cycles Project Oscillator), which seems in the past to have been devastatingly accurate. And what it says, exactly, is...
"...The CPO indicates that the stock market decline is ending and the Dow will start a move that should take it up to the 12000 area by mid summer of 2009..."
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So my problem is that i'm a quant, and when i see quantish stuff i'm inclined to pay attention and this one had me absolutely spooked for a couple days. The measure of my annoyance was in exact proportion to my confidence level in reliable quants like this one. Go peek at that chart and you'll understand.
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But, having had a few days to digest it, along with everything else, i'm back to my permabear den. Logically, yes, this quant is true. Logically, yes, my topgun associates' assessments are true when they argue that current and planned massive government capital injections (printing press economics), along with a falling dollar, are going to result in massive inflation and powerful equities runups. Based on historical performance, the CPO chart is true. So, it is all true. So now what's my problem?
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Since you ask, my problem now is that truth isn't always reality. It is true that the thermometer outside my New Mexico home registers a freezing temperature, but it is false to assume that last night's snowfall will survive past lunchtime in the desert sun. It is true that the Titanic can survive virtually anything short of a direct hit from a gigantic glacier, but it is false to assume that it will never find one.
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You see where i'm going with this? Yup. Black Swan theory. Just because you've never seen a black swan doesn't mean there isn't one out there someplace, just waiting for you to meet up with it in the time continuum. And what we have right now is a technical bias to the upside and it's a perfect recipe for a blindside by a black swan. We are believing our charts and one economic fundamental: enhanced money supply produces higher equity prices.
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Now listen to me. What we've got here is a huge pile of explosive crap. But we're sprinkling water on it to prevent sparks. So we religiously believe we've got this thing under control, that all those commercial mortgage credit default swaps, residential prime mortgages about to recast and reset and therefore default and ruin a couple more big banks and wipe out a couple big insurance companies holding the credit default swaps on them, impending credit card defaults, and steadily declining real estate values-- all of that-- is going to be cured by capital injections and fed rate cuts. It therefore cannot explode. And the DOW will therefore go up. Horseradish!!
-----------------------------------
Risk is not just a measure of probability, it's the combination of probability+consequence.
------------------
Don't get me wrong-- that forum is by no means a bunch of market pollyannas-- it's pretty much high-class tech and quant traders who know their business. As such, the whole place is mined with tripwires to detect the slightest indication of market movements, and lately more of those indications have been turning up. I've steadfastly managed to ignore most of these signals but the other day i was browsing my copy of Futures Magazine and came across this--
http://www.futuresmag.com/cms/futures/monthly%20issues/Issues/2008/12/Editorial/Markets/Markets-Tech%20talk
And what that is, exactly, is a strange chart and brief discussion of DOW outlook using the CPO (Cycles Project Oscillator), which seems in the past to have been devastatingly accurate. And what it says, exactly, is...
"...The CPO indicates that the stock market decline is ending and the Dow will start a move that should take it up to the 12000 area by mid summer of 2009..."
--------------------
So my problem is that i'm a quant, and when i see quantish stuff i'm inclined to pay attention and this one had me absolutely spooked for a couple days. The measure of my annoyance was in exact proportion to my confidence level in reliable quants like this one. Go peek at that chart and you'll understand.
--------------------
But, having had a few days to digest it, along with everything else, i'm back to my permabear den. Logically, yes, this quant is true. Logically, yes, my topgun associates' assessments are true when they argue that current and planned massive government capital injections (printing press economics), along with a falling dollar, are going to result in massive inflation and powerful equities runups. Based on historical performance, the CPO chart is true. So, it is all true. So now what's my problem?
------------------------------
Since you ask, my problem now is that truth isn't always reality. It is true that the thermometer outside my New Mexico home registers a freezing temperature, but it is false to assume that last night's snowfall will survive past lunchtime in the desert sun. It is true that the Titanic can survive virtually anything short of a direct hit from a gigantic glacier, but it is false to assume that it will never find one.
------------------------------
You see where i'm going with this? Yup. Black Swan theory. Just because you've never seen a black swan doesn't mean there isn't one out there someplace, just waiting for you to meet up with it in the time continuum. And what we have right now is a technical bias to the upside and it's a perfect recipe for a blindside by a black swan. We are believing our charts and one economic fundamental: enhanced money supply produces higher equity prices.
