PDA

View Full Version : Bond market/QE II



peb
12-08-2010, 11:19 AM
I realize that most people don't watch the bond markets like the stock markets, as the equities result always get the daily headline, but to say bonds have been interesting would be an understatement. I tend to believe the bond markets can be more indicative of troubles that stocks. Bond buyers seem to go along with the flow for a long time, but when they change their mind, they do it quite suddenly. Hence, why Greenspan stated a couple of months ago that interest rates, as measured by 10-year, treasuries could spike up to 5-7% very suddenly.

I have been admittedly too expectant of the bond markets hitting a crisis point the last few months and until a month or so ago, I have been wrong, very wrong. But the last month makes one wonder.

Municipal bonds have sold off around 6% in the last month, most of this being a straight line down the last few days. So far, this can still be written off as blowing off steam from an unjustified run-up in prices the last year. But prices are reaching where they were in Sept,08. With lots of talk about local governments having so many funding problems, one has to wonder if something is not up.

10-year treasuries are down 7% since the beginning of October. This to is huge. Considering much of the drop has been after QE II was announced, it is almost amazing. If bond buyers are fed up with the muni's due to local government problems and the treasuries are behaving the same way, does that mean that the fiscal situation in the US may reach a tipping point quite soon. I have said before, the fiscal crisis in the US, when it comes, will be driven by the bond market.

Its worth watching, a couple of charts:

http://finance.yahoo.com/echarts?s=IEF#chart2:symbol=ief;range=6m;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off;source=undefined

http://finance.yahoo.com/echarts?s=mub#chart2:symbol=mub;range=6m;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off;source=undefined

Finally, it cannot be coincidence that gold/silver is making all time highs at this time.

JBreeze
12-08-2010, 11:28 AM
You might want to look at Bruce Krasting's article about BABS:

http://brucekrasting.blogspot.com/

peb
12-08-2010, 11:44 AM
Yes it is a good blog, the sell-off yesterday and today in munis as likely been triggered by the failure of the Build America program to be included in the new stimulas/tax agreement. But the sell-off had alread started, prior to that. It is one more interesting thing going on affecting bond markets. I don't see how the program could have been extended. To be honest, I have failed to see how the program was justifying the run-up in the bonds in the first place. I bet some of the bond-trading desks are interesting places these days.

JBreeze
12-08-2010, 01:20 PM
Today's Ten Year Auction ... 3.34%

http://fidweek.econoday.com/byshoweventfull.asp?fid=443563&cust=mam&year=2010#top

http://fidweek.econoday.com/showimage.asp?imageid=19962


30 yr tomorrow...

nw_noob
12-08-2010, 03:36 PM
I have been admittedly too expectant of the bond markets hitting a crisis point the last few months and until a month or so ago, I have been wrong, very wrong. But the last month makes one wonder.

Finally, it cannot be coincidence that gold/silver is making all time highs at this time.

I've been thinking the same thing about stocks lately. Do you think it's probably about time for a downturn Peb?

More specifically, should I be looking to sell the blue chip stock that I stupidly bought before the crash, and have ridden it out with?

peb
12-08-2010, 04:07 PM
What is the stock?

Milo Christensen
12-08-2010, 04:15 PM
Nobody, and I mean nobody, knows how big the unfunded liabilities of the states and municipalities are. Look at the states in real, serious trouble in the bond market, Illinois, California, New York are the big three. If confidence in their bonds erodes any further, and that won't take much, it's going to seriously depress the appetite for munis, and man, I don't even want to think about what happens if folks flee the muni market to the point that even more responsible states can't borrow. I've seen some numbers estimating unfunded liabilities at the state level and they are in the trillions. I just can't believe how we now have to talk about problems using trillions like they were billions a decade ago. A wave of state level government shutdowns is a reasonably valid scenario at this point.

The NYT ran an article a couple days ago summarizing some of the more critical problems. (http://www.nytimes.com/2010/12/05/us/politics/05states.html?_r=1&pagewanted=1)

Combine this with the looming CRE crisis, uncertainty about Eurozone bonds and I'm not feeling very comfortable right now.

nw_noob
12-08-2010, 04:24 PM
What is the stock?

BAM (http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=BAM&&ShowChtBt=Refresh+Chart&DateRangeForm=1&CP=0&PT=7&C9=1&ComparisonsForm=1&CE=0&DisplayForm=1&D4=1&D5=0&D3=0&ViewType=0&PeriodType=7)

I bought it near the worst possible point on that chart. I need to stick to small/mid cap's.

peb
12-08-2010, 05:18 PM
I am not familiar with that company. So I could not say anything for sure. Morningstar has them valued at around $23, with a high degree of uncertainty because of a complicated/opaque operating structure. It looks like their asset base is very diversified. It says they trade at a 1.47 price/book. Which in general, is low. But a company like this could very well be viewed as a fund, ie they simply bring to the table the management (ie just buy/sell decisions) of other assets. Do they perform the actual operational management of those assets, or do they really own companies? If it is the latter (I believe this is the case), they should be viewed as a fund and a 1.47 p/b is too high, IMO (and makes morningstar's value estimate sound about right). Of course that is somewhat dependent on how the calculate book value. On the other hand, they have a low amount of goodwill on their balance sheet, this is a very good sign. This is all off of 15 minutes of research, just some items to look into. I will say this much for you, it is an interesting company to investigate. Thats not to be underestimated, because if you are going to own stock in an individual company, you need to spend time reading about them and studying them. If they are boring, thats harder to motivate yourself to do.

If this is money you have no need of for a long time, you need to spend sometime and figure out what you think the company is worth and if it will provide stable growth in its value, then you can just monitor it (ie make sure your value estimate remains reliable) and ride out the market movements. When you think you need the money, start looking for a point where it is trading at a premium to your value estimate and then sale. If it is money you need in the next couple of years, I would start thinking about selling.

As to the timing of the market, I feel like the market is probably safe for a few more months. But that is not much more than a feeling on my part. A bond crisis could certainly carry over into stocks, that would be the biggest risk in the short term. Disclaimer: I am still in US stocks, but heavily diversified in international, emerging, and commodities. I have gotten out of all bonds, besides a couple of long term "savings" accounts I manage.

nw_noob
12-08-2010, 06:09 PM
Thank you very much for that assessment Peb, it's appreciated.

I'll admit, I didn't research this company much beyond the simple stuff like P/E ratio, dividend history, press releases, and comparing it to the indexes. I much prefer smaller companies, as I can easily determine what they do, if they make money, and what direction they're headed. I had (stupidly) bought BAM with the intention of it being a short term holding while I found another small cap to buy, but sadly, 2008 happened, and I couldn't decide whether to sell or wait during the downturn. Live and learn I guess.

