Stock trading thread

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Ragorn
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Re: Stock trading thread

Postby Ragorn » Mon Aug 10, 2009 6:03 pm

Yep, you just learned the same lesson I learned when I lost all that money in June/July... you have to pick a strategy and stick with it. When you buy a stock, visualize both the lowest price you'd be willing to sell, and the highest price you would be happy selling it. When the price plunges, if it doesn't hit your low value, hold onto it. When the price crosses your high value, SELL IT even if the price looks like it may continue to rise.

Take your profits and cut your losses... don't let emotions run your trading.

I'm really tempted to buy FAZ this afternoon. Today is either the beginning of a turn, or a temporary bump in the middle of a strong rally. Problem is, those are two mutually exclusive options, and I can't decide between them >.<

DO NOT BUY FAZ BASED ON THIS POST
- Ragorn
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Re: Stock trading thread

Postby fobble » Mon Aug 10, 2009 6:35 pm

Ragorn wrote:Take your profits and cut your losses... don't let emotions run your trading.


Amen, this is so hard to do...

Ragorn wrote:I'm really tempted to buy FAZ this afternoon. Today is either the beginning of a turn, or a temporary bump in the middle of a strong rally. Problem is, those are two mutually exclusive options, and I can't decide between them >.<

DO NOT BUY FAZ BASED ON THIS POST


My personal opinion is that this is just a bump. FAZ is probably good for quick daytrade to take profit between buy/sell price margin for the day.

As for the Market trend, my opinion on that is that we are either begun recovery phases or near the recovery so why go against the market? Few people can go against the market and pick the right investments for positive returns in short run. Even less people can take educated guess and guess accurately ahead of time to make positive returns in short run.
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Re: Stock trading thread

Postby shalath » Mon Aug 10, 2009 6:37 pm

Ragorn wrote:I'm not trading today. If I make another round trip today (buy and sell in the same day), I"ll get labeled a day trader and subject to restrictions on my account. I'm not willing to take the risk of being unable to sell out if the market tanks this afternoon, so I'm on the sidelines for what's turning out to be a really great rally day.

Ummm.. but you *are* a day trader? So shouldn't you be labelled a day trader? Isn't there some kind of regulatory issue here?
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Re: Stock trading thread

Postby fobble » Mon Aug 10, 2009 6:40 pm

Read a good article and wanted to share.

http://www.istockanalyst.com/article/vi ... id/3400641

"Wall Street 'gurus' come and go, but in the case of Bob Farrell legendary status was achieved. He spent several decades as chief stock market analyst at Merrill Lynch & Co. and had a front-row seat at the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987 crash.

Farrell retired in 1992, but his famous “10 Market Rules to Remember” have lived on and are summarized below. The words of wisdom are timeless and are especially appropriate as investors grapple with the difficult juncture at which stock markets find themselves at this stage.

1. Markets tend to return to the mean over time
When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an excess in the opposite direction
Think of the market baseline as attached to a rubber string. Any action too far in one direction not only brings you back to the baseline, but leads to an overshoot in the opposite direction.

3. There are no new eras - excesses are never permanent
Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots. Look at how far the emerging markets and BRIC nations ran over the past six years, only to get cut in half.

As the fever builds, a chorus of “this time it’s different” will be heard, even if those exact words are never used. And of course, it - human nature - is never different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction eventually.

5. The public buys the most at the top and the least at the bottom
That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing. Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors Survey.

6. Fear and greed are stronger than long-term resolve
Investors can be their own worst enemy, particularly when emotions take hold. Gains “make us exuberant; they enhance well-being and promote optimism”, says Santa Clara University finance professor Meir Statman. His studies of investor behavior show that “Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
This is why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks.

8. Bear markets have three stages - sharp down, reflexive rebound and a drawn-out fundamental downtrend
I would suggest that as of August 2008, we are on our third reflexive rebound - the January rate cuts, the Bear Stearns low in March, and now the Fannie/Freddie rescue lows of July.

We have yet to see the long-drawn-out fundamental portion of the bear market.

