Glassman on Day Traders

[sarp]

"There are two kinds of investor: Outsmarters and Partakers.

"Outsmarters believe they're so clever they can beat the system,
through inside advice and superior brainpower. Partakers understand
that the best way to make money is to share in the profits of
successful businesses, by buying stock in [them]...

"There are, for example, the day traders, who think they can profit
from tiny ups and downs of stocks over minutes or hours. I do not doubt
that some people can make a profit this way....But beyond a tiny cadre
of the super-talented and super-dedicated, day traders get eaten up by
the transaction costs -- the commissions, the spreads between bid and
asked prices, and the interest incurred in buying stocks on margin."

-- James K. Glassman, "The Secret Code of the Superior Investor," pp.
63-64.

excerpted by

the Sarp
Post Count 123,009,003

[lubow]

Sarp, Glassman's comments were true up to a couple of years ago. Transaction costs, at one time, indeed nullified any profitability one can generate in day trading stocks or commodities.

It is not true today. Interactive Brokers (IB) charges a half penny per share (US) and a penny per share (Canada) as commissions and absorbs the SEC annoyance fee. I am a customer of IB, so I am a little partial. However, there are other brokerages that cater to short term traders with comparable commission schedules. As an example, today I executed four buys and four sells at 300 shrs each for a total of about $125K. The total commission bill was $12 ($1.50 per trade)

With these commissions, the trick is not to daytrade $3 stocks like JDSU, because we are charged by the number of shares. We daytrade volatile stocks that have at least one point of volatility.

One more thing... day trading is not for everyone. In fact, it's not for most people. You cannot day trade and work for another person. You also need the balls to risk an eighth of a million bucks everyday when you click a mouse. I started doing this 25 years ago trading 30 year bonds , Comex gold and Comex copper. It was only recently that I realized my old commodities system works better on certain stocks.

--
Lubow

[The Visitor]

sarp wrote:
But beyond a tiny cadre
> of the super-talented and super-dedicated, day traders get eaten

Super talent is not needed. Although I am not a true day trader. But I
am a very short term trader. As for margin, I don't touch it.

I'm sure there are others. I think Vincent, a very active trader, plans
some very short trades also.

Somewhere there is a line between trading and investing. I am now
parking some money in things I have no plans to sell. I guess that would
be investing.


John

[Flasherly]

sarp wrote:
> "There are two kinds of investor: Outsmarters and Partakers.
>
> "Outsmarters believe they're so clever they can beat the system,
> through inside advice and superior brainpower. Partakers understand
> that the best way to make money is to share in the profits of
> successful businesses, by buying stock in [them]...
>
> "There are, for example, the day traders, who think they can profit
> from tiny ups and downs of stocks over minutes or hours. I do not doubt
> that some people can make a profit this way....But beyond a tiny cadre
> of the super-talented and super-dedicated, day traders get eaten up by
> the transaction costs -- the commissions, the spreads between bid and
> asked prices, and the interest incurred in buying stocks on margin."
>
> -- James K. Glassman, "The Secret Code of the Superior Investor," pp.
> 63-64.

There's a firm down the road for day trading. Requires special
training for riding special tools in monitoring technical aspects from
market feeds. Not Joe Blow's My Yahoo! account. I've heard they'll
accept "credentials in challenge" for a seat. That, and a minimum of
$100-$250K stakes to sit for an interim evaluation. Their average
daytripper is working off a $100K pool. Dated article and recollection
- likely more by now. Pass the rolaids, please . . . NYX is on a
jellyroll again.

[lubow]

I think you should re-do the math.
$0.04 represents 0.08% of the 50 share price, but that is taking things a little too extreme. Daytraders usually enter a trade on a limit and exit at the market. Therefore, I submit only one penny spread would be satisfactory for this analysis. Also, commissions are a half penny per share each side. Adding these up:

commission 0.01 (0.005 x 2)
spread 0.01

Total cost per share = $0.02
nominal price per share = $50

0.02/50 = 0.0004 = 0.04% overhead. If you can name another business that can run on 0.04% overhead I'd like to hear about it.

