Wizard of Wall Street Oct-Nov Edition

Quote from rateesquad:

Well i did not read your other post but i did see your foolish statement about NYX. Second of all I DID not throw tomatoes at you i just argued you foolish/stupid statement. Its would be wonderful if you would articulate your thinking before witting such innocence. Kramer example just makes no since what so ever him telling him friends to buy up the stock. And you wonder why i call you an idiot. Listen if i wanted to throw tomatoes at you i would but i just want to argue the point, although i do have to question your mind set before writting something ridiculous as your statement about NYX. Stop whinnying and argue your point. Stop being a baby. OOO by the way if I hurt your feelings, I am sorry. now stop crying. Think before you post maybe then I will agree with you.

Cheers
More...

Listen here kid.

If you dont think that Jim Cramer has any effect on a stock, then your a young and foolish kid that has no business shooting his mouth off on a message board. Jim wasnt the first pumper shrill on CNBC. There were actually others before him in the early 90s like Dan Dorfman. When Dan Dorfman pumped a stock, the calls to the brokers offices would go off like wild fire.

The news reports you decided to articulate were priced into the stock on Thursday. Jim Cramer made his report on NYX Thursday night. He jumped up and down stating that it would go to 250. Then there was a vicious 3 dollar spike in afterhours.

The close of the trading day on Weds was at $82.49. On Thursday, the news reports hit and NYX closed at $87.22. Thursday night, Jim Cramer decided to jump up and down on national television stating that NYX would be the next Google and it would go to $250. However, before he stated that it would go to $250 there was a caller that stated he had made $16000 on Cisco. The whole contrived act was very convincing. Instantly, NYX shot up from the $87.22 to $91-92 in afterhours.

The news reports you articulated did cause a price and volume spike on Thursday. However, the price and volume spike was much greater after Jim Cramer's report.

There are many prop houses around New York City where there are young trading guys who watch CNBC day in and day out. If you ever go into a real institution, I dont mean the mental hospital, I mean Goldman or one of those other big names, then you will find plenty of offices with television sets where people are watching CNBC all day long. The last Trader Monthly event I was at there were several traders there discussing Jim Cramer.

In looking at a simple chart of price/volume and comparing the news events it is very easy to figure out that it was most probably Jim Cramer that caused this price/volume spike. Now you may think its ridiculous that some institutional or prop traders are buying NYX on Jims advice, but its not really that ridiculous. Believe me, the pros sometimes follow Jim.

In fact, according to the following article, Cantor Fitzgerald creates research reports with Jim Cramers picks and distributes them to mutual/hedge funds:

http://www.forbes.com/management/2005/08/18/cramer-cnbc-madmoney-cz_pl_0819cramer.html

Jim Cramer is no innocent angel. They were investigating him in the mid 90s for pumping stocks in articles that he was investing in. If you read his books and that other book "Trading with the Enemy", you would realize that this guy is a con artist. You can bet that something went down while he was at the NYSE.

Actually, I am not the first one to correlate NYX's price spike with the Cramer pump. Steve Gelsi at Marketwatch came to the same conclusion. I guess this guy is an idiot as well and you, elitetrader's thrower of fruit, are the one who seems to know it all.

http://www.marketwatch.com/News/Sto...siteid=mktw&dateid=39031.4218743634-884407424

I can only conclude that NYX has probably gotten ahead of itself. I have no position in the stock nor do I trade on Cramers picks except when he invades the stocks that I am already positioned. I have no intention on trading NYX. This is just for arguments sake and I do follow Jim Cramers picks to study the psychology of investors and how they react to a pumper shrill.

So that is my thesis? Where is your counterpoint on this or are you just going to stand there swearing like a taxi driver? Right now I am preparing for a night out. If you will pull up the cab and not just drive by, I would greatly appreciate it.
 
Wow...you got jokes.
Who do you actually know who trades for Goldman.Thats what i tought no body. Listen Eagle...there is no way that Goldman Sachs traders listen or even heard of Cramer. I know some junior analysts in golman, citibank, usb and BAC, and some smaller firms. Half of them never even heard of Cramer the other half think he is an idiot. Now do you know any PROFFESIONAL that actually listen to cramer. Institutions will never listen to a fool. I have no idea why you are studing his picks, but good luck with that. Now NYX is overbought I agree, and it will probably go down substantially but there ia no way that Cramer will be behind that action 2. Well good luck studying Cramers picks that will make you ton of money.

