May 30, 2011

Peter Thiel Foundation - 20 Under 20

The Peter Thiel Foundation run by Investor Peter Thiel, is doing a good thing for society and their vision inspires me that other billionaires and people and groups of substantial wealth will come to their senses, and do the same. The founder of PayPal, Mr. Thiel made his fortune as a venture capitalist, investing in internet companies that would grow to become giants; An early investment in Facebook serves as the best example I can think of, but now he is investing through a program in his foundation. Mr. Thiel is an investor at heart. He invests in the future of a nation and a vision of opportunity that springs forth ingenuity and invention from bright young minds. Through his non-profit, Those chosen to participate in the program will be funded by grants of $100,000 and will get mentors and access to an extensive network of those of those inside the Technology Industry. Rather than spending 4 to 8 years in school, Mr. Thiel is giving America's young adults opportunities to experience the world in new ways. The Thiel Foundation reported they received 400 applications and had selected 24 individuals to extend invitation the the nonprofit initiative is sponsoring, which asks college students under the age of 20, to drop out of college and join the program. I applaud Mr. Thiel as not only an investor in young peoples futures, but also a visionary when it comes to the power that can be realized by cultivating brilliant minds, and having the belief that they can accomplish anything if given a serious fighting chance and nurturing environment. View the Winners and what they plan to do for the next two years as part of the program.

In many ways, Mr. Thiel and his 20 under 20 Program reminds me of what Adam Smith wrote about in the 1776 Economic Classic, the Wealth of Nations. In it, the father of modern capitalism (Adam Smith) studies universities and in particular, wanted to learn if it really took 6 to 8 years to learn a trade (earn a degree). His research took him to the Ancient World and his reading dove into Egyptian, Greek, and Roman literature. In studying the social model and how universities fit into the system as a whole, he studied the Ancient relationships between Master and Apprentice. What he discovered was that an apprentice would have to work under a "master" for 7 years before becoming Masters themselves. The "Master" Status now allowed that individual to take jobs as professors or business leaders in their communities. As an apprentice, the pay was lousy and debt was often incurred, but after those seven years, they could expect to one day take on apprentices for themselves who they could also pay lousy, while raking in more of the income generated by the work done by the apprentice. Adam Smith wondered how it could possibly take 7 years to learn to become a good professor, or an officer in a business, or in a trade company.

A Look at Earlier Civilizations

What Adam Smith discovered in studying the organizational structure of Society in various cultures from Ancient Rome to Scotland in the 17th century, was that it did not take this long to learn a trade efficiently. He claimed that vigorous round the clock study of a subject of interest. Studying day and night, he proposed that a subject such as management, or being a university professor, could be learned to a high level in 2 to 2 1/2 years. His study next went to why such a long time for something like an apprentice to become a master, or a student to get a Masters Degree or Doctors a PhD. What he discovered in the various cultures he studied, was a strong relationship that existed with local business leaders and the political class. For example, in 17th century Scotland, politicians limited the number of apprentices a master could have at one time in particular trades. This essentially was regulating how many "masters" were going to be on the market. If Masters were limited to 2 apprentices, than they'd have to wait 7 years (after their apprentices served their time) before they could take on any more. The reason Adam Smith concluded, was for the purpose of regulating prices. Keeping prices high, meant the business class could reap the fortunes caused by policies meant to stifle competition. If Adam Smith was right, and round the clock study for 2 to 2 1/2 years was enough time to become proficient in a field, than Mr. Thiel wants to tap into that unserved young minds shining with potential that need to be cultivated. He is betting they can excel in life both by doing what they truly want to do, and what they are truly capable of. The current traditional educational system is important, but is it the best way to tap talented, determined minds?

Facebook, the Social Media Giant claiming over 1/2 billion users world wide, was created by college dropout Mark Zuckerberg. He has become a billionaire before the age of 26 making the choice to drop out of college to start a company. Two other dropouts, Microsoft founders Bill Gates and Paul Allen; both are Billionaires as well! There are many self-taught people now and in history including some very famous ones. Abraham Lincoln, Andrew Jackson, and Harry Truman, all were U.S. Presidents but they also have something else in common, none went to college. They must have learned their trade and studied it well to rise to the top of their careers. I don't think the 2 years the program runs is any coincidence. I correlate the time frame with Adam Smith's assessment described in the paragraph above. The $100,000 funding, mentoring, and access to networks gives these guys a good shot. Good luck to them! They can revolutionize education the way Mr. Thiel is attempting.

