It's time for poker players to start putting their money to work.

[hedgeyerbets]

an important thing to remember is that you can have "better trading knowledge than the 'average' investor" in terms of number of people, but still be a huge fish compared to most of the $$$ in play. not saying that this is the case, but it may well be.

btw - is cool that you are doing this as a good samaritan gesture, scorp

[Scorpion Man]

Red...oh i KNEW i would get flamed for that 20 year old comment..but i am happy it was at least well thought out.

I commend you for taking this seriously. I still have to tell you, though, that I stand by my earlier assertion. Do you even know WHY you are using these screens? beta between 0.9 and 1.1...for god's sake why? Low debt? Again, why is that a positive thing? Good projected revenues? Do you understand where those projections come from? How they are arrived at? 80% of the call of a stock is getting that number RIGHT and you have it as black box input...this is my point...you can't add much value this way. In many ways I would argue what you are doing is counterproductive...you are using backward looking indicators to project future performance. All that stuff is already in the price of the stock...making money in the market is all about second derivative change (do you understand why?).


I can't even being to respond to stuff like "estimated price apprecation >15%".

Stop losses suck. I mean, really really suck.

Anyways, i probably sound like a dick here. it's just a little frustrating because i don't think most people understand just how far behind the professional investors they are...and most of the professionals suck, too. hedgeyerbets is right.

It is very difficult to outperform consistently in the market. That's why people who can do it are worth 8-11 figures.

I think you have a good future...you are diligent and take this stuff really seriously and that is terrific. You just have to remember that you have a ton to learn...when I look back on my first hedge fund job out of business school now, when i had a TON more experience than you have now...i was totally, utterly clueless even then.

[maxtower]

Buying individual stocks is too risky to be done with money crucial to your retirement. If you think you have a talent for picking stocks, you probably want to put 80% of your savings into a diversified portfolio of non-correlated assets (think domestic and foreign stocks, real estate, bonds, commodities). Dollar cost average into your positions and rebalance once a year.
Then try picking stocks with your remaining 20%. If you are good at it, you're individual stock selections' returns will quickly surpass your earnings from your safe money.

[SackUp]

I am definitely interested in any investment help that is available as I'm super green when it comes to this kind of stuff.

I am 26 and just graduated from law school. I work at a firm and have a pretty solid salary which is supplmented nicely by poker. I have about $18k in an emigrantdirect account on top of my poker BR.

I'm going to start contributing to my firms 401k (I think they match up to 12% - so I plan on doing the full amount) and then was thinking of doing an IRA. What else should I be considering as far as other investments? Is what I'm doing good so far?

I've been reading the book "The only investment guide you'll ever need" by Tobias and it has been a nice foundation. Do you recommend any other books?

Thanks!

[RedJoker]

Scorpion Man, that post was in no way meant to flame you, sorry if it came across that way.

The way I do fundamental research was how I was shown how to so the answer is no; I do not understand why I use some of the screens. However, I will attempt to answer the questions.

Beta is a product of the CAPM and shows how risky a stock is when held in a diversified portfolio. Yes; my restrictions are too tight, they were stated as ideals.

‘Low debt, why is that a positive thing?’ Debt always appeared to me to hold negative connotations, for individuals anyway. In a business sense, I’d imagine debt would reduce cash-flow. Why is cash-flow a good thing? Cash-flow is needed to invest in other projects and grow the company.
I imagine you are claiming that debt has negligible importance and not that low debt is a negative thing?

‘Where do projected revenues come from?’ If I knew that I wouldn’t need to use their projections [img]/images/graemlins/smile.gif[/img]. They probably come from past revenue figures, sales estimates, etc. These estimates can never be perfect because they are using history to predict the future. Estimates are often wrong, large gaps often occur after earnings.

[ QUOTE ]

All that stuff is already in the price of the stock...making money in the market is all about second derivative change (do you understand why?).

[/ QUOTE ]

According to the EMH current stock prices include all information including past history and future projections. Therefore using projections to make super-normal returns will not work because the stock price already reflects this data.

I was watching an introductory video for ‘snapsheets’, one of the indicators available showed earnings (I think). They were looking at Amazon, AMZN. It showed that AMZN had been losing millions from 00-02 but gradually losing more each quarter. Around early 02 the trend started to change, it was still losing millions, but steadily less. By the time AMZN was profitable it was late 03, the stock price had already increased over 800% by the time it was finally profitable. Is that what you mean by second derivative?