------------------------------
Now listen to me. What we've got here is a huge pile of explosive crap. But we're sprinkling water on it to prevent sparks. So we religiously believe we've got this thing under control, that all those commercial mortgage credit default swaps, residential prime mortgages about to recast and reset and therefore default and ruin a couple more big banks and wipe out a couple big insurance companies holding the credit default swaps on them, impending credit card defaults, and steadily declining real estate values-- all of that-- is going to be cured by capital injections and fed rate cuts. It therefore cannot explode. And the DOW will therefore go up. Horseradish!!
-----------------------------------
Risk is not just a measure of probability, it's the combination of probability+consequence.
Tuesday, December 12, 2006
NUVO and So-Called "Analysts"
i haven't blogged in a bit but this deserves a special blog. monday NUVO crashed 80% on failed FDA test results of its new drug (and there are good fixes for the failure but that's another story). Bayer has been partnering with this outfit.
IMMEDIATELY wall street's so-called "analysts" pounced and they've been at it all day today too. it's absolute proof you can't trust what these jackasses say. they now have a target price of only $3 but it's been holding $4-4.49 all stinking day in spite of 'em. fools. absolute fools. traders are getting 'way more savvy than they used to be and they've learned not to trust these wall street clowns who get paid to bash. disclosure before i forget: yeah i'm in this stock.
there's word on the wires of a merger or buyout. could be Bayer even tho they said they're backing out of collaboration by early 2007. could be anybody. but SOMEBODY had paid these wall street bashers to do a number on NUVO. here's the bit that any six-year-old could figure out: BEFORE the new drug pr's started coming out, Nuvelo Pharmaceuticals (NUVO nasdaq) was trading at abt $7.50-8.00 . so it makes sense that even if the drug is totally wiped out (which it ain't) the new target should be abt $7.50, right? but the jackass "experts" have downgraded target to $3 ??? these people get paid to do this stuff- NEVER TRUST THEM!!!!!! i'm not saying buy this stock- it takes 'way more guts than most players have- and for good reason. i'm just saying never trust the so-called "experts".
IMMEDIATELY wall street's so-called "analysts" pounced and they've been at it all day today too. it's absolute proof you can't trust what these jackasses say. they now have a target price of only $3 but it's been holding $4-4.49 all stinking day in spite of 'em. fools. absolute fools. traders are getting 'way more savvy than they used to be and they've learned not to trust these wall street clowns who get paid to bash. disclosure before i forget: yeah i'm in this stock.
there's word on the wires of a merger or buyout. could be Bayer even tho they said they're backing out of collaboration by early 2007. could be anybody. but SOMEBODY had paid these wall street bashers to do a number on NUVO. here's the bit that any six-year-old could figure out: BEFORE the new drug pr's started coming out, Nuvelo Pharmaceuticals (NUVO nasdaq) was trading at abt $7.50-8.00 . so it makes sense that even if the drug is totally wiped out (which it ain't) the new target should be abt $7.50, right? but the jackass "experts" have downgraded target to $3 ??? these people get paid to do this stuff- NEVER TRUST THEM!!!!!! i'm not saying buy this stock- it takes 'way more guts than most players have- and for good reason. i'm just saying never trust the so-called "experts".
Thursday, November 09, 2006
HYPR Bankruptcy Play?
i am not recommending this play unless you're REALLY good with charts. HYPR just announced (nov. 9, 2006, abt 5pm) it's filing bankruptcy. this is not a quant thing right now- it's more of a t/a play with a 15-min chart. "Q's" often bounce and this one might too. since they haven't yet actually filed, i don't know if friday it'll be HYPR or HYPRQ.
Stick Around
yeah, stick around. i'm watching one. when it gets ripe i'll holler. check in over the weekend- it may be ripe by then.
now i want to go off topic a bit. here and there you may have noticed my links to my quant website whattolearn.com. well, last night i found out, to my great anger, that my so-called hosting service was screwing up again and my site was "site unavailable". the hosting service was vizaweb.com. i am now with another server. a word to the wise if you're putting up a website: never ever trust vizaweb.com. they lied to me about a "compensation plan" for their downtime but never came through. and now i can't even reach their site.