May 27, 2011

Martha Stewart Living Might be for Sale

The Martha Stewart Living company may by looking for potential buyers. It was reported in the Newspaper that Martha Stewart had recently approached Allan D. Schwartz. Allan is the former CEO of Bear Sterns and is now an executive at Guggenheim Partners. Ms. Stewart was meeting with Mr. Schwartz to discuss a possible partnership between his company and Blackstone, for the acquisition of her company. Martha Stewart first found the company in 1996 and as of May 2011, owns about half of the company's stock, which includes 90% of the voting shares. Essentially, any deal particularly of this size, has to have her approval. Martha turns 70 next month (August 2011) , the same time, shes is expected to join the Board of Martha Stewart Living. In August, expires the 5 year ban of serving as an officer or director on a publicly traded company. This is the expiration time of the 5 year ban which was imposed after she did prison time for lying federal investigators conducting an investigation in an inside trading case. Even though Ms. Stewart was convicted in March 2004, the ban imposed on her by the SEC, took effect August 2006 which means it is set to expire next month.

Joining the Board once the ban expires, will allow her to take a more active role once again in the company. In the five years that Martha has been off the board, the company's stock has dropped 70% (as of May 25th 2011). There has been high turnover of executives at the company over the past several years. As a matter fact, just yesterday, the company announced that it had appointed Linda Gersh as President and Chief Operating Officer, although they also said that she is not expected to assume the role for 12 to 20 months. Ms. Gersh is the Co-founder of Oxygen Media, a cable channel aimed at female audiences. The top company post has been vacant for the last three years! The last person to hold the position was Susan M. Lyne who left the company to take a position with a fast growing online retailing company, The Gilt Group. Explaining why the top position had gone unfilled, yesterday Charles Koppleman, (Chairman of the Board) said that the position had been left open for Martha Stewart "if and when she decides to return." Wow, that one caught me by surprise. This is a large publicly traded company and that is the best answer Mr. Koppleman could give? Martha has recently made it clear she has no intention of taking the top spot. When asked about it, she recounted her busy schedule, her many public appearances, and basically said, as the "face" of this company, she has plenty to keep her busy already. I noticed today, that Ms. Stewart keeps a blog. Thought that was super cool discovery. I've linked here to the official Martha Stewart blog if you are interested in checking it out, or even following it.

Possible Martha Stewart Living Deals

Potential deals might include "carving up" Martha Stewart Living's assets. Spinning off its magazine and television segments and selling those to interested media companies, and selling its highly coveted brand to a licensing company could be a couple ways a deal could get done. Getting a good price on those assets, could potentially become a challenge. For example, over the years, advertising Revenues have declined, and profits have as well. The television show, the Martha Stewart Show, was removed from NBC from syndication, and ended up on the Cable's Hallmark channel. The company is trying some innovative approaches to generating more revenues however. Creating Digital Apps are a space that Martha Stewart Living has recently been exploring in. In fact, one of the iPhone apps they released called Egg Dyeing 101, became a top seller. As the company continues to find ways to grow and work on increasing revenues again, Martha has been looking for potential buyers. It will be interesting to see what happens with this company, although my sneaking suspicion is that it will undergo a vast transformation, be taken private, and may not trade publicly again for some time. That is my view, but time will tell exactly what happens with this company. I know it must be frustrating for Martha to come back, and have watched revenues and profits slide, while she sat on the sidelines, banned from taking a direct role in the company, until it expires in August 2008. From what I have seen in the news, Martha is proactively looking to steer the ship, but appears to navigating it to the world of acquisitions. The company's market capitalization today, is $250 Million.