Cheers
 
Eagle -

#1 - I agree with most of what you've posted
except for :

"Here is a stock that I will NOT trade, EVER.

SIX FLAGS SIX

You could see a clear signal to buy. The red line crosses the blue. Indeed, some guys were fooled and they bought in heavy. However, the company let everyone down. They fooled us.

If a company fools the chart or I cant make sense of it, I move on. "
-----
If you mean NOW - well then I can't comment as I'm not following it currently. BUT, back when there was a fight for contol of this company (approx 1 year ago) it was a good trade & I made a nice profit. So will it ever show up in the work I do in stock picking?

MAYBE but certainly not NEVER
=========
#2 - On CRAMER

You're right on. rateesquad's post on this is WAY OFF BASE.

First, to suggest he's not known or watched (if not respected) on Wall St can't be true given his position & history - It is FACT that NYSE floor traders have an electronic signal in place when 1 of their stocks gets a MAD MONEY mention. 2nd, he couldn't get on the floor if he was a unknown. 3rd, there is a definite "Cramer Effect" as you discussed. The recent RIMM trading was a great chance to use it - I played it as short in PM after "Cramer Effect" run up in AM following his pump (& I agree with you that GRMN looks better than RIMM as a long - note MOT is now entering RIMM market via purchase of GOOD Technologies).
=========
#3 Can't wait for your posts RE: the following -
A) My {Eagle}Sunday post will be very lengthy and it will take some time to put together fully. Please stay tuned. You will be amazed...maybe some more people will stop by at the happy hour;)
B) response to rateesquad's Post of 11-07-06 10:36 PM (see below)

Well first of all, to all of your thinking greed and fear does not move the markets, sorry. Although it is principal which can be read in pretty much any book on trading. Institutions move the markets, usually based on fundamentals, but quantative and statistics make the trades. It is impossible for retail investor to move the markets, but can be achieved if you are really rich. Take for example, George Soros. The man who BROKE English bank...bleachable blah.... etc. BuT I do find our journal interesting.


Can I ask you couple of questions?
I need to know because I am doing a anthropology report on trader and I just need some back ground information....also I am doing interviews for my school newspaper about this subject.

Where do you work? ( Title, Industry, position, etc)
How many hours do you spend researching?
How many hours do you trade?
How many years of experience do you have?

More question will follow.....

PS this answers will benefit your credibility to the posts....although you dont have to answer them....but it would be beneficiary for me if you did.


GO EAGLE GO !!
Regards, blue2and2
 
You have seen me post about such mundane topics like Western Union, DRIP plans, 50/200 week charts and other ho-hum topics. Im telling you, thats the way you make cash. The turtle always wins the race.

However, it is now time for me to post out of my parameters about a topic that will make you or break you. I must now post the following disclaimer. I take no responsibility if you tread into the waters I am about to speak about. There is a possibility that you will lose your shirt and then some.

I do not guarantee any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed in this forum. The strategy or investments discussed may fluctuate in price or value. Investors may get back less than they invested.

You must know that there is a serious chance of loss when I reveal the following 3 letter word and that word is OIL. Anything oil can make you rich or make you poor. You do not trade anything oil related lightly. One day its looking good and the next day it turns around and takes all your cash like a thief on an NYC subway.

I can post quite a few examples of where some hedge funds got into trouble over investing in small cap drilling companies like Transmeridian. In the last year or two, there were a few funds that got into that company at above 5 bucks. Today the company can barely tread water over 3. A 40% loss in less then a year.

I can go to sleep at night soundly with my position in a well run company like Western Union, but I would not be able to sleep soundly with these small cap drillers. However, I will have to wait for my 40% profit in WU over a 6 month period. The small cap drillers will give you that 40% in a much shorter time frame.

Now we have reached a critical juncture where the spot market keeps circulating around the magical $60 mark. The elections are over, the SPR is starting to be filled again taking about a 1 million barrels off the open market per month, the Saudis are quietly cutting production and in December will announce the official cuts in production. The cuts will be deep. Americans are starting to buy the SUVs once more. Demand across China, India and other foreign countries will only get worse. Goldman is going to stop unloading its gasoline positions.

The Democrats are strongly opposed to lifting the offshore drilling ban. The lifting of this ban could have spelled $620 million per year to Lousianna in revenue by the way. However, the Democrats wont do it. They would rather see this state remain in the third world, poor people in New Orleans living on the street and the working people pay over 3 dollars per gallon to fill that Honda Accord.

So that leaves all these small cap drillers that the hedge funds had left for dead. However, they are still very much alive. They have been sold off so badly that one small spike in oil will send them higher, much much higher. I dont want to violate the rules of this board and get into the specific names. The small cap drillers I am familiar with are all under 5 dollars. Go to Yahoo and find them, they are easy to locate.

Ethanol is another area in which profitable trades can be made on a day to day basis. Verasun VSE is one company in which you can trade up and down all day, all week long.

So how do you know what is going on with the price of oil? Do you tune to CNBC or keep refreshing the NYMEX futures page? No sir. You will be left behind if you do that. You need to monitor it the same way you monitor the price of your stocks. Fortunately, the hours of oil futures trading is like Las Vegas. It never stops. I cant imagine who would be trading oil futures on a Sunday. Some guy at a monitor somewhere very red eyed and white knuckled trying to make a buck or maybe in NYC there is a suited guy hitting away at the keyboard in his 20th floor office or maybe some foreign dude in a different time zone.

The good part about the oil futures is that you can do a technical analysis on the nightly trading. You can make a prediction on where they will go. The price of that barrel will impact greatly on how trading will go that day on specific oil stocks.

I do not trade oil futures nor do I advocate trading them. There are two types of people who trade oil futures and one of them drives a Ferrari and the other takes the bus. It can make you rich or it can make you broke.

My belief is that in the next few months, the trades of the day will not be in the Googles or in the Cisco. The most profitable trades will be made within the small cap drillers and the ethanol players.

Now I have to warn you all, that some of these small cap drillers are not real companies and are even on the fringes of bankruptcy. After participating in a conference call last week with one small cap driller, I came away thinking that this was one of the worst calls I have ever heard in my lifetime. I quickly went through the 10-K and the following statement jumped out at me:

"We have a history of losses. We incurred net losses of $3.3 million, $5.7 million, $3.8 million and $20.5 million for the years ended December 31, 2002, 2003, 2004 and 2005, respectively. Our results of operations in the future will depend on many factors, but largely on our ability to execute our exploration and development program and successfully market our current and future production. Our failure to achieve profitability in the future could adversely affect our ability to raise additional capital and, accordingly, our ability to grow our business."

I knew that from listening to the call and reading the 10-K that if I were to buy the common stock it would be the same as buying a salvaged car at the yard versus a new one from the dealer.

The price of oil is powerful and right after this horrible call, the stock price shot up north. Not because of the horrible conference call, but because the price of oil headed north of 60.

Looking through the company's website I noticed the corporate HQ was in an office park somewhere in Texas and lacked a 1-800#. No email address either. I wondered to myself if this was even a real company. A few hedge funds got into this company earlier on in the year. Surely, they went over everything. haha. Think again. Money was blindly invested into this outfit for no particular reason and very hazardously.

Oil is the most corrupt device on this earth. Some of these companies are not real and trade away over the exchange operating at a loss. Some trade over 20 bucks and are not penny stocks. Operated by crooks and fooling the hedge funds into investing in them.

However, our purpose is not to invest in these companies. We just want to get in and out after we realized our quick buck. Let the SEC sort out the rest.

For this type of trading, you must heavily rely on technical analysis. Fortunately, as I have stated before, the nightly futures trading will give you a hint as to how its going to go down in the open market. This will give you a look ahead.

CNBC is also a good contrarian indicator. Over the summer, CNBC would constantly run segments on how oil was going to reach the sky. The Eric Bolling segment was particularly funny where he said he saw all bullish (and no bearish) indicators. Then they had these guys on and the reporter kept repeating "Lets fast forward here, imagine this, Iran is very angry and they suddenly turn off the tap". Then they flash a picture of the bearded man on the screen. I almost started to have flashbacks of when CNBC was so bullish on tech in 1999.

Here I sit looking at the front month trading at $59 and some change. I have a list of small cap drillers that I will throw my cash at. Not just yet, Im very patient on this trade. I have an entire screen devoted to a few of them. When oil trades under 60, these small cap drillers keep getting further into the dust. You and I know that oil wont trade at 60 bucks for long.

