Octopus Overlords

Did you see that Accenture (ACN) briefly went to $0.01 today? Finished back up at 41-ish after closing yesterday around 42.

Yeah, saw that.

CNBC wrote:A human trading error at a major firm was the root cause of Thursday's sudden, 9 percent selloff in U.S. stocks, sources told CNBC.

Multiple sources said a trader entered the letter "b"—as in "billion"—when he or she meant to type "m," for "million," shortly before 2:47 p.m. New York time.

Sources also told CNBC that the firm in question is Citigroup.

That's one big machine error. I dont know if i buy that explanation, yeh it might have triggered the auto orders, but still this kind of mistake in the midst of Greece and EU economic problem could prove very bad news, even if it as an accident. Lets hope it will be written off as machine error and everyone forgets about it.

I swear I am not the conspiracy theory guy, but I wouldn't be surprised if someone called in a favor here.

Who made money off this? That's where we should be looking. Probably the largely unregulated hedge funds.

The exchanges are cancelling all trades between 2:40 and 3pm that deviated more than 60% of the 2:40 price. Does that basically mean this never happened? And how did they arrive at 60%?

stessier wrote:The exchanges are cancelling all trades between 2:40 and 3pm that deviated more than 60% of the 2:40 price. Does that basically mean this never happened? And how did they arrive at 60%?

And 3 PM? Did the exchanges all close at 3pm?

My portfolio dropped about 10% yesterday after dropping about 4% the day before (and more over the last week) which puts me deeply back into putting having money pulled from my check every week only to watch it disappear, apparently to supplement someone else's wealth somewhere, much like the value of my house.

LordMortis wrote: My portfolio dropped about 10% yesterday after dropping about 4% the day before (and more over the last week) which puts me deeply back into putting having money pulled from my check every week only to watch it disappear, apparently to supplement someone else's wealth somewhere, much like the value of my house.

In most cases when you are long stock it doesn't disappear into someone elses wealth. The only time someone else makes money off your investments is through transactional costs and/or fees.

noxiousdog wrote:

LordMortis wrote: My portfolio dropped about 10% yesterday after dropping about 4% the day before (and more over the last week) which puts me deeply back into putting having money pulled from my check every week only to watch it disappear, apparently to supplement someone else's wealth somewhere, much like the value of my house.

In most cases when you are long stock it doesn't disappear into someone elses wealth. The only time someone else makes money off your investments is through transactional costs and/or fees.

If you're long mutual funds you can lose when they sell stocks.

LawBeefaroni wrote:

noxiousdog wrote:

LordMortis wrote: My portfolio dropped about 10% yesterday after dropping about 4% the day before (and more over the last week) which puts me deeply back into putting having money pulled from my check every week only to watch it disappear, apparently to supplement someone else's wealth somewhere, much like the value of my house.

In most cases when you are long stock it doesn't disappear into someone elses wealth. The only time someone else makes money off your investments is through transactional costs and/or fees.

If you're long mutual funds you can lose when they sell stocks.

You can lose a lot of ways. I'm just saying that your loss isn't normally someone else's gain.

Check out this audio recorded on the floor yesterday during the drop...pretty wild:

http://www.zerohedge.com/article/panic- ... p-500-pits" target="_blank

Big news out of Europe. I think this is good for the Euro in the short term?

NEW YORK, May 10 (Reuters) - U.S. stocks were poised to jump about 4 percent at the open on Monday after a $1 trillion global emergency rescue package was launched, quelling contagion fears and sending European stocks surging.

The package of standby funds and loan guarantees was aimed at preventing Greece's debt crisis from spreading and would be available to euro zone governments shut out of credit markets.

The total bailout, reached by global leaders on Monday, is on the scale of the $700 billion Troubled Asset Relief Program created by the U.S. government in 2008 to stave off the credit crisis.

LawBeefaroni wrote:Big news out of Europe. I think this is good for the Euro in the short term?

NEW YORK, May 10 (Reuters) - U.S. stocks were poised to jump about 4 percent at the open on Monday after a $1 trillion global emergency rescue package was launched, quelling contagion fears and sending European stocks surging.