6 month self updating chart of Martha Stewart Living Stock Price

May 24, 2011

Russian Search Engine Yandex Goes Public

Russian search engine company Yandex reported earlier this week that their IPO offering price would start at $25 per share, after saying it would be priced between $20-22 a couple weeks ago. The increase starting price reflects the general optimism for demand of this companies stock when they go public (which was today, Tuesday, May 24th, 2011). Priced at $25 per share, values the company at $8 billion dollars. Yandex plans to raise $1.3 Billion through this IPO by selling 52.2 million shares. Leading underwriters for today's IPO include financial giants in the world of finance with names like Goldman Sachs, Morgan Stanley, and Deutsche Bank. In IPO agreements with the underwriters and the company, the underwriters have the added option of selling 5.2 million additional shares. Investors sent the stock up today, as it closed at $38.84 on the Yandex first day of trading. Many are watching to see if there is a sort of "Silicon Valley" phenomenon happening in Russia and whether technology and internet giants will be born from it. So far, Yandex going public, seems to be a step in that direction. It was just a few months ago that I remember the Russian President, Mr. Medvedev coming to the State I live in (California) and meeting with executives and engineers in Silicon Valley. I'm wondering if he took back some of what he learned to grow Russia's market share in mobile search also.

Dominating Russian Search Market

From what I've read researching this company, Yandex is widely accepted as the largest and most popular search engine operating in Russia. The New York Times reported that 64% of Russian Search Engine Traffic, was generated by Yandex. This dominates that market, making Google's market share there, pale in comparison. Yandex is growing and much the same way Google has worked hard to enter search engine markets globally in countries around the world, such as their move into South Korea consumer Mobile Markets I Blogged about, Yandex may look to do the same in the near future. Raising capital through today's IPO, will allow them to expand and focus on research and development. I would not be surprised if Yandex evolves and emerges into a competitive global search engine. I have a personal story about Yandex that reflects my thinking in that assessment:

When I started blogging in December 2010, I noticed from my website stats that one of my visitors came from a "Yandex" referring link. I had no idea what Yandex was nor had I heard the name. When I Googled it and went to the Yandex website, I could tell that it was a search engine, but I could not read it because it was in Russian (although now I see it display mostly English when I go to it - I like the new look). I found it interesting that someone in Russia had reached my blog through a search engine in Russia (that was not I continued blogging new posts, and ever once in a while I could see that a visitor was entering my blogs URL into Yandex, and the results Yandex were providing, allowed them to select my blog, and follow it. By the way, if you are that reader, thank you for reading this blog! I appreciate it. Who knew you'd be part of my blog post today but with Yandex listing on the Nasdaq today, It is a great contribution to my story because it explains where I first heard of it in the first place (before it started showing up recently in the newspapers). This meant that Yandex, the Russian Search Engine Company, had found me before I found it. Yandex successfully indexed some of my blog pages before Bing or Yahoo did! I find that remarkable considering the fact, they are located in Russia and not as well known as Yahoo or Bing (not yet anyway). This could potentially mean, the search engine company has figured out how to crawl the web, and if they can get their algorithms and revenue models streamlined, they have a bright future, especially if they incorporate that strategy and focus on Research and Development in figuring out how to enter markets and expand market share in areas of mobile consumer markets, where smart phone use and ownership continues to feed expansion and growth of this consumer market.

Yandex Stock Soars on IPO

I think this company could really become a household name in the future. Yandex stock rose 55% on their opening day, and may continue to rise. The impressive performance after being listed for the first time on Nasdaq today, I think signals that Investors have high hopes for this company and its future. There are some who have called Yandex the Google of Russia. The way their stock price soared today, Yandex may actually become the envy of other smaller search engine companies, who may also attempt to engineer successful public listing of their companies stock in the Stock Market. I plan to keep an eye on not only this company, but the movements of its stock price over time. I'll blog about it if I see anything worth writing about regarding this new publicly traded Internet Giant.

May 22, 2011

The Dow Jones Averages Explained

The Dow Jones Averages were the focus of recent pages I've written, designed, and added to my Investing website. I wanted to explore the formation of the Dow Jones Company, and the creation, calculation, and importance of the various Dow Averages the company created. The three in particular that I have been focusing on in my research are the Dow Jones Industrial Average, Dow Jones Transportation Average, and Dow Jones Utility Average. These are indexes that investors follow to gauge market direction and performance. Charles Dow, who is one of the co-founders of the company and co-creator of the Dow Jones Indexes, was a brilliant technical analyst that realized, tracking the market could be done if approached properly. Before the Dow Jones Industrial Average was introduced to the world in 1885, investors did not have a sure way of measuring market performance. For example, if their portfolio went up 7% in a year, was that good, great, exceptional? It was difficult to know with the absence of some sort of benchmark. What Charles Dow and the Dow Jones Company gave to the world, was a way to interpret information that before appeared to be chaos with seemingly no system in place to quantify or make sense out of Stock Market movements.

