Class is in

Step into my classroom, will you? Let's take a quick foray into a typical traders analytical arsenal. Any trader will tell you that the trend is your friend. I agree, but what do traders most commonly track trends with? Lines. I'm talkin' slope and intercept, y=mx+b, lines.

To this day, the most commonly used analytical tool to track trends on a chart is by far a line. Lines are drawn for support, resistance, from highs to highs, and from lows to lows.

What if we started using slightly more complex functions to track trends? The exponential function is a clear front runner here due to it's natural ability to track growth and decay. We can even add noise using trigonometric functions such as sine and cosine.

I think a little bit of, relatively simple, mathematics still has the potential to go a long way in the stock market. You'll find out based on whether I wind up in a penthouse or in rehab. Or both.

"Make things as simple as possible, but not any simpler." - Albert Einstein

Trades

Who needs 'em anyway right? Not me.

They say to be a successful trader there are 3 things to worry about:

1. Trades (25%)
2. Psychology (35%)
3. Money Management (50%)

Those percentages are rough weighting one trader put on the relative importance of the element. Something to think about.

Update

Natural gas isn't doing anything I want it to lately and I'm keeping. I only learn through failure, too stubborn to do it any other way.

The USD is putting up a nice fight above par compared to CAD but it looks artificial. The only question I have left is about the timing of shorting the USD.

Might become a financial consultant. Ah jeez.

I don't sling rocks
I buy stocks

Change Up

I'm starting to think about adapting a new investment strategy. I think this whole value investing thing is best suited to someone with more money, more experience, and more time. Hopefully one day I'll be in the position, however the reality is that day isn't today and won't be tomorrow for some time.

I am going to start looking at companies hitting new highs, coming out with new products, and trading at over 20x PEs. My jewish personality might go into cardiac arrest when I make a purchase but my irish gambling side will enjoy the rush.

Now however I will have to follow some rules because this style can be more risky. Cutting my losses at the typical 7-8%, no exceptions, should keep me safe.

A change in style is first a change in thought. I'm cool with that as long as I leave a passage back.

No Time

I just forget about this blog sometimes therefore it will never be successful. I'm not gonna lose any sleep over it. I treat it like more of a journal anyway.

Natural Gas worked out if I had stuck to my double down strategy I would have made a +50% return. I had some uncontrollable cashflow issues that got in the way, so I'm just looking at a small gain somewhere around 5%.

I've got some information on a small cap company I think might be worth a 50% return over the next month. I've entered the position, time to sit on it.

Ain't no rest for the wicked..

If everything bad was wrong, I'd never be right.

- WDS

Chill out

It was nice when I was doing an internship making money instead of paying an institution of 'learning' for a scrap of paper.

Now that I am back in school for 8 months, the final 8 months I might add, I am back to being stressed by logistics. I've been a busy beaver buttering people up and pissing people off trying to get things done this week.

The logistics are complete for now and I can focus on trying to squeeze out some good from my courses. This directly cuts into my time to think about new investments so I will probably just be playing around with my current portfolio.

I've already decided on a strategy for the fall. I'm just waiting for a pullback to make some more purchases which will should include some smallish cap tech names and shorting the USD against the CDN on pops.

That's all for now.

Brrrrrrap

Investing is so much about the investor sometimes that it doesn't matter what the investment is. In the spirit of that, I have a suggestion to you; focus on getting to know yourself more. Find out who you want to be.

Maybe I'll get into my philosophical ideals sometime but for now I'll just say that once you start to appreciate yourself, others will follow.

Why the hell are you reading this dead-beat blog anyway?

Test time

Looks like all the shit I've been talking about natural gas is going to be put to the test as we are now seeing '09 lows and I am looking at a pretty hefty loss on my hands. I suspected as much coming into this position, so naturally I am ready to suffer the consequences should I be wrong. That being said, as usual I will find more cash, namely from my other wins, and buy more natural gas. I'll have to write a pretty big 'lessons learned' post if I'm wrong on this one, but I'm sticking to it.

More Natural Gas

I got up this morning and I said to myself, "I think that there might be something interesting to be found in comparing natural gas and equity index correlations over different time periods."

So I looked into it:



When I get some more time I want to check for other periods of over 6 months that have negative correlation. I think that is a nice buying signal right there. Time will tell.

Natural Gas

You tell me where it's going.

Of Interest

This will be the first post of a series of research posts. I've been thinking of trying out some strategies lately with fairly recent historical data. Simple stuff: buying shares and on-the-money puts and various doubling down strategies at different price levels. I think it would be interesting to see when these strategies would have been feasible to employ and in which equity sectors they would have done best.

I'll share the process and results as much as I can along the way. I'm going to try and be conservative by picking stocks or sectors that I was actually looking at last year.

More to come.

