***Official*** 2009 Stock Market Thread

[Phokus]

damn, that's one hell of a premium

 

[ahurtt]

Originally posted by: Phokus
damn, that's one hell of a premium

That would explain the relatively low volume for that particular call option. But in general you can see from the overall volumes of Calls to Puts that the call volume is heavier which could be construed as a bullish signal on RMBS (this is not an endorsement by me to go out and buy RMBS as you should always look at multiple indicators before deciding on what to do). In general for options you will find that the closer the strike price is to the current market price, the more the option will cost because the risk of the option expiring worthless is somewhat diminished. . .i.e. it's more likely that the option will expire 'in the money' because the stock has less of a movement it has to make for the option to become profitable. And also, obviously the duration of validity for the contract affects the price too. The closer in the strike date is to the current date, the less you should expect to pay because in exchange for paying less you're assuming more risk by having a shorter window of opportunity in which to profit from the option.

 

[jessieqwert]

Another Think or Swim user. They offer a rebate to cover your ACAT fee from the other brokerage.

 

[Slew Foot]

Any news on RMBS or TSRA expected soon? Ive got some options about to expire soon.

 

[manlymatt83]

Originally posted by: marketquotes

Originally posted by: manlymatt83

I'm shorting HGSI now.

Ouch. Why did you do that? It's got a floor of $14 now and it's future is looking quiet solid with 3 drugs likely coming to the market next year. ABhtrax (anthrax), Albuferon (hepatitis), BENLYSTA (lupus).

It was a very big joke. That's why the smiley

Oh, and WWYBYWB?

 

[manlymatt83]

Originally posted by: jessieqwert
Another Think or Swim user. They offer a rebate to cover your ACAT fee from the other brokerage.

They don't offer web trading though do they? after/pre? What's their ACH options like?

 

[marketquotes]

Ahhhh.

Just a lurker before, not a former member.

Just signed up for Think or Swim myself. They are owned by TD AMERITRADE as of June 11th.

Their premarkert/AH times are: 6am-5:30cst

And yes, you do your trades via the web.

 

[cheezy321]

Originally posted by: marketquotes
Ahhhh.

Just a lurker before, not a former member.

Then how did you know what WWYBYWB meant?

 

[marketquotes]

Originally posted by: cheezy321

Originally posted by: marketquotes
Ahhhh.

Just a lurker before, not a former member.

Then how did you know what WWYBYWB meant?

little thing called google which took me to the urban dictionary

 

[pravi333]

Originally posted by: ahurtt

The thing that makes options so tricky is getting the timing right for the price. Any investment advisor will tell you that timing the market is one of the hardest things to do

You bring up a very valid point, this adds whole new dimension to keep me out of options!

Originally posted by: ahurtt
However, that being said, a common use of options is as a "hedge" or insurance policy against losses on long or short positions. Say you had shorted X and you want to protect yourself in case the price of X goes up instead of down like you had expected. You can buy some X call options to cover any losses you might incur in case you were wrong about the direction of X and it goes up. Or vice versa, suppose you bought a long position in X but you want to protect yourself against significant losses if the stock price tanks. Then you could buy some X put options to hedge your long position.

This part sounds intriguing, i gotta read more on this strategy!

 

[eLiu]

Originally posted by: marketquotes

Originally posted by: cheezy321

Originally posted by: marketquotes
Ahhhh.

Just a lurker before, not a former member.

Then how did you know what WWYBYWB meant?

little thing called google which took me to the urban dictionary

lol, ATOT is a damn suspicious bunch.

Thinkorswim sounds like a damn good deal then. Are there any features etrade has that are lacking from thinkorswim?

Any restrictions on mutual funds? (do they have all the funds that are available to td amer?) Is transfering money (via ACH) from a bank acct easy/fast (as in instant buying ability)/free?

edit: one more... can you automatically reinvest dividends/returns on capital for free?

 

[pravi333]

any of you have yahoo shares? To me even though the msft/yhoo deal doesn't have any guaranteed "boat load" of upfront money to yhoo, i still think this will be profitable to yahoo. If you guys have it, planning to hold on to it or selling it?

 

[Phokus]

I signed up for think or swim myself, thanks!

 

[jessieqwert]

ToS offers ACH but it's not instant. I've never seen instant ACH before.

 

[eLiu]

Originally posted by: jessieqwert
ToS offers ACH but it's not instant. I've never seen instant ACH before.

Well with etrade, if you verify your bank acct with them (either give them your login info or let them make 2 small deposits and you report the amounts), then as soon as you click "transfer money", the funds are available for purchasing stocks/options/etc. The funds don't become available for withdrawal for a few days, but you have buying ability immediately.