The release of the Indexes, allowed investors to compare their own performance to the performance of the index they were tracking. If the Dow Jones Industrial Average was up 10% in a year, and an investor's portfolio was up 15% in the same time frame, they could now assess their performance based on how the broader market did (as measured by an index). Charles told investors that they could identify the longer direction of market trends by analyzing a chart of the Dow Jones Industrial Average, the Dow Rail Average and observing market volume to get a sense of the underlying strength of any existing trend. Although this seems like elementary now to many investors, it was revolutionary in The early days of the Dow Indexes. I think Charles Dow was a visionary. His work to create a system in which the Stock Market could be measured, and used as a benchmark for an investor to compare their own portfolio against. The Dow Jones Company was also the founders and publishers of the Wall Street Journal. This allowed Charles Dow to write in the editorial columns and share with the newspaper's readers, his views and methods for measuring the market, and forecasting its future direction.

President Obama Speaks to AIPAC

The American Israel Public Affairs Committee (AIPAC) was in a news story I saw while surfing channels earlier today. In particular, the coverage was of a talk President Barack Obama gave today to the AIPAC, a self described Pro-Israel lobbying group. President Obama spoke to an audience, defending his previous days press conference in which Mr. Obama before the cameras, made mention of returning to Pre-1967 Israel-Palestinian borders with mutual land swap agreements that would need to be worked out by those involved, as a starting point for moving peace plans forward between Palestinians and Israelis. Prime Minister Natanyahu forcefully disagreed with Mr. Obama's remarks calling the plan not possible and stating that a return to those borders would make his nation indefensible. In his talk to the AIPAC, Mr. Obama reiterated the "land swap" part of the deal he'd proposed, meant the 1967 borders were obviously going to be adjusted with any deal reached. The audience members applauded loudly as he spoke, and I thought about where I stood on the issue. That spurred me to jot some ideas down that turned into a couple pages. Might as well share them here for others to weight in on, and share their assessment, experiences, or opinion.

United States and Israel Disagree

Before going to in depth, I was not satisfied with the Israeli prime Minister saying the plan was not possible because the borders were "indefensible." I wanted him to elaborate on what this meant. Israel has one of the most highly advanced military's on earth, I find it hard to believe their borders would become indefensible if proper arrangements (agreed land-swaps) were incorporated into a plan that used the 1967 borders as a starting point. The world knows how important Israel is in these global times. Their system of government, all though far from perfect, does seem to address the needs of its own people. I commend that and find it honorable. What I see at times however is a stubborn hard stance on issues of peace on Israel's part that seem to prevent the process from moving forward. Continued building of settlements in East Jerusalem which is located in areas the Palestinians are calling for to be included in a future Palestinian state, I think speaks for itself. The Naval blockade into Gaza has done more damage to the Palestinian people, as lack of materials, jobs, capital, continues the hardships on the average citizen there. Israel in my opinion should not be surprised that Hamas and the Palestinian government have agreed to join forces and unite their governments. It surprises me that Egypt was the country that brokered this historic agreement between the two sides, but Egypt is undergoing a revolution, so the political landscape has changed. The Palestinians uniting however, was predictable in my mind. What Israel does not accept, is a government that is comprised of Hamas party members. To prove their point, Israel recently withheld tax money they collect on behalf of the Palestinian government in the sum of over $90 million dollars. This of course angered the government as Palestinians accused Israel of being obstructionist to progress and a lasting peace. Israel argued that Hamas does not accept their existence and has sworn in the past to Israel's destruction, therefor Israel cannot possibly negotiate with any government that includes Hamas. Below is a map of the Pre-1967 Israeli - Palestinian borders:

Where I see the point of both sides, I also believe both sides are preventing the peace process from moving forward. If a statehood for Palestinians is reached, then a lasting peace is suppose to be part of the agreement. In other words, the fighting it can be argued, is directly related to the lack of a current Palestinian State with recognized international statehood. I believe with such a state, that Israel would live with peace and security, not fearing rocket attacks or bombs against Israeli civilians. Palestinians and Arab nations in turn, would acknowledged what is a powerful, highly advanced, and important nation on earth, the country of Israel. If the Palestinians or Arab countries continued their illicit activities that includes targeting civilians with rockets or attacks, than the international community has to come in and say, wait, the Palestinian state was suppose to bring peace, and the fact its not, means the international community is compelled to act, using the international courts to bring justice to the enemies of peace.

