Investing Thread

[AfterGlow]

Investing in the stock market is nothing more than gambling. At least with craps, I know the odds on every bet I make.

 

[GenericMind]

That's a ridiculous statement. Show me a single craps player in the entire history of gambling that can produce a positive return as consistently as some traders and funds do.

 

[We are all ONE]

Man, talk about crazy. Hewitt Packard and Dell started a bidding war over this company last week when the company was trading at 10 Bucks. When Dell upped their bid to $27 last night I thought they had it in the bag. HP came out this morning with a $30 bid! I don't even want to think what kind of profit the call options on this company have seen this week. Thousands of percents most likely.

I had a job offer from this company 2 yrs ago

and currently I am long on both BAC and GE

got into BAC At $7 and GE at $12

 

[captainballs]

Investing in the stock market is nothing more than gambling. At least with craps, I know the odds on every bet I make.

If you cover your investments with options, or even cover your options with options, then you literally control the window of profits or losses that you will realize. That's not knowing the odds; that's making them.

 

[AfterGlow]

I find your retort to be ridiculous. First, I didn't say playing craps will return a consistent return. I said I know the odds on every bet. If I only made pass line and odds bets, the house would have a 1.41% edge and over a long period of time would win that much of my total craps play. Stocks fluctuate on variables that can't be predicted with certainty. Unless you're an insider, you're just gambling without knowing the real odds.

That's a ridiculous statement. Show me a single craps player in the entire history of gambling that can produce a positive return as consistently as some traders and funds do.

 

[GenericMind]

Maybe you should go start a Craps thread, then, because these two statements are completely contradictory and I don't think you know what the hell you're talking about.

I didn't say playing craps will return a consistent return

the house would have a 1.41% edge and over a long period of time would win that much of my total craps play

 

[AfterGlow]

Pardon me. I was responding to you. I meant to say craps will not produce a positive return consistently. I think you understood that.

Maybe you should go start a Craps thread, then, because these two statements are completely contradictory and I don't think you know what the hell you're talking about.

 

[AfterGlow]

That will only work if the options would pay off all you original investment loss and their cost does not exceed the profit you would make on the original investment. Betting for and against an investment that will pay off in either case seems contradictory to me.

If you cover your investments with options, or even cover your options with options, then you literally control the window of profits or losses that you will realize. That's not knowing the odds; that's making them.

 

[captainballs]

Then so must buying insurance.

Wait, I see what you're saying. It would be contradictory, completely, if you were limited in the quantity and expiration dates of the options you were buying. Buying one up and one down would be contradictory in that case and make no difference.

However, because the options market is wide and deep, an investor can tailor up and down combinations to limit the profit/loss window very precisely. In the world of real asset management, this kind of control is crucial because people demand precision even if it means limiting profits to a certain threshold. The fact that control exists means that risks can be calculated beyond just making money or losing money.

 

[AfterGlow]

Still, markets fluctuate based on factors that can't easily be quantified or predicted. When something unexpected happens, your whole strategy can easily come crashing down on you like a house of cards.

There's a reason why financial advisers will not accept payment that is a percentage of what they make for you.

 

[captainballs]

All of the strategies in investing are based around the fact that there are too many different elements influencing a stock price - and in the case of late 2007 (and before, if you count the hyper-inflated "economic boom"), sometimes these elements don't even affect stock prices according to any logic other than mob mentality.

However, a rational person who is willing to accept a complete lack of control over the underlying stock - and even an inability to accurately predict prices - still has the tools to pick out a very precise window into which his or her profits or losses will fall.

A strategy is not a failure if it succeeds in maintaining the size of this window. There is no way to not lose money sometimes. Taking the "pull the sell trigger" psychological element out of the decision-making process beforehand by deciding your strategy through your purchase of option combinations is what makes investing in uncontrollable stocks a battle that can be won consistently.

 

[Gup]

If you base your buys and sells on hunches and feelings, you're basically gambling much like the guy at the racetrack However, the growth of the market over time means on average the odds are modestly in your favor, unlike the track. So you're more likely to make money than not, but be careful not to confuse luck with skill.

Something to keep in mind, when evaluating a stock. There are people who definitely make tons of money speculating and day-trading, but I always remember there are piles of very smart people with ultra-fast news feeds and lots of connections out there, and they're all much more experienced than me. Maybe I'll get lucky, but the likely result is that I'll get squashed like a bug.

So, I have to rely on value. But suppose a company is making money hand over fist. They've got deep barriers to entry, no competition, great margins. Great buy right? Without looking at current prices, I say to myself "This is a great $50 stock!". But then I take a peek, and it's $200/share? Then maybe it's no deal at all right now, years of growth are already expected and factored into the price.

Which is not to say it won't still zoom up without regard to valuation (all those speculators!), but if I don't understand what's keeping it levitated, I stay away. I don't short much either, despite however irrational a stock's value seems at first -- there's an old saying that the market can stay irrational longer than you can stay solvent.

So a great buy is not necessarily a great company either. You need to find diamonds in the rough, and it's difficult. The Motley Fool is a great investment site that's been around a long time -- if you ignore the hype-sters and political flame-wars, there is some solid investing advice on there.

 

[captainballs]

If you base your buys and sells on hunches and feelings, you're basically gambling much like the guy at the racetrack However, the growth of the market over time means on average the odds are modestly in your favor, unlike the track. So you're more likely to make money than not, but be careful not to confuse luck with skill.

Something to keep in mind, when evaluating a stock. There are people who definitely make tons of money speculating and day-trading, but I always remember there are piles of very smart people with ultra-fast news feeds and lots of connections out there, and they're all much more experienced than me. Maybe I'll get lucky, but the likely result is that I'll get squashed like a bug.

So, I have to rely on value. But suppose a company is making money hand over fist. They've got deep barriers to entry, no competition, great margins. Great buy right? Without looking at current prices, I say to myself "This is a great $50 stock!". But then I take a peek, and it's $200/share? Then maybe it's no deal at all right now, years of growth are already expected and factored into the price.

Which is not to say it won't still zoom up without regard to valuation (all those speculators!), but if I don't understand what's keeping it levitated, I stay away. I don't short much either, despite however irrational a stock's value seems at first -- there's an old saying that the market can stay irrational longer than you can stay solvent.

So a great buy is not necessarily a great company either. You need to find diamonds in the rough, and it's difficult. The Motley Fool is a great investment site that's been around a long time -- if you ignore the hype-sters and political flame-wars, there is some solid investing advice on there.

One of the best places to start when trying to make advanced snap judgments on whether the price of a stock is too high is the P/E ratio (price divided by earnings, or how many dollars the stock price costs per dollar of earnings). It is the first number that pops up on almost all stock information links, after the price of course.

The P/E ratio is a great way to look at mob confidence in growth - that runaway "this stock is going to the moon" mentality. A big company like Wal Mart who has its fist deep in the ass of a market, operating at very low margins, and growing slow relative to its size because of its maturity will have a P/E ratio between 8 and 12. A company in a volatile sector like technology will, all else comparable, have a higher P/E ratio. "High" in general means 18+. Be wary of companies that have outrageous P/E ratios like 50+. These stocks are driven by a lot of speculation and will do great when there's good news and terrible when there's bad news.

 

[GenericMind]

There are so many opportunities that are as close to a sure bet as you can possibly get in today's market I honestly think you guys are over-analyzing this whole thing.

The markets today are ridiculous and, in the case of plenty of stocks, are completely predictable for anyone that's watched the market's behavior since it crashed in 2008. All of the metrics you're talking about may apply to a normal market, but certainly not this one. Today's market is driven entirely by fear. In almost every situation where fear has significantly driven down a stock price those who bought when there was blood in the streets have made out like bandits.

If you think I'm oversimplifying it, take a look at the stock picks I've made in this thread. I guarantee you they'll all return huge positive gains within the next year(and I'll certainly be posting here about it when they do). If it's such a gamble I'll be eating crow when my picks lose money. If I end up being right on over a half dozen "bets", anyone that calls that gambling is retarded.

 

[GenericMind]

This is what I mean:

The stock of high-quality companies absolutely tanking 10%+ in the matter of days over stupid things like a CEO leaving or unsubstantiated rumors of buyout talks stalling simply doesn't happen in a normal market when Corporate earnings are at all-time highs. These aren't companies that are going anywhere anytime soon, and these three are just a few of many examples that seem to happen on a weekly basis nowadays. All the smart money is using these huge unwarranted dips to accumulate stocks they know are worth a hell of a lot more than what they're trading at. People are still trading like it's March of '09 when conditions are infinitely better than they were. It's crazy, but it's also great for anyone that knows the World isn't going to end tomorrow.

 

[captainballs]

I totally agree that times like these are when people look back and say "that's when I really started getting rich." Maybe the world deserves to end tomorrow, but it won't. Everyday people were pyramiding credit for a while on an awesome scale, and the fallout from that will take years still, but banks will eventually start funding enterprise again when everyone who deserves to get fucked is sufficiently fucked.

 

[GenericMind]

I just wish it could happen faster because I'm an impatient fuck.

 

[GenericMind]

Update on the stock picks I've posted:

Transocean(RIG)

Pick made 7/19/2010
Price: $48.08
Current price: $66.26
Change: +37.8%


Nvidia(NVDA)

Pick made 8/5/2010
Price: $9.44
Current price: $13.68
Change: +44.9%


Almost Family Inc.(AFAM)

Pick made 8/5/2010
Price: $26.40
Current Price: $35.23
Change: +33.4%


Hewitt Packard(HPQ)

Pick made 8/12/2010
Price: $40.14
Current Price: $44.00
Change: +9.6%


Cisco(CSCO)

Pick made 8/12/2010
Price: $21.36
Current Price: $19.50
Change: -8.7%


PROSHARES ULTRASHORT 20+ YEAR TREASURY(TBT)

Pick made 8/24/2010
Price: $30.63
Current price: $36.41
Change: +18.8%

Average Return On Investments: +22.6%

S&P Index Return Over Same Timeframe: +5.8%

 

[GenericMind]

Sweet. Even though the U.S. market was closed today for Thanksgiving, the Swiss Markets were open. Transocean, being a Swiss company, trades on the Swiss market and it was up 3.3% today there. It's going to be a very good day for RIG when the U.S. markets open tomorrow.

 

[captainballs]

I tole a bitch put 12 in AAPL and 8 in RIM. That's thousands. Jones!