When I see the volume start to spike and the futures start to jump, I will be there. It cant hurt you to use a small amount of cash on such depressed stocks. I have a 100k allocated for just this purpose.

Remember. Oil is evil. Yes it is. It will make you money, but then take it all away. Do not tread lightly with the oil trades. You will get burnt if not done right.

When I get back from the gym at 6am and flip on the television set, there will be the bearded man on television telling us something negative. Its all setup. All of the bad news comes on Monday so the oil price will shoot up. These guys want it to be there. The election is over and now the sky will be the limit. The evil bearded man will profit, but he wont be the only one profiting from this day. If your patient and do this right, you too will be smiling like the bearded one.
 
AIG AND YAHOO

Both of these companies are now strong buys and it has nothing to do with fundamentals.

In regards to Yahoo, I have reviewed through all of the relevant SEC filings. As of June, Fidelity had about 78 million shares of Yahoo. All of these shares have now been sold off into the open market and they have little, if any, shares left in Yahoo at this point.

In regards to AIG, it is my belief that Hank Greenberg has settled his score and will now let the stock run its course. I have not seen any new SEC filings for the sale of stock from CV Star which is Hank's company.

A stocks price is about buyers and sellers. When the sellers leave, then all you have left is buyers. In both ases, the stocks biggest sellers have now left the building. I would say that AIG will run to $100 in six months and Yahoo to $40.

The reasons why Fidelity had sold off their entire portfolio in Yahoo is not known to me. It might have been for good reasons. However, you have to note that Fidelity does not hold stock in any company very long. Their churn rate is about 1 year when compared to Vanguard which is about 5 years. It is the poor man's hedge fund.

Also, sometimes Fidelity does not make the wisest decisions. There is a man in their organization who goes by the name Robert Bertelson. He had managed the Fidelity Aggressive Growth Fund from 2000 to 2002. During that time, the fund lost about 18 billion dollars (from 22 billion to 4 billion). If you look at his work history, he has not been able to hold down a job managing one particular fund for long. There is now a 4 year gap in his management history. He took a break after the 18 billion dollar loss. Now he is back to manage the Fidelity Independence fund.

Hmmmm. Does that make any sense? Should Fidelity be trusting this guy with 4.5 billion dollars? Maybe I am missing something here. If you were reviewing people to manage your money and you come upon this, "Fidelity Aggressive Growth Fund $18 billion loss". I would simply move on to the next guy.

Although, there is a saying about money managers that have lost money. They wont repeat the same mistakes they made in the past. I would have white knuckles with this guy.
 
HOW TO GET IN ON AN IPO

You might ask yourself, how do I get in on an IPO? Should you just wait until it opens and throw a market order in for 10,000 shares? Hmmmmm. No, dont ever do this. Never. No matter how attractive it might look to you.

Now I am going to show you how to make some cash on an IPO.

Lets first take the example of Shutterfly(SFLY).

http://finance.yahoo.com/charts#cha...arttype=line;crosshair=on;logscale=on;source=

After it went public, this dropped. It didnt just drop, but it dropped hard. If you got your shares at 16 dollars, then you would have watched the slow pain as the stock went to 12.50 in a matter of a few weeks. However, the key to this was patience. Everything will become a buy if it drops low enough. The key is to figure out just how low will it go.

You had to wait until the first conference call and analyst review. Then the pop began. In a few days, it went from the 12s to closing today at 14.98. Lets say you got in at 13 and then sell tommorrow when it hits 15. A 15% profit within a few days.

We have to be careful though. You should read the prospectus and see the online roadshow. See if the IPO makes sense to you.

The Shutterfly IPO made a lot of sense to me and I loved the company when it came out. Its a great buyout candidate that Google, Yahoo or some other website would snap up instantly. However, my opinion did not matter. The street threw it to the side thinking it was some smelly stuff, but it was their loss and some other traders gain.

Is Shutterfly still a buy? Well, I was much more attracted to it at 12.5 then at 15. Im going to have to pass for now and look for something less expensive.