Back to the bond market though, could a full blown bond crisis possibly bring more money into the stock market, at least in the short term? Or do you think the fear would be contagious, and likely bring down stocks simultaneously?

peb
12-08-2010, 07:17 PM
Thank you very much for that assessment Peb, it's appreciated.

I'll admit, I didn't research this company much beyond the simple stuff like P/E ratio, dividend history, press releases, and comparing it to the indexes. I much prefer smaller companies, as I can easily determine what they do, if they make money, and what direction they're headed. I had (stupidly) bought BAM with the intention of it being a short term holding while I found another small cap to buy, but sadly, 2008 happened, and I couldn't decide whether to sell or wait during the downturn. Live and learn I guess.

Back to the bond market though, could a full blown bond crisis possibly bring more money into the stock market, at least in the short term? Or do you think the fear would be contagious, and likely bring down stocks simultaneously?

Your welcome. I think the bond market troubles the last month have already "brought money into" the stock market. I put that in quotes, because the idea of money flowing into or out of the market is way overweighted. Except for new offerings, employee stock options, convertables, and other means of companies issuing new stock, money does not flow into/out of the market. Everytime you sell a stock, someone else bought it. So you may have taken money out, someone else put money in to offset it. So the idea of money flowing into or out of is often overrated in my opinion. I do think mutual fund flows have some meaning, although those do not reflect money going into/out of the market for the same reason (although indirect), they do reflect where a lot of people want their money to go. But excluding new issues of stock, even putting your money into a mutual fund, that fund will then go buy shares of stocks, others will sell, so at a macro level the same condition holds. Note: I am not saying the stock market represents a zero sum game.


But if we have a complete collapse of a portion of the bond market (be it europe soverign debt or municipals), think fall 2008, it will not have a good impact on the stock market. Leading up to the collapse it may, as many people (myself included) do shift between asset classes as markets change and this "influx of money" into stocks results in driving up the price so others are willing to get out of the market. But when the collapse happens full force, those same people will be selling to get out, and prices will have to fall enough so that people are willing to get out.

People argue with my theory of why money doe not flow into/out of markets on a macro level, but I have yet to hear someone explain how it can happen outside of new issues (ie public offereings, employee options, converablts, etc) or money truly leaving the market by company buybacks.

nw_noob
12-08-2010, 08:10 PM
I think the bond market troubles the last month have already "brought money into" the stock market. [...]

But if we have a complete collapse of a portion of the bond market (be it europe soverign debt or municipals), think fall 2008, it will not have a good impact on the stock market. Leading up to the collapse it may, as many people (myself included) do shift between asset classes as markets change and this "influx of money" into stocks results in driving up the price so others are willing to get out of the market.


This bond collapse is almost sounding like it's an eventuality rather than a possibility. I've been a bit puzzled by continued stock market gains based on ??? I think you've explained it for me. I have trouble wrapping my head around the markets sometimes... it's that "markets aren't rational" thing.

leikec
12-08-2010, 08:35 PM
This bond collapse is almost sounding like it's an eventuality rather than a possibility. I've been a bit puzzled by continued stock market gains based on ??? I think you've explained it for me. I have trouble wrapping my head around the markets sometimes... it's that "markets aren't rational" thing.


The stock market is priced where it is (among other things) because the potential bond market problems are either considered to be insignificant to the overall economy, already priced in to the current market valuation, or that the implosion of the bond market will occur far enough out in the future to game the move.

No stockbroker ever jumped out of a 15th story window because of a national depression. Stockbrokers jump out of windows because they fail to predict a national depression before it eats up their position in the market.

Jeff C

peb
12-08-2010, 08:48 PM
This bond collapse is almost sounding like it's an eventuality rather than a possibility. I've been a bit puzzled by continued stock market gains based on ??? I think you've explained it for me. I have trouble wrapping my head around the markets sometimes... it's that "markets aren't rational" thing.

Your welcome, but I must insist I have explain very little. Markets are not rational, you have that correct, not in the short/mid term. Overtime, they reflect value quite well. I think part of the market increase is the bond collapse, but a lot of it is a fairly good stream of positive economic news. It also has something to do with inflation expectations. Many stocks can rise on inflation, as investors assume they profits will keep up with inflation. Also, the financials may start to do better, as a steepening yield curve will help their profits. I think there are several things that will keep the markets ok for a few months, but that is a very rought guess. I would not be surprised to see the lows (maybe within 1000 points on the dow) of March 2009 revisited within the next 2 years. Those are my predictions, they are worth what you paid for them.

You can break long term market gains of 9% into thirds, 3% reflects economic growth, 3% reflects dividend payments, 3% reflects inflation. So over time (sometimes quite a long time), the market is a good proxy for the economy, but not short term in either direction.

BTW, I do think there is a bond collapse that is an eventuality, its just a matter of when and what part of the bond market. We will see interest rates get high again, so that by itself will be a significant portion of the collapse. But the default risk of to many munis and too much soverign debt is just too high. Finally, there is no way US Treasuries will maintian their AAA rating over the long term without significant fiscal changes by our government.

peb
12-08-2010, 08:57 PM
Nobody, and I mean nobody, knows how big the unfunded liabilities of the states and municipalities are. Look at the states in real, serious trouble in the bond market, Illinois, California, New York are the big three. If confidence in their bonds erodes any further, and that won't take much, it's going to seriously depress the appetite for munis, and man, I don't even want to think about what happens if folks flee the muni market to the point that even more responsible states can't borrow. I've seen some numbers estimating unfunded liabilities at the state level and they are in the trillions. I just can't believe how we now have to talk about problems using trillions like they were billions a decade ago. A wave of state level government shutdowns is a reasonably valid scenario at this point.

The NYT ran an article a couple days ago summarizing some of the more critical problems. (http://www.nytimes.com/2010/12/05/us/politics/05states.html?_r=1&pagewanted=1)

Combine this with the looming CRE crisis, uncertainty about Eurozone bonds and I'm not feeling very comfortable right now.

Missed this milo, you are correct in your assessment. There are lots of local governments on solid financial footing, but there are a lot who are not. As to the eurozone problems, I honestly do not know if the Euro as a currency will survive. My far-out prediction is that it will not be around, at least not in anything close to the same form, in 3 years. Will the Germans really accept large scale printing of money and devalueing of their currency to save Italy and Spain. We have watched Greece and now Ireland shock the system, we have at least three more countries to go, and they get to be progressively larger.

purri
12-09-2010, 12:52 AM
^sounds very familiar to me. (Das Kapital anyone?)

