Entries Tagged 'finance' ↓

Take it to the bank

I love to think about ways that banks could be better.  It’s especially fun right now, while banks are folding left and right, and taking on government money. Small disclosure here, as I spent the first part of my career learning at a rather large bank, and took away invaluable experience.  I loved it.  BUT, don’t love the parts of banking that scream opportunity.

Here’s 3 things that my bank (and I’ll keep it annonomous) can and should do to make customer’s more happy and attract more of them:

1.  Build more intelligence into online banking. I’ve talked about this before.  It’s just a no brainer to me to use the online banking platform as your primary marketing/face of your organization.  People going to branches all the time is a thing of the past. Invest capital accordingly.

2. Start streamlining loan processes.  I should be able to do most things though the site above that gets me 95% of the way towards my loan needs before I even talk to anyone.  Its not that hard.

3.  Give me a 1 stop shop.  I know this is difficult, but take one example.  Most banks have investment arms that are just so out of tune with reality, that I can’t believe people even use them.  It’s sick even thinking about paying $29.99 a trade or higher.  Especially with how easy it is to move money electronically.  So if you can’t compete, what’s the point?

Simple.  Technology is your facilitator on all fronts.

Opportunity is absolutely all over the place right now in this business as customers are willing and READY to take their money elsewhere.

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Learn with Stupid (me)

In a world of never-ending lists, I figured why not make one of my own?  I am pretty sure, in the next 5-10 years, all writing whether it be factual or fictional will just be pages of lists.  That way everyone can read the first couple points on each page, make an incorrect inference, and form an opinion that misses the point of the list.  But I digress…

So for MY list, I wanted to lay out 4 concepts I am currently actively following while trading.  These are just loose concepts that help me follow some rules when I am making plays.  And yes it’s beginner crap, but its still stuff I didn’t know when I started adding portfolio positions.

1. Average INTO your positions. I used to just blanket plop down an allotted amount on a particular play, which is really dumb when you think about it. Averaging into a position helps smooth out that crazy volatility that you fight daily.  It also lets you think about whether your making a smart play if the primary or any other trend goes against you before you’ve put your chips in that basket.

2. Monitor your portfolio beta. If you don’t know what Beta is, look it up and learn about it.  Its simple to understand. Its a correlation of sorts to the S&P500 (really whatever underlying you want). If the S&P is going up or down, how is your money going to react.  REALLY helps you understand where you might be on a daily basis by taking a quick glance at the SPY.

3. Speculate smartly. It’s sort of an oxymoron to say something like that, but it’s important. Start to watch how stocks react to events. Ask yourself twice (or 3 times) if you want to go along with the trend of what the crowd is betting on.  I have been burned many a time on this.  Just overall be smart and play low limits when making these bets, that’s all I can say.

4. Sell insurance. I’m at the fledgeling point of my career in this, but I have added it as a tennant of my portfolio.  I have shaved off about 20% of my money to put to work in selling index spreads with defined risk. Its a complicated topic, but there is much to be gained by getting into this game.  It adds an income stream of some sort by collecting premiums from those that are hedging bets. No better way to define it.

So there you go, some of my stock trading principles. Be waiting with baited breath for my next list.

Feeling Sentimental

Everyone seems to have figured out the top and the bottom of the Market lately…er wait, its the top . Its a constant reminder to me of how complex the economy is and how most everyone is dead WRONG. It’s probably why value strategies have withstood the test of time against all detractors as well. It can weather the fact that in the short term, you don’t know which direction the market is moving. Your betting on a longer term trend. The sentiment is so tough to nail down.

It’s not that you CAN’T make money right now trading. It’s just that its a bit harder. People telling you that they called being short today, will loose their arse tomorrow, and hand it all back because they probably were lucky being short in the first place. Anyone that tells you any different is probably not telling the truth. Hell, I can tell how much of a rookie I am as I wanted to be long SPY and short Oil. I couldn’t have been more wrong. Glad I am being overly cautious before putting money out there.

I am going to follow that mantra because sentiment is all over the place.

Grey Hair Advancing

Yeeesh. I did this with BW3′s (BWLD).  I watched it happen again with Research In Motion (RIMM).  I held them through some impossible earnings expectations. I have since turned sour on BW3′s, because their CEO can’t successfully navigate increasing chicken prices.  Hard to believe while Southwest (LUV) seems to be dealing with a commodity that is seeing exponential price increases and still navigating the waters, but I digress.

These earnings announcements are a constant reminder for me that I am investing for value in the mid to long term with these plays. If I look back at my portfolio I am doing very well in this strategy when I bought Wal-mart (WMT) and Anhesier-Busch (BUD) at around 40 bucks a share. It just took them time to get to the valuations that I was aiming for.  NOTHING happens overnight in value.

It’s good to remember this when we are in negative sentiment, sell the news type markets.

Humpty Dumpty

If you have lost on significant amounts of dough on positions in the market, it’s worthwhile to look back and ask yourself “Why did that happen?”.  A lot of times you’ll find answers in the numbers in the short or long term.  Sometimes the answers will tell you that you would have had a hard time predicting as huge a downward move as had been established. That’s what is happening in lots of sectors in the market today. Particularly in banking.

A super-prime example of this right now is Fifth Third Bank (FITB).  Just take a look at their chart here. Its an AMAZING testament that if your not careful the market can erase you in a matter of moments. I follow them pretty heavily since it is a former employer of mine and I have written copious amounts of software that is still in use. It was trading at $70 bucks a share when I started there, now they’re down under 10 bucks. All it took was creative financial instruments that people didn’t fully think through in the long term and WHAM! Another reminder that following the money is probably the easiest thing to do if you work in finance.

Lots of the people that I follow on twitter and through their blogs talk a lot about sticking and moving during tough market times. Nothing could be truer of having positions right now. Be active in the positions you take, even if your long. Sometimes it’s tough to see the secondary trends that follow the overall market ripple, but paying attention can get you out of positions that are going to get hammer you.

As a product of this trend in regional banking, I look for these markets to have some consolidation. No one has the leverage right or the cahones to take someone on their balance sheet, but as things continue to shake out its going to happen. Good time to be trolling for some strong upstart banking companies looking to grow who were smart enough not to loan to every Tom, Dick and Harry out there.

Earn Me.

I just finished pairing down my portfolio which means that I am selling off the terrible plays that I had a hard time letting go of. This will free up some cash to put into good companies and get away from these naive plays that I made when I first started investing. This is leading me into a quick newbie lesson if your like me.

The first thing is get rid of companies when they dip 8-10% below your original investment. It’s a really, really difficult thing to do, especially considering you are really smart and made a nice pick on a value play that “seems” underpriced, only to watch it sell off. The problem here is you might wait a very, very long time for that play to recover, if it does at all. I was bad about this when I started investing and was holding on for dear life in numerous positions. For example, I held a position in NOOF and one in OPMR when they were almost double where they are now. Both of these were relatively speculative plays, especially with OPMR and I never should have been sniffing around them anyway. In a nutshell, they both started a nice downward trend with OPMR becoming a total massacre. I should have seen the signs and gotten out of the initial downward move and saved myself money in the further pullback. But you don’t learn those lessons until your out there trading.

The second important lesson I have learned is to research everything as best I can. A *lot* of people will invest following analyst recommendations, or blog posts like mine (Don’t do it, I am just learning :) ) and make plays based on these people. That’s a big mistake. Analyst recommendations are usually something to take into account and note, but they often are priced into the market already, or might not be giving an accurate picture. People writing about the companies on blogs or through twitter might have different investment objectives than you. It’s good to get exposed to what they are talking about to get an idea of the strategies that they are following, but don’t fall in love with their recommendation until you’ve done your homework. Remember this:

–Its a bit like getting to watch Texas Hold’em on TV where you see how the pros play their hands when you see the cards they have. The intarwebs, particularly in blogs and micro-blogs, like twitter, are opening up avenues of transparency that have never existed. Use this transparency as chances to learn.–

So in light of not following these two lessons, how are you going to find companies to invest in? Earnings. Earnings, I would argue, is the place where you can glean the most out of a company. This is capitalism, and if companies aren’t growing and turning over solid double digit growth, why even get involved? Even mediocre management has a tough time screwing up good products that are generating good revenue growth.

Stick with investing in good companies that are posting good earnings per share numbers of 20% growth or so. Don’t turn a blind eye to everything else and research the crap out of them, but use this earnings growth as a good screen to tuck away the crap and focus on companies that worth investing in.

