Any stock traders on the board?

[cantdrv55]

I went to a personal financial seminar today and sat through a sales pitch by Investools. Their product replaces several stock research tools as their website will have info on the many parameters one should consider in order to make informed decisions. They also provide classroom training and, actually, you'll only be able to use their web tools after you've completed the hands-on course. The cost if high ($3K) but I thought it would be money well spent if they can deliver on their promise. Just wondering if anyone here has tried Investools or is even a current subscriber. My fear is that the info they'll provide will be prejudiced towards certain stocks or fund families. BTW, I don't think you can buy/sell through them. Just a research site if I understood the pitch correctly.

[widebody911]

My philosophy on stock 'help' is if they really knew the secrets, they'd be out using that info, giggling quietly all the way to the bank.

[jyl]

You can get lots of information about a given stock through free sources.

For example, here's what you can get from Yahoo!Finance:
- quotes including real-time and options
- charting, including relative performance and the main technical tools
- historical price and volume
- short interest, insider trading
- news
- SEC filings
- valuation multiples, financial ratios
- consensus EPS and revenue estimates
- EPS surprise and revisions history
- holders
- summary financial statements (go to the SEC filings for the detailed financials)
- industry and competitors

I'd be surprised if Investools provided significantly more information than that. Well, maybe it provides some screening tools that Yahoo!Finance doesn't. Actually, looks like Yahoo!Finance provides some screening too: http://screen.yahoo.com/stocks.html

If you choose the right brokerage, I believe you can also get free access to many sellside analysts' reports.

Most companies now make their analyst meetings, quarterly earnings call, and other presentations available on their website, often via webcast or at least copies of the slides used.

At that point, you have access to more or less the same stock-specific "public information" as the professional analysts use.

As for software tools, the most-used one is Excel (for building models). The others (Bloomberg, Bridge, etc) are primarily quick and convenient ways to retrieve and chart data, the same data is mostly available through the free sources mentioned above. I mean, those tools do more than that, but most analysts don't use those extra features much.

Another type of information is macro-economic. Interest rates, currency rates, quarterly/monthly/weekly economic data releases, etc. This is mostly available free on the web too, often as news on Yahoo!Finance, or if you want details then from the government agency's website.

A third type of information is industry-level data. Some of this can be gotten from free sources - for example, if you want to know monthly ocean containers inbound to West Coast ports, you get that from the ports' websites. Some isn't readily available because it is subscription-only - for example, if you want to know monthly microprocessor unit shipments and average selling price, you need to belong to the relevant industry or get the data from someone who does. But often that data will be contained in sellside analyst reports anyway.

So how do you know what to do with the information? I have no idea how good the Investools class is. I did browse their website a little. I'm skeptical of stockpicking "systems", for various reasons, but I have never really studied them so I'll keep quiet on the topic.

I know there are some very good books on company valuation, fundamental stock analysis and technical analysis. I'm not sure if there are good books on the bigger subject of stock-picking and the even bigger subject of investing, but I imagine there must be.

Some tried and true books that most professionals have read:
- Security Analysis by Benjamin Graham
http://www.amazon.com/exec/obidos/ASIN/007141228X/qid=1100917269/sr=2-1/ref=pd_ka_b_2_1/104-8516509-0382357
This is the classic text on fundamental analysis. Written over 60 years ago.
- Technical Analysis Of The Financial Markets by John Murphy
http://www.amazon.com/exec/obidos/tg/detail/-/0735200661/qid=1100917269/sr=1-3/ref=sr_1_3/104-8516509-0382357?v=glance&s=books
Good basic book on TA. I'm not convinced it pays to get any more "sophisticated" than this, for 99% of us.
- Valuation by McKinsey & Company
http://www.amazon.com/exec/obidos/ASIN/0471361909/qid=1100917219/sr=2-1/ref=pd_ka_b_2_1/104-8516509-0382357
How most every beginning analyst learns to build valuation analyses.
- Financial Statement Analysis And Security Valuation by Stephen Penman
http://www.amazon.com/exec/obidos/ASIN/007253317X/qid=1100917553/sr=2-1/ref=pd_ka_b_2_1/104-8516509-0382357
This is an unusual book. Shows you how to build a working Excel financial model of a company, how the basic ratio and return analyses work, and danger signs to look for in the financials. Expensive book but worth it. I took this class from him when he was still at Berkeley.
- Two other books that are very interesting, not "how-tos" but very educational, are A Random Walk Down Wall Street by Malkiel and Why Stock Markets Crash by Sornette.

Unfortunately, most things in life can't be learned from books. Stock investing (or mutual fund investing) is like anything else, you have to actually do it, make mistakes, lose money, feel stupid, and painfully learn little by little what you are good at and what you are not good at. Control your risk, stay diversified, make small bets at first, have a stop loss discipline.

Also, in my opinion the most important thing is saving, next is asset allocation (what % stocks, what % bonds, etc), and actively picking stocks and mutual funds is last. Frankly, I think that passive (index) funds are a very good way to go.