Milo Christensen
12-09-2010, 08:52 AM
I've been Googling "municipal bond crisis" and I ran across this blog about an emerging GOP plan to add a section to the bankruptcy laws that would allow states to declare bankruptcy (http://blogs.reuters.com/james-pethokoukis/2010/12/07/secret-gop-plan-push-states-to-declare-bankruptcy-and-smash-unions/). Allowing California, Illinois, and New York, the big three in irresponsible state spending to declare bankruptcy would enable bond defaults and/or state employee union busting and even the rewriting of pension contracts. That major states would be allowed a provision that could result in bond defaults, seemed very far fetched to me, but then I remembered the GM bankruptcy and how the Federal government enabled bondholders to get the shaft in the name of political expediency.

Milo Christensen
12-09-2010, 09:05 AM
Is bankruptcy a possible solution for the US?

Both political parties, in their own irresponsible ideologically driven ways seem hell bent for leather on making that a possibility, aren't they?

peb
12-09-2010, 10:53 AM
Is bankruptcy a possible solution for the US?

For municipalites, yes, it happens and will likely occur more often. For states, I don't think it has ever happened before, but it could. From a federal government perspective, it can't happen from a purely legal framework, which just means that the end result will be much messier and destructive. At some point in time, people will not lend the government money without charging very high interest rates, because there is such a fear of a future default on the bonds. This will be reflected in a collapse of US treasury prices. The problem will then snowball, as the interest rates on the existing national debt will become a large part of the budget. Its the same thing that happened in Greece and Ireland, except for one very big difference. There is not "higher" monetary/government body to step in and help. Thats what could happen, will it, in some less drastic form, I think so. The numbers only add up to that scenario. That's why I think the bond buyers could become the power behind the government in the future.
Another outlier prediction: Could we see a return of "private" currencies in the future? Almost all paper money started out this way, ie notes issued by private banks. In this country and abroad. In this day of the internet commerce, is it that outrageuous that an entity such as GLD, which holds huge amount of physical gold, issues some type of gold-backed share which is tradable as commerce, not just as a security on the NYSE.

At the end of the day, the idea the governmetn can continue to spend via borrowed money just because their bonds have the "full faith and credit of the US government" may not work anymore.

Milo Christensen
12-09-2010, 11:09 AM
The interest rate snowball scenario is the one to worry about. Also known as hyperinflation and the best scenario for a systemic, societal collapse I can imagine. But I can also see muni bold holders being thrown to the curb. If you're also referring to Treasury bond holders, that's a different scenario, that comes right back around to hyperinflation, given that fiscal responsibility is not at option.

I've become pretty much convinced that holding gold is some kind of illusion. A throwback to the days when people didn't trust those private bank issued currencies you speak of, which had an all to frequent habit of folding up their tents in the middle of the night. Started really by the Bank of England and the pound sterling, they had so much Chinese silver it was easy to use it as a guarantee to back the paper. Our early government, of course, had so much gold it was easy to use it to back the dollar. But the price of gold is already so ridiculousy inflated, how can it ever be used without also being hyperinflationary?

leikec
12-09-2010, 11:14 AM
Quote - "But the price of gold is already so ridiculousy inflated, how can it ever be used without also being hyperinflationary?"


Exactly.

Jeff C

peb
12-09-2010, 11:21 AM
The interest rate snowball scenario is the one to worry about. Also known as hyperinflation and the best scenario for a systemic, societal collapse I can imagine. But I can also see muni bold holders being thrown to the curb. If you're also referring to Treasury bond holders, that's a different scenario, that comes right back around to hyperinflation, given that fiscal responsibility is not at option.

I've become pretty much convinced that holding gold is some kind of illusion. A throwback to the days when people didn't trust those private bank issued currencies you speak of, which had an all to frequent habit of folding up their tents in the middle of the night. Started really by the Bank of England and the pound sterling, they had so much Chinese silver it was easy to use it as a guarantee to back the paper. Our early government, of course, had so much gold it was easy to use it to back the dollar. But the price of gold is already so ridiculousy inflated, how can it ever be used without also being hyperinflationary?

I don't understand you last sentence at all. If the value of any currency goes higher, by definition, is deflationary not inflationary. So if gold itself is already inflated too high, that just means other goods/services cost less in terms of gold, not more.

As to the value of gold itself being an illusion and a throw back to those days of not trusting a private bank's money. My argument would be as follows, gold had value and was treated as a natural currency WAY before any paper money ever came about. Gold has always, through history and across almost all societies, had sometype of intrinsic value associated with it. It is almost like a natural currency. The idea that any pure barter economy ever existed on any significant scale is very questionable, economics is part of man's social structure and money has always been needed for commerce in one form or fashion. And now that we have non-gold backed currencies throughout the world, much of the market still treats as a defacto currency, and not just since the crisis. So you can believe it is an illusion based, I guess, on mankind's progress, but you would be going against almost all of human history.

Disclaimer: I am NOT a gold bug.

pefjr
12-09-2010, 11:21 AM
BAM chart looks solid, those Bond charts look like another leg down.

Pugwash
12-09-2010, 12:52 PM
I've been Googling "municipal bond crisis" and I ran across this blog about an emerging GOP plan to add a section to the bankruptcy laws that would allow states to declare bankruptcy (http://blogs.reuters.com/james-pethokoukis/2010/12/07/secret-gop-plan-push-states-to-declare-bankruptcy-and-smash-unions/). Allowing California, Illinois, and New York, the big three in irresponsible state spending to declare bankruptcy would enable bond defaults and/or state employee union busting and even the rewriting of pension contracts. That major states would be allowed a provision that could result in bond defaults, seemed very far fetched to me, but then I remembered the GM bankruptcy and how the Federal government enabled bondholders to get the shaft in the name of political expediency.

How does the fact that the 3 States you keep mentioning are also some of the Sates that receive the lowest amounts of Federal dollars. For every dollar in Federal taxes collected, Illinois receives 0.75, California 0.78 & New York 0.79.

http://www.taxfoundation.org/research/show/266.html

California for example, according to Wikipedia (http://en.wikipedia.org/wiki/Economy_of_California#Tax_burden), sends over $3.5 Billion per year more to the Fed than it receives.

Or are the two unrelated?

nw_noob
12-09-2010, 04:51 PM
A question for those more economically knowledgeable than I (that's pretty much all you guys):

What would signal a collapse of part of the bond market? Are we watching for a major default somewhere? Is a failed government bond sale the tipping point? Is it exponential spikes in rates? Is it some mysterious mix of all those things?

