Monday, February 28, 2011


Is there a way to make a template for themes?

Primary theme, Assumptions, Timing, alternatives,
Secondary evidence, anecdotal evidence, second derivative markets,
catalysts[what drives this market?], descriptors[market,volatility]
global affects
what are real facts, what's hypothesis, historical reference,
what's affected, what are correlated assets,
what's signal for  a change in the trend, what's the best gauge or index/etf to watch
what are contrary opinions, the prevailing opinion
any counter-intuitive proposition,
what subtleties are there, alternatives
cyclical and macro economic headwinds
buy/sell side sentiment,
political sentiment,
hedge,  black swan, white crow

Overwhelming. But if you did it on a routine basis, and reviewed it once a month, you could use it when you thought it was appropriate. You could do the final analysis on the individual stock when ready. I'll let you know if it works.

You are speculating, though. How many themes should be attempted at one time?

That's my amateur guess.

Friday, February 25, 2011

About the Blog Name

A "black swan" event is a bad financial event no one anticipated.  A "white crow" is a good financial event no one anticipated. In statistics, these events are considered a standard deviation greater than 6 sigma.

Your list of screened stocks Part 2

What edge do you get from your list? Screened stocks are lists that anyone can easily get. Is that necessarily bad? For the sake of this post, let's explore other options.

What is a more unique step?

I have tried these:
Come up with a unique value metric, TA, or theme no one has heard of, or discounts.
Actually do the hard work of a FCFF/FCFE evaluation. No short-cut here.
Do a Sector analysis. How long do sectors stay in favor?

I have not tried these yet:
Do a Qualitative analysis approach. Are there screens for that?
Do Macro themes. Not the 24-hour news cycle stuff, but trends that you think will last longer than 1 year.
By the way, how did we go from deflation worries to inflation fears without resting for awhile in the neutral zone? ....but I digress.

Both fast money & slow opportunity options.
I will never have the resources that larger funds have, but I can create unique opportunities.

I want to come up with a short-cut for something that needs a unique approach. Maybe that's a waste of time. Maybe homework/hard choices is the answer. After a month, I find that if I don't believe in the list, then I probably would have been better off using a screened list instead.

That's my amateur guess.

Thursday, February 24, 2011

Your list of screened stocks Part 1

I don't like to use stock lists because with their popularity, everyone else is thinking the same thing you are. In the short term, where is my edge? I've been trying to compile a list of "momentum" stocks from a stock screener this last quarter.

Does it matter what stocks you pick? Or will everything just go up, just "pull the trigger". If you have an edge, and your following your should be a slam dunk. Earnings have been good this season, the trend is up. Well, maybe it does matter. Nothing is simple, right? What other variables can I remove from the experiment? Distractions?  Not enough homework? O.K. lets limit your list to a bearable 3-5 stocks that you can scan and read about every morning. Volatility? Risk? You took care of that in your plan. It should all be equivalent.

External factors are hard to control things and are just part of trading.

So why the different results? I guess you could say trading is like the "fog of war".

O.K., I'm not giving up that easy. Take 3 lists. Not the only three options, but a start. List one consists of  momo stocks. List two consists of GARP stocks. List three consists of value/dividend stocks.

Assumption 1) Momo stocks sometimes  "regress to the mean" quickly. Faster than you can react. Oh! and your plan says wait a bit, just in case it bounces back from the dip. Sometimes there's no reason that you can see that this stock is appreciating. But you hopefully eliminated that element in your DD.

Assumption 2) With value stocks, the stock trading range will not be as large. You might add in the dividends as income. Sometimes they never appreciate, at least in my short time frame. But you can account for that in your DD.

Assumption 3) Growth stocks have a mix of assumption 1 & 2. Growth rate is not as fast as momo stocks. Less growth would give you less profit.

So which list is best? The amount of  variables in lists are infinite. What edge do you get from your list?

That's my amateur guess.

Wednesday, February 23, 2011

Short-term Trading blog is open

The market is going down again, today; However, I wouldn't panic until you see the retail investors in AAPL panic. And panic is a bad word. I guess I should say, the trend has not switched over yet.

Using an 8 day average, the SPY and DIA have been on an upward trend for 59 days. So we are at the top of the high range, slowly rolling over the edge. Unfortunately, I've missed some of this latest rally.  I was betting on a "sideways market" and jumping out too soon. I was using position sizing, risk/reward, discipline, expectancy, etc. All the things we have learned to do to survive swing trading.  I did well, selling the advancing stocks, but ended up keeping the stocks that went nowhere. Sort of creating a portfolio of what my first assumptions were.  Maybe looking at SPY & DIA is a better measure of trend.

That's my amateur guess.