virtual stock exchange

[MilSpex]

Put all my money in Hasbro for the Transformers pay off.

[poly800rock]

Put all my money in Hasbro for the Transformers pay off.

i used to live near the hasbro factory, no thanks

[djrajio]

going with the virtual stock market bets i placed. i wish i really had some of the stocks i put money into, some of their growth has been amazing. GLBL ~12 now $28, TSL was $40, now $60. I've been mainly speculating energy stocks for long term, natural energy as attitudes go away from oil. Don't have enough money for the capital gains for shorts

The problem w/ just playing the stock market is that most personal investors don't have enough capital to be fully diversified against the higher volatility and risk in the market. Even if you have 5,000-10,000 dollars and pick a few stocks, what happens if they all go south. What if they are all highly-correlated w/ one-another? You're better off going to Vegas. Basically, you have no way to hedge w/ such a low capital base. I'd say you'd have to have around 100,000 dollars just to start off. You might want to look into exchange traded funds, mutual funds, etc. ETFs are nice because they act like a stock but represent a basket of stocks and can be redeemed to their equivalents when you cash out your position.

[djrajio]

Put all my money in Hasbro for the Transformers pay off.

Actually, not too bad. Steady trend upwards since beginning of the year. Vol is low and Put/Call ratio is slightly positive. I'd say if the P/E ratio and dividend payout is low, thus more profits are invested into the firm, thus more shareholder value, thus higher stock price, then a 1-2 year long position might not be bad. Obviously, further analysis would need to be done...

[chrisj]

234567894cf

[datasupa]

The problem w/ just playing the stock market is that most personal investors don't have enough capital to be fully diversified against the higher volatility and risk in the market. Even if you have 5,000-10,000 dollars and pick a few stocks, what happens if they all go south. What if they are all highly-correlated w/ one-another? You're better off going to Vegas. Basically, you have no way to hedge w/ such a low capital base. I'd say you'd have to have around 100,000 dollars just to start off. You might want to look into exchange traded funds, mutual funds, etc. ETFs are nice because they act like a stock but represent a basket of stocks and can be redeemed to their equivalents when you cash out your position.

that's red hot, next level financial advice.

no, wait.....it's beyond next level. way beyond.

that's some tier 1 shit right there.

[poly800rock]

thats the thing though. I'm at the range of say $4k. Certainly not the biggest investment, but also, not going to kill myself over that loss (it wouldn't be a 4k loss anyways, maybe worst case senerio 2k? probably would kill myself over 100K though). I would think the logic would be to go balls out, because at that level, i have the possibilty of having higher returns than say, a mutual fund or IRA. Obviously this is wishful thinking, and seeing as i view the market as glorified gambling anyways, I don't think splitting the 5k in 3 or 4 different arenas to diversify (although i understand what you are saying) and only gaining say 10% of the investment back per year vs. the potential 100-200% of a 20-40$ stock. I'll do some research on ETF's. I wish i put more away when i had a steady gig and wish i knew about the roth 401k's.

[djrajio]

fair enough.

[djrajio]

Why ETFs Are Soaring In Popularity Among Individual Investors

Retail investors have replaced institutional investors as the primary source of new inflows into exchange traded funds. And with all the media hype surrounding ETFs, it’s little wonder. But of all the benefits commonly touted as reasons for the funds’ soaring popularity—including their low fees, tax efficiency, and ability to trade throughout the day—many commentators miss one of the most important reasons of all: ETFs are the perfect asset allocation tool, and asset allocation is the most important decision an investor can make.

A landmark study published in 1986 by Brinson, Hood and Beebower* concluded that even professional money managers were able to add very little value by their selection of individual stocks or attempts at market timing. Rather, the vast majority of variation in returns – 93% in the funds examined by the study – could be explained by asset allocation.

Asset allocation is the process of deciding how much of your portfolio to invest in each asset class, however they are defined. Broad asset classes include stocks, bonds, and cash; as well as commodities, real estate, collectibles, foreign currencies, and some would argue derivatives.

Investment professionals and academics alike work themselves into a tizzy debating the merits, nuances, and implications of the Brinson study. But we know from practical experience that:

• Professional managers add little value by security selection or market timing, which is why so few are able to consistently outperform their peers (or a benchmark) within the same asset class.
  
• Allocation among the various asset classes, however they are defined, is exceedingly important in determining investment performance. That’s no guarantee you’ll get the asset allocation decision right, but that’s where you should focus your effort.