The doomsday predictors said that a U.S. debt-death-spiral would start when China steps away from buying U.S. debt, and the Fed takes their place... well that's happened, so are we doomed? Or is that a feature, not a bug, that ensures we stay in better shape than the rest of the world.

peb
12-09-2010, 05:16 PM
A question for those more economically knowledgeable than I (that's pretty much all you guys):

What would signal a collapse of part of the bond market? Are we watching for a major default somewhere? Is a failed government bond sale the tipping point? Is it exponential spikes in rates? Is it some mysterious mix of all those things?

The doomsday predictors said that a U.S. debt-death-spiral would start when China steps away from buying U.S. debt, and the Fed takes their place... well that's happened, so are we doomed? Or is that a feature, not a bug, that ensures we stay in better shape than the rest of the world.
China has by no means stepped away from buying US debt, they can't afford to. They are walking a tightrope of trying to slowly diversify without killing the US exports before they can get domestic consumption up high enough to maintain their growth.

A major default would only be at the muni/corporate level. Failed government bond sales would be evidence. But in general it would be a spike in interest rates/fall in bond prices. Here is a charrt for JNK, high yield bond etf, hit the max button so you can look at Oct'08, when it fell 50%, that is an example of a collapse in part of the bond market, as a lot of the holdings were indirectly tied to mortgages.

http://finance.yahoo.com/echarts?s=jnk#chart1:symbol=jnk;range=my;indicator =volume;charttype=line;crosshair=on;ohlcvalues=0;l ogscale=off;source=undefined

If you saw the same thing for IEF (7-10 year treasuries) you would know we were screwed. If one follows CDS markets, you can definitely see the problem when insurance premiums against defaults spike.

Milo Christensen
12-09-2010, 05:33 PM
A question for those more economically knowledgeable than I (that's pretty much all you guys):

What would signal a collapse of part of the bond market? Are we watching for a major default somewhere? Is a failed government bond sale the tipping point? Is it exponential spikes in rates? Is it some mysterious mix of all those things?

The doomsday predictors said that a U.S. debt-death-spiral would start when China steps away from buying U.S. debt, and the Fed takes their place... well that's happened, so are we doomed? Or is that a feature, not a bug, that ensures we stay in better shape than the rest of the world.

Good questions. Several key indicators in the muni markets - cash in versus cash out, now negative at a higher rate than that during the depth of the crisis in late 2008. I don't have the exact numbers at my command, but I remember there's a need for an inflow of about $15 billion a month into what is about a two trillion dollar market and the latest figures show something on the order of $8 billion a month out.

As the appetite for bonds shrinks, rates necessarily have to increase, peb has shown the rise of in recent rates as fairly dramatic, reflecting the increasing uncertainty of the state and local municipal bond market.

But if any risk at all becomes obvious, and it is becoming obvious that risks are either unknown or hidden - in exactly the way the risk of bundled subprime mortgages was either unknown or hidden, the wise money will be much more selective. Munis are supposed to be a haven, a tax shelter, risk free.

This guy says it better than most, he's quoted in the article from the N (http://www.nytimes.com/2010/12/05/us/politics/05states.html?pagewanted=1&_r=2)YT I posted earlier:


“Most financial crises happen in unpredictable ways, and they hit you when you’re not looking,” said Jerome H. Powell, . . . . . . “This one isn’t like that. You can see it coming. It would be sinful not to do something about this while there’s a chance.”


States are under tremendous pressures right now. They either have to raise taxes, cut services, or suffer the consequences. Again, from the article:



Richard Ravitch (http://topics.nytimes.com/top/reference/timestopics/people/r/richard_ravitch/index.html?inline=nyt-per), the lieutenant governor of New York, is among those warning that states are on an unsustainable path, and that their disclosures of pension and health care obligations are often misleading. And he worries how long it can last.
“They didn’t do it with bad motives,” he said. “Ninety-five percent of them didn’t understand what they were doing. They did it because it was easier than taxing people or cutting benefits. We’re getting closer and closer to the point where we can’t do that anymore. I don’t know where that is, but I know we’re close.”

nw_noob
12-09-2010, 06:02 PM
China has by no means stepped away from buying US debt, they can't afford to. They are walking a tightrope of trying to slowly diversify without killing the US exports before they can get domestic consumption up high enough to maintain their growth.


My mistake, I don't usually pay much attention to bonds. I had just seen a story a few weeks ago that said a recent (3yr?) Treasury Note auction was divided 30%Fed, 30% foreign central banks, 1%China. That info was then spun to create the impression I had held. Thanks for clearing that up.

Keith Wilson
12-09-2010, 08:56 PM
I'd be lying if I claimed to understand the bond market, but here's The Economist's latest take on the subject. A partial quote; the rest here: (http://www.economist.com/blogs/freeexchange/2010/12/monetary_policy_0)


Reduced bond yields are not the Fed's goal. The Fed's goal is to facilitate recovery, so as to move inflation and unemployment closer to the central bank's target levels. Beginning in late August, the Fed signalled its intent to do more to achieve its goal through additional purchases of Treasury securities. And indeed, the Fed's messaging was successful; Treasury yields were lower in early October than they were in late August. But lower yields were the means, not the end. The promise of more Fed action boosted markets and expectations, and before long actual economic data was following suit. But of course, we'd expect an improving outlook for the American economy to lift American government bond yields. Yields were low, aside from Fed activity, because investors were uninterested in putting their money in private projects. That's no longer the case; with rising growth expectations comes rising interest in private investment, which makes for falling bond prices and rising yields. Yields are rising because QE2 has been successful.

JBreeze
12-09-2010, 09:33 PM
From the Bernank's 11/04/2010 Op Ed:

...This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion...

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?hpid=topnews

Anyone looked at the rise in Mortgage rates lately? They usually correlate well with the 10 yr Treasury yield I posted earlier in this thread.

Milo Christensen
12-09-2010, 11:37 PM
Another good article on the crisis in American municipal bonds (http://biz.thestar.com.my/news/story.asp?file=/2010/12/7/business/20101207090003&sec=business), I don't know why it's in the Malaysia Star, but it's by a New York based AP business writer and those guys are usually pretty good.


Risk is inherent in the unprecedented, not the precedented and the muni investor is there to somehow eliminate risk.

peb
12-10-2010, 09:08 AM
I'd be lying if I claimed to understand the bond market, but here's The Economist's latest take on the subject. A partial quote; the rest here: (http://www.economist.com/blogs/freeexchange/2010/12/monetary_policy_0)

I agree that lower rates were not the primary goal of QE II, but as jbreeze pointed out and Berneke made clear in his op-ed, which I criticized before on this forum, they were an expected result. Yes, as stated above, there has been a shift of money from bonds to other investments, and this could account for much of the recent drop in prices, but I don't think that means QE II is working. Could be, but I don't see it. If the fed is buying a lot of the bonds, which should increase prices due to another large buyer in the marketplace, and the opposite happens, then could we assume that interest rates would have gone up even more without QE II? If that is the case, and rising rates are a sign of success, than QE II is simply retarding the private growth. Which would be my position, as I think interest rates are too low, that interest rates can be too low and actually stunt the economy.

Milo Christensen
12-10-2010, 09:25 AM
Good morning, peb. I'd like to come back to something we posted here yesterday


. . . But the price of gold is already so ridiculousy inflated, how can it ever be used without also being hyperinflationary?


I don't understand you last sentence at all. If the value of any currency goes higher, by definition, is deflationary not inflationary. So if gold itself is already inflated too high, that just means other goods/services cost less in terms of gold, not more. . . .

Bear with me here. I know you're a great deal more technical in your analyses than I ever am and that I can't always explain what I mean to say in words. I was thinking as I wrote that any private bank which wanted to use a commodity like gold as a backing to give real value to a piece of paper would be inflationary in that it now takes so many dollars to buy gold. My definition of inflation is related to the amount of paper money that has to be exchanged for a good/service. I see clearly now where you're coming from, I could use much less gold now to buy a good/service than a few years ago, therefore the inflated price of gold has deflated the value of the good service, but only in terms of gold, yes?

peb
12-10-2010, 09:43 AM
Yes, that is what I mean. Inflation is always a measure against the price of goods and services as measured against a particular currency. This is obvious, as there are lots of instances where inflation occurs in one country (say A), but not another(call it B), simply because the A's currency is decreasing in value. If B's currency is not, then you will also have an instance where it takes more of A's currency to buy B's currency. Now if gold is a currency, and I submit it already is on the financial markets, that the price of gold we see is simply an indication of inflation as measured against US dollars. Which, BTW, does not necessarily say anything about the value of gold increasing or decreasing. Its just that we think in US dollars.

Since we are on the topic, I said yesterday, I am not a gold bug, ie someone who buys and buys gold because that is the only thing worth buying. Perhaps I should explain. I do believe gold has an intrisic value, that over time (but like all markets, it often must be measured over long periods of time), is remarkably constant. But if I believed that the US Dollar had no risk of devaluation at all, I would not just keep all of my assets in US dollars, stuffed in a mattress somewhere. That is a hoard, not an investment. An investment is expected to grow in value based on a successful enterprise, interest paid, or even market conditions. Now there are times where I would like liquid assets in some currency kept in something other than US dollars and there are times where I will make a speculative trade on currencies. Fortunately there are very good financial products that allow for this. So, while I am not a gold bug, I am an investor and trader, so I will diversify into gold on the markets at times.

Milo Christensen
12-10-2010, 10:18 AM
As long as you're not taking physical possession of the gold, what you do makes sense.

I'd appreciate further updates on the municipal funds market as you see fit to post them.

Keith Wilson
12-10-2010, 01:57 PM
I think interest rates are too low, that interest rates can be too low and actually stunt the economy.Hm? Please explain.

Milo Christensen
12-10-2010, 02:01 PM
Keith: I read this as taking a look at the ability to borrow at some very low rate from the Fed and invest at, for instance, 3% in New Zealand. The U.S. doesn't benefit at all.

peb
12-10-2010, 02:28 PM
Hm? Please explain.

A couple of ways. First of all, rates of return for individuals are too low, so they are forced to save more. Anyone serious planning right now for retirement, kids education, etc looks around and sees very difficult times for investing, so if they are serious, they are expecting lower rates, and hence saving more. Secondly, live is just too easy on banks. This one is important. Banks can borrow money, short term, from depositors or the fed at zero interest. They can then "loan" that money back to the governmetn by buying treasuries and make a pretty decent spread for a risk-free return. That is especially compounded right now by the new bank capitalization standards which reduce the banks capital requirements based on the risk level of their assets, and soverign debt is placed very low by regulators. Look at how much banks have increase holdings of US treasuries and you will see this to be the case.

It is also a feature of a "liquidity trap", which many people think we are now in, in which the expected returns of investment is low, people start to hoard cash. In that situation, the demand for money becomes very elastic, ie does not increase relative to money's cost (interest rates). An example mentality of someone in this situation is, "interest rates can only go up, if I buy a bond, it will decrease in value more than I can make on interest, so I might as well stay in cash". I am pretty sure that QE II is a sign that the fed thinks we are in a liquidity trap, ie low interest rates are not working, so lets create more money through other means.

Here is one good article:

http://online.wsj.com/article/SB10001424052748704271804575405592876165452.html

And for a more technical, but fairly easy to understand explanation:

http://www.hussmanfunds.net/wmc/wmc101025.htm

Now we need higher interest rates, particularly short/mid term rates, it will allow for more investment options, reduce people chasing yield and cause a more serious look at risk evaluation of all investments. The downside, it hurts housing, as if that is going to pull us out of the doldrums anytime soon.

gibetheridge
12-10-2010, 02:42 PM
Keith: I read this as taking a look at the ability to borrow at some very low rate from the Fed and invest at, for instance, 3% in New Zealand. The U.S. doesn't benefit at all.


I believe what you are describing is called a carry trade.

http://www.investopedia.com/terms/c/currencycarrytrade.asp

I don't have the knowledge base that you guys have, but it seems to me that the US would benefit if the profit were spent at home.

peb
12-10-2010, 03:00 PM
Keith: I read this as taking a look at the ability to borrow at some very low rate from the Fed and invest at, for instance, 3% in New Zealand. The U.S. doesn't benefit at all.

US banks don't have to do this at all, they can achieve the same results by borrowing from the treasury. Banks don't want to do this, because the currency exchange markets add a significant risk to these international carry trades.

Milo Christensen
12-10-2010, 03:06 PM
peb's the expert here. I follow the muni market only because it's one of six major ways we can still screw this economy up even further. The other five being the potential commercial real estate collapse, an oil price shock, continued failures of Eurozone client states, and any signs of a reluctance of major sovereign players with trade imbalances with us to not buy our paper, and/or a "trade war" instigated by the continued misguided effort of this Administration to limit global trade.

I'm encouraged by the American people, who, at the individual and family level, are doing everything they can to reduce their debt and consumer debt is dropping very nicely, thank you.

I would feel a lot better if we could just get the various levels of government to become fiscally responsible by dramatically raising taxes across the board on all Americans fortunate enough to still have an income, combined with reducing spending and the huge unfunded entitlement programs at the state and federal levels. This whole "under the radar" program of the GOP to allow state level bankruptcies is very disturbing as it would send us rapidly off into unprecedented areas of investment risk.

gibetheridge
12-10-2010, 03:16 PM
Well said, Milo, but I must say that I really appreciate a bit of socialism, especially health care. We pay considerably higher taxes up here. I'm certainly not complaining, they're worth it.