Monday, November 06, 2006
TD Ameritrade Haemorrhaging Customer Base
td ameritrade (AMTD) shares have slipped from an early october high near $20 to near $16 today, as traders express disgust over tda's recent policy of not allowing buys to go thru on certain stocks. it is widely believed that tda has heavy short positions in certain stocks (including SSSU and TDCP) and is attempting to manipulate prices downwards for their own benefit, to the disadvantage of their own customers. some flavour of the growing tempest can be seen here where traders are pulling out of tda en masse...
Saturday, November 04, 2006
Quant Verified Again
DRGV. yup, HOD dropped from .064 thurs to .060 friday. i think dip would've been even bigger if i hadn't posted abt it here and on a forum. quant picks are easily messed with is why i rarely post them. please note that my post on this (just previous) was at 4:24 a.m. friday, 'way before mkt open.
Friday, November 03, 2006
i don't like sharing picks, especially quant picks because quant is like a rare orchid- very sensitive to light. it's a stalking tool, a sniper thing. that said, looks like this one going down some today (friday nov 3 2006). don't know if it's shortable (might be a pink) but if this quant picture is true then is good for short early or for long once it bottoms...
Quotetracker Picked Up By TD Ameritrade
here's a tidbit to munch on... on Sept 29 2006 td ameritrade through its subsidiary T2 API Technologies, LLC acquired the medved quotetracker program.
hmmm- too soon to read the tea leaves but if recent experience with tda is any guide we should all be expecting quotetracker to go from free to astronomical in no time. the qt site still looks the same except for the tda watermark stains here and there, and LOL the fact that they've disabled all links to other brokers.
for those who didn't know, qt is a free streaming quotes and L2 program that you hook up to your broker's feed.
hmmm- too soon to read the tea leaves but if recent experience with tda is any guide we should all be expecting quotetracker to go from free to astronomical in no time. the qt site still looks the same except for the tda watermark stains here and there, and LOL the fact that they've disabled all links to other brokers.
for those who didn't know, qt is a free streaming quotes and L2 program that you hook up to your broker's feed.
Thursday, November 02, 2006
Td Ameritrade Saga Continued
ROFL, i'm slowly piecing this together and in a way it gets funnier by the minute...
it now appears that i'm one of a select group (LOL) of ppl who had something to do with the recent TDA debacle over sssu, even though i don't hold any sssu. let me explain... someone who'd been away from the marketmillionaires tdcp thread for awhile sent me a pm asking what the heck was going on with tdcp. i wrote him back with this...
while you were gone something interesting came up: we were trying to figure out how to stop our brokers from using our own shares to short us and stop them from loaning our shares to mm's to short us. so LOL
catfish says, "Hey, if you put a limit sell on your shares they can't do anything with 'em." so ppl did, with ridiculous limit sells like $75 etc. 
and then we forgot abt it. well, it looks like the news spread and it really killed td ameritrade's action. so td ameritrade decides to restrict buys based on supposedly "questionable practices" of tdcp- hahaha. so now you know the story. cracks me up!!
so okay, hehehe- what obviously happened was that this whole thing spread like wildfire all over the boards and folks started putting all their other stocks on limit sell because very soon after Scottrade, e-Trade and others started in with the same "buy restrictions- sell only" monkeybusiness as stupid Td Ameritrade. ain't the internet just wunnerful?!!
it now appears that i'm one of a select group (LOL) of ppl who had something to do with the recent TDA debacle over sssu, even though i don't hold any sssu. let me explain... someone who'd been away from the marketmillionaires tdcp thread for awhile sent me a pm asking what the heck was going on with tdcp. i wrote him back with this...
while you were gone something interesting came up: we were trying to figure out how to stop our brokers from using our own shares to short us and stop them from loaning our shares to mm's to short us. so LOL
catfish says, "Hey, if you put a limit sell on your shares they can't do anything with 'em." so ppl did, with ridiculous limit sells like $75 etc. and then we forgot abt it. well, it looks like the news spread and it really killed td ameritrade's action. so td ameritrade decides to restrict buys based on supposedly "questionable practices" of tdcp- hahaha. so now you know the story. cracks me up!!so okay, hehehe- what obviously happened was that this whole thing spread like wildfire all over the boards and folks started putting all their other stocks on limit sell because very soon after Scottrade, e-Trade and others started in with the same "buy restrictions- sell only" monkeybusiness as stupid Td Ameritrade. ain't the internet just wunnerful?!!
