Michael Covel: News & Info.

Take a read of an article by Chuck Jaffe about recent stock picking fun at CNBC. An excerpt:

The story involved the shenanigans that have occurred in two well-publicized stock-picking competitions, one run by TheStreet.com and the other by cable business-news channel CNBC. TheStreet has called off the first round of its “Beat the Street” competition because some contestants apparently had taken advantage of the system by which the game was being run. The site didn’t disclose exactly how the purported cheats were gaming the system, but said all of the participants of the first contest could enter its next stock competition, and that the $100,000 in prize money will carry over and be part of a much bigger prize for the next go-round.

Food for thought about hedge funds - the basics.

From the introduction to Wall Street Speculation, Its Tricks and Its Tragedies (published 1902):

Wall Street speculation is the most stupendous game known to the world of chance; as compared with it, the game of Monte Carlo pales in utter significance; in no other game are the stakes so high, is success so transitory and failure so overwhelming. It is a game in which the wealth of Croesus changes hands in a single hour, a game in which a few manipulators behind the scenes pile up millions on top of millions year after year; but in which the vast majority of the outside public, who tamper with it, go to financial and often to physical and moral ruin.

Dale D. writes me with a good reminder that we all know intuitively, but forget:

Michael,

Regards,
Dale D.

An excerpt I caught from Market Wire on Yahoo Finance this weekend:

QUALICUM BEACH, BC–(MARKET WIRE)–Jun 16, 2007 — Profiting from the stock market has just been made much easier. Powerful new technologies combined with proven Value Investing strategies deliver the performance most investors only dream of. With just one click you’re shown the top undervalued stocks with the greatest built-in margin of safety. “Ultimately a stock’s value depends on its fundamentals,” said Mark Hing, President of Aptus Communications. “Investors who keep their eyes firmly planted on fundamentals and remove their emotions from the investment equation are best positioned to increase their returns and minimize their risks in the markets.”

Hold on! Sticking to a pure fundamental approach is the antithesis of removing your emotions from the investment equation. Fundamental perspectives are always tied to subjective interpretations of things like balance sheets (which of course are often “massaged” into whatever number the executive wants).

Feedback in:

Michael:

Chuck Cain

Marc Andreessen writes on his blog about perma-bears. An excerpt:

But as with other habits ingrained into us by evolution, the habit of predicting doom and gloom when it isn’t in fact right around the corner might no longer make sense. On Wall Street, investors who have this habit are known as “perma-bears” and generally are predicting the imminent collapse of the stock market. This habit keeps them from being fully invested. Sure, they’re well protected during the occasional crash of 1929 or 2000, but by and large they massively underperform their peers who take advantage of the fact that most years, the economy grows, and the market goes up. They have disappointing careers and die unhappy and bitter. In reality it seems very difficult to predict either a bubble or a crash. Lots of people predicted a stock market crash… in 1995, 1996, 1997, 1998, and 1999. They were correct in 2000. But as soon as the stock market recovered in 2003 and 2004, they were back at it, and there have been similar predictions from noted pundits ever since — incorrectly.

I found this article (PDF) from TRADER Monthly fun reading, but if you actually believe there is relevance to a listing like this for trading success, well I have some swamp land in Florida to sell you…

From today’s Washington Post…excerpts that need little setup:

Until recently, it was hard to blame the average Chinese investor for assuming that the stock markets only go up. Since June 2005, the Shanghai composite index has gained about 300 percent. Chen Junjie, 34, who works at a consulting company, used to joke that if the Chinese stock market had a motto, it would be “Even idiots can make money.”

Continuing:

The Chinese stock markets, which are largely closed off to foreigners except for a select group of institutional investors, are dominated by inexperienced individual investors struggling to understand capitalism. They have driven up shares of companies that are known to be corrupt or losing money. Investment strategies in China are far from scientific. Many investors flip stocks after a few days. Stocks with lucky numbers 6 and 8 in their trading symbols are considered good buys. Xu Wenming, who works in importing and exporting, said he invested a lot in the Pudong Development Bank because, he said, “Pudong is a good name.” Pudong refers to the part of Shanghai east of the Pu River. Yu Xueqin, a retired office assistant, invests in companies that produce retail products because government officials are “always saying China is a big populated country and the need for consumer products is big.” In the past, posts on Internet investment boards were mostly tips about how to invest. Now they are filled with desperate tales of caution. A woman, who said she was 48, described how she took $26,000 out of savings bonds without her husband knowing and put it into the stock market, only to lose money. “I am sweaty, shaky, like I’m about to collapse,” she wrote.

Sometimes I see very bright people, people with advanced degrees and or accomplished careers, just cringe at the idea of “how” markets work. The simplicity of an auction, what really is happening, doesn’t register with them. They seem to think more about it then they should. It becomes overly complicated in their minds. A great way to show and explain stock and futures markets? The Tsukiji fish market in Japan:

The Tokyo Metropolitan Central Wholesale Market, commonly known as Tsukiji fish market is the biggest wholesale fish and seafood market in the world and also one of the largest wholesale food markets of any kind.

I had the opportunity to view and film the exchange for the first time this week. If you get the chance, deal with the jet lag when in Tokyo, haul yourself out of bed at 5am and check this market it out. It is truly a unique experience.

View image.