Investment question ...

lol...geez man. i'm only up about 15% my 1st 2 weeks of trading with my dads corp account...so i guess my trading is garbage.

just because i swing trade doesnt mean i don't know about other things. calm down...i am just trying to help him out so he doesn't do more work than he has to. i wasnt even telling him to trade. i was telling him to invest in an index fund and he will be better off. you and i both know that. you get the divisification that you think is good plus you dont have to do any work. its not hard...its easy and you dont have to pay anyone to do it since you can do it yourself.

 

one more thing....portfolio theory is crap. i have read about it and its simply incorrect and does not account for everything. it is simplistic. if you want to say thats true then you have to dismiss the thousands of people who consistently beat the market....even guys like buffet and lynch and guys like those who are giants in investing. not to mention the tons of traders and day traders who have destroyed market averages. further it dismisses what i see happen everyday when i watch the market. there are clear patterns that form that give you information about what is going to happen in the future. if you dont want to acknowledge it then thats your problem and dont say what i do is garbage. i spend more time doing this than you ever have so i think i would know what i am talking about. i am not an expert at trading by any means, but trading is a completely different animal than deciding if portfolio theory is valid or not. trading involves dealing with your emotions and controling yourself...thats why people fail at day trading...not because it is an invalid way trying to succeed in the market.

i give up....how about this...i will just continually post my returns and you will eventually understand what i am learning to do isn't garbage.


that being said....you will be better off just buying an index fund and not simply and index fund of the DJIA, but of the broader market. i am right...look at the numbers.

 

Not losing any money in 2001 is pretty impresive. What do you plan on doing with your portfolio in this overbought market? I'm taking out most of my money in my small caps but leaving it in my safe large cap and defensive stocks. Just preparing for a market correction. I've just starting investing a little over a year ago and I don't want to lose all the money I've made over that time.

 

yeah...it isnt very hard. in fact i dont even really care about the general market very much. its boring and most stocks do their own thing anyway.

all i was talking about was if you don't want to do any work and still make good returns from your money then all you need to do is buy an index fund, because the market always goes up. it has for a very long period of time and it has far outpaced what bonds do.

also, i won't say i am smarter. intelligence means NOTHING in the stock market. lots of smart people have lost a lot of money in the market because they thought they were bigger and better than the market. patience, confidence, respect, willingness to change, learn, adapt, and react mean everything.

finally, its good to hear you havent lost any money. lots of people lost their asses because they got involved in something that they didnt know anything about.

 

I'm impressed. What do you invest in then (generally ) and how much time do you spend picking and monitoring your investments?
You should be giving us advice instead of us kibbutzing.

 

Not only is he smarter than the average investor, he's smarter than every investor. A 2 week track record managing his dad's account is hard to argue with.

These day traders(correction swing traders) grasp on financial markets is the equivalent of a medical receptionist's grasp on medicine. They may see alot of x-rays over a given period of time and think that they can identify a condition, but they're unable to understand underlying reasons that cause the x-ray to appear as it does.

Back to the bonds, Enron's bonds were actually investment grade just prior to its fall. Surprising, but before all of the Chewbaca offshore nonsense they actually did own alot of hard assets in the form of pipelines.

 

::bashes head against wall and wonders why exactly he is replying even after he said he won't reply to this person anymore::

if you've learned anything by watching the market then the 1st thing you should know is finances don't move prices. it's people's perception of how valuable that company's stock is at that point in time. you've already been thru one market crash and i think we both know that stocks didn't get to their stupidly high levels based on finances...they were based on what people were willing to pay for them, not based on how financially viable the company was. come on man...get off your financial high horse and quit acting like you are better than me.

i know you don't want to believe that i know anything about the market and what drives it, but i do. i know you don't want to read anything i write or believe anything i write either, since i have said it's not intelligence that makes people good in the market. read my posts again and you'll see that i am not talking about intelligence. i'm talking about learning from what other great traders have learned and how they have gone about their trading. i don't do anything special or anything that requires excessive intelligence.

 

I agree with robbie on his theory, it's just that predicting how irrational people will behave is impossible.

 

the times when people are the most irrational are when you can predict how the stock will act in the future.

there are lots of other times too, but thats just one for the irrational side of things.

 

Yes but then you get into timing of things, are they most irrational now or will they get more irrational. It's like when I had Amazon, held it when it went sky high because I was just as irrational and then it went way down, and I missed out because I didn't time my rationality.

 

well like what i am talking about you have short term reactions...long term ones are very difficult to predict. why? because things change which fundamentally alter the situation that was there before as time advances. if you watch the ticker you can tell when the price trend is going to change a pretty high percentage of the time. its hard to make a profit off that if you can't day trade, which i can't do since i don't have more than 25k.

other times you can tell when the volume spikes up but the price stays flat. i am much better at telling people what to do, since i am still a rookie and still learning how to trade, but my only pick for today was PIII based on that idea. here is what i posted in the yahoo group i'm in about PIII...

the comment about the chi-com b*stard stocks was a joke to the group moderator who is hardcore anti-china, just in case you were curious.

anyhow...if you can confine yourself to the things that you know and not try to play everything like i have been trying to do then you can do well. whenever you see a time of mania or panic you can tell based on the price and volume and how they react to those overreactions. its not something easily explained, but its something you learn if you spend this much time trying to learn it and experience it happening.

 

http://sfgate.com/cgi-bin/article.cgi?f=/g/a/2004/01/21/moneytales.DTL


Investing Like Dummies
Cal professor says most of us are playing poorly with our own money

by Lisa Margonelli, special to SF Gate Wednesday, January 21, 2004

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Sitting on Terrance Odean's desk at UC Berkeley's Haas School of Business are two huge monitors, like twin periscopes, that he uses to peer into vast oceanic databases containing the brokerage records of 700,000 investors. By analyzing the successes and failures of the subjects in this giant sample, the Cal associate professor can see into those private moments when we make our investment decisions. When we humans invest -- an activity that should be coldly rational, focused on bottom lines and dollars and cents -- he's discovered that most of us are quite irrational. "It would be better if we were like -- what's that guy? Spock. Yeah. Spock," Odean says.
Odean has devoted his academic career to studying the general un-Spockness of the average investor. With short, curly hair, a boyish face and a large gold hoop in his left ear, Odean can best be described as looking like a clean-cut pirate, an oxymoron no less unlikely than Odean himself, who dropped out of college and spent years working in construction, driving a cab and programming computers before going back to college at age 37.

He wanted to study psychology, but his UC Berkeley advisers told him he'd have better luck getting into a less crowded major. He chose statistics, which was not crowded, and ended up working with Daniel Kahneman, winner of the 2002 Nobel Prize in economic sciences, who uses cognitive psychology to study how people make irrational economic decisions. Odean planned to earn a Ph.D. in psychology, but Kahneman suggested he study finance instead, because it was more likely to have job openings. And Odean, who was then expecting the second of his three daughters, made the most rational economic choice, and that's how he came to where he is today.

Odean is not studying our investing behavior purely because we're fascinating, but also because we're doing dumb and risky things and he'd like to educate us. Over the past 15 years, there's been a revolution in the stock market, as more and more Americans -- a recent estimate counts tens of millions -- have started investing in stocks. In 1989, according to the American Council for Capital Formation, less than one-third of American households were invested in the stock market, but by 2002, half of us were in the market: Thirty-two million investors entered it during that period. And when Odean peers into his monitors, he sees us all acting foolishly. The scene is analogous to one of those freshman-year college parties of old, where people experimented with getting drunk for the first time -- but instead of drinking beer, we're playing with stocks.

Two factors have driven Americans into the stock market: First, in the late '90s, the stock market was booming, and everyone had a friend who was (or seemed to be) making massive amounts of money by doing nothing more than choosing the right stock. It was speculative, it was lucrative; the stock market was the place to be. "In 1999, the world was full of genius investors. There were several at every party," Odean says dryly. The second, and more significant, reason most of us are in the market now is that many retirement plans are no longer pensions, but investment plans, such as 401(k)s. Once, professional investors managed pension-plan money, but now we as individuals do our own investing. "The risk of managing that money has been put on the employee," says Odean.

Not only do workers have to worry about picking the right stocks or mutual funds, they also have to worry about whether they'll make enough on their investments to support themselves to the age of, say, 95. When most people were in pension plans, those who lived to be 95 were covered, because they were balanced out by the people who died at 65 and 70. But with 401(k)s, investors have to figure out how to make their own money go as far as possible. It doesn't help that many people are living longer, either.

In some ways, the 401(k) model of retirement planning has given workers more freedom -- now, it's much easier to quit your job and move to another company, because the 401(k) travels with you. But in order to invest wisely, we need to know how. And most of us don't. "We don't teach investing in high school," says Odean. "The unsophisticated investor doesn't get a clear benefit from having a lot of choices."