Monday, October 30, 2006
Dreams DO (sometimes) Come True
lousy filthy trash stinkbox td ameritrade may be about to get its due. in part, silver screen studios is suing td ameritrade because...
" Due to the conduct of TD Ameritrade and ETrade preventing investors from purchasing our shares and receiving a dividend they will be forced to cover, we will hold a board of directors meeting to set the dividend date on this weekend and make an announce on next week. Market makers and brokers will have 10 days to balance their positions in preparation for the dividend. "
link to full smartbrief.com story
like i said last week- i hope somebody sues the crap out of them! so dreams do sometimes come true- i blogged about it thursday and this came out friday!
" Due to the conduct of TD Ameritrade and ETrade preventing investors from purchasing our shares and receiving a dividend they will be forced to cover, we will hold a board of directors meeting to set the dividend date on this weekend and make an announce on next week. Market makers and brokers will have 10 days to balance their positions in preparation for the dividend. "
link to full smartbrief.com story
like i said last week- i hope somebody sues the crap out of them! so dreams do sometimes come true- i blogged about it thursday and this came out friday!
The FOREX Market
the FOREX market is the currency exchange market. you buy and sell currency of different countries. it is extremely volatile, it is extremely tricky, and you can lose a lot of money fast.
now the bright side. you can trade FOREX 24 hrs a day, from sunday afternoon until friday afternoon. you can make a lot of money, but because things happen so fast, you absolutely must have a plan and follow it. and it has to be a GOOD plan, obviously. yes, you could use technical analysis as a plan. and i have to admit that here, in FOREX, t/a has a special advantage over quant: raw speed. if you haven't bothered to quant the currency pair you're trading, t/a can give you that quick snapshot you need to make a decision. if you're very good, you'll be right at least about half the time, which is profitable if you limit your loss to less than your gain.
on the other hand, if you quant the pair and do updates every few minutes, you should find your success rate jumping to about 80% or more. for you quant aficionados, i do provide a set of reporting algorithms in my tutorial. for everybody else, here are some general rules to follow when trading FOREX...
on the other hand, if you quant the pair and do updates every few minutes, you should find your success rate jumping to about 80% or more. for you quant aficionados, i do provide a set of reporting algorithms in my tutorial. for everybody else, here are some general rules to follow when trading FOREX...
- your FOREX broker has a page that lists all the upcoming scheduled government news releases. STUDY THEM and about 30 minutes before they come out, GET OUT of the related currencies. you never know- the pr may cause the price to go 'way up or 'way down and it's real hard to predict. NOTE: by "related currencies" i mean any currency related to the one issued by the government who's issuing the pr. you'll have to study to figure this out. for example, a USA pr will often have a dramatic effect not only on the USD, but also the opposite effect on the EUR (euro); or, the USD and the CAD (Canadian dollar) often travel in lockstep with each other. again, study and know- but mainly get outta the way!!!!
- never trust common t/a patterns (indicating strong price change) for more than a minute or two, and maybe not at all. these turn into fakeouts- i dunno, maybe half the time. as covered earlier, too many people are using t/a. so the big banks and governments (yeah, govt's trade the market too) know exactly what everybody's gonna do before they do it and they clobber ya!
- my personal rule, most of the time, is never use trailing stops, either for stop loss or for limit stop. the fine print in your deal with your FOREX broker tells you why: "in extremely volatile conditions, trailing stops may not be honoured". and they mean it! i've got burned on this once and learned my lesson. so always use hard stops and limit stops.
- if you can afford it, do not set your stop loss based on what you can afford to lose. set it based on what you realistically believe the pair "could" move to. if you can't afford this, you might want to reconsider the trade and find something better because all you're doing is gambling.
- never gamble on a trade. quant it, or use t/a. do not go with just your hunch.