What I think the real problem is, is that both sides don't really trust each other. The Israelis don't believe Hamas when they say attacks will stop, as Hamas actively pursue government positions and posts which provides it more resources and power, than currently held. It's possible in Israel's eyes that Hamas will always advocate its destruction whether publicly or privately, and has now adjusted and changed their tactics in order to accomplish these ends. The possibility Hamas is uniting their government, may be so they can get closer to Israeli cities in the future, and this may be a legitimate security risk for the Israeli government. The Palestinians on the other hand, see Israel as the aggressor, with much more sophisticated weaponry in their arsenals that they employ when hunting down Palestinian militants. Civilian deaths from these Israeli attacks also occur and cause deep pain and grief to Palestinian families that are touched by it, the same way Israeli families mourn the death of their innocent members at the hands of rocket attacks or suicide bombers. As both governments, militaries, strategists, and security apparatus of each side, continue to highly distrust one another, a foundation for peace will not be stable. I understand Israel is suspicious of Hamas and its intentions, but I also realize that establishing the country of Israel, meant displacing many who called the country "Palestine" and had made it their homes. Palestinians were forcefully removed from their homelands, and I can understand their dismay at what has occurred. Both sides have wronged each other, this to me is crystal clear. It's time to start acting like grown ups and work out their differences through peaceful dialogue and diplomacy. It is my belief, that the entire world, is counting on it. Israelis want security and recognition, and Palestinians want a life of dignity, respect, and self perseverance that has been non-existent in their societies since losing their Palestinian State in 1948 to the creation of Israel. It is obvious peace has to come with compromises from both sides. Here's a Times article on the current Israeli - Palestinian situation

May 16, 2011

Nursing Homes and Health Coverage

American nursing homes and home care agencies were the focus on the front page today, of an article I saw in the New York Times. It was disappointing to learn the fact that most American Nursing Homes and Home Care Agencies were not providing health insurance to their workers. If that wasn't bad enough, it was revealed that many of these workers are paid so low that Health Insurance plans offered for individuals, was too expensive for them to obtain on their meager pay. According to this article today, of the workers providing hands-on care to nursing home residents, 1 of 4 employees has no health coverage whatsoever. For those providing care to people with needs, at their homes, only 1 out of every 3 has coverage. I see this as a paradox of sorts when I thought about it. In America, there are estimated to be 90-100 million people belonging to the baby boomer generation. This generation represents the population increase that is due to a rising birth rate several years directly following the end of World War 2. Soldiers around the world returned home after the end of the war, and began settling down and raising families. This generation is now beginning to retire. As a matter fact, they will be retiring in mass over the coming years, as they cross 65 years of age. Many of these Americans need special care. It is common that the older you get, the slower and eventually, weaker you become. Having a set of Americans dedicated to caring for our aging population, is not only a job, its a social responsibility. Just like an infant can't care and protect for itself, there will be many elderly people in the same situation. We should not terrify them that a society with morals and family values as is so often proclaimed, will forget about them and the people who step forward willing to serve their unique and individual needs, will be forced to find higher paying jobs just to keep up with the rising costs of food, gas, and basic materials. As costs rise, so should salaries and benefits!

Pay Healthcare Workers DECENT!

rising costs and stagnant wages not fair to the American Worker
I use to hear people say, "America is the place where all your dreams can come true." Although I still believe this to be true, I think American can do a better job of not making that dream feel so out of reach for millions of Americans. I salute full heartedly those who work in healthcare and in particular, to help and provide for some of the most fragile citizens who need it most, the elderly. Workers should be paid enough to not only buy their own health insurance, but to also expect that this industry will be protected, meaning salaries will rise with inflation. When you get paid $500 every week, but over time that $500 buys you less and less things because of rising prices, than you aren't really getting paid that amount anymore. That $500 is not as valuable because it does not buy you as much, therefore in a sense, you are actually getting paid less. America needs to wake up and start taking care of not only it's elderly, but also its workers. We have way to large of a segment of the population who are becoming seniors all at once, to play around with this issue. Bold action needs to be taken and this issue must be addressed with intelligence, compassion, and the desire to do better and live in a fairer, kinder world. America is falling behind on this issue while the problem continues to advance forward. There will be a head on collision, I'm just hoping the problem is met with prudence, rather than incompetence. At this point in time, I have my fingers crossed.