9. When all the experts and forecasts agree - something else is going to happen
As Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

Going against the herd as Farrell repeatedly suggests can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets
Especially if you are long only or mandated to be fully invested. Those with more flexible charters might squeak out a smile or two here and there."
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Re: Stock trading thread

Postby fobble » Mon Aug 10, 2009 6:43 pm

shalath wrote:
Ragorn wrote:I'm not trading today. If I make another round trip today (buy and sell in the same day), I"ll get labeled a day trader and subject to restrictions on my account. I'm not willing to take the risk of being unable to sell out if the market tanks this afternoon, so I'm on the sidelines for what's turning out to be a really great rally day.

Ummm.. but you *are* a day trader? So shouldn't you be labelled a day trader? Isn't there some kind of regulatory issue here?


Ragorn is doing short-term trading but not daytrading per government definition so is not labelled as daytrader.

Edit: Pattern Day Trader is the term SEC uses and probably the day trader you are thinking of.
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Re: Stock trading thread

Postby Ragorn » Tue Aug 11, 2009 1:27 pm

fobble wrote:My personal opinion is that this is just a bump. FAZ is probably good for quick daytrade to take profit between buy/sell price margin for the day.

As for the Market trend, my opinion on that is that we are either begun recovery phases or near the recovery so why go against the market? Few people can go against the market and pick the right investments for positive returns in short run. Even less people can take educated guess and guess accurately ahead of time to make positive returns in short run.

We're definitely in a recovery phase, and anyone who takes up long positions now will find themselves in the money long term. If you're looking to buy long, you don't need to time your entry for pennies... if you're selling BAC for $50 in ten years, it doesn't matter all that much whether you bought in for $16.40 or $16.15. Day traders care very much about those 15 pennies, because I'm looking to sell tomorrow at $16.80, so the difference is very important.

Ummm.. but you *are* a day trader? So shouldn't you be labelled a day trader? Isn't there some kind of regulatory issue here?

Yes, there is. If my account is labelled a pattern day trader, I'm subject to restrictions mandated by the SEC. I can't even tell you what those restrictions are, because I don't know. And because I don't know, I'm extremely interested in NOT having to find out until I've had time to properly research the implications :)

Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction eventually.

I just keep fixating on this. Last week was a ridiculously good rally for the financials. I can't help but feel they're overbought and due for a reckoning soon.

In any case, FAS was down yesterday and is down another 2% in premarket. One of two things is going to happen today... either the market is going to give me a "good reason" to be cautious about FAS, or we're going to see another day where FAS starts down 2% and ends 5% up and I try to get in somewhere in between.
- Ragorn
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Re: Stock trading thread

Postby fobble » Tue Aug 11, 2009 2:35 pm

I hope what we are seeing today is the profit-taking from result of T + 3 of people buying during the rise and now 3 days have past, investors are taking profits. Or investors are playing 'safe' and waiting for the meetings to end and to hear the results.

Well...at least that's what I'm telling myself hahahaha. My eyes are either bleeding red or I took a beating so far today.

Anyhoo. Regarding pattern day trader, I think biggest hurting point is having minimum of USD 25,000. If you go under that, you face problems. Taking into consideration that pattern day trader's equity may go below USD 25,000 worth during trading day and by end of trading day. You'll realistically need to be safely above the min. balance or have enough cash on side to deposit into your account to cover the difference.
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Re: Stock trading thread

Postby Ragorn » Tue Aug 11, 2009 3:24 pm

Yes, I think today is a pretty clear indicator that my strategy is going to change to "sit on the sidelines until the market says otherwise." I'm not buying into FAZ, ever again.

The thing about FAS is, we're definitely in a recovery phase. It may be slow, and there may be ups and downs, but FAS will always recover as the market trends upwards. FAZ is the opposite story. FAZ is a play for one-day trades when you think the market may tank... but in a recovery market, holding FAZ is going to be a losing proposition in the end. If I buy FAS and the market shifts, I can always hold it for a day or a week on the notion that it will recover. If FAZ gets away from me... it's gone forever and I have to sell at a loss or risk piling up ever-increasing losses.