Thursday, October 26, 2006
How Your Broker Screws You
i was just about to go to bed when i decided this just had to be blogged. i hang out at a stock forum and for days the significance of a certain small firestorm had eluded me. the light just went on. apparently, TDAmeritrade is restricting the purchase of certain stocks, including TDCP. you can sell, but you can't buy. i don't use TDAmeritrade because its fees are 'way overpriced, so i don't have a direct interest in the controversy. but i do have an indirectly powerful interest since i hold some TDCP.
the key question for me came up tonight on the tdcp thread when somebody asked if what TD Ameritrade was doing was legal. not being a lawyer but delighting in legal puzzles, i decided that it's probably illegal and i hope like hell somebody sues the crap out of them. TD Ameritrade's explanation so far is that they restrict purchase of "questionable" stocks or companies with "questionable practices". well, if you know anything about TDCP, that just doesn't fit.
what does fit, however, is something i mentioned earlier in this blog- your broker can short stocks against your interest and can loan stocks to market makers to short against your interest. if there's strong buy pressure on the stock (as is the case now with TDCP about to have its stockholders' meeting on oct. 28th, and a demo of its technology with Oklahoma University), then any brokers or market makers holding heavy short positions are about to get screwed big time.
so if you're really big like TD Ameritrade, why not use your market muscle to deny all your clients the right to buy TDCP? and for added fun, why not scare them all into selling with the "questionable practices" red herring? that way, you get some shares to sell when things do break loose. in addition, you drive the pps down.
now, besides my opinion about TD Ameritrade's practices on TDCP being illegal, i consider that it's also a violation of their fiduciary obligation to place their clients' interests above their own. bottom line, if you're with TD Ameritrade or anybody else who suspiciously restricts buys, i say dump the suckers and find another broker.
the key question for me came up tonight on the tdcp thread when somebody asked if what TD Ameritrade was doing was legal. not being a lawyer but delighting in legal puzzles, i decided that it's probably illegal and i hope like hell somebody sues the crap out of them. TD Ameritrade's explanation so far is that they restrict purchase of "questionable" stocks or companies with "questionable practices". well, if you know anything about TDCP, that just doesn't fit.
what does fit, however, is something i mentioned earlier in this blog- your broker can short stocks against your interest and can loan stocks to market makers to short against your interest. if there's strong buy pressure on the stock (as is the case now with TDCP about to have its stockholders' meeting on oct. 28th, and a demo of its technology with Oklahoma University), then any brokers or market makers holding heavy short positions are about to get screwed big time.
so if you're really big like TD Ameritrade, why not use your market muscle to deny all your clients the right to buy TDCP? and for added fun, why not scare them all into selling with the "questionable practices" red herring? that way, you get some shares to sell when things do break loose. in addition, you drive the pps down.
now, besides my opinion about TD Ameritrade's practices on TDCP being illegal, i consider that it's also a violation of their fiduciary obligation to place their clients' interests above their own. bottom line, if you're with TD Ameritrade or anybody else who suspiciously restricts buys, i say dump the suckers and find another broker.
Quant: External Correlation
earlier, i stated that quant mainly uses open, hi, lo, close, and volume data. that's generally true, but there are other ways to quant the stock of your choice. all things are connected. here are a couple of ways to quant against external data:
- quant against a related index. for example, if yours is an energy stock, you could quant the index performance against your stock's pps. there are many such indices. somewhere, buried in that data, is the relationship to your stock.
- quant against an apparently unrelated index. this may be even more fruitful than using a related index.
- devise your own index, quant it, and run it against your stock's pps. now it gets really interesting. by doing this, you're introducing some "apparent" fresh randomness to the process. but it's not really randomness, since everything, under quant rules, is related anyway. so what you're actually doing is finding new correlations not yet noticed by other quants.
true, you may often have to factor your net values to make them all readable on a single chart, but that's a small price to pay for the potential richness of the enquiry.
Wednesday, October 25, 2006
Where and How to Screen
okay, you made it through the splitter minefield.
your further screening now depends on your style of trading. if you're a fundamentals trader, you'll want to look at certain things. i suck at fundies so we won't even go there. if you're using technical analysis (t/a), you'll want to look for certain things. i have skill there but i already posted some good places to get that info- and they all do a better job than i could do here, though i may revisit the subject later.
that leaves quant. if you've chosen to be a quant trader, this post will help you. there are two kinds of quant trader- long-term, and short-term (like me). and in case you missed my earlier warning: sitting ducks get shot. that's why i'm short term, 1 or 2 days at most.
