Archives of “January 1, 2019” day

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Understanding The Cryptocurrency Boom

  
Analysis, Education

I recently came across a December 1996 San Jose Mercury News article on tech pioneers’ attempts to carry the pre-browser Internet’s bulletin board community vibe over to the new-fangled World Wide Web.
In effect, the article is talking about social media a decade before MySpace and Facebook and 15 years before the maturation of social media.
(Apple was $25 per share in December 1996. Adjusted for splits, that’s about the cost of a cup of coffee.)
So what’s the point of digging up this ancient tech history?

 1. Technology changes in ways that are difficult to predict, even to visionaries who understand present-day technologies.

 2. The sources of great future fortunes are only visible in a rearview mirror.

Many of the tech and biotech companies listed in the financial pages of December 1996 no longer exist. Their industries changed, and they vanished or were bought up, often for pennies on the dollar of their heyday valuations.
Which brings us to cryptocurrencies, which entered the world with bitcoin in early 2009.
Now there are hundreds of cryptocurrencies, and a speculative boom has pushed bitcoin from around $600 a year ago to $2600 and Ethereum, another leading cryptocurrency, from around $10 last year to $370.
Where are cryptocurrencies in the evolution from new technology to speculative boom to maturation? Judging by valuation leaps from $10 to $370, the technology is clearly in the speculative boom phase.
If recent tech history is any guide, speculative boom phases are often poor guides to future valuations and the maturation trajectory of a new sector.
Anyone remember “push” technologies circa 1997? This was the hottest thing going, and valuations of early companies went ballistic.  Then the fad passed and some new innovation became The Next Big Thing.
All of which is to say: nobody can predict the future course of cryptocurrencies, other than to say that speculative booms eventually end and technologies mature into forms that solve real business problems in uniquely cheap and robust ways no other technology can match.
So while we can’t predict the future forms of cryptocurrencies that will dominate the mature marketplace, we can predict that markets will sort the wheat from the chaff by a winnowing the entries down to those that solve real business problems (i.e. address scarcities) in ways that are cheap and robust and that cannot be solved by other technologies.

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"The Big Short's" Steve Eisman Reveals What The Next Big Short Is

  
Analysis, Education

“That Wall Street has gone down because of this is justice… They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

      – Steve Eisman

One decade before he became famous for the being the inspiration behind Mark Baum’s character, played by Steve Carell in the movie the “The Big Short”, Steve Eisman was making hundreds of millions predicting the next big short, namely the collapse of the subprime mortgage industry. Which is why every appearance of the otherwise reclusive financial guru sees broad popular interest, and this past Sunday, when Eisman appeared at the beachfront Fontainebleau Hotel in Miami, where several thousand Wall Street securitization professionals are convening this week for their 22nd annual ABS East Conference, was no different.

Incidentally, it’s the same gathering where, in one scene of the film “The Big Short,” the character based on Eisman bursts into outrage at a mortgage executive giving a talk.


Steve Eisman Photographer: Daniel Acker/Bloomberg

Eisman hadn’t attended a securitization conference since 2007. But Information Management Network, the organizer of an annual confab in Miami, decided to changed that when it invited him to give the keynote speech Sunday. (more…)

Book Review :Elder, The New Sell & Sell Short

  
Analysis, Education
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Most traders have read Alexander Elder’s Trading for a Living, originally published in 1993. Elder has, of course, written other popular books such as Come into My Trading Room (2002) and Entries and Exits (2006). His latest work, The New Sell & Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines (Wiley, 2011) is an expanded second edition of his 2008 book. It comes with a built-in study guide: three sets of questions and answers. Although it is a paperback, the charts and graphs are printed in color and the stock is of high quality.

The first part of the book covers Elder’s signature contributions to the trading literature: psychology, risk management, and record-keeping. It is brief because we’ve been there before, but Elder does describe some new ways to keep records—an ongoing project because he believes that “the single most important factor in your success or failure is the quality of your records.” (p. 341)

Part two tackles the all-important question of how to exit a (long) trade. Elder offers three alternative scenarios: sell at a target above the market, be prepared to sell below the market using a protective stop, and “sell before the stock hits either a target or a stop—because market conditions have changed and you no longer want to hold it.” (p. 59)

Elder then moves on to shorting stocks, futures, and forex; he also has a section on writing options. Finally, he points out some lessons of the 2007-2009 bear market. (more…)

The journey to becoming a winning trader

  
  Education
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You need to learn to execute without fear or hesitation.
You need to accept that you will get stopped out when you are wrong.
And you also need to accept that the only way to really accumulate profits on your account is to let winners run.
And finally, the fourth and probably most difficult step is to push your winners, or in other words, you add to your winning positions.

Jesse Livermore :Timeless lessons

  
  Education
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All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis.

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.

Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.

It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.

Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes.

When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day.

Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.

A prudent speculator never argues with the tape. Markets are never wrongopinions often are.

Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly.

I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humansand human nature never changes.

When you make a trade, you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade.

I am fully aware that of the millions of people who speculate in the markets, few people spend full time involved in the art of speculation. Yet, as far as I’m concerned it is a full-time jobperhaps even more than a job. Perhaps it is a vocation, where many are called but few are singled out for success.

The big money is made by the sittin’ and the waitin’not the thinking. Wait until all the factors are in your favor before making the trade.

It was never my thinking that made big money for me. It was my sitting…Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after this that a stock operator can make big money. it is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of ignorance.

Give up trying to catch the last eighth – or the first. These two are the most expensive eighths in the world.

Without faith in his own judgment no man can go very far in this game. That is about all I have learned – to study general conditions, to take a position and stick to it.

Remember that stocks are never to high for you to begin buying or too low to begin selling.

That is where the tape comes in – to enable you to decide as to the proper time for beginning. Much depends upon beginning at exactly the right time. (more…)

7 Points To Follow If You Are A Trader

  
  Education
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  1.  Expect long hours of study and research. Assume you will lose money in the beginning.
  2. A person interested in becoming a trader must have the mindset of an entrepreneur. Risk, irregular income, and spending money to make money, are all part of the business.
  3. You must trade like a business person and not a gambler. Gamblers need not apply; go to Vegas instead.
  4. Risk management will be your priority. Too much risk exposure will eventually lead you to be an unemployed trader with no trading capital.
  5. You are your own human resource department. Be prepared to manage your own greed and fear.
  6. To keep your morale up, you must keep all your losses small, and allow your winning trades to be as large as possible.
  7. Jesse Livermore’s quote for potential candidates: “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”
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