Also, using your figures, $8000 overhead per year from trading $10MM worth of stock is awfully tiny. Frankly, I don't know of any business that can stock $10 million of goods for $8000 in overhead. Daytrading may not be the evil monster they want us to believe. It only becomes evil if the trader becomes hyperactive and does not have a daytrading plan.

--
Lubow

[ynotssor]

"Flasherly" > wrote in message
oups.com

> Spreads - sounds like hedging.

Wrong. The "spread", in the context of this thread, is the difference
between the bid and ask prices.

[Flasherly]

ynotssor wrote:
> "Flasherly" > wrote in message
> oups.com
>
> > Spreads - sounds like hedging.
>
> Wrong. The "spread", in the context of this thread, is the difference
> between the bid and ask prices.

And here I am, buying into CEFs - still without a precise understanding
of their premiums or discount.

[sarp]

lubow wrote:
> Sarp, Glassman's comments were true up to a couple of years ago. Transaction costs, at one time, indeed nullified any profitability one can generate in day trading stocks or commodities. ....
>
> It is not true today.
> --
> Lubow


The more I read Glassman, the more dippy and self-serving he seems.

Still, everybody knows something and nobody knows everything, so airing
these views is a good way to learn the economics of the market.

the sarp

[Ephraim]

On 15 Mar 2006 13:09:01 -0800, "Flasherly" > wrote:

>
>ynotssor wrote:
>> "Flasherly" > wrote in message
>> oups.com
>>
>> > Spreads - sounds like hedging.
>>
>> Wrong. The "spread", in the context of this thread, is the difference
>> between the bid and ask prices.
>
>And here I am, buying into CEFs - still without a precise understanding
>of their premiums or discount.

Every CEF has an official EOD "net asset value." The NAV is the per
share market value of its various holdings. If the per share market
price of the CEF is greater than its NAV, then the CEF is selling at a
premium equal to the excess of the market price over the NAV.

Go the other way - market price less than the NAV - and that is the
discount.
--
Regards,
Ephraim

[Flasherly]

Ephraim wrote:

> >And here I am, buying into CEFs - still without a precise understanding
> >of their premiums or discount.
>
> Every CEF has an official EOD "net asset value." The NAV is the per
> share market value of its various holdings. If the per share market
> price of the CEF is greater than its NAV, then the CEF is selling at a
> premium equal to the excess of the market price over the NAV.
>
> Go the other way - market price less than the NAV - and that is the
> discount.

At the end of the day, then, a sum number of indexed equities a CEF
represents are assessed at, in addition, a premium to trade upon the
following opening strike, if not at a discount. Whom, the issuers I
should presume, exact through what processes? Think that was where I
was at on the last blank page I turned while reading about CEFs.

[Ephraim]

On 16 Mar 2006 07:55:43 -0800, "Flasherly" > wrote:

>
>Ephraim wrote:
>
>> >And here I am, buying into CEFs - still without a precise understanding
>> >of their premiums or discount.
>>
>> Every CEF has an official EOD "net asset value." The NAV is the per
>> share market value of its various holdings. If the per share market
>> price of the CEF is greater than its NAV, then the CEF is selling at a
>> premium equal to the excess of the market price over the NAV.
>>
>> Go the other way - market price less than the NAV - and that is the
>> discount.
>
>At the end of the day, then, a sum number of indexed equities a CEF
>represents are assessed at, in addition, a premium to trade upon the
>following opening strike, if not at a discount. Whom, the issuers I
>should presume, exact through what processes? Think that was where I
>was at on the last blank page I turned while reading about CEFs.

A CEF does not just "represent." It owns. It's holdings may be (at
least) equities and/or bonds. Each EOD those holdings are marked
to market. The resulting total is divided by the number of shares
issued by the CEF to give a per-share NAV.