Here's an example: A regular investor has a hard time deciding which of the zillion available stocks to buy. As a result, we're more influenced by stocks from companies we know, or our friends know, or that have been in the news. One study, which Odean conducted with UC Davis colleague Brad Barber, found that individual investors tend to buy "high attention" stocks when they're in the news. (And, often, they'll sell other stocks to buy the flashy ones). Professional investors who work for institutions and have a broad knowledge of what's available generally don't buy stocks while they're a hot topic.

In addition, Odean and Barber were able to use their massive data set as a sort of time machine, or more accurately, a "coulda shoulda woulda" machine. They looked at the stocks individual investors sold on the days they bought flashy stock. What if the investor had held on to that frumpy old stock? In most cases, they found that the original stocks outperformed the flashy ones.

So, what to do about having too much choice? "Buy mutual funds," says Odean, "and hold on to them for a while." But even with mutual funds, there are new traps.

Most mutual funds have fees, which come in three types: those with a front-end load, which means you pay a fee when you buy the shares, those with a back-end load, which means you pay when you sell your shares, and an ongoing fee. Figuring out what that ongoing fee is takes time: You have to dig through the prospectus and do some multiplication. Many people don't bother to find out, which means they may be losing money to mutual fund fees. One study Odean did with colleagues found that people are more sensitive to up-front load fees but less sensitive to ongoing fees -- meaning people are more likely to avoid funds with front-end fees, even if the ongoing fees could end up costing them more money.

Odean believes fund managers need to be clearer in how they present their loads and fees. He envisions something like the nutritional labels that appear on foods. "I'd like investors to know enough to feel confident buying an index fund, but not so confident that they put all of their money in one stock," he says. "And, of course, not so cautious that they're putting it under the mattress."

According to Odean, confidence is learned, and too much of it is a dangerous thing. Once we've had a few successes investing, he says, we start to assume our successes are the result of our own decision making, rather than due to pure dumb luck. (This learned overconfidence is called "self-serving attribution bias.") Then, we start believing we're like Gordon Gekko, Michael Douglas' character in the '80s zeitgeist film "Wall Street" (before he got caught), and we start to trade more frequently.

And, the more you trade, another study by Odean and Barber determined, the more you lose. In this study, called "Trading Is Hazardous to Your Wealth," they found that the 20 percent of investors in their sample who barely traded their stocks at all kept up with the market index (which was 18 percent per year during the six years of the study.) But the most active traders in their sample -- stock market cowboys who turned over the stocks in their portfolios two and a half times per year -- fell seven percentage points per year behind the market index. (Everyone made money, but people who didn't trade much made more.)

And here's where Odean and Barber discovered something else: Men, particularly single men, made less money on their stocks than women investors solely because the men were overconfident. Both men and women picked equally so-so stocks, but the women, who were less likely to think they ruled the market, traded 45 percent less, which increased their earnings.

Another problem is that once we start losing, we prefer to keep losing rather than admit we've lost. In another study, Odean found that most people hold on to losing stocks and sell winners -- except during December, when they're trying to realize losses for taxes. This is clearly irrational -- we simply don't want to face the loss. "It's prolonging hope," says Odean. "If you sell a losing stock, that's the end of the story. You lost. But if you delay selling it, there's still a chance."

So, after hearing all this, I start to wonder whether humans have some irrational way of dealing with money that dates back to our days in the caves, hoarding antelope meat or speculating on proto-corn crops. Odean says it's not that we are hardwired to be irrational about money, but that we have certain survival skills from our prehistoric days that don't translate in financial markets. Namely, we're really good at seeing patterns where there aren't any.

Odean tells a story to illustrate. Two hunters go for a walk, and they hear a roar from around the rock in front of them. One hunter continues walking and gets eaten. The other hunter runs away and survives. The next day, the surviving hunter hears another roar and quickly assumes he should run. "He doesn't say, "Well that was only a statistical sample of one. Maybe I should keep walking,'" says Odean. In the woods, and in everyday life, there are advantages to seeing patterns and using them to make quick judgments about danger and safety. "In fact, it was better to have imagined a pattern than to miss a real one," says Odean.

Not so in the stock market, which is full of possible patterns, nearly every one of which will cost you money. So, the solution is to retrain yourself not to see those patterns, not to get overconfident -- at least when you're investing. "Financial markets are a place to undo how we think," Odean says.

But not all risky investment behavior comes from the early days of our species' existence; some comes from the relatively recent phenomenon of advertising. Odean is doing a study of what online brokerage advertisements teach people about investing. He fires up one of his monitors to show an E-Trade advertisement: Two women discuss online stock trading, and one of them runs to her computer to complete a trade, claiming she's made $1,700 in biotech stocks that day. Her friend, who is less beautified and less confident, and frequently cringes, confesses that she owns mutual funds. In the world of the ad, mutual fund investors are losers, while more attractive, in-control people take risks in the stock market and make out like bandits. Statistically, this is the opposite of what happens in real life. "She's not in control of her life," Odean says. "In fact, she's speculatively trading in an undiversified portfolio!"