Edited to ask: Have any of you been involved with day trading? I would like to hear about that.

Going for a hike now.

peb
12-10-2010, 03:45 PM
Milo thanks for the compliment, we are not on exactly the same page with respect to the fiscal solutions, but not far off, see my thread on the deficit reduction commission a couple of weeks back. I don't know if I am an expert, I just find it important to follow from a professional standpoint and occasionally find that typing out some of my thoughts helps me to triangulate stuff, so its not a complete wast of time.

glibtheridge, I think Donn does day trading. I am not a practitioner at all (at least not on purpose, I have had a couple of stupid "fat-finger" actions when making trades and had to fix them immediately). I am not saying it is impossible for someone to make money day-trading, but I think it is really tough. You need to really educate yourself in lots of areas of the market (including options). You need to really make sure you have very good tools. Most people loose money doing it. And you are competing with the best. When you are doing short-term trades, you are not investing, it is pure speculation. It becomes much more of a zero-sum game. I once met a guy who was a professional better on horses. I was amazed at how hard he worked at it, up everymorning watching training, talking to trainers/jockeys/pwners (some of his best info came from owners, as they did not knwo to keep their mouth shut like the professionals) , etc. His average work day was over 12 hours. He stated flat out, it only worked because with pari-mutual betting, the odds were set by the betting public, and as such, he made money because he was competing against amateurs. I always keep that in mind when I think I see a good short term trade.

nw_noob
12-10-2010, 03:47 PM
Edited to ask: Have any of you been involved with day trading? I would like to hear about that.


I try to be more of a swing trader when the opportunities present themselves, but I have made exactly one day trade in my short years of investing.

I worked nights at the time, so when I got home I checked all of the small caps on my watch list. Lo and behold a $2 stock that I liked had just dropped 15% in the last couple of minutes. I did a bit of googling, saw no apparent reason for the sudden drop, bought it, put in the sell limit order, and went to bed. When I got up for work I found I had made about 10% after commission.

That said, I've also made buys with the same intentions, and wound up holding for months.

gibetheridge
12-10-2010, 08:03 PM
Thank you for the answers. I'd like to hear from Donn, hope he's watching.

I think that perhaps the biggest reason most day traders fail, and supposedly 98% of them do, is that they try to day trade using investment strategies, using long term strategies to trade short term that is, and, as you said PEB, trading is not investing. It's plain to see that you are a master of "fundamental analysis", not to mention articulate. Day trading requires a different approach, that being "technical analysis". It's very difficult trying to predict the medium to long term using fundamentals, and just about impossible to predict the short term future doing the same.

Four years ago I found that it was getting painful building houses and decided to give trading a try. I knew absolutely nothing about any aspect of the market, didn't even know what a symbol was, so I went to the library and took out all of the books they had on the subject and studied them carefully, and not realizing that things had changed so much since they were written that my head was full of useless information I opened and funded an investing account, not even a trading account, and the difference is profound.

From there I tried to make money applying fundamentals, for instance the news, PE ratios, profit margins etc. etc. and lost money on a very regular basis. Then in September of 2007 I quadrupled what was left of my account balance in just that one month by compounding my gains and using the 2:1 margin my online broker offered. It was just luck, I was ecstatic, and it didn't last. By the end of October I had lost more than I had gained, using the same techniques. At that point I discovered demo accounts and switched to using one. I know, it sounds not far short of stupid to not have started that way, but remember, I knew nothing about what I was doing.

I stuck with it until about one year ago, studying everything in sight and maintaining a bias against the supposedly ridiculous pastime of technical trading, and carefully heeding all of the advice about staying away from the currency markets.

At the end of those first three years I still couldn't pull it off, and it wasn't getting any easier carpentering, especially with two ruptured knees (soccer is a rough game, the best in the world, but hard on the body, especially the knees), and in desperation I decided that it wouldn't hurt to investigate technically trading the FX. Up until nine weeks ago I pursued it with a vengeance, and as of nine weeks ago I had quadrupled my demo account balance, which was the minimum gain I had set for myself before funding a live account.

When I sent in my application to open the live account I was informed that the broker, whose trading platform is quite superior, is not allowed to open accounts for residents of British Columbia. In order for a broker to operate here they must be insured by CIPF and subscribe to certain regulatory agencies which this particular broker does not. It's interesting to note that BC is the only area in North America with such strict regulations.

This was disheartening, to say the least, not only because I liked and was adept at using the trading platform, but because BC only permits the use of 20:1 margin trading currencies, while everywhere else people use 100:1, or even 200:1. This meant that I would have to work five times as hard to get to where I want.

OK, so I found that there are four out of maybe two dozen possible online brokers that I could use. One of them was acceptable, and indeed there was even an advantage, they offered a lower spread between the bid and the ask, which is a big help when trading short term.

I downloaded the demo platform and familiarized myself with it. Eventually I found that I did better to use my previous and preffered platform to base my trades on, but place the actual trades on the new platform.

Now, after nine weeks of technichally trading the EUR/USD exchange rate I am up 70%, another 10% and I will have achieved the equivalent off quadrupling the account balance using the preffered 100:1 margin. This was not the result of a couple of highly profitable fluke trades, I have placed well over 400 trades in the last nine weeks, with a success rate of over 90%, perhaps over 95%, I haven't added them up recently. I expect to gain that last 10% this month and have sent in my application to open and fund a live account, having been repeatedly assured by the broker that it can be approved for residents of BC. Starting in January sometime I'll be going for it for real again, but this time with the proper ammunition.

I too have made the odd "fat-fingered trade. Actually, I don't miss-click, I get tired and make a mistake, click on buy when I meant to sell or vice-versa. Since I buy and sell several times a day, and since trading is such a stressful pastime and since in my time zone the preffered trading hours are the wee and early ones it's not unlikely that I will be tired or worn out.

I guess I could go into a lot more detail, but I'm tired of typing.