There are thousands of stocks to trade, personally I think that filtering stocks to get to a tradable number requires some screens that may make moderate difference but I don’t think it is harming your stock selection. Although time may be better spent elsewhere I’m not sure it’s counter-productive.

[ QUOTE ]

when I look back on my first hedge fund job out of business school now, when i had a TON more experience than you have now...i was totally, utterly clueless even then.

[/ QUOTE ]

The difference between what I know now and what I knew a year ago is vast, and what I will know tomorrow after this post is torn apart [img]/images/graemlins/smile.gif[/img]; I am under no illusions that I could ever know all the intricacies of the market no matter how long I trade.

Hi Degen, sorry could you explain pwn3d, I’m sure it’s some basic acronym or abbr. but I’ve never seen it before. Thanks.

[dardo]

Hello SM,

I've been reading your answers. And it really impress the experience you may had (althought I hope you understand I have a reasonable doubt about the things you say.)

I completely agree that understanding what is investing is absolutely crucial for making the most from your earnings.

Also, I do think going from poker to trading can be a natural evolution.

I've been playing poker for several months, and right now I'm investigating on this world.

Do you think there will be space in next decades for the small day traders (up to 1Mill$)? Or that computerized trading will take all the possibilities?

thanks,

dardo

[Scorpion Man]

Red...I was not offended don't worry about it.
You are off to a great start and are obviously reading a lot. Unfortunately, reading is not a substitute for experience and cannot be applied in a vacuum. For starters, the academic constructs you cite like the Efficient Market Hypothesis are just that...academic hypotheses... They don't really hold in practice for many stocks. EFH is good for talking about the market overall IMO, but it breaks down at the individual security level.

Beta is a backward looking measure and can really misrepresent a stock's risk...for example you could have a stock that rarely moves but has a single large risky event coming...it would show low beta but then open down 50% in a day. Also, many companies go through fundamental changes that then change their beta one way or another...betas are calculated from history and do not take thoughts about changes in the future into account (I am not saying they are useless...just that they can be misleading). Also, there is nothing wrong with high beta stocks...they just move around more.

Debt...good or bad?...its a trick question...the answer is yes. It depends on a lot of things...but simply, the more right you are about the company you are involved in, the more debt, the BETTER. This is too involved to talk about at length here, but the simplest example of one of the reasons this is true is as follows.

You have the opportunity to buy shares in a house. I have the opportunity to buy shares in the one next door. THey are exactly the same, except that my house is capitalized with $20k in equity and $180k in bank debt. Your house is awesome cuz it has NO debt -- its capitalized with $200k in cash. Lucky you.

House appreciates 10%. We go to sell. You are up 10%. I am up 100%. Get it?

Works both ways...when you are really wrong, debt is a killer. High debt is best in a turnaround that is starting to work adn you have confidence the worst is behind you.

An extreme example would be Healthsouth, which people thought was going to file...it went to $0.08...then to $5-6. Was the debt a good thing or a bad thing?

Lastly, on second derivative...lets say there are 2 companies that are kinda priced like everyoen things they should be for now (whatever the heck that means). Company A has beeen growing at 50% for a long time adn is about to grow 30% in 2007 although people don't know it yet. Company B has been shrinking at 5% per year and is going to grow 2% in 2007, but people don't know it yet.

You must short one and buy the other...what do you choose?

I assume you have taken calculus, but first derivative is rate of change and second derivative is rate of change of rate of change (i hope..its been 20 years for me). The growth rates of 50% are first derivative...the change in the growth rate is second dervative. 50%->30% = negative second derivative. -5%->+2% = positive second derivative.

On revenues...that was where we spent most of our time...figuring out if the street expectations for revenues and earnings were correct or not. That is where the rubber meets the road.

[Scorpion Man]

[ QUOTE ]
Hello SM,

And it really impress the experience you may had (althought I hope you understand I have a reasonable doubt about the things you say.)


[/ QUOTE ]

Ummm...you are a liar, but I would like some advice? Cool.

I was never a trader, always an investor. My personal bias is there are very very few good day traders. Most are basically playing a video game and are at a horrible disadvantage to the professionals and market makers. The "rake" alone is a killer.

I actually think that poker has more to do with investing than trading, but I might be in a minority there.

[fflaque]

[ QUOTE ]
I actually think that poker has more to do with investing than trading, but I might be in a minority there.

[/ QUOTE ]

yes you are in the minority [img]/images/graemlins/wink.gif[/img]