(Another study Odean worked on showed that people who were new to online trading traded far more than when they were doing so by phone, leading to lower earnings. Over time, though, online investors calmed down and made fewer trades.)

Of course, it can be hard to resist the urge to speculate or to second guess yourself. Odean says that in 1997, he and his wife decided to build a house within two years. Odean looked at the market and decided it was overpriced, and, if the market fell, he didn't want to take a loss with only two years to make it back. So he pulled the family's money out of the market and put it in the bank. As the market continued to rise, his wife asked, "very nicely," according to Odean, if they shouldn't still be in the market, but they left the money safely in the bank. As it turned out, they probably would have been better off if they'd left the money in until 1999, but if they'd left it in until 2001, they would have lost a lot and would not been able to build their house. In the end, rationality prevailed, and everything turned out fine.

Odean says he doesn't fall into the trap of "self-serving attribution bias." To him, a metaphor for the market is to think of it as being something between a roulette wheel and a chess game, and thinking you can guess which way it will go is illogical. The only thing you have some control over is the amount of risk you're willing to take.

In the end, Odean has one suggestion for people who'd like to invest their retirement wisely: "Buy an index fund. Sit on it for 10 or 20 years. Keep your fingers crossed and hope your generation is one where things in the market go well." And if you'd like to take a more active role? Try pressuring the government to do something to lower the budget deficit, which, if it continues to rise, could dampen long-term growth and prosperity. "We're basically mortgaging our future," he says. And, with that, he turns back to his monitors.

 

basically what i got from it was that people who are dinking around in the market shouldn't be and instead should have an index fund and let it sit. (something i said before but was ripped on for saying)

he is partially right about what he says. i will drive this point into the ground over and over and over and over again. you can know which way the market is going to go....HOWEVER....those times do not come around as often as people want them to. the key word is WANT. if you are going to be in the market then you have to leave your emotions on the side or else you will get murdered. you also have to accept when you are wrong and adapt to the new situation or evaluate if the situation has even changed.

i have 2 stocks that i love right now...EMRG and XMSR...why do i love them? because i am comfortable with them and their product. i am willing to put my money on those suckers any time they dip or flatten out. that is only TWO stocks that i have found out of the whole entire universe of stocks around. i may be correct on what other stocks do based on what i know about how prices act, but those are the only 2 that i have full faith in right now. that is not to say that there aren't many other companies like that, but when you stick to what you are comfortable with you are generally right.

now...why don't i make beaucoup bucks for all this talk about how much i think i know? because i am still a rookie and i still make a lot of mistakes and i don't have the freedom and liquidity daytraders have to make up for my mistakes and take profits when i see them. further, i don't have the patience that i need to develop either. lets take my most recent trade....sold 150 CYD for 1180 EMRG @ 3.30...i bought CYD at 28.3 because i got careless and didn't wait for an opportunity that i had 100% confidence in. why? for the same sort of reasons that the article was talking about. i was stupid and careless and i had hope and i got restless based on my previous inability to take profits with EMRG. i had 1250 EMRG @ 1.60 before selling at 3 based on getting over involved with things and then making the stupid CYD trade. none of those things should have ever came into play if i was able to control my emotions. so what did CYD do on me? it tanked...so i ended up selling it for a 10% or so loss. got back into EMRG based on news and i was right and i am up some, but i was also right that i needed to take profits today, but i was unable to since i am not on margin and my trade hasn't settled yet.

for all that crap i wrote my point was that the reason people fail in the market is their inability to control their emotions and stick with their winners...i am a prime example of that. stick with your winners...sell your losers...control yourself...wait for opportunities. ANYONE who has ever been successful in the market whether they are a trader or investor will agree with that and it is something that is much easier said than done.

 

Hello, I feel that I am an expert in this area. I work in investment banking on the fixed income side-

Investing in international bonds will help you with (1) asset allocation and (2) diversification.

As stated previoiusly, two ways you can invest in this area: a mutual fund with intl bonds -- this fund would allow you to invest in many bonds at once...represented by the net asset value (nav) of the mutual fund price. I suggest looking at morningstar to get a ratings on these funds. Try to go with a no load or low load fund and a closed fund too. A typical transaction fee for a intl bond mutual fund is 1.7%

Second way is actual buying of the international bond. The only probem with this is that bonds are less liquid than a mutual fund share. Example, say some bond goes up big time, and you want to capitalize on your gain, you may not be able to unload it at once. The market may not be there.