As with everything in the world of investing, it gets more complicated. Broad asset classes can be subdivided in a variety of ways. Stocks are usually broken down by sector, market cap, style or geography (domestic/int’l); bonds are broken down by issuer type, credit quality, and more. And so on for the various asset classes. Academic studies since Brinson have largely reached the same conclusion: however the asset classes are defined, the allocation of funds among them is the most important decision an investor can make, not in picking individual investments within the class.

Increasingly ordinary investors accept those findings. Contrary to the constant admonition from professional money managers that “it’s a stock picker’s market†(imagine that); picking stocks is often a fool’s errand. ETFs allow you to easily target an asset class, with more flexibility and accuracy than either index or actively-managed mutual funds, and often cheaper as well. That is why they are soaring in popularity among small investors.

To illustrate: most investors remember 2001 as a dismal year for stocks. In reality the average stock in the S&P 500 was up that year! But the mega-cap Tech stocks that dominated the index fell precipitously, dragging the index down with it. However, you could have sold short the Technology Sector SPDR in proportion to its representation in the S&P500, thereby “carving out†the troublesome sector—something you could not have done with any mutual fund.

Again, there’s no guarantee that you would have had the foresight to get out of Tech, but many people did. And for the first time they had a ready-made vehicle to do something about it. With an index mutual fund tracking the S&P500, you would have been forced to go along for the ride in what had effectively become a mega-cap Tech-heavy asset class, whether you wanted to or not.

With an actively managed mutual fund, you would have had to trust that the manager had the foresight to do something about it (many did not), and you could not have known whether or not this was the case until after the fact when fund holdings were reported months later.

Critics will argue that with more than 400 ETFs listed in the U.S. and hundreds more in the offing, something more than just asset classes are being offered—really, how many asset classes can there be? They have a point: some ETFs seem to be more creations of the marketing department that have no discernable economic rationale as an asset class per se. But others represent different flavors of asset allocation, and some of the newer more innovative products are designed to dynamically assist with the constant job of asset allocation.

For example, the PowerShares FTSE-RAFI 1000 functions like an equity asset allocation tool on auto-pilot. While remaining broadly diversified by market cap, style, and sector, it uses a fundamentally-driven methodology in an attempt to systematically avoid market excess by periodically reallocating assets.

In the first instance (“carving out†Tech from the S&P) the onus of asset allocation is on the individual investor; in the case of PRF it is on the fund, making it more suitable for “set-it-and-forget-it†investors. Either way, the ETFs are tools for implementing an asset allocation strategy.

Of course, there’s no guarantee you’ll always get that strategy decision right—but since it’s the only one that really matters, isn’t that where you should focus your efforts? Increasingly, it looks as if ordinary investors now driving ETF assets agree.

* Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, "Determinants of Portfolio Performance," Financial Analysts Journal, July/August 1986.

[poly800rock]

thanks djrajio. didn't mean to avoid your advice above. I was talking to a buddy that trades on the philly exchange and was telling him how pissed i was i've only gotten 10% out of my mutual funds, he quickly jumped down my throat saying that 10% was a generous return. I'm so used to quick pick stocks that I forget that long term isn't a few years, its your lifetime.

[djrajio]

thanks djrajio. didn't mean to avoid your advice above. I was talking to a buddy that trades on the philly exchange and was telling him how pissed i was i've only gotten 10% out of my mutual funds, he quickly jumped down my throat saying that 10% was a generous return. I'm so used to quick pick stocks that I forget that long term isn't a few years, its your lifetime.

Well, I think the notion of making double or triple your investment in less than a year is very unrealistic and sort of the image Hollywood and the media makes of the stock market. If for example to take a look at the S&P 500 index, which represents the 500 highest volume/net cap traded companies, the net change this year has only been 9.5%. That is to say, if you had all the money you needed and bought at equal weighings all the stocks in the 500 on January, your return would be only 9.5% today. In addition, hedge funds which represent the supposedly smart guys in the market, had an average of only 8% this year. So to put it into perspective your 10% from your mutual is actually beating the market. I'd say put more money into the fund.

[sleazie ninja number 47]

or even an index fund...that's what I do with my tens of hundreds of dollars...

[chrisj]

rajio my friends have an investment fund that is based on a formula that selects the stocks that gained the most in the last week and puts them in a list from where they can select and research on and decided which of these stocks to buy and which of their current stocks to sell..

whats your take on this?

[djrajio]

rajio my friends have an investment fund that is based on a formula that selects the stocks that gained the most in the last week and puts them in a list from where they can select and research on and decided which of these stocks to buy and which of their current stocks to sell..

whats your take on this?

Well based on my own experience and historical understanding, this is a common methodology that has been used widely in the past and exists in various forms. At the most basic level, I can't really comment if its a good fund or not because there are so many factors and variables to consider. Given what you've said, here is some food for thought.