So what say you, Donn? I'd like to compare notes if that suits you. The more I learn the better I'll do.

peb
12-10-2010, 08:28 PM
glibtheridge, very interesting. I wish you the best of luck. I am not purely fundamental investor, actually lately I have switch some of my activity to a more technical approach myself, I developed my own trend following algorithms. Lots of backtesting and simulations. In general, I have always found a combination of the fundamental and technical analysus works best. But I decided I needed a little more displine on the technical side. I suspect that to a certain extent, that is correct for daytrading also, as a I have seen professional trading desks, and real-time news feeds are important to them. Actually, my fat-fingered trades have typically been buy instead of sale and vice versa. I simply don't do anything that short term, I typically look for mid to long term activities. Sounds like, if nothing else, you are trying to prepare yourself well. Remember an important point, singles can win a lot of ballgames, you don't want to have to rely on the homerun.

gibetheridge
12-10-2010, 09:48 PM
Thanks you guys.

nw_noob
12-11-2010, 02:47 PM
These days, I trade only in highly liquid and volatile issues, and seldom hold positions for long...rarely over an hour, and never overnight.


I'm curious Donn, what kind of % gain are you looking for on such short term trades?

gibetheridge
12-11-2010, 04:06 PM
And I too am curious Donn. Do you use technical analysis? If so, what are your favorite indicators?

Quote..."but each one is a pretty low % of the purchase price."

Do you open long positions only? Trading FX it's standard routine to place both long and short trades, twice as many opportunities. I probably open an equal number of each.

Quote..."I'm curious Donn, what kind of % gain are you looking for on such short term trades?"

I have been averaging just over 1%/day, maybe 3-4 tenths of 1% per trade, compounded daily. The last time I checked it was 1.2%, still using the demo account (but not for much longer). Time will tell. After 4 years of R&D I sure hope it works out.

gibetheridge
12-11-2010, 04:44 PM
But you must have some basis for choosing to go either long or short? Lots of people simply follow the trend. It seems to work. You?

Liquidity and volatility are the name of the game with FX. $4,000,000,000,000.00/day, many times the volume of the stock markets, and open 24/5. Not volatile for the full 24 hours though, it's best between 0500 and 0900 EST when both the London and New York markets are open at the same time.

If I'm being too nosy just don't reply, I'll take the hint.

JBreeze
12-11-2010, 05:00 PM
RE: Technical analysis ....here are a couple of charts from some folks frustrated trying to find patterns:

http://4.bp.blogspot.com/_7Se7iswAanA/TP-UnPBM6LI/AAAAAAAANIw/OGOgw7ZF-j0/s640/gold_ta.gif

http://2.bp.blogspot.com/_7Se7iswAanA/TQAL7evclII/AAAAAAAANJA/7G7jP2GH4yo/s640/technical+analysis.jpg

pefjr
12-11-2010, 05:01 PM
Some good rules there Donn. The best trader I know only trades the S&P Futures contract and only trades the first 20 minutes in the morn and the last 20 minutes before closing. He has been very successful for 20 yrs that I have known him. He got me started and helps out from time to time. For you guys trading, I recommend this book. Use it like the christian uses his bible. By that I mean know everything in this book that applies to your type of trading. http://www.amazon.com/Technical-Analysis-Explained-Successful-Investment/dp/0071381937

gibetheridge
12-11-2010, 06:30 PM
JB

That's just what it looked like to me for the first three years, nothing but irrational nonsense. What a joke, right?

Nope, I was dead wrong, and arrogantly so at that.

A person who is well versed in these things would find several ways of knowing when to open or close positions from this screen shot of the indicators I use.

For example; In the top chart, which shows a price graph, one can open/close positions based on the change in color of the Japanese Heikin Ashi candles. Another approach, also in this same chart, is to use the crossovers of the 2 period moving average and the 9 period moving average, called MACD, or moving average convergence divergence. Additional confirmation can be derived from the support (heavy red horizontal(in this case) line) or the resistance (heavy green sloped(in this case) line). Support and resistance is not of much use in itself, but helps with confirmation. There are a number of crossover scenarios shown in the lower 2 indicators as well. The idea is to trade when the majority of them are in agreement, which helps to avoid false alarms.

I chose the 1 hour interval for this example, but depending on which platform(s) one works with there are 5 second, 10 second, 30 second, 1 minute, 5 minute, 10 minute, 15 minute, 30 minute, 1, 2, 3, and 4 hour, 1 day, 1 week and 1 month intervals available. I pretty much stick with the 1 and 5 minute, with 10 seconds and 15 minutes for determining the general short and long term trends and reversals.

I find it to be quite compelling. I guess that's obvious.





http://farm6.static.flickr.com/5287/5252729098_d7c3293258_b.jpg

JBreeze
12-11-2010, 07:20 PM
I put those charts up there for a chuckle, not to denigrate TA.....the quick reply function didn't allow me to add this :d

But seriously for a moment ....it would seem that you would have to have a really good and fast news service to go along with a responsive platform....I've followed a technical trader who can be in and out of a position in minutes, often for 25 cents on a 50 dollar stock. I'm afraid I'm not fast enough to see the formation and don't have the skills to take action ahead of, or at the same time as others who are looking at the same thing.

I do look at RSI over several periods to help with the fundamentals when making a decision....Bill Cara's blog has an RSI tool that is helpful in making a decision on companies traded on N. American markets.

Whatever works is good! I'm finding the actions of the Fed's POMO, changes in currencies, and other world events making this all a lot more difficult (and interesting).

gibetheridge
12-11-2010, 07:59 PM
Donn, at this point all of the water in the world wouldn't slow me down in the least. I'm committed and quite sure of myself. Remember, I've stuck with this for 4 years now. Also I have refined my approach to the point of achieving a 90 to 95 percent success rate. Anyway, I know you're sharing valuable experience, and I appreciate it and thank you for it as well.

I guess that there is nothing that can see into the future, and that being the case I wonder how you know when the top and bottom 20% have passed. I guess the bottom 20% is easier, although I've thought I'd seen the bottom 100s of times only to watch it reverse again and retreat some more.

Heikin Ashi candles are a moving average type candle, which means that they are indeed lagging indicators. Moving average crossovers are lagging as well, even tight ones, lagging more or less depending on the number of periods you specify, and that includes moving averages of the price and the RSI.

I guess what I'm saying is that I agree with you 100%, and that these indicators are my way of determining tops and bottoms and lagging entries and exits.

JB (I keep thinking of you as JPEG), I realized those charts were a joke right away, and a good one, too, especially since I can identify with the haphazard nature of the first and the outrageousness of all of those Fibonacci fans in the second. I laughed out loud even.

Not only do I not trade the news, I try not to know anything about it while I'm trading since I find it next to impossible to predict how the market is going to react to most events and having a bias has a negative effct on my bottom line. It's just too full of surprises. Now, having said that, I do make a point of checking the economic calendars for medium and high relevancy scheduled economic announcements like Non Farm Payrolls, FOMC announcements, CPI etc., not that I want to be there to take advantage of the announcements, just the opposite. I avoid trading just before, during and after major economic events just because of their unpredictability and sometimes outrageous volatility. I like to keep it as close to a science as possible, which reminds me of something my son said to me once..."You're trying to make a science out of something that can never be more than an art". Smart boy.