Hurricane

Hurricane say: Stay away from the windows

I'm buying natural gas on the way down because I'm insane.

In other news, if we are getting tornadoes in Ontario, Canada for the first time in like 50 years, whats the weather got to be where the get some Real winds.

Yarr, there she blows.

Today in the Markets

China loses 4% off one of its equity indices and we see the Americas shake the blues to rally mid-day. Regardless of whether we turn south from here this is a good sign that many think this is just a dip and we will soon be headed higher.

Status

I've come up with arbitrary net worth numbers to assign people to a social class:

< $50,000 - Riff Raff - You are poor as shit cause you spend too much. Much fun to be had here. There is beauty in the struggle that is the low class.

$50,000 - $500,000 - Middle Class - I hate the middle class. You are like limbo, waiting to die. However, you are necessary.

$500,000 - $10,000,000 - Rich - You or your descendents will probably make your way back to the middle class because in reality, you probably got here by chance.

$10,000,000 < - Wealthy - You control things silently. You understand how the world works. If you don't, you are only visiting this place.

Game time

What makes you able to buy a stock from someone and sell it back to someone else at a higher price? How is this even possible? What makes you different?

Questions I ask myself everyday.

Now that I've seen and held stocks that have swung -80% or -90% and recovered 200%-500% I have a wonderful view of the cyclical nature of stocks. I also see that the common investor's view of risk is wrong. The number you call the standard deviation of an investment is not the risk of that investment. It is the closest thing that they could wrap their head around.

Never buy at new lows. I want to widely promote this rule because it encourages even cheaper prices for me, the buyer. My aim is to throw the traditional rules out the window and create my own, slowly but surely. In fact, I'm not convinced I need rules to be a sucessful investor. At least not ones that can never be crossed.

Knock it off

Stop buying.

Everyone and their uncle can see a pullback coming. Heck even I'm selling some of my stocks. I happened to get lucky with oil driller TDG, they reported a loss when I was betting on a nice gain, and I still managed to get out in the green. I'll pick them back up at a later date. It's about time we had a leg down, I was starting to miss the days when I felt so poor I thought I didn't deserve food. I'm still staying over 50% long but not by much. I will be buying again when prices look attractive.

I know. Real rocket science eh. Shuddap.

Bad Move

My friend gave me a good piece of advice yesterday. I wish I had taken it.

Today I faced with two decisions. First, to lock in some gains via purchasing BAC puts and second to take profits on my natural gas position. I wanted to do both first thing in the morning. I decided not to because I was afraid and as a result I lost money instead of making it.

He who hesitates is lost.

Today in the Markets

BAC continuing a measured move higher? It was only a matter of time considering the levels of say WFC and MS.

Natural Gas continuing higher? Natural gas is a random walk most of the time. I'm half in GAS and half in HNU leaving me approximately 1.5x leveraged to weed out half of the mathematical theivery from 2x leverage. That being said I might play around moving between 1x and 2x because I'm bullish on nat gas until 2010 as it stands.

HBF and ATVI didn't get bought because I saw better upside potential elsewhere. More risk but you know what I say:

When you've been playing with fire and already been burned a couple things happen: (i) it doesn't hurt as much when it happens again and (ii) you know how to play with fire a little better.

Viva la revolution

Eat It

I don't trade for the trend
I trade Before the trend
I don't see the end
and I don't have to
cause I got flava like all dressed chips seasonen

Rising up

I never realized how much a douche bag I must sound like blogging about how I am learning all this crap about investing until I read some other university punks opinions.

You know the kids. The kids that live to work. the kids that march to the beat of the corporate drum. Fuck them.

In other news I passed exam one of the CFA program and there's not a damn thing they can do about it. Booyah.

Psych Out

I'm all about learning the psychology behind whatever it is I am up to.

I didn't understand what people were thinking shorting the financials in the teens. I didn't understand what they were thinking shorting ANYTHING that had gone down 50-80% or more. It didn't seem like there was much reward left and too much risk.

Now I get it. It's the same now except reversed. I'm comfortable buying stocks that have doubled and tripled off of their bottoms because I'm comfortable with the Value that's left in their equity.

Moral of the story: risk and reward are silly to quantify sometimes.

Let It Be Known

You know, most good investors, especially the trading type, they either wince or laugh hysterically at you when you mention the words "double down". Well I've been doing that for quite some time now, and today is the day that I'm back to that psychological barrier: Even.

That's right, I'm back in the black. That might not sound like a feat to you but let me insist, It Is. I was buying all kinds of ridiculous trash in '08: Citi at 26, Media stocks that went to 0, Double long financials (UYG), Bank of America at 14.

I lost my shirt, shoes, and pants on all of those at one point. What did I do? I bought more. Just like a broken clock is right twice a day, even Bill Miller is right twice a decade.

It's not about how often you win, but about how much you win when you do.

Buy

Continue to buy with whatever money you have, find, or borrow.

This is my strategy and I'm sticking to it. See folks, consistency is key. The only sure-fire way for myself to lose money right now would be to stop buying. The market and the economy have shown that the worst is over for now, from an overall perspective.

I bought some natural gas in TSE:GAS recently. I am looking at adding to my small-cap value plays that are a little lagging. I am small money thus I use small money advantages.

If you are big money, what the hell are you listening to me for?

Clarity

Maybe I should be a little more clear with my intentions.

For the time being I'm not concerned with how much money I make or lose. It's not about an amount. It's about an ability. It's about the ability to grow money.

I want to be able to lose everything and make it back. The ability to create a fortune, to me, is preferable to having one.

Character

"Character is what you do when no one is looking"
- Jackson Browne

I don't know who Mr. Browne is but I must agree. I'm a strong proponent of doing some things "just because" sometimes. For example, when I was a child I would never walk down the hallways of the apartment building, that didn't make sense to me. Why walk when you can run? So I ran unless someone was watching, you know, because I didn't want Them to know I was crazy.

A couple others: I like to hold doors for people and I like to hand out fashion complements (although the value of which, coming from me, is subjective). I don't have to do these things and in all reality I'm not going to get anything in return; I do them just because.

This is relevant because it applies directly to success. Reading annual reports, building and playing with financial and statistical models, reading and thinking about financial information... you get the idea. I think that if you can put these into your character through desire and effort, you have a much higher probability of getting whatever it is that you want. Hell, rumour has it, if you do it well enough you'll wind up with more than you wanted.

Fraud

You know why Bernie Madoff looks like he doesn't have a care in the world? Because he doesn't. If he did he would have escaped to a suitable hiding spot in the world and found a new plethora of wives long before he was discovered.

My point: Madoff is just one of the guys who got caught. There is more of these shenanigans going on presently and many of them will get away with it free and clear.

Revamp

Alright I'm tired of being in the hole. It's time to step it up.

I found my stocks that are going to do it for me. NRG, HLF, ATVI. I could tell you how they all scream CANSLIM. I could tell you that I like just plain like these companies. You're not going to buy some third tier blogger's stock picks anyway.

I'm going to go peddle on the street, scrounge up some change, and buy and hold baby. Buy and hold.

Bite me.

Relapse

Man I feel like Eminem coming back to this blog it's been so long.

Although I only have one message: Buy Shit. I mean come on, I was buying these crappy equities in Jan 2008, do you really think I wouldn't be buying now? See, if you're consistently crazy, sometimes you overlap with the sane investors. Even a broken clock is right twice a day.

Buy whatever you want, well not inverse ETFs, but you get the drift. Just do something, you can't afford to sit there and watch everyone else make a killing. Maybe your wallet can but your pride can't. I'm going to start putting these puppies on credit cards pretty soon.

I should disclose I am a losing investor and have not broken even since I started investing in 2008. Pft, historical returns.

May Updates

I had to write exams and then of course party afterward so I haven't really had time to learn anything interesting about Mr. Market.

Looks like a shit load of what I said in my last post came true. Even that drilling company I mentioned is up 90%. At least now I know what some good bullish signs to look for on a CANSLIM stock. eg. Intelligent analyst making good points, fund managers saying they own it and would buy it, price depressed but looking like it might technically break out.

I haven't changed any positions myself, lumber and steel canadian small caps, GDL and SML. Still in BAC, god bless america, eh. I'm looking for some more canadian value plays, possibly in the energy sector if the right stock comes around. Still not convinced we won't retest the lows for no good reason other than late bad news digestion.

I've also got to bust my ass for the CFA level 1 exam while starting my ivnestment research internship. Damn industry barriers.

Notes

Watch BAC report some positive earnings due to gypsy accounting rules and shoot up. Watch them.

I really have to get around to opening a forex account so I can short the USD vs. CDN.

Been watching a lot of portfolio managers on the Canadian business station. Bunch of green energy and gold clowns. There are patterns on the show, Trinidad Drilling seemed to be a consensus choice of the smart ones for a drilling play.

If the DOW actually does decide to go to 1000 (I did hear that prediction today) I'd probably look to buy Canadian banks. They are pretty solid and get hammered a little too hard due herd mentality.

I actually made a nice gain in this rally with some borrowed money. For the first time I see the sense in not being 100% long and have moved to a bit of cash with the gains. I'm learnin' folks.

I'm still alive

I've lost the will to develop new strategies and come at this whore of a market from any new angle. There is only one angle. 60 degrees. Downward.

You see, there are benefits of being a student. My life can afford me the luxury of being able to drink myself out of this mess. Problem solved.