first, where do you find stocks to look at? well, places like nasdaq.com, otcbb.com, smallcapcenter.com, and stockcharts.com, as well as others, have listings of the day's winners/losers or gainers/losers, etc. currently, for quant, i use the smallcapcenter.com listings, for no particular reason except that i have a (free) "screening" account there.
if you google "screen stocks" in quotes, you'll find tons of free screening sites. a "screen" is a set of parameters you set to search for stocks that meet your criteria. you might choose to set a variety of t/a values for various indicators, such as "closed above open", "macd crossover", "rsi above 50", "volume above X value", etc. the system produces a list for you and then you look a little deeper to decide your trades, if any.
but for quant work, i don't much bother with screens (although screening with a t/a volatility indicator might be helpful). i just run the winners or losers and mainly look for my price range and good strong volume and volatility. if you're a long-term quant, you probably want to avoid volatility and just look for a healthy longterm trend. but as a short-term trader, i want high volatility because i want to get in there, make my money, and get the heck out!
if you google "screen stocks" in quotes, you'll find tons of free screening sites. a "screen" is a set of parameters you set to search for stocks that meet your criteria. you might choose to set a variety of t/a values for various indicators, such as "closed above open", "macd crossover", "rsi above 50", "volume above X value", etc. the system produces a list for you and then you look a little deeper to decide your trades, if any.
but for quant work, i don't much bother with screens (although screening with a t/a volatility indicator might be helpful). i just run the winners or losers and mainly look for my price range and good strong volume and volatility. if you're a long-term quant, you probably want to avoid volatility and just look for a healthy longterm trend. but as a short-term trader, i want high volatility because i want to get in there, make my money, and get the heck out!
so for a quant, it's really as simple as that. no setting up of screens and poring for hours over t/a charts. i just grab data for a few promising candidates and start quanting them. in an hour or so, i can get maybe three or four to answer strongly to a custom algorithm. and if the algo says any are ready to go, next day i may trade them. otherwise, they go in my reporting algo library and i keep them under watch. adding data to these each day and reading the resulting charts only takes a couple minutes per stock. when they get ripe, i'm ready to hit 'em.
if you want to learn quant: whattolearn.com . or go to amazon.com and buy a book- but be very selective; many quant books get you 10 feet deep in higher mathematics in the first three pages, therefore proving pretty useless to most people. quant just doesn't have to be that complicated. spreadsheet skills and common sense will do the job, which is why i've simplified quant at whattolearn, along with a simple video spreadsheet tutorial if that's all you want.
if you want to learn quant: whattolearn.com . or go to amazon.com and buy a book- but be very selective; many quant books get you 10 feet deep in higher mathematics in the first three pages, therefore proving pretty useless to most people. quant just doesn't have to be that complicated. spreadsheet skills and common sense will do the job, which is why i've simplified quant at whattolearn, along with a simple video spreadsheet tutorial if that's all you want.
Monday, October 23, 2006
Screening: Finding Good Stocks to Trade
before we even go down this road (screening), i want to make an important point:
never, EVER, buy a splitter!!
never, EVER, buy a splitter!!
there are some rare, very rare exceptions, but chances are you'll never see one.
mainly, this rule applies to OTC stocks under about $5. but splitter disease is spreading north into higher priced stocks too.
mainly, this rule applies to OTC stocks under about $5. but splitter disease is spreading north into higher priced stocks too.
oh, for those who don't know, maybe i should explain what a split is, huh? okay, there are two kinds of splits, forward split, and reverse split. both suck. and the lower the stock price the worse they suck. splits are notoriously bad in pennies, especially pink sheets, where no warning is required before a split.
let's pretend you have 100,000 shares of fictitious stock "ABCD" at .001 at 10 a.m. on a monday morning. total real value = $100. and then at 10:01 they announce a 1/2000 reverse split. this means that for every 2000 shares you held at 10 a.m. you will now have only 1 share. but that 1 share will have an "instant" value of 2000 times what each of your previous shares had. so you will theoretically have 50 shares at a new value of $2 per share. total real value again = $100. so far so good, right?
but, and i can almost guarantee this, by 10:15 a.m. you'll be lucky if your shares are even worth .25 each. total real value = $12.50, for a loss of $87.50. and, to make matters worse, you probably won't even be able to sell them at that price. and just when you think it can't get any worse, it DOES!! the ticker symbol gets "instantly" changed in a split and you can't trade anything- it takes days to sort it out with your broker. so what happened??