This is just a simple way to start finding better companies to put your money into. But once you start here. quickly you will be eliminating the noise and picking up on the signals before the analysts and bloggers turn their eyes towards the companies you are getting into. That will pay off in returns that you would have missed if waiting for someone else to tell you what to do.

StockTweet’s. Not the Puffy Things You Eat During Easter

I am a big fan and active user of Twitter, as I have posted about here. People are just starting to scratch the surface on some of the cooler things that we can do with the service. One of the places I think some things can be done is in the world of finance. Markets move quickly, and information quicker. Getting insight from some top notch fund investors, and financial guru’s can help hone your skills and strategies, hopefully making you better at what you do.

The one problem here is the noise. How do you find useful information and distill it into something even more useful on a hourly or daily basis, etc. A problem that a fellow Twitter’er @sorenmacbeth has set out to solve. Hence the birth of StockTweet. You use a special tag that denotes that you are referencing a stock symbol by Prefixing the symbol with $. This essentially aggregates the data from people following the service on Twitter. Opens up a whole world of data warehousing. Cool stuff, and I hope it starts to flourish.

Check out more of what’s cool about the service in this blog post:

FT-Alphaville

What I Learned Feeding My Daughter Macaroni

I wish I could just sit around playing and having fun with my daughter. All day when I am at work, especially when the weather gets nice, I wish I could just take off to the park with her and my wife. However, checking my investments as they’re making money (optimism!) and scouring the market for plays in the early morning just isn’t my reality yet. Neither is removing myself from being tied to a “normal” workday. Heck I work best between like 7 and midnight, but having meetings then would probably be frowned upon in my work setting.

So the other night while I was feeding my daughter some macaroni I realized that I needed some concrete financial goals. Nothing like the “make a million bucks tomorrow” crap that everyone talks about. I wanted a realistic 5 year plan about creating some more financial freedom. Over the past couple of years I have turned my brokerage account over 4 times. It doesn’t sound like a lot, but do the math when you start doubling your money and things can add up quickly. I am going to try and do that 2 more times over the next 5 years. This will break up my investing goals into 2.5 year increments. That way I have tangible goals to attain and some time frames to metric to help me watch my progress as I move along. I realize this is going to be far from easy, and some would say impossible. But shooting for big goals keeps my eyes on the prize and motivates me immensely. Plus what the hell do I have to lose besides my money.

It’s that simple for me. These goals would remove me from the idea that I needed to operate in an 8-5 world if I choose. It also would allow me to focus my time on investments, growing my money, managing risk, and dipping my toes into some business ideas that I find interesting.

Take note that I never want to quit working and I really do love what I am doing. I just want to shift my focus into a faster paced world where I feel like I can flourish without becoming unmotivated. So, when you get some time, map out your financial goals no matter how big or small. Or just follow along with me as I try to make my goals become a reality. I might fall short, but most times I find setting goals is half the battle. Plus its tons better than sitting on the sidelines watching other people taking their chances and succeeding.

What’s good in a quant fund?

Quantitative Finance seems to be an established trend in investing. It’s using computer models to find probably situations to invest in. There are tons of hedge funds around the country that employ some sort of quant strategy with the money they have under management. I think there is a space to play here, and a partner and I have been actively developing strategies to compete. It makes sense since we are software developers by day with a business background for me, and engineering for him.

It’s a tough space to figure out. People that have strategies aren’t exactly actively publishing how they are doing it, what their results are, etc. So we have very little information to go on as far as comparisons against the field. So one of the biggest questions for us is what would be good returns for an investor looking to get into this space?

Currently one of our 5 strategies is producing well. Up over 10.36% for the year, while the S&P is down around 2%. If you look even further back over the past 200 days, our strategy is up around 23% (Note, these numbers don’t include some small % of slippage). We are making quick hits in investments with exposure lasting no longer than 14 days to limit risk and are playing nothing but equities.

So our big question in to the investing world out there is, does this kind of return interest you? and do you think it would be competitive in today’s investing marketplace?

Hilariousnous on Wallstrip…

I loved watching Wallstrip today. Yahoo and Microsoft merger talks has made everyone with a pulse know exactly what it is like running a company that has billions in market cap. I would argue that these are the times where CEO’s actually earn their ridiculous salaries. There is a lot more strategy going on than meets the eye. Check out what everyone in NYC had to say: