I had promised that I was going to start my own thread regarding stock investments and the markets. So many things have happened since last time I was here and I really do not feel like sharing my knowledge. But a promise is a promise and there have been few people that have emailed me and supported me.

This thread will deal with investing in the stock markets. I will not discuss individual stocks but discuss ETFs like SPY, DIA, IWM and QQQQ. The one good thing about trading ETFs compared to individual stocks is the the ETFs provide instant diversification among similar companies within the same sector.

I will post more as we go along, regarding entry-price, profit-target and stop-losses. I do not think that any ETF is good or bad. It is good only if I'm making money and bad if I'm losig money.

If you have not been in the market so far, please read this as an information piece only rather than my recommendations. There is risk involved and you should know how much risk to take on any position.

Any suggestations, comments and criticisms are welcome as long as it is market related. If this thread gets out of hand and we start discussing off-topics, I'll stop posting.

Have a happy new year!!!! May 2007 bring you and your family lots of joys and riches.

singingbowl, what do u think about holding commodities ?

with global slowdown and nervous investors, i can see more and more money going to commodities- gold, silver, copper, oil.

wt u think ?

good job latoboy....The dancer man(Nicholas Darvas) talks about Kathmandu too in his book....its an interesting book.....study and put the kowledge in practice....it will boost yr performance and confidence.....when finished with this book....let me know...i can recommend u some more books....

Singing Bowl, Thanx for recomending the SOLF. So far its $21.67 . I hope it drops some more.

check out this stocks: CX , CSE, DLB , USG, EXEL.

singing bowl, SOLF was great for me , i got out after the ER with nice profit..I'm long on JASO...

I loaded up more V today ..i'm long on this one too..hoping it will take care of the down payment for the condo that i'm buying after 6 months...

 

Latoboy, I have a big interest in trading commodities and options and will be doing my homewroks this summer. Without necessary knowledge and preparation, i won't be jumping on them. They are riskier than stocks. Very risky!!! I will do some paper trade too see how things work and not and develop a plan.

anthony 15, happy for u man....Solf worked out both ways....u made a nice profit going long and me going short.

bams, I have not covered my short position on SOLF......I will be covering my position between 18.5 to 19.

singingbowl, im reading about all these things about food shortages going to be on for the next 10 years or so...

can u let me know if u have any good idea on how to play that ?    instead of buying a ag company, would it not be simpler to just actually buy some kind of commodity etf such as the Powershares Agriculture etf and then hold on that one .

let me know if u can come up with some good ideas.. i am considering going more into commodities myself..

how long PDO, MXC, V, MCO can drop????? I need a help in that.

V @ 75  will have a lot of support... a ton of buyers want to buy it under 75. including Me.

Still holding S&P futures short. I will look for buying opportunities once we get above 1440 or at 1250. I think we have a good chance of getting to 1250 before 1440.

CSUN and ROYL took a beating today. It seems that we were able to get a pretty decent price for those.

Okay, here is another pick. HIMX. Buy it once it gets above 5.07. Initial stop is 4.50. Target 7.50.

Let's see if we can make something here too.......

As usual do your own research.

your prediction on market trend has been spot on... so far short on s&p looking like a good bet.

i think we just need a couple more downdays on market to confirm further downwards movement.

HIMX never got to 5.07, so cancel the order but keep that on the watch list. ROYL is trading below the target price.

Futures are showing a nice profit here. I had earlier said that we could see a reversal around 1420-1440 and the high ended up being 1440.50. That's just beautiful.

1250 is very likely but I would not be surprised to see 1100.

I will post my picks when I think the time is right to get back in the market. It might be a while though.

Here's my pick for this week. BLD------ Buy it at 3.15 and stop at 2.50.

with todays negative CPI numbers and Housing numbers, i think the S&P downtrend is still in place.

emini, when u say buy at this number, u mean at the bid or ask price?  since some stocks have quite a bit of difference between the bid and ask.

Latoboy, I usually put a buy stop at price X. So once the last price hits the amount, it will buy at the price. Hope this answers your question.

I'm long BLD. It is trading below it's book value.

yes thx u answered my question..

This is hilarious. Buy at 3.15 just b/c it's trading below its book value? You can't be serious?? I seem to recall Bear Stearns's book value somewhere around the neighborhood of $84/share around early November of last year, and yet how low did it go? Exactly! Do you have any idea that you are engaging in a classic boiler room operation called the Pump and Dump strategy buddy- with absolutely no analysis, and given the super low volume and small market cap of this stock it has got the signs of ill-formed connotation on the intent of your postings, and thus your desire to keep this thread running.