Risks/concerns you have to look for when investing in bonds: (1) direction of the interest rates - price and interest rates are inverse related when dealing with bonds. (2) liquidity of bonds (3) credit quality of country (4) transaction costs.


International bonds have more risk (due to the sovereignty of the country that issued them)..so that said. I would make my choice based on the companies economy. I personally am attracted to Korea, Japan, and Brazil right now.

If you have anymore questions, feel free to email me at ibcdos@yahoo.com

Bonds are excellent if you are seeking a fixed coupon payment. Bonds are great for investors that seek low risk..(assuming investing in a AAA government tax free bond or a AAA rated corporate bond). It's all about diversification and asset allocation. You wont' fare to well if the market crashes and you have 100% in equity. At least if you had 20% in bonds, you would be getting some sort of coupon payment while your equities were tanking.

 

I two played XMSR> I bought 2000 shares at $11.00 and ditched it at $27.89.

I, however, have to disagree with your analysis, XMSR is highly speculative. It does not have any true earnings yet. In fact if you look at the valuation (it is very high compared to normalcy). I'd rather put my $$ in a company with great amounts of cash, strong balance sheet, strong PE, and a proven product.

Satellite radio may be here to stay, but I doubt the true upside of a company that's revenues are dependent upon subscriber numbers.

Traders were buying that stock on the euphoria of satellite radio. Don't get caught up in the speculation. If you make a gain, take it and invest in something more solid.

 

quick thing, well maybe not so quick , about it being speculative based on having no true earnings. there are only 2 companies in the satellite radio industry...XM and Sirius. We both know XM is flat out killing Sirius and that SIRI still has major financial issues to deal with. that coupled with how far behind XM they are in subs and simple name recognition seriously hurts them. i already know people who call satellite radio XM radio as if they think that is what satellite radio is...kind of like the kleenex thing.

in all likelyhood XM will be profitable by the end of the year if not very close to it. i haven't seen estimates on how their new promo to have commercial free music stations will effect those estimates. last time i checked they needed 3 mln subs to be profitable...they estimated they will have 2.8 mln by end of 2004. however, they have continually beat their subs estimates and there is also this to take into account...

pretty big stuff...especially in an industry where they are by far the leader out of 2 companies. also, XM's product comes standard in the vehicles its in...SIRI's comes optional...another big leg up for XM.

i know you still see it as speculative, and i can understand why, but i think these things far outweigh the speculative side of things that you see.

That quote describes SIRI much more than XMSR. XM's chart has had its overvalued points for sure, but SIRI is the one people go manic over because they think it is such an amazing deal at that cheap price even though they are dead wrong.


anyhow...enough typing...but before i go i've got to compliment you on how well you played XMSR. you got it almost dead on. i can only hope to develop that sort of patience in my plays. i feel like i am getting closer to nailing things, but its like i am just a bit off. it's frustrating, but i know i'll get it eventually.

one last thing...have you ever checked out a company called Sadia S.A. (SDA)...its the only other one that i found when i was still looking at investing stuff that has outperformed XMSR. i found it later than XMSR too. check it out and tell me what you think about its future prospects if you could. hell it might be worthwhile to you too...its probably a company you'd love. tons of cash...makes tons of money...high ROE...its a brazillian company though and i don't know a ton about their economic situation, especially with all that debt in that country.

 

Well, I dont exactly deal with the investors. I underwrite the security to market. Our clients are mostly middle market- to larger capped companies that want to raise debt. We provide a service to companies who are seeking debt as a way to raise money.

I think you are thinking that I am a portfolio manager. I can advise on personal experience though. Two types of bonds

1) taxable and non taxable.

Non taxable or tax exempt...I would just hold till maturity to gain the coupon payment. If you buy gov guaranteed bonds, they wont default.

Bonds can not be traded like stocks. There is not enough liquidity in the market to do so, and the transaction fees are very high. Most people invest in bonds as (1) diversification (2) shift in asset allocation from equities to bonds or vice versa...so what I did was when the market was really high and the interest rate was skyrocketing in year 2000..I sold 80% of my equities and invested that money in corporate bonds/tax free bonds/ general obligation bonds. I received interest payment semi-annually and a nice capital gain (bc the interest rates tanked and the bond prices appreciated)


Euro based bonds --- I would advise not to invest in just a sovereingn bond (ie bonds backed by Mexico). It's just too risky..What I would invest in would be a mutual fund that specialized in international bonds.... I'll try to find some stuff for you on it.

Do you have an email address?