Also, by using short interval charts you can define small moves, what PEB called "singles", very quickly. I've done lots of successful trades that only lasted for 1 or 2 seconds. Using very short intervals one must stay glued right to the charts, no going off to the bathhroom for a half of a minute.

Listen to me, for Christ's sake, spouting off as though I'd been trading real money for the last 5 years. Well, like I said before, time will tell.

SamSam
12-15-2010, 12:38 PM
A little more digression from bonds.

This morning (7AM) CNN had someone touting this stock that closed yesterday at $10.81. It opened today at $11 and is now at $11.19, up 3.5% from yesterday, up 1.7% since CNN talked about it. Could a person, almost without thinking, first thing in the morning buy whatever a mass media like CNN is pushing and sell it later in the day for a possibly automatic few percent gain, which gain is a result of mass exposure and not necessarily warranted?

http://ir.entropic.com/stockquote.cfmIf I had bought 1000 shares of this and sold it now, after 5 days, I would make $130 on $11,000. If I had sold it at it's high, at 3 days, I would have made $1,030. If I had caught the major lows and highs as Donn tries to do, after 4 days I would have made $2,450.

Where is a good place to learn about stock trading? Where is a good place to practice stock trading? What do trades cost?

gibetheridge
12-15-2010, 04:38 PM
A couple of things to remember;

The estimates vary between 95% and 98%, but that's how many people who attempt trading lose money in the long run. I know a guy who decided to give it a try and by the end of the year had lost his wife, his property and 1 million dollars.

I read a study that suggested that those who are successful at trading are those who developed a strategy over at least one year of demo trading.

Don't ever risk more than you can afford to lose.

Looking back on my own experience I would say it's just simple coincidence that CNN's touting of a certain stock coincided with an increase in it's value. The market gained, so so did the stock. Try overlaying the price graph of almost any stock over the graph of any of the major indexes and you will see a positive corrolation. The real trick is being able to accurately predict the movement of the entire market over whatever time frame you choose.

Once again, in my own experience the best way to do that, in fact the only way that I stand a chance, is to use the technical indicators that I showed and described in post #62. Save it somewhere so you can refer back to it after reading the following. Read each of them twice, as much to learn the language as anything else.

And remember this...NO one can tell you how to win in the market, you can only develope your own strategy over a period of time. What I'm doing may never work for me again, and may not work for you at all. I would not advise anyone to become a daytrader, or an investor for that matter. My posts in this thread were just an attempt to learn from others. This post is just being polite and answering your questions.

http://www.abebooks.com/servlet/SearchResults?sts=t&tn=day+trading+for+dummies&x=70&y=17

http://www.abebooks.com/servlet/SearchResults?sts=t&tn=Currency+trading+for+dummies&x=59&y=14

http://www.abebooks.com/servlet/SearchResults?sts=t&tn=technical+analysis+for+dummies&x=0&y=0

SamSam
12-15-2010, 05:22 PM
The evening before CNN made that statement there was a big spike movement of 644,000 shares. I assume they were bought. My cynical nature assumes that someones pumping the rudder. But then again in the last year the thing has climbed steadily from $3 to $11-12. Not that that particular stock is something I would deal with but it's interesting to follow.

Our last investment was a few thousand in tech about the day before they crashed a decade or so ago, so I'm pretty leery. But, is there any practice stock trading sites that are good?

nw_noob
12-15-2010, 05:49 PM
What do trades cost?

Each brokerage is different. I think the bigger outfits like E-trade are around 8-10 bucks per order, but some charge double for limit orders. I use a lesser-known company that is 7 bucks, 'cuz I'm cheap. Just shop around a bit and you'll find one you like. I'd guess some of the bigger names have practice accounts too.

Like gib said, there aren't really a lot of universals, you've got to do what makes sense to you, or else you'll be clueless. The only advice I know to be true 100% of the time is this: you'll never loose money by taking profits. I've missed some big gains by employing that strategy, but it is true.

pefjr
01-27-2011, 03:05 PM
These charts are starting to get interesting now. Stocks usually follow bonds with 3 to 6 mos. lag time. The SM tops are usually more volatile, and the volatility has increased on this move above 12,000 on the Dow. Pays to be cautious now, risk is too high for reward. I am putting stops and will probably get stopped out. The brave can buy puts or sell short.

pefjr
02-01-2011, 10:08 AM
Looking at the stock market of Egypt. There are some interesting opportunities developing here. A might bit early though.

gibetheridge
02-01-2011, 08:08 PM
Look what it did to the price of oil. As soon as this is resolved the price will probably retrace from 90 back to 81. Timing is everything.

paladin
02-01-2011, 11:11 PM
I have Never dealt in stocks except for the stocks purchased as part of an employment package. I deal in metals and "antiques" like Donn, mostly old firearms.

SamSam
02-02-2011, 01:46 PM
I have Never dealt in stocks except for the stocks purchased as part of an employment package. I deal in metals and "antiques" like Donn, mostly old firearms.I was wondering how the Tucson shooting effected the price of assault weapons, automatic pistols, etc.

paladin
02-02-2011, 01:58 PM
Nothing that I can tell. There may be a market for AK-47 type stuff but I don't deal with that. The individual states can let you spend the money for high capacity magazines, then prohibit their resale within the state whenever they feel the urge. I deal with the old black powder stuff, winchesters etc and colt pistols. Normal period for stuffing them in a deep box is 3-5 years. A Winchester that I purchased for 600 bucks 5-6 years ago recently went for $2500, a Colt 1849 pistol, .31 cal that I paid about $300 and sat on for 5 years went for $900 and so on. I stopped buying a lot of the stuff about 4 years ago as I was running out of cheap storage space, and storage would eat up a lot of profit, so it's a balancing act.

SamSam
02-02-2011, 02:21 PM
I was just wondering. After those events there is always the news stories about the big upsurge at the local gun dealers by people looking for protection or something. Looking at Egyptian stock things, there was an immediate pile on into an Egypt Fund that most couldn't figure out why.

gibetheridge
02-02-2011, 02:35 PM
Haven't looked at it, but it sounds like traders are looking to capture the rebound. If you look at most price charts you will find that most moves are followed by a retracement of about 50%. There are people who base their trades on this phenomena, they watch what are known as "Fibonacci retracements", which you can learn more about at www.investopedia.com (http://www.investopedia.com). Although it doesn't really make sense in itself enough of them do it that it becomes a self fulfilling prophecy. The trick is determining the reversals, and once that's done knowing at which level to exit the position.