The package of standby funds and loan guarantees was aimed at preventing Greece's debt crisis from spreading and would be available to euro zone governments shut out of credit markets.

The total bailout, reached by global leaders on Monday, is on the scale of the $700 billion Troubled Asset Relief Program created by the U.S. government in 2008 to stave off the credit crisis.

Short term, yes. Probably VERY short term.

Here's a WSJ story that suggests a fund buying 50k options set off the whole mess as people on the other side looked to mitigate the risk.

From the original WSJ story:

As more details of last Thursday's collapse become clear, there is less evidence to suggest a "fat-finger" data-entry error caused the collapse. Instead, the picture is one of a highly rare confluence of events, some linked, some unrelated, that exposed weaknesses in the stock market large and small. Within five minutes, the Dow Jones Industrial Average had lost 700 points as trading seized up in individual stocks such as Procter & Gamble and even exchange-traded mutual funds.

"It did point out that there is a structural flaw," said Gus Sauter, chief investment officer at Vanguard Group. "We have to think through how you preserve the immediacy and yet preserve the liquidity."

Through the trading desks at Barclays, Universa bought 50,000 options contracts, according to people familiar with the matter. The contracts would pay off about $4 billion should Standard & Poor's 500-stock index fall to 800 in June. It was at 1145 points at the time of the trade.

Back across the country in Chicago, the big trade appeared to have had an immediate ripple in the markets. The traders on the other side of the Universa trade were essentially betting stocks wouldn't post big losses.

But to minimize the risk of losing money, they in turn needed to sell, according to traders.

LawBeefaroni wrote:

Through the trading desks at Barclays, Universa bought 50,000 options contracts, according to people familiar with the matter. The contracts would pay off about $4 billion should Standard & Poor's 500-stock index fall to 800 in June. It was at 1145 points at the time of the trade.

Back across the country in Chicago, the big trade appeared to have had an immediate ripple in the markets. The traders on the other side of the Universa trade were essentially betting stocks wouldn't post big losses.

But to minimize the risk of losing money, they in turn needed to sell, according to traders.

That's awesome. It'd be funny if it didn't tank my retirement along with their stupid greed.

A friend of mine chatted me (in jest) a bit after it happened:

05-06-2010 2:09 PM F: stop selling!
your options trading is tanking the whole market

I'm going to have to give him crap for that.



HFT is going to get a lot of scrutinization.



EDIT:

DJNW wrote:Nasdaq OMX Group Inc. (NDAQ) voiced support for a series of circuit breakers that would halt stock trading when the Standard & Poor's 500 stock index falls below key levels, a top official will tell lawmakers Tuesday.

Eric Noll, head of transaction services for Nasdaq OMX, said the exchange operator supports new rules that would see a 15-minute halt in trading when the S&P 500 falls 5%, with a one-hour stoppage when the S&P 500 falls 10%.

If the S&P 500 fell 20%, trading would be halted for the remainder of the day, according to Noll.

Is 15 minutes enough at that first break?

From the articles, it looks like in that amount of time people knew there was a problem and were looking at how to save themselves rather than figure out what was actually going on. Why do we think it would be different with a mandatory halt? Wouldn't it just give everyone time to figure out how bad it was and have everyone poised to sell the second they were able?

An hour seems like a better choice so that people can talk and try and figure things out.

But then, what do I know?

stessier wrote:Is 15 minutes enough at that first break?

From the articles, it looks like in that amount of time people knew there was a problem and were looking at how to save themselves rather than figure out what was actually going on. Why do we think it would be different with a mandatory halt? Wouldn't it just give everyone time to figure out how bad it was and have everyone poised to sell the second they were able?

An hour seems like a better choice so that people can talk and try and figure things out.

But then, what do I know?

People will sell first and ask questions later. I think the idea is to give humans the chance to stop out-of-control computers rather than follow them off the cliff. Not exactly sure either, though.

OK guys. Gold is hitting new highs, the ECB seems to have temporarily staved off EU collapse via Greece, and commodities seem to be rebounding.

In my relatively short investing lifetime of about 11 years, I have never heard/read as much inflammatory verbiage being thrown about as I am right now...definitely at a high point. An article on Business Insider likened the US to the Weimar Republic recently.

As investors, what if anything are you doing, or do you believe the "chatter" is just hype and/or someone trying to sell you gold/precious metals?

I'm having a hard time deciphering the tea leaves, but one thing is for sure...we can't trust the CBO figures based on their history of assumptions (being wrong).

So do you follow the herd and buy gold, silver and platinum? Seems like a dangerously overfull bubble to me personally (I just sold my silver company (SLW) last week at more than a 100% gain in about 6 months, and thought I was done with it! Obviously sold too soon there)

Or do you do nothing, deer in headlights from information overload? You can easily find respected "experts" vociferously arguing both side right now...that now is a great buying opportunity in equities, as well as those forecasting the end of the financial market as we know it....or almost complete collapse. It's damned confusing.

Or do you keep on as normal, which in my case would be buying and selling stocks as they reach my targets.

Here's what I am doing now, would be interested in your thoughts or strategies:

1. Slowly winding down positions (like SLW - Silver Wheaton) over 100% gain, even if they have not reached my "target". Did this with AXP (American Express) and a few others already.

2. Hold about 15% in cash as I try to figure out what the hell is going on (but I am not sure that holding USD is a great idea either...jeebus that sounds crazy!)

3. Start looking for good non Euro Zone large cap values with big dividends as a a defense to the alleged impending storm.

4. Consider more exposure to the miners like Rio Tinto (I have a small position, but it sure looks good now, after the big Oz tax debacle)

I had already started getting a little defensive last year when I started buying big dividend US large caps like Novartis, Johnson and Johnson and Exxon.

Carpet_pissr wrote: Or do you do nothing, deer in headlights from information overload? You can easily find respected "experts" vociferously arguing both side right now...that now is a great buying opportunity in equities, as well as those forecasting the end of the financial market as we know it....or almost complete collapse. It's damned confusing.

Or do you keep on as normal, which in my case would be buying and selling stocks as they reach my targets.

Here's what I am doing now, would be interested in your thoughts or strategies:

1. Slowly winding down positions (like SLW - Silver Wheaton) over 100% gain, even if they have not reached my "target". Did this with AXP (American Express) and a few others already.

There are options strategies.

Carpet_pissr wrote: 2. Hold about 15% in cash as I try to figure out what the hell is going on (but I am not sure that holding USD is a great idea either...jeebus that sounds crazy!)

15% is high for a "wait and see" cash approach. 85% is pretty heavily invested. It's fully invested for some.

Carpet_pissr wrote:3. Start looking for good non Euro Zone large cap values with big dividends as a a defense to the alleged impending storm.

4. Consider more exposure to the miners like Rio Tinto (I have a small position, but it sure looks good now, after the big Oz tax debacle)

I had already started getting a little defensive last year when I started buying big dividend US large caps like Novartis, Johnson and Johnson and Exxon.

Personally I don't like getting fixated on sectors. I get very familiar with individual stocks. I monitor them. If they aren't attractive at any given point in time, I still follow them. I constantly add stocks to my stable but only act when they appear to be a good investment (on either side) or fit in with a specific strategy (for example, your dividends idea).

I'm much more conservative than you guys, but my strategy has evolved to the following:

Divide assets into:
Fixed Income: Includes long term CDs, bond funds, preferred stocks.
Equities: Domestic
Real Estate: REITS and similiar high capital intensive businesses. Excludes energy extraction.
Commodities: Gold and natural resources.
International (equity 66%, bonds 33%): Outside my circle of competence. I look for mutual fund managers with a long track record.
Cash.

I try to keep each class balanced (not equally) and shift money around as they go 10%-20% out of targets.

My equities lately has centered around dividend paying stocks that are currently high yield relative to their historic payouts. The IQ Trends newsletter has been extremely helpful. However, I'm an avid Buffett follower so will often pick up companies he likes that happen to be distressed (mmmm Wells Fargo).