what happened was, splits make traders nervous and they start dumping huge quantities of stock and that drives the pps down. it makes them nervous because splits (reverses) have historically been used by companies to boost their share price and to cover up some real bad balance sheets. more often nowadays, however, r/s are used simply to screw the investor and line the pockets of company officers. they wait for the pps to crash then buy back in.
take a look at JKRI (former JRIV, former JKRV)- but hurry before they split again and change their ticker. it's one of the nastiest pieces of stinking crap i ever had the filthy misfortune to trade. luckily, it was 'way back when i started so i didn't lose that much. the absolute nastiest piece of crap was WTVN (former WFTV)- i didn't lose much there either, but i watched one lawyer lose $120,000 literally in a few heartbeats the morning it happened.
but you can protect yourself, more or less. most of these scumbags are chronic splitters. so if you check their history for splits going back at least a couple years and you see even one, run like hell and warn everybody else! splitting is an addictive way for crooks to make money. you can check for splits by going to nasdaq.com, loading the chart for the stock, set it to show maybe 3 years of data, select the "Splits" checkbox below the chart and click "Update". the chart will then show you splits for that period with an "s" in a circle where they occurred.
alright, so that's step1 in how to screen for good stocks.
next post we'll get further into screening.
let's pretend you have 100,000 shares of fictitious stock "ABCD" at .001 at 10 a.m. on a monday morning. total real value = $100. and then at 10:01 they announce a 1/2000 reverse split. this means that for every 2000 shares you held at 10 a.m. you will now have only 1 share. but that 1 share will have an "instant" value of 2000 times what each of your previous shares had. so you will theoretically have 50 shares at a new value of $2 per share. total real value again = $100. so far so good, right?
but, and i can almost guarantee this, by 10:15 a.m. you'll be lucky if your shares are even worth .25 each. total real value = $12.50, for a loss of $87.50. and, to make matters worse, you probably won't even be able to sell them at that price. and just when you think it can't get any worse, it DOES!! the ticker symbol gets "instantly" changed in a split and you can't trade anything- it takes days to sort it out with your broker. so what happened??
what happened was, splits make traders nervous and they start dumping huge quantities of stock and that drives the pps down. it makes them nervous because splits (reverses) have historically been used by companies to boost their share price and to cover up some real bad balance sheets. more often nowadays, however, r/s are used simply to screw the investor and line the pockets of company officers. they wait for the pps to crash then buy back in.
take a look at JKRI (former JRIV, former JKRV)- but hurry before they split again and change their ticker. it's one of the nastiest pieces of stinking crap i ever had the filthy misfortune to trade. luckily, it was 'way back when i started so i didn't lose that much. the absolute nastiest piece of crap was WTVN (former WFTV)- i didn't lose much there either, but i watched one lawyer lose $120,000 literally in a few heartbeats the morning it happened.
but you can protect yourself, more or less. most of these scumbags are chronic splitters. so if you check their history for splits going back at least a couple years and you see even one, run like hell and warn everybody else! splitting is an addictive way for crooks to make money. you can check for splits by going to nasdaq.com, loading the chart for the stock, set it to show maybe 3 years of data, select the "Splits" checkbox below the chart and click "Update". the chart will then show you splits for that period with an "s" in a circle where they occurred.
forward splits have historically had somewhat better outcomes, but these days even those suck. they're the reverse of a reverse split (you get more shares but a proportionally lower "instant" pps). using the above example, but instead a 2/1 forward split, you would end up with 200,000 shares at an instant price of .0005 per share. and the same events would likely unfold, for much the same reasons.
alright, so that's step1 in how to screen for good stocks.
next post we'll get further into screening.
One More Funny
this one's hilarious, in a macabre sorta way...
i can't post it here 'cause it's not mine. but when you get to the page scroll down to the post by "grizzums" and check out the animated avatar and his signature...
here's da link... marketmillionaires.com
i can't post it here 'cause it's not mine. but when you get to the page scroll down to the post by "grizzums" and check out the animated avatar and his signature...
here's da link... marketmillionaires.com
More Stock Humour...
and this one's about what happened with one stock when sharp online traders dug in their heels over a stock and refused to let the mm's run the show (the fight continues).... LOL
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