 

[Zugzwang152]

Originally posted by: cheezy321

Originally posted by: marketquotes
Ahhhh.

Just a lurker before, not a former member.

Then how did you know what WWYBYWB meant?

if he lurked, he would have known?

 

[Phokus]

I had a finance/economics professor once tell me that value stocks outperform growth stocks in the long run. he also told me that you can manage risk by mixing your portfolio between domestic and international stocks because they have negatively correlating betas (i think that's what he said anyway).

So based on this, would the most prudent strategy for my retirement investments be to invest in equal amounts of domestic value index funds and international value index funds (and maybe 10-20% in bonds or whatever, i'm still young)?

 

[Azurik]

Originally posted by: Phokus
I had a finance/economics professor once tell me that value stocks outperform growth stocks in the long run. he also told me that you can manage risk by mixing your portfolio between domestic and international stocks because they have negatively correlating betas (i think that's what he said anyway).

So based on this, would the most prudent strategy for my retirement investments be to invest in equal amounts of domestic value index funds and international value index funds (and maybe 10-20% in bonds or whatever, i'm still young)?

Depends on your risk tolerance. Internationals are more votile, especially emerging markets. Maybe a mix of:

50% domestic
25% international
10% emerging markets
10% bonds
5% cash/liquid assets

 

[ahurtt]

Originally posted by: Phokus
I had a finance/economics professor once tell me that value stocks outperform growth stocks in the long run. he also told me that you can manage risk by mixing your portfolio between domestic and international stocks because they have negatively correlating betas (i think that's what he said anyway).

So based on this, would the most prudent strategy for my retirement investments be to invest in equal amounts of domestic value index funds and international value index funds (and maybe 10-20% in bonds or whatever, i'm still young)?

Define "long run." The problem with that term is that it means various things depending on who you ask. If you ask one of the most famous value investors of all time, Warren Buffet, he'd tell you that the minimum amount of time you should hold a stock would be 5 years (and the longer the better). To some long term means 5 years . To others 10 years, 15 years, or 20+ years. While Buffet is a value investor who consistently beat the market average year after year, he also used a focus strategy as opposed to widely diversifying. He'd do a shit-ton of research to pick a small handful of value stocks and focus on them rather than using the shotgun blast diversification strategy and spreading his capital all over the market. This would result in much higher than average volatility in his portfolio. When he was up he was beating the market handily but on the other hand when down he'd be significantly underperforming the market as well. But the idea was that by riding out the down times and having confidence in the companies he had chosen then, yes, over time this small handful of hand picked value stocks would significantly outperform the market. The way you negate short-term volatility is either with broad diversification or with time and constant research. A value-index fund is not as likely to bring the drastic kind of gains that investors like Buffet were able to achieve in my opinion because they are indexes which imply they kind of spread their capital over a broad range of small cap value companies rather than focusing on a small handful of the best of breeds in category. But unless you have the time, the desire, and the knowledge to put into researching and following your investments like a professional, it may be the best you can reasonably hope to accomplish.

 

[mshan]

Over the long term, stocks >> bonds > cash (don't know how accurate these statistics are, but I'll say 8% vs. 5% vs. 2% just for illustrative purposes).

Intermediate term bonds (say Vanguard Index Total Bond Market) will have lower returns than stocks, but typically tend to go up when stocks go down. This can reduce the overall volatility (day to day swing in total portfolio value), but, just like cash, will drag down long term returns.

If you are still very young (20 - 30's, and retiring at least at age 65), 100% stock allocation is probably correct move, if you are comfortable with greater swings in total portfolio value.

I haven't read about international mutual fund investing in a while, but my impression is that it can improve risk-adjusted returns of already well diversified portfolio, but is not absolutely necessary in otherwise well diversified all domestic portfolio appropriate for your time horizon and risk tolerance.

Risk (permanent loss of capital) is different than beta (volatility or price fluctuation from say day to day), and strategic asset allocation can account for about 92% of total portfolio returns over time.

http://www.amazon.com/Personal...&qid=1248964503&sr=8-1
http://www.amazon.com/Common-S...&qid=1248964534&sr=8-1
http://selectedfunds.com/pdf/SFSuccInv4Q08.pdf

Dollar cost averaging into Vanguard Index Total Stock Market ain't a bad strategy for the long term if you don't have a lot of cash to deploy, and is particularly attractive in taxable accounts because of it's extreme tax efficiency. Aggressive in proper ways (almost 100% stocks, where many mutual funds typically have 5% cash position), very low expense ratio, low hidden costs (owns whole market, so hidden costs of lots of buying and selling aren't a constant drag on returns), and you can let it continue to compound basically tax free in early years of retirement when you have to first take out distributions from retirement accounts such as 401K. Money managers that charge high expense ratio and trade a lot may have to beat market by say 2 -3 % per annum just to keep up with market as a whole because of the "tyranny of compound interest", as John Bogle calls it.

 

[Phokus]

Thanks for the replies everyone

Originally posted by: ahurtt

Define "long run." The problem with that term is that it means various things depending on who you ask. If you ask one of the most famous value investors of all time, Warren Buffet, he'd tell you that the minimum amount of time you should hold a stock would be 5 years (and the longer the better). To some long term means 5 years . To others 10 years, 15 years, or 20+ years.

Well, i said my retirement portfolio and i said i'm young, so you could probably guess it's at least at 20 years horizon

While Buffet is a value investor who consistently beat the market average year after year, he also used a focus strategy as opposed to widely diversifying. He'd do a shit-ton of research to pick a small handful of value stocks and focus on them rather than using the shotgun blast diversification strategy and spreading his capital all over the market. This would result in much higher than average volatility in his portfolio. When he was up he was beating the market handily but on the other hand when down he'd be significantly underperforming the market as well. But the idea was that by riding out the down times and having confidence in the companies he had chosen then, yes, over time this small handful of hand picked value stocks would significantly outperform the market. The way you negate short-term volatility is either with broad diversification or with time and constant research. A value-index fund is not as likely to bring the drastic kind of gains that investors like Buffet were able to achieve in my opinion because they are indexes which imply they kind of spread their capital over a broad range of small cap value companies rather than focusing on a small handful of the best of breeds in category. But unless you have the time, the desire, and the knowledge to put into researching and following your investments like a professional, it may be the best you can reasonably hope to accomplish.

Well yeah, i'm obviouisly not looking for buffet like returns... i don't get to invest in individual companies in my 401k

I just want the maximum return out of the type of funds i choose.

 

[IHateMyJob2004]

Originally posted by: Phokus
I had a finance/economics professor once tell me that value stocks outperform growth stocks in the long run. he also told me that you can manage risk by mixing your portfolio between domestic and international stocks because they have negatively correlating betas (i think that's what he said anyway).

Professors are hilarious. I once had Warren Buffett tell me that there is no difference between value and growth stocks to a value investor. There is no rule that you can nto find value in a "growth stock".

Betas are great for telling you what happened in the past.

As for risk managemnt, the only risk is overpaying for a company. That is the whole point of value investing.

Having said that, JNJ is grossly undervalued.

So based on this, would the most prudent strategy for my retirement investments be to invest in equal amounts of domestic value index funds and international value index funds (and maybe 10-20% in bonds or whatever, i'm still young)?

You should isntead learn about intellegent investing. Index funds a re better place to look, but you better be keeping an eye on the major indices relative to GDP to determine if hte markets are generally over or undervalued.

 

[Azurik]

Originally posted by: Azurik
I'm actually HOPING that the stock price goes down in the interim (even though I do have some Aug call options). Hopefully, once the remaining two writs are denied, I'm going to load up on even more shares/options. Too many things can happen after those writs.

Well one writ got denied since that post, but the stock price has jumped back up today on huge block volume. Dammit... and the reason? Whispers in the street.

Rambus (RMBS) is trading higher in reaction to the circulation of a rumor that Samsung (005930.KS) has made an offer of $24/share. StreetAccount notes that RMBS has been the target of takeover rumors in the past


$24 is such a lowball offer.

 

[Slew Foot]

Originally posted by: Azurik

Originally posted by: Azurik
I'm actually HOPING that the stock price goes down in the interim (even though I do have some Aug call options). Hopefully, once the remaining two writs are denied, I'm going to load up on even more shares/options. Too many things can happen after those writs.

Well one writ got denied since that post, but the stock price has jumped back up today on huge block volume. Dammit... and the reason? Whispers in the street.

Rambus (RMBS) is trading higher in reaction to the circulation of a rumor that Samsung (005930.KS) has made an offer of $24/share. StreetAccount notes that RMBS has been the target of takeover rumors in the past


$24 is such a lowball offer.

Yeah thats a lowball, make a real offer, and preferably before August option expire please.


edit: I also got some tivo 12.50 options Nov, seemed cheap enough for a small lottery ticket. Not expecting drug company like gains, but hopefully I can cover.

 

[Safeway]

Anyone investing in the new Motley Fool mutual fund? I might add it to my portfolio. :beer: