The real importance of the study of financial behavior is found in an approach to investing called technical analysis. The two basic approaches are found in two camps fundamental analysis that focuses on the study of the stock value and technical analysis that follows the market behavior.
The basis of technical analysis is the efficient market hypothesis. The EMH assumes that, at some level, the market processes available information and acts accordingly. As such, one can assume that if a stock is trading at a higher volume or if people are shorting the stock, then that is an indicator of some information that has come out about the security that is being process by the efficient market.
Technical analysis looks at a few primary indicators, at least for your purposes, when analyzing the market. The primary factor that one needs to watch is volume. Where are people trading for a day or a historical period of time. A high trading volume of the TTM could indicate that the stock has large price movement.
The other primary factor in technical analysis is watching the statistics. Based on behavior, statistics are often a good indicator of price change and what is likely to happen next. Many technical analyst, or chartists, use a moving average to forecast potential outcomes.
The primary factor to success in technical analysis is timing. So you better sift through the financial bull crap quick and watch those candlestick charts!
Thursday, March 27, 2008
Monday, March 24, 2008
Visa, it is everywhere you want to be....
After the IPO of Visa (NYSE:V) on March 18th there has been an incredible increase in stock price at the potential gain of an already profitable company of nearly 10 dollars.
China seems to believe in Visa, buying nearly $300 million dollars worth of the debit & credit card company, the Country's largest life insurance company is betting on the long term stability of America's power to spend. The large life insurance company, based in China, decided to buy the IPO in a recent surge of foreign investment that Chinese companies are undertaking.
It seems that the wise investment bankers injected the IPO, Visa, at just the right time. With the precedent of 350% change over time of the MasterCard brand in a bull market the Visa sale, which netted $18 Billion dollars for the leading card service, could do even better being inserted in a possible upswing in our GOLDILOCKS economy.
Potential pitfalls for the economy can only be fully realized in a huge downturn in consumer spending and credit. The credit component seems to be a null point because the credit crisis we are in seems to be only affecting the big purchases like housing and car buying but will not hugely bleed into buying a shirt from Abercrombie or jewelry from Tiffany & Co., who posted great earnings and is up as much as $5.00 today.
The debit side of the business also seems to be strong as a growing number of people are rejecting the green that they used to carry and going with Visa and banking backed plastic for transactions.
Look for Visa to continue to rise and be everywhere you want it to be!
(disclaimer: author has a long position or positions of Visa traded under class a NYSE:V)
China seems to believe in Visa, buying nearly $300 million dollars worth of the debit & credit card company, the Country's largest life insurance company is betting on the long term stability of America's power to spend. The large life insurance company, based in China, decided to buy the IPO in a recent surge of foreign investment that Chinese companies are undertaking.
It seems that the wise investment bankers injected the IPO, Visa, at just the right time. With the precedent of 350% change over time of the MasterCard brand in a bull market the Visa sale, which netted $18 Billion dollars for the leading card service, could do even better being inserted in a possible upswing in our GOLDILOCKS economy.
Potential pitfalls for the economy can only be fully realized in a huge downturn in consumer spending and credit. The credit component seems to be a null point because the credit crisis we are in seems to be only affecting the big purchases like housing and car buying but will not hugely bleed into buying a shirt from Abercrombie or jewelry from Tiffany & Co., who posted great earnings and is up as much as $5.00 today.
The debit side of the business also seems to be strong as a growing number of people are rejecting the green that they used to carry and going with Visa and banking backed plastic for transactions.
Look for Visa to continue to rise and be everywhere you want it to be!
(disclaimer: author has a long position or positions of Visa traded under class a NYSE:V)
Thursday, March 6, 2008
Mass Hysteria over what again?
Can you taste pessimism seeping out of the mouths of every financial “journo” about the market? Every financial tabloid and dramatized show have two important tools on their Swiss Army knife lexicon; recession and housing crisis.