The discount or premium is dictated by the market: what price does
the market - buyers and sellers - place on the shares of the CEF.
If CEF-share-price > NAV, that means the market places a premium over
NAV on the CEF's shares. The other direction indicates that the market
discounts the CEF's shares from the NAV.

For example: go to http://www.cefa.com/

Near the upper left corner is a box: Daily NAVs.
Enter TAI and click on the little arrow.

There you will find the performance data for Transamerica Income
Shares which trade on the NYSE. You will see that the NAV for TAI
was 22.28 yesterday. The closing price was 21.80. As the display
shows, that was a 2.15% discount from NAV.

TAI is trading at 21.93 at the moment. This is not surprising,
since TAI is a bond fund, and who knows what interest rates will
do.

TAI currently pays a 13-cent per share dividend each month.
At a share price of 21.93 that means they pay 7.1% (not annualized).

If you click on "Click Here for more information about this fund"
you will learn, among other things, this:

Quote
Transamerica Income Shares, Inc., a closed-end, diversified management
investment company. The objective of the Fund is to provide a high
level of income, with capital appreciation only a secondary
consideration. It is the policy of the fund to have at least 80% of
its assets invested in fixed income debt securities or cash and
equivalents. At least 50% of the fund's assets will be invested in
straight debt securities with a rating within the four highest
categories for such securities as determined by Moody's or Standard &
Poor's. Debt securities with equity features may comprise up to 20% of
the fund's net assets.
End quote

Also, for instance: Here are its top-ten holdings:

Pemex Finance, Ltd. 3.5%
Time Warner, Inc. 3.48%
Centaur Funding Corp.-144A 3.17%
News America Holdings 3.16%
PSEG Funding Trust 2.78%
Magellan Midstream Partners, LP 2.29%
Cia Brasileira de Bebidas 2.29%
ICI Wilmington, Inc. 2.17%
Dominion Resources, Inc. 2.16%
DaimlerChrysler NA Holding Corp. 2.12%

And there is other information such as total assets
and number of shares outstanding @ 9/30/2005, as well as
historical information and contact information.

My wife and I own TAI shares, which is why I chose them as
an example. This is NOT a recommendation.

Repeat: This is NOT a recommendation, either to buy or to
sell TAI shares.
--
Regards,
Ephraim

[Flasherly]

Ephraim wrote:

> The discount or premium is dictated by the market: what price does
> the market - buyers and sellers - place on the shares of the CEF.
> If CEF-share-price > NAV, that means the market places a premium over
> NAV on the CEF's shares. The other direction indicates that the market
> discounts the CEF's shares from the NAV.

Closer - a price buyers pay, the sellers/owners determine. Site
faq/promotion - nope. Here it is, at the bottom - under a discounts
and premiums hyplink.

Premium/Discount: Established on real world demand - perceived fear, to
include suggestions of prior performance, whether there's a set yearly
payout, status quo peer ranks, and PE ratio valuations. What's it all
mean (to you) - not much*, because a CEF will "usually" match NAV.

> Repeat: This is NOT a recommendation, either to buy or to
> sell TAI shares.

OK - I went through the steps. TAI is at -2.15 present discount.
That's 35% current difference above for my CEF at 31.92. Whereas a
spread on their current yearly P/D averages oscillates between 2% on
mine, it's 8% on yours, meaning I could have paid as little as roughly
24% over what you paid earlier this year, or as much as I more recently
payed, at its high. The CEF I'm playing is Templeton Russia and East
European, TRF, which is better to not readily recommend.

I looked over a CEFA faq offering a discount example and advantages it
poses to prospective clients, which is fine. Abovementioned, their
explaination for real world demand pricing does shed some light,
although the included "not much" is definately not in skew with TRF. I
pay 3 to 4 times a premium over TAI, so to risk last year's marketed
return of 100% on 60% NAV vrs 5% on 2%. CEFs are slick to figure for
how an underlying 'real world' NAV will affect subsequent, additonally,
CEF manager P/D determinations.

[sarp]

Can you please define CEF and EOD?

I don't think "Continuing Examination File" and "Entered on Duty" are
what is meant here.


the sarp
++++++++++++++++++++++
>
> Every CEF has an official EOD "net asset value."

[Flasherly]

sarp wrote:
> Can you please define CEF and EOD?
>
> I don't think "Continuing Examination File" and "Entered on Duty" are
> what is meant here.

Another form of exponential day trading.

ETF
A security that tracks an index, a commodity or a basket of assets like
an index fund, but trades like a stock on an exchange, thus
experiencing price changes throughout the day as it is bought and sold.
Investopedia Says... Because it trades like a stock whose price
fluctuates daily, an ETF does not have its net asset value (NAV)
calculated every day like a mutual fund does. By owning an ETF, you get
the diversification of an index fund as well as the ability to sell
short, buy on margin and purchase as little as one share. Another
advantage is that the expense ratios for most ETFs are lower than those
of the average mutual fund. When buying and selling ETFs, you have to
pay the same commission to your broker that you'd pay on any regular
order.

CEI
When an investment company issues a fixed number of shares in an
actively managed portfolio of securities. The shares are traded in the
market just like common stock.
Investopedia Says... Most mutual funds are open-end funds, not
closed-end. The main difference with closed-end funds is that market
price of the shares is determined by supply and demand and not by
net-asset value (NAV). Also known as a "closed-end mutual fund" or
"closed-end fund".

[sarp]

Flasherly wrote:
> sarp wrote:
> > Can you please define CEF and EOD?
> >
> > I don't think "Continuing Examination File" and "Entered on Duty" are
> > what is meant here.
>
> Another form of exponential day trading.
>
> ETF
> A security that tracks an index, ....
>
> CEI
> When an investment company issues a fixed number of shares in an
> actively managed portfolio of securities. ....
> "closed-end fund".

Flasherty:

thank you for taking the time to answer my basic question.

I am aware of ETF's like Spiders, QQQ, and Diamonds. This is good
investment for long-term conservative investors, not lottery-ticket
types like me

I am also aware of Closed End Funds. They often trade, if memory
serves, at a 10% discount. That takes care of CEF.

I assume EOD means "end of day" and is a term that day traders would be
concerned with, because it refers to the expiration of a standing buy
or sell order.

the sarp

[sun]

hello Lubow
how are you ?
Please tell me how to promotion my products and open new marketing
share . Because I am a new trader . thank you

[lubow]

You wanna start a business? Just make sure you have capital.

--
Lubow
"sun" > wrote in message
oups.com...
> hello Lubow
> how are you ?
> Please tell me how to promotion my products and open new marketing
> share . Because I am a new trader . thank you
>

[Flasherly]

sarp wrote:

> Flasherty:
> thank you for taking the time to answer my basic question.

Learn a thing or two about principles now and then.

> I am aware of ETF's like Spiders, QQQ, and Diamonds. This is good
> investment for long-term conservative investors, not lottery-ticket
> types like me

Used to know a millionaire who quit investing after a stint with QQQQ.

> I am also aware of Closed End Funds. They often trade, if memory
> serves, at a 10% discount. That takes care of CEF.

Templeton Russia. CEFA's listing is was at 30% premium yesterday. If
the manager pulls out all of his stock out and sells TRF outright, then
I bought 30% more of something I sure wouldn't want to turn to less
than nothing. If not, and he does as well as last year, well, I guess
I've bought 90% more of what I ever could have bargained for.

> I assume EOD means "end of day" and is a term that day traders would be
> concerned with, because it refers to the expiration of a standing buy
> or sell order.

EOD is after you've put as much money as possble in your pocket. Guess
there's still time to buy back into some real estate. Wasted a lot of
it today messing with computer configs.

[sarp]

Flasherly wrote:


> Used to know a millionaire who quit investing after a stint with QQQQ.

Sure QQQQ compounds yearly at 11% a year including dividends (according
to the Glassman book).

Doing the math shows you that you cannot make a million in 20 years
unless you put a large chunk of cash in to start with.

> Templeton Russia. CEFA's listing is was at 30% premium yesterday. If
> the manager pulls out all of his stock out and sells TRF outright, then
> I bought 30% more of something I sure wouldn't want to turn to less
> than nothing. If not, and he does as well as last year, well, I guess
> I've bought 90% more of what I ever could have bargained for.

I don't quite understand what you are saying here, sorry. Clarification
would help.

By CEFA I assume you mean Closed-End Fund Association website. thanks
for this tip.

TRF looks good. There is also EUROX and Price Latin America Fund.

Funds often turn over 28% of holdings and that is what a good manager
is for -- to get high appreciation.

A fund like this would be my second stage investment plan, but I am
looking for a shooting star first, and I can afford to lose a few small
chunks of money in order to find it.

the sarp

[Flasherly]

sarp wrote:
> > Used to know a millionaire who quit investing after a stint with QQQQ.
>
> Sure QQQQ compounds yearly at 11% a year including dividends (according
> to the Glassman book).
>
> Doing the math shows you that you cannot make a million in 20 years
> unless you put a large chunk of cash in to start with.

Someone managing and selling restraunts 18-hours a day. While on the
way up, he put the whole wad on QQQ. Half a million, I'd guess he was
worth for it at the time, right about when Greenspan made his debut by
stomping the hell out of dotcoms. He said he got out in time, and that
he would never again invest in the market. I doubt he abandoned
investment considerations, being he doesn't in the least mind
depreciating my investment efforts. According to him, the only way to
make it 'big' is in currency exchanges. Modestly big, I'd say for
Greek terms, which he eventually achieved through commercial real
estate.

> > Templeton Russia. CEFA's listing is was at 30% premium yesterday. If
> > the manager pulls out all of his stock out and sells TRF outright, then
> > I bought 30% more of something I sure wouldn't want to turn to less
> > than nothing. If not, and he does as well as last year, well, I guess
> > I've bought 90% more of what I ever could have bargained for.
>
> I don't quite understand what you are saying here, sorry. Clarification
> would help.

Sloppy analogy. If, tomorrow, Russia returned to Bolshevism and Levi
Strauss exchange rates, and my Russian holdings are wholly negated,
TRF, at a 30% premium would cost me 30% more of nothing, than were I
holding, instead, identical stocks at a true devalution on their NAV.

> By CEFA I assume you mean Closed-End Fund Association website. thanks
> for this tip.
>
> TRF looks good. There is also EUROX and Price Latin America Fund.

I sold my EUROX holdings 2/28 and switched to TRF. I made a
substantial run purposely because a similar play within the last year,
though at loss, in order to regain that loss. Opportunely, I don't
forgive myself for ill-plays, but come back with vengence in mind.
Oil's another for instance. Haven't found a wave yet to ride back in
on Latin American, been mostly nickel-dimed of late, although I did
very well prior to selling out of the sector aways back.

> Funds often turn over 28% of holdings and that is what a good manager
> is for -- to get high appreciation.
>
> A fund like this would be my second stage investment plan, but I am
> looking for a shooting star first, and I can afford to lose a few small
> chunks of money in order to find it.

There's a nasty distribution skew on a bread'n'butter pick in there -
moving up through modest into aggressive midcaps and international
blends. India. A 90-day comitment that may involve a little skin. I'm
in all of them.

http://finance.yahoo.com/q/bc?s=TAVIX&t=1y&l=on&z=m&q=l&c=mindx,tivfx,trf,twhix,adre