For that reason, I'm going to look at red days as opportunities to buy FAS cheap, rather than days to try to play FAZ.
- Ragorn
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Re: Stock trading thread

Postby Ragorn » Wed Aug 12, 2009 6:28 pm

And this morning may have been the all-clear. I'm sitting in FAS at $71.74 with a tight stop market order (at $70.50). There's a lot of news today, a lot of potential for more gains... but also some potential for pitfalls. Keeping a close eye on the price as much as I can today.
- Ragorn
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Re: Stock trading thread

Postby Ragorn » Wed Aug 12, 2009 6:31 pm

And like five seconds after I said that, price dove under and I got stopped out. What will be annoying is if this was just a volatility dip and the price closes at $73 or something.
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Re: Stock trading thread

Postby fobble » Wed Aug 12, 2009 6:33 pm

Good move man. I went in financials right before the dip so whether I like it or not. I gotta hold on.
C at $3.99
FAS at $77.76 (ouch...)

Only saving grace is EJ is putting me in green. Except I missed out on early morning sell off and missed $ 24 peak.
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Re: Stock trading thread

Postby Ragorn » Wed Aug 12, 2009 7:03 pm

And just like that, the volatility dip recovered and it's back in the high $71s. Oh well. Could have turned nasty, and I got out without making any money, but without any significant losses.
- Ragorn
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Re: Stock trading thread

Postby Sarvis » Wed Aug 12, 2009 8:32 pm

I was so close to buying at the end of yesterday, it stopped falling and even took a couple tentative steps upward. I chickened out, however, because every choice I made for the last two weeks was wrong... :(
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Re: Stock trading thread

Postby Corth » Thu Aug 13, 2009 1:23 am

fobble wrote:I went in financials right before the dip so whether I like it or not. I gotta hold on.


This is an example of bad trading psychology
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth

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Re: Stock trading thread

Postby fobble » Thu Aug 13, 2009 3:09 am

Corth wrote:
fobble wrote:I went in financials right before the dip so whether I like it or not. I gotta hold on.


This is an example of bad trading psychology


Well I'm not going to hold on so long that I'll take 30-40% loss. It does mean however, that I gotta hold on because financials is in upswing and instead of setting stop limit at say 6-8% I'll take greater risk and willing to go down far as 12-14%. For example, I went into C at 3.99, it dipped to 3.69 which is about 7%. I went into EJ at 19.88, it dipped to 18.70s which is also about 7%. Normally my stop limit is set at 6% but I did not in this case and held on. Today's after market price for C is above $ 4 and EJ is $ 21.50s.

Believe me when I say I learned my lesson on insane psychology of holding on too long and loosing out on opportunity cost. Took me year or more to be back to what my worth was in 2007. But I also learned on not holding on my investment strategy because I chickened out too early (BAC being perfect example).
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Re: Stock trading thread

Postby Ragorn » Thu Aug 13, 2009 1:18 pm

Yes, I wish I had more of fobble's mindset and less of my own. I'm perhaps a little TOO conservative when trading... even on this upswing, ticks of -3% or -4% really panic me because I always fear we're about to turn downward. If I could just control myself a little better, I'd make more money.

FAS opening in the $73s today. Shoulda held on through yesterday's little dip.
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Re: Stock trading thread

Postby Sarvis » Thu Aug 13, 2009 1:53 pm

Is falling fast now... I seriously need to finish that book on short term trading so I can figure out what the hell's going on. ;)
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Re: Stock trading thread

Postby Ragorn » Thu Aug 13, 2009 2:57 pm

Figures were announced this morning that were lower than anticipated. I bought in at a bad price ($74.25) this morning, because futures were up and rising, and I didn't pay enough attention to the news that came out at 8:30. So this morning's dip tested the mental fortitude I was talking about in my last post. FAS dipped to the high $70s, I held, FAS recovered, and now I'm slightly green. Will watch today and see how it goes.
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Re: Stock trading thread

Postby fobble » Thu Aug 13, 2009 8:20 pm

Ragorn wrote:I'm perhaps a little TOO conservative when trading...