I was watching CNBC and realized that this is a bunch of hype for a myriad of reasons. While I could go on for some time about the fear tactics that many journalists use to keep the viewer glued to the ticker, I think there are a few things that need to be pointed out about our current condition.
First of all, recession is apart of a healthy economy. Much in the same way that a forest needs to be burned down, sometimes a recession or a “blip on the radar screen” can be a good thing. Not only does it allow the investor to rethink a trading strategy and reemploy a new one, but it keeps the economy in check and often times slaps the hand of those doing risky or unethical behavior, i.e. the sub prime swindlers. What we are really looking for here is a Goldilocks economy.
The bump in our road is not as bad as it could be. While indicators of recession have moved a few percentage points, there have been no wild swings. For the most part, consumer spending continues to be steady and people seem to be secure in mortgages that were thought to be in technical default.
What is really bothersome is the reoccurring thought of why? Why do they keep reporting something that cannot be changed by anyone until the next set of number, those that will establish a trend happen? The markets enter a new realm in this situation and that is the mastery of the technical analyst. The reason that the real moneymakers do not care about a down turn is the financial tools that are available. The hedge fund managers and the venture capital guys have their money hedged in a much more sophisticated way.
While Jim Cramer is telling all of you to be diversified by having stocks in several different industries, the Wall Street guys are doing that and buying stocks short and long. They are diversified by, essentially, making beta one. These professionals are the people that are outsmarting you. They are the professionals that do not care if there is mass hysteria, they will make money either way the market goes.
I was watching CNBC and realized that this is a bunch of hype for a myriad of reasons. While I could go on for some time about the fear tactics that many journalists use to keep the viewer glued to the ticker, I think there are a few things that need to be pointed out about our current condition.
First of all, recession is apart of a healthy economy. Much in the same way that a forest needs to be burned down, sometimes a recession or a “blip on the radar screen” can be a good thing. Not only does it allow the investor to rethink a trading strategy and reemploy a new one, but it keeps the economy in check and often times slaps the hand of those doing risky or unethical behavior, i.e. the sub prime swindlers. What we are really looking for here is a Goldilocks economy.
The bump in our road is not as bad as it could be. While indicators of recession have moved a few percentage points, there have been no wild swings. For the most part, consumer spending continues to be steady and people seem to be secure in mortgages that were thought to be in technical default.
What is really bothersome is the reoccurring thought of why? Why do they keep reporting something that cannot be changed by anyone until the next set of number, those that will establish a trend happen? The markets enter a new realm in this situation and that is the mastery of the technical analyst. The reason that the real moneymakers do not care about a down turn is the financial tools that are available. The hedge fund managers and the venture capital guys have their money hedged in a much more sophisticated way.
While Jim Cramer is telling all of you to be diversified by having stocks in several different industries, the Wall Street guys are doing that and buying stocks short and long. They are diversified by, essentially, making beta one. These professionals are the people that are outsmarting you. They are the professionals that do not care if there is mass hysteria, they will make money either way the market goes.
Tuesday, March 4, 2008
Apple buyback?
Apple could present a plan in the next few months to buyback a large portion of their common stock outstanding according to apple insiders.
Investors in AAPL are looking to leadership to make the same move that Microsoft (MSFT) made and plans to follow through with by August 17th of this year.
Apple may follow in the wise path of Microsoft because of their cash rich balance sheet. With virtually no debt and large cash reserves, the company is in a good position to stimulate the stock value for the investors.
Last summer Apple's common stock was trading for around $200. Now, the once great has almost decreased in value by $100 at a trading price of $124.64 today.
Not a largely consumer elastic with the change in consumer spending, Apple still has strong sales but weak valuation. I attribute this, in large part, to the future view of free cash flow in the future. As I have discussed before, the market's view of future sales has been bearish for the last few quarters.
A buyback will decrease the market liquidity of Apple and, for a short time, stimulate stock price. What apple really needs to do is increase investor confidence and come out with another revolutionary product like the i-Phone!
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