tax cuts for the wealthy sign
President Obama's healthcare legislation is suppose to address this by making coverage options that are more affordable then the current ones that exist. This might address providing coverage, but the low pay of American workers proving services to the elderly, must be cracked opened and examined. I mean, is it me or is it ludicrous to have given the wealthy large tax breaks recently that's going to take $700 billion dollars to finance (borrow so essentially it becomes part of the deficit), yet when it comes to something like the well-being of our seniors and the people who care for them in nursing facilities or that provide home-care, America would rather cut from this sector then enrich it and make it better. I watch as that sector continues to inch and claw its way forward. just for survival. Instead of enriching the bank accounts of a selected few with these borderline corrupt political policies which at times sound like outright lies (such as suggesting the economy will grow if we borrow and give it to the rich!). We should instead as a nation, focus on enriching the lives of our most vulnerable and most important segment of the population, the seniors who have carried the world on their backs for the next generation, me, us. They deserve better and the brave and heartful people who serve them, definitely deserve better. I hope America gets this one right, because we are going to be facing a catastrophic failure of how we care for nearly 1/3 of America's population who have started retiring in droves. America will have to face this reality and if it is not well prepared to meet this challenge head on, I think seniors lives are at risk and America's reputation as a compassionate and giving society able to care for its members.

May 11, 2011

Trading Stocks in Upward Trends

Stock Market Buy and Sell Prices
Trading Stocks in Markets Trending up has been my favorite time to go long on a position. As I was watching the markets today (which generally fell) I thought of an analogy between nature and a discovery I had while trading stocks. I wanted to make sure I captured it in a blog posts so others (including myself) could read it at some future date. In the beginning, nearly 8 years ago, I read books on investing, and did not have any success in the market even with what I thought the books were recommending. It would be much later that I would realize the best and usually most important things I learned about trading the markets, was in actual trading. You can read a book about how to play basketball, or how to golf, but until you get out there and make your mistakes (that are great opportunities to learn and grow from)find your sweet spots, and establish your own systems and preferred approaches, you won't truly understand the game. A book on Teaching basketball may not explain properly how decision and emotions can effect a players performance directly. Just like an investing book might not tell you about the different ways the markets are manipulated, but being in the field long enough, proves to you this happens on many occasions, and with the advent of computer high speed trading, will only continue to find new ways to transform and disguise itself.

Ok, back to the analogy I had today that I mentioned above. I have watched the markets long enough to recognize stock prices in general have many of the same properties as moving water. For example, in a market that is strongly rising, signals that investors are entering the market, putting their money to work, and ultimately sending prices higher. In other words, A flow of money into the stock market, raises stock price values (more investors are betting on those companies, giving them more value) So if you put in a Market buy order, and the execution price ends up being higher than when you placed the order, I've learned this is a good thing! You want to catch the current of money that is pushing stocks higher. In this regards, I thought of a flowing current of water like a stream, flowing in one direction, with me standing on one side with a stone in hand. That stone symbolized my desire to buy a stock and throwing it in, represents that I made a Stock Purchase. The moving stream represents the rising stock market. When I cast my stone into the water, the current should immediately pick it up and carry it forward. In a stock buy execution, you enter a buy order, but your execution price is higher because that stock is rising. I remember trying to get the best price for a stock in my younger trading days. If the stock was going down, I thought I could get a bargain and buy it while it fell in value. BIG MISTAKE, This has lost me money, and regularly enough to help me learn and change this habit. I highly recommend out of advise and personal experience, do not buy a stock when its going down!! That's like throwing your stone into the moving stream of water that is moving in reverse, and saying, "Hopefully it will change direction." I learned that hope is a distraction and not enough to make a good move. You have to be precise, tactful, and even clever. If you want the current to carry your stone forward, you must wait until it's moving in the right direction. In other words, if you want to buy a stock - believing its price will go up, You have a much better chance that it actually rises if the "current" of money flowing into the market, is strong, moving the stock market in the right direction.

A Little Insurance for Rising Stocks

rising stock prices in the Stock Market
I use to miss opportunities all the time waiting for a stock to drop in price so I could buy it. Many of those same stocks never fell to the price I was waiting for, but instead ended up taking off in upward directions. Remember if the stream is moving forward, don't try to throw your rock behind it, so it will pass by you as its carried by the stream, just throw it in, and watch the current immediately pick it up and propel it forward. Wen I place market orders, I am pleased when I see the actual execution price is a little bit higher than when I placed the order. To me, experience has shown me, this is a good sign, this means your stock is already moving down stream. I know it seems counter intuitive, believe me, I know. My thinking about investing and stock trading has grown exponentially, much of it through personal experience. I remember when that would have sounded counter intuitive to me too, but that was before I really started trading a lot. I have documented my trades, my thoughts, ideas, and so forth into journals that I can study from later. Some of my best ideas have come from reading these notes and records weeks or months after I've written them. One things is clear to me from looking at my documentation over the years: Look for the long moves, the rises that move 20 to 40%. Buying a stock because you think it will go up fast in a couple days, in my opinion is dangerous, and not worth the risk. Find a stock that you believe can rise a good amount in several months. I have found for me personally, this approach tends to deliver more favorable outcomes. Worrying about small fluctuations or trying to catch fast rises, is misleading and very difficult. It can also take you away from the study of what's important, such as which industries are rising or leading markets higher and which companies you should be watching. I have begun organizing and sharing much of my documentation on a new website about investing that I'm working on. I continue to add to it everyday. Take a look!

May 5, 2011

Discoveries in Stock Trading

Never Trade when you have had a lack of sleep. When you exit or enter a position, and it goes against you, your ability to recall your research, and observation and study of market conditions, become highly impaired and your awareness and focus time is diminished. Of higher importance in making this point, lack of sleep when trading the stock market impairs your ability to properly analyze your emotions.

If you buy a stock believing it will go up, and shortly after you buy, it immediately goes down, It is much easier to think clearly having enough sleep when you have to face a decision and analyze several factors quickly, and as accurately as possible for the best outcome in a given situation. It's not easy to think fast and through emotion - confusion, shock, dismay, or anger when your brain is not functioning at near full, or preferably full capacity. The Trading Legend Jesse Livermore wrote about this very subject. I have chosen my favorite quotes of his related to the Health and Trading the Stock Market. What you have to observe and interpret include things like, what are the major index levels, what is another company's stock in the same industry doing, what are the volume levels - is the decline because investors are generally selling at the same time, or is it because the market is in a reaction after a strong rise. It takes strong thinking to recognize what's happening in the Stock Market. Often the true reason for a heavy rise or fall in the Stock Market, doesn't come out until weeks later. A Stock Trader always has to consider this possibility as well, and act upon instinct and experience for making Trading decisions, under these circumstances time and time again. Sleeping enough helps the thinking process stay sharp for stock trading.

Sleep and Stock Market Success

I have known about this rule for many years now. I remember staying up until 1:00am every night reading headlines, watching the Asian Markets or the European markets (Europe's Markets open 12am if you're in California). I would stream Bloomberg news from the internet and listen, watch, research, and document my ideas and potential leads for what stock to pick or what industry to focus on. I would then go to sleep for about 5 hours, wake up at 5:30, start reading the Wall Street Journal and New York Times (I loved that they delivered the paper as early as 4:30am) looking for potential leads or companies that I could watch throughout the day, looking to see how or if it reacted to news, what volume levels would be like trying to quantify if at all possible, the added attention a news story or article in the paper could exert on that stock's trading volume for that day or even that week. Livermore who I mention above, also had plenty to say on Newspapers.

As a stock market operator who worked in secrecy, he would later reveal how he used newspapers in relation to his Stock trading skills. read about how this extraordinary Stock Trading Master Used Newspapers in relation to trading the Stock Market. Each morning as the market, opened, I felt well prepared for the trading day....or so I thought. I was right about a lot of things I thought the market would do, but I was also wrong on a lot of things I thought it would do. When I made profitable trades, I was content, but that was not how it was in the beginning! Feeling like you're prepared and then losing money in your trades can be discouraging. I learned that having enough sleep was part of being prepared, something I wasn't doing and was making me unprepared to trade in the Stock Market. I do know now!

When I made unprofitable trades, I was confused, and unhappy with myself. What I came to realize was, I was a bit sleep deprived, and although well informed on market events, news, analyst views and so forth, I was not getting enough sleep! This effected my Trading, when the market went against a trade I made early on, I would hold on and just watch it fall, not sure what to do. I remember even telling myself, it will rebound, it will be back up by the end of the week. Well, most times it wasn't and I lost much more by holding on too long. It was a long learning process but let me just say this, When I started going to bed earlier and sleeping more, I felt more refreshed trading or observing the market. My thoughts came to me easily. My observations had the capacity to push my mind in to analytical mode without the panic or confusion. My recall of all my reading, studying, and past trading experiences, were right at my finger tips. I could use them to make better decisions. If a stock was going against me, and I did my mental calculations and saw I had chosen wrong, this stock was going to fall... then unlike before, I would Immediately sell! This Market has pit falls! it is difficult sometimes to spot them and may take a trained eye, but it is even more difficult if you haven't rested your mind and body. Your memory recall, intellectual faculties, power to analyze, ability to make decisions that may be counter to popular thinking or even your own emotions, and your overall awareness and attention level are very powerful tools in your arsenal. You want to make sure that they stay sharpened and well maintained so when they are called upon, they will perform to the best of their ability. The human mind is the greatest of all tool, and must be taken care of too. Healthy food and plenty of sleep are important!

May 1, 2011

Overpaying for Shares in the Market

The notion that common stocks with a strong record of earnings and sales growth reported nearly if not every quarter, will continue to rise and lead the stock markets higher may be absolutely right in a general assessment and view. However, this does not change the reality that investors can pay in full or even overpay for a stock position in a certain company. When an investor is considering taking a position in a company's stock, he or she expects that the current prosperity and future prosperity of the company, will carry the stock price higher as well. This could prove to be true, except many investors enter at a time when the future prosperity expected in that particular company has become apparent to many investors, and is already reflected in the stock price. Recognizing that a stock's price and its calculated future increases in value may not be fully reflected in the price, is the art and skill that have made investors past and present, very wealthy individuals. Spotting a stock price that's deflated when it can be higher, requires research, wit, intellect, and lots of detective work identifying and monitoring it.

Investors need to realize something that I read early on but didn't fully comprehend until building hours of market trading under my belt. When a large company grows, companies that have been around for awhile and are well established, it is much harder to record rapid growth than a newer up and coming company. Investors need to acknowledge both for mid-size companies (the SP400 Mid-cap Stock Index defines Mid-cap as a company with a market capitalization somewhere between 2 and 10 Billion dollars) and also for large size companies (ones with market capitalization over $10 Billion) rapid growth can not continue forever. When large companies have experienced great expansions over the decades of being in business, that growth pace inevitably becomes harder and harder to achieve. I believe it's for this reason that when I watch my list of pre-selected stocks and also the performance in the trading day of the Three major U.S. Stock Indices: the Dow Jones Industrial Average, Nasdaq, and S&P500 Index, that I notice reoccurring patterns that have become predictable over time. The Nasdaq performance throughout a trading day, always seems to indicate what the Dow Jones and SP500 indices are going do. The Mid cap SP 400 index always seems to follow what the other major exchanges are doing. I have noticed recently however that for the year, the Mid Cap index is up 23% vs the Dow Jones Indusrial Average gain of 14%. I am actively looking and researching companies in the mid cap size because I know there are good possibilities for growth at this level for a company and could also mean a rising stock price.

Nasdaq Leads Dow Jones and SP 500

Generally rising markets, sends the Nasdaq higher than the other two exchanges at the end of that trading day. The reverse is also true. If the General market direction is down, the Nasdaq will typically fall by more than the other two Stock Indexes. On days however, when I see the Dow Jones trading in the green (a level above the previous day's closing level) and the Nasdaq trading in the rad (below the closing level of the previous day), I have observed that about 80% of the time, if the Nasdaq stays in the red, the Dow and SP500 will end up closing the day in the red as well. I have observed that the same is true in the reverse situation. If throughout the day I see the Dow in the red and the Nasdaq in the Green, 90% of the time, the Dow pulls up and ends the day in positive territory (in the green). This is not something you can find in books. I didn't, the way I learned this was sitting in front of my trading screen day in and day out until patterns began to emerge. As I observe these patterns, I realize they become useful tools to forecast future movements both in an individual stock, and in stock market levels in general in the U.S. and Globally.