Death

Each day I summon up enough courage to look at my wreck of a portfolio. I then muster up enough strength to convince myself that stocks are worth buying. Then the market goes lower and I do it again the next day. At least now I have no fear of god, for I am in hell. Only one thing to do in hell; keep going. Yes I know I ripped that of Churchill.

Rock Bottom

It's feeling very foolish of me to have bitten off more than I can chew with this whole investing biz. If you like to gamble you might like to take a look at the price and volume action in BAC, it's kinda bullish, just sayin'..

Be forewarned, you could wind up like me walking around public places listening to eminem beats getting ready to stab someone.

Options

I'm thinking about getting into options trading. Why? Why the hell not. If I'm going to gamble in the stock market mind as well do it big.

Seriously though, considering my peanut size account, age, and arrogance I am not exactly risk averse. I almost want to study the theory behind derivatives. Almost.

Instead I'll just start watching the price changes and read up on everything practical for derivatives.

Bear Market Analogy

Pretend for a minute that your mental fitness is proportional to your physical fitness. Also assume that a bear market is very much the same as some type of wacky amusement ride. Then what you are left with, my friends, are those who can handle it, and those who can't.

Not Much, Not Much

I haven't posted anything in over a week because I have lost interest at the moment in global equity markets. Go lower? Go ahead. Go higher? It's about time.

Since I am almost entirely long right now the only action I watch for is a unprecedented pop in one stock to sell into to buy another cheap one. That's about it right now.

Holiday

I'm sitting here reading some academic crap I probably already know waiting for the market to open and BLAM! I sign into my brokerage account to see US exchanges are closed for some holiday.

Sure Canadian markets are open but they're not going anywhere without Papa States. Until tomorrow Papa.

To The Lost Ones..

This one goes out to all my fallen comrades. When you have nothing left to lose, you have nothing to fear. You are free my friends.

I am a bottom caller

I am calling the bottom or damn well near it in BAC. It's fear that sparked the sell-off and the scent of fear drew short sellers to pile on. If I wasn't already broke I'd buy more. Out of spite.

But for now I'll just wait it out and learn a valuable lesson one way or the other.

So...

I'm getting my ass handed to me in the market. I'm long BAC, I'm long Canwest (CGS), I'm long steel and wood small caps. Yeah I'm losing money. No I'm not worried (enough to sell anyway :P).

I'm not surprised by any of the blood on the street, part of me was expecting it. Now I'm going to get some of my bum friends to give my some cash to invest. Market's gotta come up sometime, right?

Credentials

I always like to know get to know the author when I'm reading. You can't deny context.

I'm a 21 year old undergrad pure mathematics finance student at the University of Waterloo. I spend some of my time skipping first year accounting courses and some of it in a real analysis class with some real geniuses. I'm there because those are the challenging classes for me. I've done internships at two major Canadian banks, one for the Canadian statistics department, and one for a sub-prime mortgage brokerage in the summer of 2007. I'm currently studying for the first examination of the CFA designation. I'm also currently looking to do an internship with an investment manager that I respect.

Warp Speed

I've had this feeling lately that we (the market) are going to go lower sometime soon. Not a funny ha-ha lower either. History says when the economy gets around this bad equity prices go lower. So why haven't they yet? That question gives me another funny feeling.

Reading this article made me think about the time we live in. This isn't 1929 folks. Panic and fear affect us differently today than it did then. The initial reaction is the same of course, humans didn't emotionally evolve in 80 years. We are the same biological creature, but now in a different setting. Now we communicate with one another more freely than ever before. We disperse our fear and doubt by informing ourselves, telling others about our failures, and listening to others.

In the beginning of 2008 you were asking yourself, "Is it really possible we might be heading into a bear market?" Now you are asking yourself with the same uncertainty, "Is it really possible that we will see the beginning of the next bull market in 2009?"

The answer to the first question might be similar to the second.

Small Caps FTW

It is pretty clear now that small caps are a good bet for the month. All of the ones I'm in were in the green today which is comforting to see. The best time to buy them is probably mid-late december when the tax selling is at a peak and they are at inexplicably low prices. Last year could have been the best year for the bottom pickers due to the bear market, assuming 2009 doesn't end worse. Even if 2009 sees lower lows, there might not be as pronounced selling due to the fact people are used to losing money.

If you're down 50% and you lose another 50% that second loss doesn't hit you nearly as hard. This is my first bear market, and a nasty one at that, but it'll pass. This isn't Armageddon. This isn't going to be a decade long.

Short term: I could care less.

Long term: Up.

Kill

Personally, days like today are why I invest. We need more days like today. We need them soon. I'm selling some emerging markets ETFs that I bought at damn near the bottom a little while ago so that I can afford to purchase leading small cap steel stock. I think all the variables are lined up for that trade.

Bears need it.