Hey man, it's all about your comfort level with taking risk. There is absolutely nothing wrong with taking low risk or your style of investment. If it works for you, it works! Everyone has different take and approach to market. Thing I love about the market is that regardless of all the discussions, strategy, calculations, debates, news, and all that stuff, market will ultimately tell you right or wrong.

Besides...one dollar earned is better than nothing earned, and one dollar lost is better than loosing more than a dollar.

That's what I keep telling myself when I look back at what-shoulda, coulda-shoulda trades and yes it does make me feel better hahaha.
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Re: Stock trading thread

Postby Kifle » Thu Aug 13, 2009 9:56 pm

As much as speculative trading is fun to watch, it would be cool if somebody opened an investment thread as well. It would be nice to see the contrast in indicators to watch for and how the psychology contrasts. I know Corth is more of an investment trader, and I believe Kiryan seems like ones as well.
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Re: Stock trading thread

Postby fobble » Fri Aug 14, 2009 7:51 pm

CIT, to buy or not to buy. Tis the decision I am trying to analyze the current market situation while I wait my funds to settle from selling EJ. Big risk with possibly of big payouts or big nothing.

Currently I'm leaning towards buying CIT shares with profits I gained from EJ and WCG sell off while hedging the balance in another more safe stock....

Or should I take a big gamble and all in...

ahhhhgggg
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Re: Stock trading thread

Postby Ragorn » Mon Aug 17, 2009 1:49 pm

Didn't have time to track the market much on Friday. Woke up this morning and everything I earned last week was flushed. Wheee.... gotta love this game :) Could be worse... I gave back my profits, but at least I didn't sink deep into the hole.

There's a lot of panic in the news today... earnings season is over, there's not a lot of news coming that might propel stocks upward. It's hard to tell if today is profit taking or the beginning of a market correction that will take the DOW back down below 9000. I struggled for a couple hours this morning over whether to take my funds out (and potentially succumb to panic and fear), or to let them sit and risk either an extended decline into correction, or worse, a margin call at a really bad price. In the end, I decided to withdraw my funds and take my loss. FAS is down 10% today, and it's not clear which direction it's going to move first.

I have a tendency to always sell at the absolute lowest point, so I have a feeling I'm just going to close the day feeling hosed again :) But that's ok... if I pull out and the market continues to move upward, I can profit off that. If I leave my cash in and the market keeps correcting, I get further into the hole. So I think that my decision was based on logic rather than emotion, and if turns out the market proves me wrong, I'm still ok with that.
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Re: Stock trading thread

Postby Ragorn » Mon Aug 17, 2009 7:49 pm

Guh. FAS below $65 at the moment. All the talk today is that this might be the long-dreaded "correction" that we've all been waiting for. Going to see how tomorrow opens. I'm still against playing FAZ, but if we're really going to enter a sustained downturn, I may play it for some small round-trip gains with a very tight stop. I'm not interested in holding FAZ overnight and letting it run away from me.

God.

Don't hold FAS over the weekend, dumbass :) Yes, I got hosed for -9% today.
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Re: Stock trading thread

Postby Corth » Mon Aug 17, 2009 10:28 pm

Ouch.

Without anything to back this up - my very subjective feeling is that we won't see a bottom until all the optimism goes away. Even at the recent bottom a few months ago, everyone was considering it an excellent buying opportunity. Thats not what bottoms are made of. A market bottoms when the proverbial blood runs in the streets. When people think the stock market is absolute garbage and the last place any reasonable person should put his money. It could be a few months or even years, but thats what I am looking for before I start buying broad index funds again.

On the other hand I'm not about to run and buy FAZ either. Way too speculative for my blood. I'm just out of the market altogether except for retirement account and kid's ESA.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Kifle » Tue Aug 18, 2009 12:10 am

Corth wrote:A market bottoms when the proverbial blood runs in the streets. When people think the stock market is absolute garbage and the last place any reasonable person should put his money. It could be a few months or even years, but thats what I am looking for before I start buying broad index funds again.