[cantdrv55]

As usual John, thanks for the advice. You're a wealth of information on many topics. The stock investing I do now is passive but I thought I'd try my hand at beating the street. I'm a saver and re-evaluate my asset allocation annually. I should probably do that more often but my investments have done OK so far, just not stellar.

[304065]

LOL, Valuation: Measuring and Managing the Value of Companies

I always laugh when someone new to Wall Street starts talking about NOPLAT. . .!

[jyl]

Ah ha, but you have apparently missed the innovation of the bubble years. When you buy companies that don't make money, you need to talk about Net Operating Profit (Loss) After Tax . . . .

[jyl]

Here's something to think about. What's interesting in this picture?

[jyl]

Also - gee, I must be bored tonight - here's an interesting website I ran across. Concise readable articles on current economic topics including the daily data releases.

http://www.bmonesbittburns.com/economics/

[LeeH]

Originally posted by jyl
Here's something to think about. What's interesting in this picture?

The peak horsepower (all 50 of them) are at the low end of the RPM range?

[cantdrv55]

Originally posted by jyl
Here's something to think about. What's interesting in this picture?

So what's the red line?

[LeeH]

100 day moving average

[cantdrv55]

Originally posted by LeeH
100 day moving average

OK, I'm thick. I still don't understand what's interesting about the graph. AMD is tracking the MA of what, the market in general? If so, is AMD in the S&P?

[jyl]

The red line is the 100-day moving average of AMD's stock price.

A few years ago, a friend and I were in a long boring meeting. I had my laptop, so we pulled up the charts of numerous stocks (mostly tech names) and compared the success of sellside buy/sell recommendations to the following mechanical rule: short the stock when the price falls below the 90-day MVA, long the stock when the price goes above the 90-day MVA. (The 90-day MVA line will be almost the same as the 100-day MVA line in the chart shown) In most cases, the mechanical rule worked better than the average sellside analyst's recomendations, and better than even the best sellside analyst's recomendations. In many cases it worked better than many large investors had done on those stocks.

Anyway, MVAs are one of the basic tools of technical analysis. And the most useful, since there's not much subjectivity involved - you can easily program a computer (or train yourself) to recognize a MVA cross-over, you can't easily program a computer to recognize most other so-called "technical patterns".

If you find this interesting, you should buy that John Murphy book. You can probably find it used and cheap. It's quite a good read. Although actually applying most of the stuff is very hard - can be costly too :-)

[jyl]

Originally posted by LeeH
The peak horsepower (all 50 of them) are at the low end of the RPM range?

Its a torque chart, silly . . .

[RoninLB]

IMO.. the stock market buyer is at the low end of the food chain. The people who took the company public made the real bucks. Trying to "play" the market is competing with pros. The logic of value gets tossed around like a frisbee. The long term holder in a basket, be it various indexs, whatever is the best long term shot.

that said, there is plenty of liquidity around looking for a place to bed down. Liquidity = trading & index profit potential. I'm watching RE for entertainment. Increasing interest rates, RE curve, etc make sectional crashes a possibility imo.

I think the question of xmas consumer spending should be a leading indicator. fwiw, I also believe that inflation is higher than realized.. strange scary times are a happening.

at one time realizing 3% above inflation was considered success.

[turbo6bar]

jyl, using that mechanical rule, when do you sell or when do you complete the option? Or is this an individual decision?

Comments on the effect(s) of a falling dollar on the US economy? As I understand, the falling dollar will cause bonds yields to rise (to encourage foreign investment). Rising bonds yields and rising short-term interest rates will stifle the economy, particulary the RE market. Is my view too simplistic or incorrect?
jurgen

[turbo6bar]

cantdrv155, I would lump in Investools with other investment seminars/programs. They only work if you have the ability and patience to execute. Carleton Sheets' program works if you are willing to invest a lot of time hunting for the right seller.

[jyl]

Originally posted by turbo6bar
jyl, using that mechanical rule, when do you sell or when do you complete the option? Or is this an individual decision?

In theory, switch the position when the stock next crosses the MVA. For example, using the AMD chart posted, go long AMD in early '01, sell that position and go short in mid '01, cover and go long in late '01, sell and go short in early '02, etc.

Of course, in late '02/early '03, and again in most of '04, this rule would have had you churning and not making much money. So maybe you'd say the stock has to penetrate the MVA by at least a minimum amount or for at least a minimum period to trigger a trade. Understand that I don't actually trade using this approach - it is simply the observation that got me interested in technicals.

Presumably this approach would work best on stocks that actually make big moves, rather than just churn around the same level. For example, if you look at the 5-yr charts for WMT, IBM, UPS or DELL, this approach would have generated lots of commissions and not much profit. But if you look at the 5-yr charts for INTC, SNDK, CAT, SMH, ELX it would have worked better.

What I suppose you'd want to do is to see if the approach works when you cannot predict whether a stock will make big moves, or simply churn. (Because if you need to predict, then it's not a mechanical rule!) So select 20 stocks and a past 1 year period, both at random, and back-test to see if this mechanical rule would have produced profits, after trading costs. Do that over and over until you get some confidence that the rule works, or not, and in what situations.

Comments on the effect(s) of a falling dollar on the US economy? As I understand, the falling dollar will cause bonds yields to rise (to encourage foreign investment). Rising bonds yields and rising short-term interest rates will stifle the economy, particulary the RE market. Is my view too simplistic or incorrect?
jurgen [/B]

We can make a list of the possible effects, but we don't know how likely or how large they would be. Also, many of those would counteract each other, and we don't know which will be stronger. Finally, some of these effects feed off each other, in a circular way. Without some real training in economics (none here) and probably some really good economic models, that's the best we can do.

I started to make a list, got to point 12, and realized I'm late for something. I'll think about it some more.

Anyway, my personal guess is that a steady, gradual, controlled decline in the US dollar is, net, probably positive for the US economy. An accelerating, sudden, uncontrolled drop is probably negative.

[RoninLB]

The dollar market game is complicated. What was good yesterday can be affected by unforseen events and perceptions pushing the trend to higher or lower levels. A simple clear indicator is the steepness of the yield curve. Another unspoken piece of info is the economic growth rates of countryA vs countryB. Big bond mkt players follow all that. Economic flexibility is another contributor.
ie: China's growth rates might be extraordinarly high, but it's relatively strong central command can't possibily be as flexible as the US system, therefore China's curve will be more radical on the down side.

anyone can get great info on some specific company by riding the NYC to metro RR trains. CPAs & tax lawyers know what's happening before mgt does. That herd toss inside info around in cynical jokes for entertainment. What rocker called the firm last night to get $5k for night time spending 'cause he's not allowed to have credit cards? How much does Ivanna Trump spend on clothes each month? Who had to spend $20k to back door a Flamango for his wife's supprise birthday party? Which company's controls are an audit problem? Who trying to write off $20mill in lawyer fees, with No return/only to break balls, 'cause he's pissed off at the guy who screwed him for $2mill. Who's mgt is gonna get trashed as soon as the yearly tax records are formally recorded to the feds, thus opening up the issue of bad mgt decisions?

IMO.. co news releases and co mgt interviews are constructed by & given by door to door vacuum cleaner salesmen with fancy titles.

[jyl]

Back from dinner.

Effects of falling US dollar.

One type of effect is on exports and imports. US companies who export goods will tend to see higher sales (their products will be less expensive for foreigners to buy) and usually higher profits. US companies who sell imported goods will tend to see lower sales and usually lower profits. US companies who use imported goods as inputs to their production will tend to see higher costs and lower profits. The exporters may increase employment and spending while the importers and users of imports may decrease it.

Another effect is on consumer spending. Imported goods will tend to become more expensive. Consumers may divert spending to domestic goods, or may reduce spending on domestic goods, depending on how substitutable the goods are. If there has been a net increase in employment, this will tend to increase consumer spending; a net decrease would tend to have the opposite effect.

There is an inflation effect. Higher input prices and higher consumer prices will tend to produce higher inflation.

Financial markets are affected, in complicated ways. Foreigners will tend to get lower returns on their US investments (stocks, bonds, businesses, etc) since the dollars produced by the investment are now worth less in the foreigner's currency. This may cause foreigners to sell (or buy fewer) US investments, driving values down. For bonds, lower prices means higher yields aka interest rates.

On the other hand, if the falling dollar has caused a net positive effect on US companies' sales and profits, and on US employment, this increased economic growth may drive up the value of some US investments, particularly stocks and corporate bonds.

If economic growth has increased, the Fed may tend to raise the fed funds rate and/or reduce liquidity in order to slow growth. If inflation has increased, the Fed may also tend to raise rates. If the reverse, then the opposite applies.

Investors who have bet on interest rates, currency rates, etc will make or lose money depending on how these effect play out. If enough large investors are caught in losing positions, and forced to liquidate, their trades can amplify these moves.

Foreign governments may not be willing to see the US dollar decline, since it affects their economies. They may attempt currency market intervention, or change policies in their own economies.

A lot of these effects tend to work in sort of feedback loops. For example, if higher economic growth leads to higher interest rates, and higher interest rates tend to slow economic growth.

I'm sure there are many more effects. But anyway, you can see all the complex and often conflicting dynamics. I don't think there's we can confidently say how they'll work out in any given case. Maybe if we had lots of economic training and very sophisticated economic models, we could be confident - and we still might well be wrong.

Back to my personal opinion - just an opinion - if the US dollar declines gradually against the euro and yen, and the Chinese revalue their currency too, I think it is probably net positive for the US economy. Higher economic growth, higher interest rates, lower current account deficit. Maybe it deflates the real estate bubble, probably a good thing. If the US dollar declines suddenly and a lot, I think it is net negative.