However, there are a few other cast aside IPOS and there are two that I am actively monitoring. GSAT and RRST. Both of these are sliding ever lower day by day. Cast aside as the rest of the street rumbles up. Its not that these are bad companies just unknown right now. Both GSAT and RRST are going to go MUCH LOWER. Patience is the key. Wait for the first call and then wait for the analyst to give his opinion. If he says "strong buy", then follow that lead.

Always wait for the first conference call and then the analyst opinion.
 
RISK MANAGEMENT

A question was posed in a different thread about getting in on stocks in 2003-2004 when they were at the all time lows. One poster had asked the question, how could you get in then if you had just lost everything in the prior years.

This is a reasonable question. So when the market does retreat, what do we do? Well, you could use puts or short the market. However, shorting is a risky strategy due to whipsaws in the price ejecting you from your position. The next question is when will the market retreat. The market did skip over the Sept-Oct pullback and the VIX is at an all-time low. I would surmise that a retreat might be in the works with a possible recession next year. The market is trading healthily above the 50 week MA and it feels as if it might pull back to the blue line.

Well, we can discuss it all day long and make educated guesses, but really, we dont know. So if we dont know when the market will pullback, when will we know to short and then if we get in on the short too late then we might get whipsawed out of our positions on the bounces. Ahhhh. Not so simple afterall.

So the one answer I have is to pull some of your profits from each trade and place them in a financial instrument that will always go up.

Bonds? Money market? No. These financial instruments offer a very humble return and, with inflation, we need a little more return on our dollar. Therefore, the answer I have is the Vanguard Wellington Fund. This fund is a balanced mutual fund that contains a mix of bonds and high quality large cap stocks. During the tech bubble/crash, it still delivered good returns and did not feel the effects that other mutual funds suffered. A 10 year return shows an average of 8% per year.

The fund is managed by the Wellington Management Company and is the oldest fund in existence (since 1929).

https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0021&FundIntExt=INT

In the good times, we need to be thinking about the bad times. In the bad times, we need to look forward to the good. When the market is down, you need to think about the market going up at some point. When the market is up, you need to think of the day it will be down.
 
Western Union update

In a press release today, it was revealed that Warren Buffet has decided to keep his shares of Western Union as a result of the First Data spinoff. This gives me increased confidence in my long term position on the company.

Warren Buffet employs the best money managers in the world. He instructs his money managers to only buy stocks that they feel would be excellent buys throughout their lifetime.

I have been monitoring the Level II quotes and the chart very closely. It appears that every time the price nears a low for the day then someone sends an order for a block of shares usually about 250,000 shares. Someone is acquiring this stock everyday and it is showing. As the shares get acquired, the float becomes less.

The options expiration is tommorrow and that is the main reason for the weakness today. I believe now is a good time to take advantage of the weakness due to options expiration. Notice how the options are priced and that most of the option holders wont make any money unless the stock closes over 23.3. Therefore I can only conclude that its being manipulated today. It will probably be over 24 next week which is an educated guess.

This company has been reviewed by the best minds out there on Wall Street and they have concluded that this is a great buy. I have added 9000 shares today to my personal inventory.

It is my belief that Western Union will turn into the next Mastercard-like stock. The value is there. Mastercard was manipulated in the same way. I would see roadblocks of disappearing bids-asks on the Mastercard Level IIs almost as if a computer program was trying to fool traders. When the big money holders have been allowed to get their stake in Western Union, then and only then will they allow this thing to run.

Think about this. Over the summer was the time to pickup technology stocks. Now is not the time to pickup tech stocks except if you want to get a few bucks off the top and you probably will. Now is the time to pickup stocks that have not been noticed by Wall Street and allowed to run their course. I fully believe that by March, Western Union will run to the 30s and it wont stop there. It might double in price by the summertime.

Many posters get on this messageboard to state that they have made 30-40% return for the year and that is a very respectable amount in my book. However, here is a 40% return you can make in 3-4 months. If you gave me a choice of putting all my cash into a stock which is guaranteed to run to 32 dollars in 3-4 months or trading for an entire year risking large amounts of capital, I would easily pick Western Union and go lounge on the beaches in Thailand.

Sorry Don Bright, I guess thats my personal decision on this matter.
 
i am sure that you are aware that wu is already valued higher than ma. i would argue that ma has a much better recurring revenue business. that is not to say that wu cant go up some but to expect a ma like run is not reasonable.
 
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