1) What is the universe of stocks that they are selecting from? US only? Foreign exchanges as well? Index stocks? etc. You should be also curious about weather they are delineating between various asset classes, i.e. they take the highest gainers from small-cap, large-cap, tech, commodities related, etc. Reason being is that certain classes might have strong gains and correlation one week and not the next, so just based on that formula, you may have a portfolio strongly skewed to a specific asset class which isn't good for diversification. I.e. tech stocks were big gainers in the late-1990s then tanked.

2) One week seems like an awful short time period. My guess is that they take moving-averages over various time periods, one week, one month, three month, and then do a weighted avg /std.deviation or similar methodology divided by the sensitively of the stock (vol). Again, this is due to correlation w/ similar assets and also the cyclical nature of some stocks. If its earning seasons for certain industries, they'll tend to outperform/underperform the general market in the short-run based on quarterly earnings, the cyclical nature of the business.

Probably ask your friend more questions before getting your feet wet. Also, remember that historical data/trends can never fully predict the future, so it might be worth checking out the financial statement and credit health of the stock in question as well.

[ouss]

Well, I think the notion of making double or triple your investment in less than a year is very unrealistic and sort of the image Hollywood and the media makes of the stock market. If for example to take a look at the S&P 500 index, which represents the 500 highest volume/net cap traded companies, the net change this year has only been 9.5%. That is to say, if you had all the money you needed and bought at equal weighings all the stocks in the 500 on January, your return would be only 9.5% today. In addition, hedge funds which represent the supposedly smart guys in the market, had an average of only 8% this year. So to put it into perspective your 10% from your mutual is actually beating the market. I'd say put more money into the fund.

maybe hedge funds had an average 8% this year, but you have to look at returns' volatility too which i think that would be lower than the S&P 500's volatility (particularly in the february period where long/short funds were less affected than the average by the markets being down).

by the way, i'm testing a strategy which consists in a kind of long/short using call and puts warrants on much correlated equities as renault/peugeot, ppr/lvmh, total/vallourec and it works kinda well but needs to be improved....

last thing, i asked my mom to lend me some money i would manage for her, she told me than she wanted a 100% return a year WITHOUT NO RISK, seriously what does it mean? (btw, she lend me money, i lost it, so i'm working to pay her back damn! )

[djrajio]

maybe hedge funds had an average 8% this year, but you have to look at returns' volatility too which i think that would be lower than the S&P 500's volatility (particularly in the february period where long/short funds were less affected than the average by the markets being down).

Interesting perception. I think there may be some truth to your statement, but I think you also have to take into account the fact that hedge funds aren't obligated to release financial statement information like publicly traded companies; thus there really isn't any definitive means of knowing the true returns/vol avgs of hedges funds. I think this aspect will positively skew the volalitiy avgs for hedges funds to be lower than actuality, since hedge funds that are doing poorly won't have an incentive to release "bad data". This sort of "surviveship bias" will, in my opinion, reflects positively on the existing avg data returns of hedges funds which may not entirely reflect the reality.

[ouss]

Interesting perception. I think there may be some truth to your statement, but I think you also have to take into account the fact that hedge funds aren't obligated to release financial statement information like publicly traded companies; thus there really isn't any definitive means of knowing the true returns/vol avgs of hedges funds. I think this aspect will positively skew the volalitiy avgs for hedges funds to be lower than actuality, since hedge funds that are doing poorly won't have an incentive to release "bad data". This sort of "surviveship bias" will, in my opinion, reflects positively on the existing avg data returns of hedges funds which may not entirely reflect the reality.

I agree with the fact that by being not obligated to release any statements, if perfs are bad they're less likely to publish it. But actually since information is more disponible, you would know if they run bad look at LTCM, Amaranth or more recently the Bear Stearns' funds.

And if you look at returns on a year basis, and since hedge funds really started running in the 90's , you can easily get the average volatility by looking at annual returns and see that in terms of volatility they outperform indexes as the S&P, especially for long/short strategies, because if in a bullish market they don't catch the whole"upping" of the markets, in a bearish one, like 2002, they manage to get (little) positive returns while indexes are down 30%, so on the long-term they get pretty much constant returns.

[djrajio]

I agree with the fact that by being not obligated to release any statements, if perfs are bad they're less likely to publish it. But actually since information is more disponible, you would know if they run bad look at LTCM, Amaranth or more recently the Bear Stearns' funds.

And if you look at returns on a year basis, and since hedge funds really started running in the 90's , you can easily get the average volatility by looking at annual returns and see that in terms of volatility they outperform indexes as the S&P, especially for long/short strategies, because if in a bullish market they don't catch the whole"upping" of the markets, in a bearish one, like 2002, they manage to get (little) positive returns while indexes are down 30%, so on the long-term they get pretty much constant returns.

Actually I don't quite understand your logic. For one, LTCM, Amaranth, and the Bear Stern funds are only funds that shut down but what about the myrid of funds within a hedge fund universe that underperform but aren't obligated to show their financial status? Also, many funds are closed-end funds for many years, so many investors are locked out and/or hidden from the true NAV at any given period (quarter/yearly typically). Also, where you're getting your annual return data for hedge funds? Certainly it isn't available on Bloomberg, assuming you are using the industry standard. Even the S&P Hedge Fund index that used to run stopped as of 2006. Furthermore, assuming you are getting the return information from funds individually, how do you know that you're comparing apples to apples? Because hedge funds aren't required to abide by SEC filing requirements, who is to say that they aren't juicing up their financial statements to investors to make them more appealing? What I'm saying is that there is no true way to determine the vol of the entire hedge fund industry because of these problems and furthermore, I would argue that with their use of leverage (which by the way is how hedge funds make their spectacular profits) they have actually HIGHER volatility than the S&P. The S&P is a benchmark for the entire US equity market. It would be perposterous to assume on a historical avg that it has higher vol than hedge funds in my opinion. In addition, you mention the tech-bubble crash of 2001-2004. But if you were to carve out the tech sector from the index, the reality is that other sectors actually outperformed and increased in value, its just telecommunications and tech stocks weighed too heavily on the index.

[cuddlysheep]

i gotta quit reading this thread its ruinin my high...:confused:

[ouss]

damn its sellin hard in this bitch!

[peteyross]

Well, I think the notion of making double or triple your investment in less than a year is very unrealistic and sort of the image Hollywood and the media makes of the stock market. If for example to take a look at the S&P 500 index, which represents the 500 highest volume/net cap traded companies, the net change this year has only been 9.5%. That is to say, if you had all the money you needed and bought at equal weighings all the stocks in the 500 on January, your return would be only 9.5% today. In addition, hedge funds which represent the supposedly smart guys in the market, had an average of only 8% this year. So to put it into perspective your 10% from your mutual is actually beating the market. I'd say put more money into the fund.

To supplement what Rajio says here, super high returns are generally only seen in top tier venture and private equity funds. The obvious problem with top tier venture and buy out funds is that to get into these funds, you've gotta be a QIB and an accredited investor. Not only that, you've gotta get in before they're full, which is not an easy task.

I won't go into which top tier buy-out firm I am close with, but I have seen numerous instances in which individual investments have returned well over 10x within 2 years. The story-book returns that investors crave are often well-hidden out of the public eye. Some top tier buy-out funds from the 2000-2001 vintage have IRRs as high as 85-100%, which is basically unheard of.

As Rajio concisely stated above, expecting these kinds of returns from public capital markets is foolish though. As a basic investor in public markets, I'll happily take 10% annually for the rest of my life.

[ouss]

To supplement what Rajio says here, super high returns are generally only seen in top tier venture and private equity funds. The obvious problem with top tier venture and buy out funds is that to get into these funds, you've gotta be a QIB and an accredited investor. Not only that, you've gotta get in before they're full, which is not an easy task.

I won't go into which top tier buy-out firm I am close with, but I have seen numerous instances in which individual investments have returned well over 10x within 2 years. The story-book returns that investors crave are often well-hidden out of the public eye. Some top tier buy-out funds from the 2000-2001 vintage have IRRs as high as 85-100%, which is basically unheard of.

As Rajio concisely stated above, expecting these kinds of returns from public capital markets is foolish though. As a basic investor in public markets, I'll happily take 10% annually for the rest of my life.

which means that to get more money, you already need to have much much money.

[peteyross]

Haha, exactly.

[ouss]

Recommendations:

Short Bear Stearns and other heavily sub-prime invested finance firms.

Short Yahoo.

he called it!

[djrajio]

Short Nippon stocks now / Short Toyota, Honda, Nissan, etc.

[m@!]

i'd like to play with you all. is there a game i can join?

[ouss]

a sufu group was created as you can see on the first page but i think it's over

rajiv, i'm kinda disappointed you aint answered my pms

[djrajio]

a sufu group was created as you can see on the first page but i think it's over

rajiv, i'm kinda disappointed you aint answered my pms

I answered them bro.

[GoodHustle]

Anyone here use any online brokers like E-Trade? There seems to be quite a few out there. Are there any major differences amongst the online brokers?

[ouss]

I answered them bro.

thanks man!