REITS I'm more familiar with and they are easy to understand so I'm much more comfortable trading in and out.

Just to update/inform:

I picked up some shares of the Market Vectors Double Short Euro the other day, and found out after the fact that these "ultra" type funds typically have worse performance (than say a non double short fund on the same currency) due to all the fees, etc. Shenanigans.

So instead of or in addition to what I have in terms of a LONG position on a short currency, will short the long funds (non ultra this time).

Also considering shorting a home builder ETF or the US real estate ETF as well.

Again, I am not typically short ANYthing (tried it once a few years ago), OR a bear, but as I see things currently, we are in for some big time nastiness.

ND: curious to know what % you have in gold at this time? Are you worried about continued USD devaluation?

Carpet_pissr wrote:Just to update/inform:

I picked up some shares of the Market Vectors Double Short Euro the other day, and found out after the fact that these "ultra" type funds typically have worse performance (than say a non double short fund on the same currency) due to all the fees, etc. Shenanigans.

So instead of or in addition to what I have in terms of a LONG position on a short currency, will short the long funds (non ultra this time).

Of course they have "worse" performance. They're leveraged and you don't have the risk of holding a true short position.

Again, I wish I had money to invest in Nestle. They took a huge dive this week after spending 5 nice months on the up and up and with an increase announced in their dividends. They're now paying $1.48 per share which could be had at $48.10. I can't find who often they pay dividends. Do different companies do that differently? I'd have picked them up for $47.50 in January. I'd be unhappy with the drop now but you know it's going to bounce back again shortly.

I'm getting close to being able to play with investment money. I figure another $2,000 in the bank will give me minimum comfort and another $2,000 pay for my coming dental bills. Barring disaster between now and then, I may be able in form to start asking questions by October. *fingers crossed* Of course, we'll see if I want to actually get involved in October or if I'll want to wait out whatever is going on then.

Carpet_pissr wrote: ND: curious to know what % you have in gold at this time? Are you worried about continued USD devaluation?

It's tiny. Commodities are 10% of my portfolio, and gold is only 7% of that, so you're looking at less than 1%. Still, it's served it's purpose. I've gotten to sell 1/2 twice and still have my original investment.

I'm not worried about anything specifically so much as just pursuing diversification.

LordMortis wrote:Again, I wish I had money to invest in Nestle. They took a huge dive this week after spending 5 nice months on the up and up and with an increase announced in their dividends. They're now paying $1.48 per share which could be had at $48.10. I can't find who often they pay dividends. Do different companies do that differently? I'd have picked them up for $47.50 in January. I'd be unhappy with the drop now but you know it's going to bounce back again shortly.

It probably took that dive because of the dividend. The ex date was 4/19. On Friday the 16th, it was right around $50 and on Monday the 19th, it was right around $48.50. The dividend was $1.49. Dividends aren't free money.


EDIT: IOW, the 16th was the last date you could buy NSRGY ADR and be a "shareholder of record" on the record date (the record date was 4/21, the ex-dividend date is 3 trading days before the record date). So if you bought it on the 19th (the next trading day), why would you pay an extra $1.49 when the guy selling you the stock is going to get the dividend on May 26 (which happens to be the dividend date)? You wouldn't, and that's why the price usually drops equivalent to the dividend amount.


EDIT EDIT: I re-read, I see you were talking about the dive this week. That was because of the blow up on Thursday. But regardless, if you bought on that dip you woldn't get the dividend.

LawBeefaroni wrote:

LordMortis wrote:Again, I wish I had money to invest in Nestle. They took a huge dive this week after spending 5 nice months on the up and up and with an increase announced in their dividends. They're now paying $1.48 per share which could be had at $48.10. I can't find who often they pay dividends. Do different companies do that differently? I'd have picked them up for $47.50 in January. I'd be unhappy with the drop now but you know it's going to bounce back again shortly.