Now before you get all feverish let me try to clarify a few of your misunderstandings in my earlier post, and albeit I do not have a lot of time today I am going to give you some background into the world of how professional money managers PROPERLY manage their financial assets.

First off, a little synopsis on your approach: 

Everyone has the right to invest in the capital markets as they well damn please- you included. If your financial investment philosophy has worked for you thus far, and continue to prosper- that's great. No one is discrediting you for your investment behavior (of course, this is exclusive of your pump and dump strategy above). However, what is evident is that you terribly lack sound investment judgement based on solid fundamental techniques that many seasoned individual investors and professional money managers are accustomed to. Granted you argue that you are a small-time player and do not have a huge portfolio, but that still does NOT mean you should bet all your eggs in one basket (when you see the futures go up by 200 points one morning for example). Let the truth be told that you would be better off in Las Vegas. This, of course, is a critique on your investment strategy, but no reason to get overly furious and hasty- after all, you do not have to read a word of what I have to say- ignore if you like. I am sure that others who are testing the waters in the ocean of capitalism will appreciate the commentary.

A two-liner on my investment philosophy:

Over the years, as an investor and a recent buy-side investment analyst for a big cap fund this is something I live by: be very cautious of the downside movement because upside will take care of itself. Preservation of capital (unlike the capital appreciation) is of absolute importance to me. I can bear to watch my portfolio not beat the S&P 500 index in any given year, but having a negative return is unforgivable. When you hedge your downside risk (risk-arbitrage) you minimize the downward spiral. This is most likely to return your results being skewed toward the black on your books.        

So, now let's answer some of your questions, shall we?

Diversification works if you are trying to protect your capital but does not work if your main goal is capital appreciation.

As a speculator (and not an investor) your attempt to get-rich-quick scheme is not going to work. If you lose 80% of your assets because you gambled how in the world are you going to see your capital appreciate. I suppose you like to believe all stocks eventually go up.

Where did you get the idea that diversification will provide above averge returns in the long run? I'd like to see that. If the portfolio is diversified properly and has a portfolio beta of 1, then it will perform exactly like the market--no better no worse.If you use 3% of your portfolio on 1 stock, then you'll have 33 stocks in the portfolio and that does not provide the necessary diversification. That's what my professor told us in the portfolio management class.

Good question. There is a lot to be said here- and b/c of sake of time I am going to be very succinct. Diversification does not mean that you invest in broad indexes- if S&P 500 (as a benchmark) has a beta of 1 we can compare this against individual firms which may have a beta greater than 1 (this can be easily done using a financial history database like COMPUSTAT or Bloomberg). Then you plug this into your model given the criteria you set, for example:

-risk free rate (US treasury bill will do)
-associated risk (standard deviation of the equity)   
-arithmetic average of past returns
-past earnings growth (inclusive of dividends)
-alpha
-financial ratios
-others, etc..

And out pops the risk premium, which is the rate you expect this stock to perform relative to the benchmark. The above model is very proprietary and varies quite distinctively. So, to answer your question- I may pick a stock with the risk premium higher than the index, but comfortable enough with the associated risk (i.e. optimal risky portfolio in academia) all while concentrating in several sectors- telecom, pharmaceuticals, biotech, internet, financials, etc. There is also asset allocation step here where a different model applies (I will omit this one for the sake of brevity) And so, this is diversification. The best of money managers know how to tweak this model depending on current market conditions- and their chances of beating the index is increased by the risk-arbitrage position they take, which I have not even talked about (won't do so as I don't have the time).

Anyway, if you are not convinced I suggest you go on with your Pump and Dump scheme (others- be aware!) And BTW you have got to have a lot of balls to call someone a commie in this country. But as frustrated as you might be with your performance I do not think it will worthwhile for me to call you any names. You are at the mercy of your own disposition buddy.

JB

JavaBeans,

 

I guess you do not even know how the pump and dump process works. There are probably 4-5 (maybe less) people that trade here regularly and they probably buy 100-500 shares and you actually think that their buying will increase the price so much that I can unload my stocks. That’s funny as hell.

 

I have posted my trading blotters here more than once and if you go back through the thread you can find it.

 

Anyway please tell us how we can make unlimited gains with limited risks using futures/forex/commodities.