InvestorGeeks

What Does it Mean to Lack Liquidity?

by Christian

The market is in turmoil and BNP is complaining about liquidity issues. I went back to look at an interview from Scholes (author of Black-Scholes pricing) for an opinion on the situation.

As a result, “decision time becomes elongated” and speculators hold back their capital just when their services are most in demand. The lack of liquidity itself then becomes a factor in asset pricing, leading to swift, sharp drops in values.

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Trading Badly

by Jason

I’m in a funk. You ever get to that place where you want to reverse every one of your trade ideas? I’m there now.

I sell GRMN at $81 and it goes to $103. I buy BBBY for some reason at $36 and it goes low. Then I watch it bounce, set a stop loss that gets hit at $34.74, and watch it have a nice up day today. I sell EBAY in a whipsaw too, and now it’s jumping up like I thought it was going to two week ago.

I think the main mistake here is I’m being conservative, trying to avoid losses. GRMN looks like it’s dropping, sell… EBAY is dropping, sell. The other part of it is that I was nearly fully invested when the stocks started tumbling a couple weeks ago. So “reinforcing” my position was a trick out of my disposal. (That’s my own fault.) I aslo was pretty frustrated for getting in BBBY early and just wanted to get some distance from that trade.

So what do you guys do when you make big costly blunders like this?

Patterns in Random Numbers

by Christian

At iTulip they had an interesting posting regarding the currency markets.

“We are fast reaching a stage at which elegant quantitative models won’t determine who survives, in fact, those that tend to rely on models in this environment may be most likely to be shining shoes sooner rather than later.”

Really, you mean you CAN’T PREDICT? Who would have thought? Seriously, I have been talking about this time and time again (1,2,3). I might be a newbie at this, and I might not have all the credentials of a full time quant. BUT, after a year of doing algorithmic trading I have learned that you cannot and should not predict the market.

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If I Were Bernake What Would I Do?

by Christian

I was puzzling and thinking if I were Bernake what would I do? Many are crying raise the darn interest rates. Many are saying lower to give the companies a break. Bernake though does not strike me as an individual that leaves a statement. He strikes me as an individual that tries to do the right thing.

So if I were Bernake and his personality here is what I would do:

1. Drop interest rates. Yes you read that right drop interest rates. He wants to do the right thing and give home owners a break. But he is not dumb.
2. Tighten liquidity quite a bit. Let LBO’s and the likes squirm and struggle.

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The Bernanke Put

by Phil

Fingers crossed.

He should moderate his language, open the possibility of a rate cut, and send the markets higher.

I hope he keeps his mouth closed, talks about inflation and the US dollar, and keeps rates right where they are.

Wishful thinking? Perhaps. However, I just have a vibe that he isn’t the soft touch that people think he is. My impression is that he just might suprise a few people.

Time’s up Bernanke! - are you made of steel or of butter?

Good luck,

Phil

PS In what is becoming a theme, here is another idiot piece by Ben Stein, and here is another piece about bankruptcy and an instant 7000 people out of a job. Of course, you need to make up your own minds.

This post is for entertainment purposes only. No part of this post should be construed to constitute investment advice. The author is not an investment professional and assumes no responsibility for any investment activities you undertake. Prior to undertaking any financial decisions, you should contact an investment professional.

Bear Market? and Go Fly a Kite, Jim Cramer

by Christian

I think Jim Cramer lost it, and I don’t quite understand what Jim Cramer is recommending.

In his “Stop Trading” segment on Street Signs today, Cramer said the nation’s central bank is “asleep” and should immediately “relieve the pressure” on financial firms and the nation’s home owners who are facing big increases in their mortgage payments as ‘teaser’ rates expire.  Many thousands will “lose their homes,” he warned. “This is not the time to be complacent.”

He predicted a big rebound for the major stock market averages if the Fed does indeed lower rates

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Managing Multiple Strategies

by Jason

So the other day, the big sell off started. And it’s arguable that it’s just beginning. Spurred on by Phil’s post, I considered selling out of everything.

It made sense: I thought everything was going down, so I should sell.

But it also didn’t make sense. One thing I’ve pointed out before is my struggles with trading/investing using so many different strategies. It’s easy to mix them up. That’s why when I make an entry, I need to know what my exit is… and stick to it.

The clearest no-no, which I avoided…