Posts Tagged ‘value investing’

Options Expiration Friday – Anything Can Happen

SPY 5 MINUTEAnother crazy day ahead

What else is new in this market?  As you can see from Dave Fry's SPY chart, the pattern is holding up of high-volume (relatively) sell-offs following low-volume run-ups.  This is how the Institutional Investors manipulate the markets to dump unwanted shares on retail investors.  I've been telling you all week how it works and now we can see it in action.  

Of course, it's nice to have this knowledge ahead of time – that's the edge we strive to give to our Members at Philstockworld.  Even if you are just reading us for free and don't have access to our Live Member Chat Room, you would have done very well to follow our advice on Tuesday and go with the DIA puts at $166.80 and the DXD longs at $26.20 – it was right there on top of the morning post (which you can have mailed to you every day, pre-market by SUBSCRIBING HERE)!  In our Member Chat, the previous day, our trade ideas were:

A 5% pullback on DIA is 8.3 points (830 Dow points), back to $158.40 from here.  The June $161 puts are .95 so, if you have $100K to protect against a 10% drop, you can buy $5K worth of the June $161 puts and a 5% drop pays you back $8,000 and a 10% drop to $150 (15,000) would net you $11 per contract so a 10x return is $55,000 back – that's overhedged actually!  

On DXD, the July $25/28 spread is $1.10 and is $1.25 in the money so you get all the upside on DXD up to a 140% profit on a very small move down in the Dow.  We already have July $28 calls in the STP and it's a little too soon to roll but we will.   

On a new trade – you can just get out if the S&P holds 1,900 for more than a day – that's not too far from here.  


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More Observations On HFT’s Tyranny Of Stock Markets

More Observations On HFT’s Tyranny Of Stock Markets

Courtesy of Tyler Durden of Zero Hedge

Anywhere one turns these days, bashing HFT is the new market normal. Having written 150 articles on the topic, beginning in April 2009, we are happy to have brought the world’s attention to this most dangerous of market aberrations. Yet until the SEC finally bans the practices of micro churning, quote stuffing, positive feedback loop chasing, flash trading, subpennying, DMA accessing, and all other aspects conceived merely to provide some market participants with an unfair advantage over everyone else, the fight against HFT must continue.

Which is why we draw your attention to two items: the first is a paper by Bluemont Capital "The Marginalizing of the Individual Investor" in which the authors question if HFT has distorted true market valuation (yes) and to what degree. Some relevant soundbites: "Unfortunately, high-frequency trader interaction with computerized algorithms of large-cap financial institutions is providing opportunities for high-speed, virtually undetectable market manipulation", "At a minimum, computerized high-frequency and algorithmic trading are undermining traditional value investing strategies. Short-term liquidity and data movements are distorting information on real business performance", "Essentially, high-frequency trading platforms function as positive feedback loops. Engineers treat positive feedback loops as inherently unstable, as each positive response generates stepped-up repetition of the same actions. Positive feedback loops result in an ever- expanding balloon, but like all balloons, the risk of bursting increases with the balloon’s size." It concludes that the "continuing advances in computerized trading pose challenges for regulators throughout the world—and leave individual investors marginalized… Regulators should not only seek to assure that markets are able to continue to function under stress, but they also need to devise remedial actions that protect individual investors who have fundamentally different objectives from the high-turnover objectives of high frequency traders and computerized algorithms."

The other notable item is the appearance of our friends at Nanex on ABC radio over in Australia, where firm founder Eric Hunsader discusses the previously highlighted concepts of latency arbitrage as a potential progenitor to the May 6 crash, as well as possible ways that the NBBO arbitrage could have provided for unfair and illegal mispricing opportunities for a select few.

Bluemont Capital "On the Marginalizing of the Individual Investor":

 

Full August 29 interview with Eric Hunsader on Latency Arbitrage
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DID TRADERS KILL VALUE INVESTING?

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DID TRADERS KILL VALUE INVESTING?

Courtesy of The Pragmatic Capitalist

The “Writing on the Wall” piece in today’s WSJ concludes that traders killed value investing.  The author, David Weidner, implies that hedge funds and computerized trading have changed the game from what was once a long-term game to a short-term game. Mr. Weidner says:

Today, a hedge fund investing billions using a quantitative formula can stall a stock; a couple hedge funds aligned can turn a profitable company into a Dow laggard. Toss in a few short sellers and you have the great Wall Street collapse of September 2008.

It wasn’t always this way. Before the machines and the shorts took over Wall Street, stocks were evaluated by an underlying company’s prospects. Buy-and-hold investing ruled the day. Investors such as Warren Buffett and Bill Miller were the models.

Curious choice of “models”.  Regular readers know that I have debunked the Bill Miller myth.  He can’t create alpha to save his life.  He’s been nothing but a value fund manager on beta steroids for years and his risk adjusted returns prove it.  As for Buffett – he’s a more complex outlier.  While Buffett has sold the “value” approach hook line and sinker a look under the hood proves that Buffett does a lot more than value investing.  What Mr. Weidner fails to note in his article is that Buffett started as a hedge fund – Buffett Partners.  He used the fund to buy Berkshire and then essentially became the first ever activist investor.  Buffett likes for you to think that he just reads balance sheets all day and let’s everyone else manage his $150B empire, but that’s just not accurate.   Buffett scrutinizes every aspect of a deal in the same way that a private equity fund or hedge fund would.  He sells this folksy next door persona, but Buffett is far more complex than he leads on.  Although most of Buffett’s long-term returns came from a few names (Coke, Geicco) he is actually more active than many think.  His derivatives and currency trades over the years are far from “value investing” and his entire insurance business is more like an option writing strategy than


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Zero Hedge

Where COVID Cases Are Growing The Fastest

Courtesy of ZeroHedge View original post here.

COVID-19 cases are growing in many countries around the world, but, as Statista's Katharina Buchholz details below, some are hit harder than others. Numbers by Johns Hopkins University published on Our World in Data show that among the highly affected countries with rising ...



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Phil's Favorites

Have Bear Markets Changed Forever?

 

Have Bear Markets Changed Forever?

Courtesy of 

We’ve never seen a bear market like the one we just lived through. Nothing comes close in terms of how quickly it started and how quickly it ended.

In just 19 days, the Dow was 20% below its highs. In 22 days, it was 30% below. And in just 27 days, it was all over. The bottom was in. To call this unusual is an understatement. You can see in the chart below that most bear markets take literally hundreds of days to bottom.

This entire bear marke...



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Digital Currencies

A Unifying Theory of Everything

 

A Unifying Theory of Everything

Courtesy of Scott Galloway, No Mercy/No Malice@profgalloway

This week, New York Magazine let me go full stream of consciousness on … everything. Their editor pitched me the idea to articulate a unifying theory on “this whole crazy techno-fiscal moment.” Problem is, while I understand crypto better than 99 percent of people, I do not understand crypto.

On Wednesday, crypto pioneer Coinbase listed shares on the NASDAQ, and closed the day at an almost $100 billion valuation, making it nearly as valuable as Goldman Sachs. Coinbase’s big day made a bunch of wealthy people wealthier, but it also poked several bears — ...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Biotech/COVID-19

Scientists are on a path to sequencing 1 million human genomes and use big data to unlock genetic secrets

 

Scientists are on a path to sequencing 1 million human genomes and use big data to unlock genetic secrets

A complete human genome, seen here in pairs of chromosomes, offers a wealth of information, but it is hard connect genetics to traits or disease. HYanWong/Wikimedia Comons

Courtesy of Xavier Bofill De Ros, National Institutes of Health

The first draft of the human genome was publ...



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Chart School

Money Printing Asset Price Targets

Courtesy of Read the Ticker

The FED giveth and the FED taketh away. Right now the FED is giving a lot into 2022 US Mid Terms. 

Unless the FED breaks the market, here are some BRRRRR asset price targets, not normal price targets but money printing adjusted price targets. 


BITCOIN 175,000 to 500,000 USD

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DOW to 40,000 to 50,000

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Politics

Colombia gives nearly 1 million Venezuelan migrants legal status and right to work

 

Colombia gives nearly 1 million Venezuelan migrants legal status and right to work

Venezuelans wait at the Colombian border to be processed and housed in tents in 2020. All Venezuelans now in Colombia will receive a 10-year residency permit. Schneyder Mendoza/AFP via Getty Images

Courtesy of Erika Frydenlund, Old Dominion University; Jose J. Padilla, Old Dominion University...



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Kimble Charting Solutions

Will Historic Selloff In Treasury Bonds Turn Into Opportunity?

Courtesy of Chris Kimble

Long-dated treasury bonds have been crushed over the past year, sending ETFs like TLT (20+ Year US Treasury Bond ETF) spiraling over 20%.

Improving economy? Inflation concerns? Perhaps a combination of both… interest rates have risen sharply and thus bond prices have fallen in historic fashion.

Today’s chart looks at $TLT over the past 20 years. As you can see, the recent decline has truly been historic. $TLT’s price has swung from historically overbought highs to oversold lows.

At present, the long-dated bond ETF ($TLT) is trading 7.8% below its 200-...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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Promotions

Phil's Stock World's Weekly Webinar - March 10, 2021

Don't miss our latest weekly webinar! 

Join us at PSW for LIVE Webinars every Wednesday afternoon at 1:00 PM EST.

Phil's Stock World's Weekly Webinar – March 10, 2021

 

Major Topics:

00:00:01 - EIA Petroleum Status Report
00:04:42 - Crude Oil WTI
00:12:52 - COVID-19 Update
00:22:08 - Bonds and Borrowed Funds | S&P 500
00:45:28 - COVID-19 Vaccination
00:48:32 - Trading Techniques
00:50:34 - PBR
00:50:43 - LYG
00:50:48 - More Trading Techniques
00:52:59 - Chinese Hacks Microsoft's E...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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