mkt

Of all the talk here about buying the S&P at various levels I have to make this comment.... It's a load of crap if you think you can trade a large index future and make a profit. I mean come on - you think you get "feelings" and can technically trade??


That guy who is posting here talks about learning how not to loose his money. This is correct - he is up against professionals who have boat loads of money, tricks, and better information than him and have a great number of "set ups".


Guess why day traders did well for 97 to 99 cause they were usualy long and the mkt rallied. guess why they are almost all gone now - cause they were usually long and the mkt sold off. Next victim please...


Even for individual stocks - do you think you can know more about a stock then the investment bankers who do business for the company?


No where on this board do people talk about the economy, global trends or changing demographics - the real drivers of the markets.


So I chuckle to myself every time I see a "buy S&P right now" line. If you really could do it you'ld be quietly doing it and not here wasting your time.

This idea of professionals having better information is pretty thin anymore. And besides, your point only holds if they have 100% of information. If they have a more realistic 3% of information, and they price it in, then of course you cannot use that same information to make a profit yourself, and any movements based on that information will appear random to you.


Why would I be quietly doing it? I certainly don't post every trade I ever make, I am pretty quiet in that respect for the simple fact that it would be so easy to lie on the Internet, as so many people do. If my expectation is 1 point a trade, I could certainly fudge a half point each on entry and exit. So even if I did post every trade, and I gave the exact reasons, the chances that anyone would believe me, much less give me any more credibility than you do, are slim to none.


As it is, I rarely post trades, and when I do I only post counter-trend trades where I can use stated limit-order prices which the market trades through after the post, and prices available market-on-close. Meaning, I only post trades where I can't cheat. If I ever miss an entry or exit "timestamp" in the forum, I expect to hear about it. I never just say "Yeah, I bought that."


There are published returns to investors generated by individual systems traders all over the place. But like Richard Dennis said when he made $200 million, you could publish the exact buy and sell times in the newspaper each morning and nobody would pay any attention. That's half the fun!


Besides, do I sound like a guy who wants to stare at a screen in some little room all day, and make $20 million dollars a year, like other people do who can do what I can do? (I had written a bit longer paragraph here about my personal motivations, but I edited it out


And of course, you can't help but make money in a bull market, I learned that a long time ago. But the growth and decay of populations of day traders responds to a great many more market-microstructure changes than just whether the market is rising or falling.


And people talk quite a bit here about global economics and such. I'd name names, but there are enough people enough more on top of it than me, that I'm afraid I'd be rude and leave someone out. But, for example, here's a post on demographics that got me in trouble:


http://www.twoplustwo.com/cgi-bin/ne...s.pl?read=1555


Of course in my opinion, when you start trying to talk about global economics, is when you really do choose to butt heads with the smartest, best capitalized people on Earth. The number of people in this world whom I believe can make "supernormal" returns timing major economic shifts using popular theories can be counted on the fingers of one hand. So, you see, we all have our own silly little prejudices, in our own little worlds.


And we all have our own motivations. I admit I am probably wrong in my assessment - since my strengths are fairly narrow - but I don't think that posting on this forum is a waste of my time. Not that I don't waste a lot of time, mind you, this is probably just less of a waste, relatively speaking


eLROY

This is just getting ridiculous, where your post has 5 views and my post has 10 views, meaning you are probably reading my post over and over.


So tell us about your economic take on the current global situation, and what it portends for stocks, already!


After all, I gave you a good chuckle, now you owe me one. Let's hear it. Where are stocks going and why??


eLROY

yes elroy i read your post 10 times. (-:


Q4 rally for stocks preceded all of the positive economic news we have been seeing.


This month sell off in bonds is saying the bond market is a believer as well.


The yield curve is pricing in 250 bps of tightening in the next year. (similar to 94ish)


Enron stays with us as balance sheet fraud still has to play out (note qwest story about the swap it did with enron)


Telecom will continue to melt down


All thats left are profits to be realized.


With the S&P trading over 20 times earnings that is a tall order for companies.


I see stocks in a holding pattern for several months. If last Q4 rally really saw "6 months ahead" then we are getting really close to that and we have not seen the profits yet. SHOW ME THE MONEY


This month high yield indices are up 2.3%


I still like high yield for the next quarter.


Just my thoughts -

How can you say that all of Wall Street has 3% of known information out there and thus what they've priced in is irrelevant?


If Wall Street only has 3%...then how much realistically can someone like you have?


I'd really like to hear your spin on how Wall Street is only pricing in 3% of known information? How did you arrive at this number? What is the 97% they aren't pricing in?


What I'd also like to know is how long you've been trading and how your techniques have varied over the years.

I can tell you, from experience, that when we get into this area of defining "all" information, which begins to involve asymmetric information, and geographically scattered information - and the question of "known by whom" that follows naturally from our definition of the term "known" - that some people's propellers are going to be spinning in a vacuum.


The simplest example I can give of information which is not known on Wall Street is if I decide, for the stubborn sake of making a point in this post, to actually sell short 500 shares of Amazon.com stock on Monday at the open, buy it back 15 minutes later, and close out the account. It is true that people on Wall Street can make assumptions about the general ability of people to buy stock, by having cash, and that they can assume that rather than being on Mars, I share some of the conditions affecting, and am therefore correlated to other people. And they can also assume that people going outside of their normal pattern of investing, as with a 401k, might create some cost to them, and my quick trade would be out-of-pattern for me.


