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Ben Bernanke bails out Time Magazine

timemagazinegreenspan

WASHINGTON – After naming Ben Bernanke Person of the Year for saving us from the crisis that he helped create, Time magazine sales have “dropped off a cliff,” according to one Time magazine employee, speaking on condition of anonymity.

As a result of the drop-off in demand, Time magazine is now going through a liquidity crisis. Because of this situation, Ben Bernanke has decided to provide Time magazine with the necessary liquidity to stave off bankruptcy. The Fed has added millions of editions of Time to its balance sheet.

“From what we can tell, these Time magazines – especially the edition with Greenspan on the cover – have more intrinsic value than do Treasuries. There is actually stuff to read in them. So our balance sheet isn’t impaired in any way by paying cover-price for these issues,” said Fed Chairman Bernanke. “We also felt it would be best for the economy to take these editions out of circulation, and we are asking the American people to sell their Greenspan editions to the FOMC.”

The preliminary numbers are showing that the Fed, through Open Market Operations, has monetized at least 500,000 copies of the edition with Greenspan on the cover – the last time a Fed Chairman appeared on the cover of the prestigious magazine.

“If necessary, the Fed has the tools it needs to remove any excess liquidity from the markets,” said Bernanke. “We could start by selling off the Jim Bunning baseball cards that we have on our balance sheet.”

Trading Emotions


Confidence Without confidence it is not possible to achieve much in other streams of life. In the equity markets, it is doubly true. If you lack in self-confidence, doubts may creep up in your mind. This may lead to indecision, which in turn lead to missed opportunities and losses. For day-trading and short interval trades, confidence is of utmost importance.On the other hand, on down days be careful. In many instances, you may be tempted to book small profits just to make your day balance sheet look pretty. This is not the issue. When you are faced with loss-making trades sooner or later, that same daily balance sheet will not look pretty at all.Never be far away from the correct principles of trading no matter what your mind is tempted to think. It is just too painful to reinvent the wheel.
Discipline
In order to be a successful investor/trader, you must be very disciplined. Stick to the plan of action. This means that you will stick to trading policies, trading plans and so on. Know your objective and work accordingly.
Ideas
Do not seek to implement new ideas that come all the time during markets. Remember, ideas are just ideas. If you feel there is value in them, they have to be thought about, refined, tested and then brought to the trading room. If you try to implement new ideas immediately to trading all you will do is to erode capital and confidence.
Hope
Do not allow hope to loiter anywhere close to your trading system. Hope has the potential to do maximum damage to your capital.

Bruce Berkowitz's Basic Checklist For Investing

1.Can you kill the investment? Is there adult supervision at the company?
2. Is the company essential? Does it depend upon the kindness of strangers?
3. What can the company make? Reasonable profitability for owners?
4. How are owners paid? Distributions?
5. Management – honest in past and present?
6. Does accounting reflect reality?
7. Does the balance sheet match up with the income statement?
8. Catalysts – Buybacks? Misunderstood? Is enterprise having a big problem that is fixable? Everyone’s been burned by the stock so afraid to buy it.
9. Are there irrational fears of current headwinds?
10. Does the business have pricing power or unit growth?
11. Can you hold the investment for a long time & does it improve portfolio performance?

Traits of the Successful Trader

1. Find the plays that make the most sense to you.

Build from your unique personality.  Some traders will make a career of momentum trading, killing anything that is moving.  They could care less about a balance sheet or even the actual full name of the symbols they trade.   They just want to play and are damn good at it.   Some will find this intellectually suffocating.  They will want to trade all the markets, reading as much about as many longer term opportunities as possible.  This fits their inner need to learn, think, and grow intellectually.  Both are totally acceptable save if the momo trader is forced to trade macro plays.

2. Spend as much time trading, thinking about trading and talking about trading as you can possible stand.

The past years have gifted us a treasure of research on elite performance which provides a clear path for our success.  Time at our craft, experience, practice, reps gained determining plays are the road to successful trading.  Put down Boring New Book About Some New System You Do Not Understand and start reading The Talent Code, Bounce, Talent is Overrated, Mindset, Drive, Outliers, The Art of Learning.

3. Find a GREAT mentor.

And I do not mean necessarily at a trading firm.  Before Dr. Steenbarger went off-line and joined one of the great hedge funds of our time, I peppered him with questions.  Phil Mickelson, considered one of our greatest golfers ever, has three coaches watching his game.  Peyton Manning has a head coach, offensive coordinator, quarterback coach, and father providing him feedback.   There is little evidence of elite performers reaching their potential without high level coaching.

Standard & Poor’s 500 Guide, 2013 Edition

It’s commonplace for authors to write revised editions of their books. But book reviewers are not supposed to serve up revised editions of their reviews. The former are billed as new and improved; the latter seem nothing more than warmed-up fare. The problem is that sometimes it’s difficult to start from scratch when reviewing a book that, while completely new, is also identical in structure. Such is the case with the 2013 edition of the Standard & Poor’s 500 Guide. So, with apologies, herewith a revised edition of last year’s review.
This is a very big paperback—8 ½” x 11”, more than 1000 pages, and weighing in at about 4.5 lbs. With so much information available online, why would anyone need this book? I can think of several compelling reasons.
First, a personal preference: I enjoy flipping through pages, making serendipitous discoveries. (The one downside this year: thanks to UPS, the bottom of the book got wet, so the pages don’t exactly flip.) I don’t have the same kind of experience online since I normally am looking for something specific, not just seeing what comes my way. (more…)

My 10 Favorite Nicolas Darvas Quotes


My favorite Nicolas Darvas quotes from the book on the subject of:
Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.”
Technical Analysis versus Predictions
“I believe in analysis and not forecasting.”
Trading Psychology
“I became over-confident, and that is the most dangerous state of mind anyone can develop in the stock market.”
Risk Management

“I decided never again to risk more money than I could afford to lose without ruining myself.”
Fundamental Analysis

“All a company report and balance sheet can tell you is the past and the present. They cannot tell future.”
Trend Following
“I made up my mind to buy high and sell higher.”
The Market tells its own story best

I accepted everything for what it was-not what I wanted it to be.”

Advantages & Disadvantages of EBITDA

The Advantages of EBITDA

Although there is no silver bullet metric in financial statement analysis, nevertheless there are numerous benefits to using EBITDA. Here are a few:

  • Operational Comparability:  As implied above, EBITDA allows comparability across a wide swath of companies. Accounting standards provide leniency in the application of financial statements, therefore using EBITDA allows apples-to-apples comparisons and relieves accounting discrepancies on items such as depreciation, tax rates, and financing choice.
  • Cash Flow Proxy:Since the income statement traditionally is the financial statement of choice, EBITDA can be easily derived from this statement and provides a simple proxy for cash generation in the absence of other data.
  • Debt Coverage Ratios:In many lender contracts, certain debt provisions require specific levels of income cushion above the required interest expense payments. Evaluating EBITDA coverage ratios across companies assists analysts in determining which businesses are more likely to default on their debt obligations.

The Disadvantages of EBITDA (more…)

5 Points for Traders

  • Concentrate on what is important. The most important thing when I am trading is profit and education, to some extent.  You can get to profit many ways but your actions need to all bend towards that one objective.  Me talking about my position takes me away from analyzing the position.  Also, for me, it makes me less flexible. Now I am thinking about what the market is doing and how I look to other people.  Also, if you are going to talk your book the most effective way is to get out into it, albeit the most unethical.
  • Start with a logical thesis. For example, leave out the fact that you said the following about the company “offers a useful, attractively priced service to customers, is growing like wildfire, is very well managed, and has a strong balance sheet,” but still decided to short the company anyways.  I realize this statement does not always mean a stock price is going to rise but the next logical step does not mean the stock is going down.
  • Follow your plan. Do not make reference to your strategy as the following “outright frauds (our very favorite), industries in decline or facing major headwinds, weak or faddish business models, bad balance sheets, and incompetent,excessively promotional and/or crooked management”  and not follow it.  See above statement.
  • Do your research before you make a trade. Don’t use anything with the word “monkey” in it for research purposes and tell someone about it.  Also, 500 people is not a very big sample size.
  • And finally, don’t act like a loss is the end of the world or a win. If you are doing the right things, your best and worst days are always ahead of you. After the trade is over the next trade is the most important, once again assuming you are doing the right things.

Nothing is ever going to prevent you from losing but there are several things that can prevent you from winning over a long period of time.

Nicolas Darvas Quotes

Discipline:
“I knew now that I had to keep rigidly to the system I had carved out for myself.”
Risk/Reward:
“I was successful in taking larger profits than losses in proportion to the amounts invested.”
Exiting profitable trades:
“I decided to let my stop-loss decide.”(Speaking on when to exit an up trending stock)
Bear Markets
“I also learned to stay out of bear markets unless my individual stocks remain in their boxes or advance.” (more…)

Its all about managing risk

Trend Following is all about managing risk. As Trend Following is not about prediction, we do not know when we enter a trade whether it will be profitable or not, so we take calculated risk and put a position small enough not to hurt us bad in case the trade is a loss trade.
This small risk taken over a lot of trades ends up in the right side of the balance sheet, which makes Trend Following a good strategy.
Risk Management strategy is called Position Sizing or Money Management (MM).
 
We have made our business managing risk.
We are comfortable with risk and we get our reward from risk.”