It probably took that dive because of the dividend. The ex date was 4/19. On Friday the 16th, it was right around $50 and on Monday the 19th, it was right around $48.50. The dividend was $1.49. Dividends aren't free money.

That would still work for me.

Where do ally'all recommend getting started. I assume you start by finding the right broker and learn by understanding them. But I don't even know how to do that. I spent a little time at fool.com but their advice is essentially "Find the right broker" without explaining the pros and cons brokers nor what to look for or expect. It's a bit intimidating.

LawBeefaroni wrote:EDIT EDIT: I re-read, I see you were talking about the dive this week. That was because of the blow up on Thursday. But regardless, if you bought on that dip you woldn't get the dividend.

That dividend would have been if I had the money to buy in early January when I wanted to.

The current dip is where I would like to buy now on the assumption that Nestle is going to continue to do well, the price is going to go back up and the dividend will continue to strengthen for next time.

If you know what stocks you want, you could do it yourself through something like Scottrade.com. $7 commission for most trades.

stessier wrote:If you know what stocks you want, you could do it yourself through something like Scottrade.com. $7 commission for most trades.

Even that is something I am trying to understand. The stock market is something akin to magic to me. So if I got $1,000 and satisfied something of scotttrade's requirements. It's $7 no matter what the trade? If I buy $100 worth of Nestle's for instance. It costs $7 to buy it and then $7 to sell it. So I have to come up with a 14% return after taxes just to break even. OTOH if I drop all $1000 in right off that bat I only have to come up with 1.4% to break even. Does this work the same with index funds? How can you see what funds scottrade lets you in to? And beyond all the things I don't know, there are all the things I don't know I don't know. It's a bit intimidating when you are completely ignorant.

LordMortis wrote:Again, I wish I had money to invest in Nestle. They took a huge dive this week after spending 5 nice months on the up and up and with an increase announced in their dividends. They're now paying $1.48 per share which could be had at $48.10. I can't find who often they pay dividends. Do different companies do that differently? I'd have picked them up for $47.50 in January. I'd be unhappy with the drop now but you know it's going to bounce back again shortly.

Hmmm, looks pretty expensive right now (to me).
PEG Ratio 2.26

FYI, dividends for Nestle are paid out every April (at least they have been for the past several years). Yes, different dates for different companies. Some do it quarterly, some once a year, etc.

If you don't put 10-15 hours per week into this stuff, you're better off with indexes. Find a low cost index mutual fund and just put a fixed amount every month into it.


If you do enjoy putting time into it, there's lots of boards on the motley fool where you can learn. I hit the Berkshire board and the REIT board daily. Benjamin Graham's book The Intelligent Investor is supposed to be required reading, though I read Securities Analysis instead.

Also, keep meticulous records. Learning what you know and what you don't know by keeping score is the best move I ever made.

LordMortis wrote:

stessier wrote:If you know what stocks you want, you could do it yourself through something like Scottrade.com. $7 commission for most trades.

Even that is something I am trying to understand. The stock market is something akin to magic to me. So if I got $1,000 and satisfied something of scotttrade's requirements. It's $7 no matter what the trade? If I buy $100 worth of Nestle's for instance. It costs $7 to buy it and then $7 to sell it. So I have to come up with a 14% return after taxes just to break even. OTOH if I drop all $1000 in right off that bat I only have to come up with 1.4% to break even. Does this work the same with index funds? How can you see what funds scottrade lets you in to? And beyond all the things I don't know, there are all the things I don't know I don't know. It's a bit intimidating when you are completely ignorant.

I highly recommend doing a lot of reading before even selecting a broker. Your strategy, once you develop one, can help dictate what kind of broker you get.

Avoid the Mad Money, Rich Dad, or "How to Make Money in a [market type] Market" stuff. You want to know that P/EG is, not what someone else thinks is the right ratio to "buybuybuy." [EDIT: not directed at Carpet_pissr, posted before I saw his post] You want dry, found-at-your-local-library type fundamentals. Fortunately most of that can also be found on the internet.

You are correct in your understanding of Scottrade's commission. As for breaking even, remember that any profit is also taxable. You can't write off commissions but you can include them in your cost and proceeds, which helps a little bit.

LordMortis wrote:

stessier wrote:If you know what stocks you want, you could do it yourself through something like Scottrade.com. $7 commission for most trades.

Even that is something I am trying to understand. The stock market is something akin to magic to me. So if I got $1,000 and satisfied something of scotttrade's requirements. It's $7 no matter what the trade? If I buy $100 worth of Nestle's for instance. It costs $7 to buy it and then $7 to sell it. So I have to come up with a 14% return after taxes just to break even. OTOH if I drop all $1000 in right off that bat I only have to come up with 1.4% to break even. Does this work the same with index funds? How can you see what funds scottrade lets you in to? And beyond all the things I don't know, there are all the things I don't know I don't know. It's a bit intimidating when you are completely ignorant.

Your analysis is correct on stocks.

Index funds normally have no trading fees, but you have to look at each individual one to be sure. The narrower the fund scope the more likely it is to have fees. You can probably find funds on scottrade here.

LordMortis wrote:
The current dip is where I would like to buy now on the assumption that Nestle is going to continue to do well, the price is going to go back up and the dividend will continue to strengthen for next time.

Why do you make that assumption that it will continue to do well and why is the current price attractive, assuming that assumption? Why will the dividend continue to strengthen?

These are more rhetorical/zen than real questions, of course. You have the answers/assumptions. Now show your work.

noxiousdog wrote:If you don't put 10-15 hours per week into this stuff, you're better off with indexes. Find a low cost index mutual fund and just put a fixed amount every month into it.

Also, keep meticulous records. Learning what you know and what you don't know by keeping score is the best move I ever made.

Completely agree with both of these.

Someone at work the other day asked me what broker I would recommend to her, and knowing that she didn't know the first thing about investing, I basically said just pick one. Unless you are going to be actively trading, they are all pretty much the same. For someone that has no plans or interest in treating this either as a side job or a hobby, it doesn't matter if you go with Ameritrade, Scottrade, or Fidelity imo. You can buy indexes from any of them.

Even if you do want to get into investing more deeply, then you can always switch brokers later to one that suits your investing style. At this point, you probably don't know what your style is, so it would be difficult to say "go with X broker". Again, not THAT much difference between them, so it's hard to go wrong.

Check this link out though, fwiw:

http://www.consumersearch.com/online-brokers" target="_blank

LawBeefaroni wrote:Why do you make that assumption that it will continue to do well and why is the current price attractive, assuming that assumption? Why will the dividend continue to strengthen?

Nestle will continue to be profitable because they are the largest food company in the world, which is to say nothing of the continued growth of their frozen foods divisions. They are about the largest answer in the west for people trying to eat at home, trying to eat healthy, while putting as little effort in to it as possible and when you grocery shop you can see how more and more shelf space is being dedicated to Nestle product, while more and more grocers are popping up.

The current price is attractive because it's a spike downward. I'm more comfortable with the idea of buying on downward spike and then letting my money sit there, hoping to collect dividends later, while fearing that if an emergency happens requiring me to pull my money that I won't have totally hosed myself.

But again, I don't know what I don't know.

Carpet_pissr,

Thank you for the link.

LordMortis wrote: The current price is attractive because it's a spike downward. I'm more comfortable with the idea of buying on downward spike and then letting my money sit there,

If people around you are buying dollars for $1.50, and then it spikes downward to $1.25 would you buy?

noxiousdog wrote:

LordMortis wrote: The current price is attractive because it's a spike downward. I'm more comfortable with the idea of buying on downward spike and then letting my money sit there,

If people around you are buying dollars for $1.50, and then it spikes downward to $1.25 would you buy?

If people around me are buying dollars for $1.50 that spiked down to $1.25, I might buy. It would depend on whether I thought people were going to pay more than $1.25 for that dollar later and if I had a good faith that someone was going to me an acceptable token amount of money for possessing that dollar on a regular basis.

Barron's annual broker roundup is worth a read. The cheatsheet. I've linked to previous iterations in this thread.