But what is more signifcant, and has a greater impact than any of that, are their assumptions about other people making such assumptions. Meaning, most of the missing information is not so much in the physical world, involving the quanitities of known petroleum reserves, and the cost to find more for instance, but rather exists in the form of the contents of people's minds. Nobody knows how much new stock investors will demand next year. But how much they demand, and how much is supplied, are both contingent on the volatile contents of the minds of decision makers right now, and almost any amount can come into existence.


I called 3% "realistic" to make a point, and to contrast with 100%. The amount of information that Wall Street is not pricing in is 99.99% with about a billion 9's, if you assume the entire data reflected in the universe, which will all be brought to bear at a single point by the end of time (or at least some subset). I don't know how else I can put it, except to say that people on Wall Street just don't know jack any more than I do. I guess a better way to say it would be that no matter how much information you price in, the amount not priced in is still infinite.


My trading has changed in that in that it has gotten worse, as I have lost interest. I have found easier ways to do more reliable things, which have less of a chance of an enormous profit or loss. I don't try to do remarkable things any more because I don't have to, and some days I am sad about it. This has been about 10 years total, about half of it spent focused on trading. I have never really enjoyed the act of trading, it feels weird in my brain. In short, when I first started trading I was just latching onto a way to make some money that was open to an oddball like me. I guess my skills and ambitions have moved in two totally unrelated directions.


My first trading was as a SOES bandit, which was as easy as using cake mix to bake a cake. SOES banditing was just the world's fastest, easiest form of trend trading. In the sub-period of my life when I have focused on S&P futures, I have gone from being an utterly clueless idiot saved by randomness, to being a freak counter-trend trader, to being a bored and disillusioned trend-trading adherent. What I am much more fascinated with than trading are 1) the processes by which scattered bits of information are brought to bear in the ticker, the quantity obtained, and physical factors which could increase or decrease this quantity and rate, and 2) how people evolve strategies and habits, and how they inter-operate.


If you had spent your life studying a player piano, would you want just to sing along, or would you want to start monkeying around with the apparatus at some point? I would like to teach it to output less random songs that are easier to sing along with. Really, the condition of that piano is totally volatile and fascinating and in flux, but I don't think anybody else on Earth is even watching.


eLROY

You have to ask yourself whether all the information that Wall Street doesn't know (your what are people thinking and expecting) really affects the market. I think you overestimate the effect individuals have on the market.

In any case, if you are bored with trading I hope you made boatloads of money with it before it got boring.

You said I overestimated the effect individuals have on the market. But at no point did I make any statements as to the relative magnitude of the impact of individuals on the market!?


All I did was illustrate where a decision made by an "individual" (whether that "individual" is Peter Lynch or a gas pumper who decides whether or not to turn his savings over to Peter Lynch) cannot be known or predicted by Wall Street. And the total supply and demand for stock at various prices is the aggregate of the individual demands by individuals.


Now if all individuals were non-correlated, there wouldn't be a problem. But given that there are only two sides of the market to be on, it is very easy for everyone to be on the same side.


In any case, your whole "the-effect-individuals-have-on-the-market" idea is hokey. I don't know what exactly it is you assume I picture, but I can guarantee you it is neither some sort of conspiracy theory where the big players fix the prices in boardrooms, nor is it something I came up with the other day sitting at the McDonalds drive-thru.


So what I am wondering is what, exactly, you would say does "effect" the market, John?


eLROY


P.S. If people on Wall Street know jack, then why didn't all the individual junior investment bankers short Nasdaq 100 futures at 5,000, and hedge their own anticipated job loss???

sure maybe, but what about those that dont want to adjust every quarter so so. and want to hold until they see a reason to move. arent bonds looking poorly for out a year or two as interest rates will certainly take its toll on them.

Believe me Wall Street doesn't know as much as some people think. For my company we get to deal with 13 different investment banks and guess what, about half of them are flat out idiots! They only know what is going to happen with us when we tell them and at that time any investor can be listening in as well. We have one guy calling us up all the time and all I hear from him are four letter words, questions about how easy is it to get a girl in a Vegas casino, when he is coming out here so he can buy us dinner (and hope we spill the beans accidently), and finally he gets around to the fact that he doesn't quite understand how to model one of our businesses anymore since its "sort of changed in the last quarter" and if we can help him out with that. With Reg FD our answer is quite simply "NO". And this is the main helper of one of the more followed analysts on Wall Street. So you are going to tell me this guy and his firm have a big edge? Yeah right, hardly. I have been saying for awhile there are two edges. One to the guys that trade well, who read the market well from a supply/demand standpoint (people like Leroy and Dr. Bill). I am not one of them but I know they exist. The other is the one who looks big picture as I do and understands just about everything is driven by economics sooner or later. Why else would I harp on the things I do, even though they really aren't about revealing where the best trade for tomorrow is? Simple answer to this all is to understand the rules of big picture thinking and then either apply it for longer-term investments or use it to narrow down your potential shorter-term investments and stick to ideas that don't go against wiser long-term thinking. At least the way I see it.