Michael Covel: News & Info.

From Bloomberg News yesterday…another myth clings to life:

“Crude oil plunged as low as $45.25 yesterday, after falling below $45.485 a barrel, said Steve Taylor, a trader with New West Petroleum Inc. in Sacramento, California, citing charts traders watch to predict price moves. A Fibonacci graph of the increase from June 30 to the peak of $55.67, identifies $45.485 a barrel as the 50 percent retracement of the rise. Fibonacci analysis is a tool, named for a 13th Century mathematician, which is used by technical traders who chart historical prices and volumes to discern trends and turning points in a market. ‘That spooked a few people out of the market,’ said Steve Taylor, a trader with New West Petroleum Inc. in Sacramento, California. ‘We saw the funds liquidating all day long.’”
Bloomberg News

Fibonacci as prediction? Not exactly: read.

Lesson? Think critically.

Take personal responsibility. No blame games. That is Mark Gilbert’s point:

“Hedge funds, already the usual suspects whenever financial markets go awry, stand accused of suffocating the very market anomalies they rely on to beat their less adventurous peers in the investment community. The “prosecution” alleges that with $866 billion chasing identical strategies, any arbitrage opportunities in markets where hedge funds are active disappear too fast for anyone, including the hedge funds, to make a buck. It all smacks of sour grapes from those who either regret not jumping on the hedge-fund bandwagon, or are struggling to turn a profit this year. Traders and investors feed on volatility. The bigger the price swings of a stock, bond, commodity or whatever, the greater the profit potential. When markets flatline, it’s harder to make money or, to use the current odious idiom, to “generate alpha.”
Mark Gilbert
Bloomberg News

Volatility ebbs and flows…just like price movement. Keeping track of volatility and responding to current levels with a direct plan of attack — separates the winners and losers.

Consider from this weekend’s Barrons:

“Margins of the sort Google generates invariably attract new entrants, so it’s no surprise Microsoft wants a piece of the action. But the process invariably squeezes margins as companies spend to grab consumers’ attention. J.P. Morgan estimates Google itself will boost research and development spending 60% and sales and marketing expenses by 54% next year. If Google doesn’t continue to keep generating top-line growth, or R&D and marketing expenses increase even more, margins obviously would suffer. Whether Google’s inside shareholders will stick around to find out is another question. Lock-up restrictions on 270 million shares will be lifted within six months of the August IPO, including nearly 40 million later this month. CNET reported last week that the Web developer who drew those cutesy holiday logos for Google’s home page registered to sell 2,495 shares for a profit of $489,000 at recent prices. If you saw dot-com stock gains go up in smoke all around you four years ago, what would you do?”
Barrons

What you should do is trade the trend. Don’t try and predict the trend, just trade it either up or down. If you get out now — what if the share price doubles? Forget price targets, they are not wise. Ride the trend as high as it can go, but just make sure you have an exit plan or go short plan at some point when the trend ends.

Number of days between Red Sox World Series triumphs: 31,459.

The fabled mathematical concept, PI (of PI R SQUARED fame): 3.14159.

Source: ESPN.

People often ask, “can I invest with trend followers through my retirement program?” Good question. The short answer is that it depends on what kind of retirement program you have. For example, Lincoln Trust offers flexible programs that go well beyond the “standard issue corporate retirement plan”.

Along the lines of “retirement flexibility”, consider:

“For a quarter-century, a Boston inventor has been obsessed with a single idea: an innovation that would give millions of American workers the chance to borrow their own money from their 401(k) savings plans using a new kind of credit card.”

Read article here.

For those that continue to be “long only” or said more directly “buy and hopers”, the following white paper is food for thought: Long Short White Paper from Deutsche Bank Absolute Return Strategies.

Thought about alternative markets recently? Consider: ‘The Futures of Risk’ White Paper from Hedgestreet.

A good map showing exchanges and trading growth across Asia.

John G. Miller’s The Question Behind the Question is a great, quick read about personal accountability. Do you ask “why” or “how”?