Honestly, with all of the current security nets the government has placed for our financial sector, I'm not sure if such a low opinion of the market will be had here in the states. That coupled with the education people have received about the market through k-12, I think rock bottoms like that aren't going to happen again. It will get low, but there are too many people these days to push it back up for a quick buck. I would predict that we'll see swings like this for quite a while (at least another year), but never have mass lemming accountants and brokers. As the market gets too low, large groups of people will see a slight upswing, hop on the wave, and ride it until they get nervous about a correction -- then they bail and will watch it plummet. It's more or less a self-fulfilling prophecy en masse.
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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 12:25 am

There is nothing new under the sun. All the education in the world cannot defeat human nature. The security nets you speak of are a blessing and a curse. On one hand, they do instill additional optimism. Like for instance the FDIC creates a sense that consumers will be protected from institutional failures - so consequentially there are less 'runs on the bank'. On the other hand, if people realize at some point that the government does not have the power to avert an additional downturn - which can easily happen if foreign governments and investors stop buying treasuries - then the resulting pessimism might be worse than it otherwise would have been. Its one of those 'the bigger you are the harder you fall' sort of things.

I'm not predicting a market crash. I think we are in the beginning of a long term bottoming process. In all likelihood, a few years from now when a lot of people have gotten their hopes up multiple times, only to be dissapointed on each occasion, most of them will take their ball and go home. Thats when it will be time to buy. Already we have had a lost decade. If you purchased any of the various stock indexes in 1998, you haven't made a penny since. At what point do people throw in the towel and purchase bonds instead? I'm waiting for the stock market to be extremely unpopular (as its been many times in the past) before once again going long on the broad market.

That being said, I wouldn't be surprised if the negative market action these past few days are just a head fake. The general trend has been a pretty strong bear market rally. Nothing goes straight up or straight down, so this could easily just be a blip in a more prolonged rally, or the start of the next leg down.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 1:06 am

Image

This chart is kind of interesting. They aligned the immediate lows following market crashes in 1929 (great depression), 1974 (arab oil embargo), 2002 (tech crash), and 2008/2009 (current market).

It seems, if history is any guide, that there are two likely ways it can go. We have been tracking 1929 very closely, and right around this point it started the first of several legs down.

Alternatively, if things go like 1974 or 2002 then we have seen the immediate bottom already.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby kiryan » Tue Aug 18, 2009 2:39 am

I tend to agree with Corth, yet I admire Ragorn's cahones. There is money to be made whether the market goes up or down, whether the short or long term is good or bad.

The difference between 1929 and now is millions that go into the stock market every week with our pay checks and hundreds of billions in investments need to be invested... If 12 months down the road, I start hearing people say they are going to stop doing their 401k... I'll be sure that we are following the great depression. I know some already have, and more have quit contributing out of financial need, but the vast majority of people are still plugging away hundreds of millions of dollars every month into the market.

They have created quite a machine. I try not to understimate it and the people factor.
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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 3:52 am

The implications of that are pretty crazy. The argument is that the stock market is forced to go up because of the retirement savings iinfrastructure. The flip side of that argument is that when the baby boomers start retiring in droves (soon enough), the stock market will be forced to go down, regardless of the fundamentals of the economy, as more money will be redeemed from retirement accounts than added to them.

My feeling is that the point is overblown. The stock market is a place to put savings - typically retirement savings - and that is not any different now than it was in 1929.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Ragorn » Tue Aug 18, 2009 4:21 am

See, I would never dream of putting my retirement fund into the market now with the intention of keeping it there long term. There's just too much potential for short-term gains.

Even if I play the market up and down for months and I only come out 15% up (instead of the 40-50% I was up last week), that's still three times better than a high-yield savings account.

But I'm young, I'm open to risk, and I have the time to watch the market on a minute-to-minute basis. I can understand someone who can only get daily (or god forbid, weekly) updates wanting to make a secure investment that they could walk away from.
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Re: Stock trading thread

Postby Sarvis » Tue Aug 18, 2009 4:39 am

Corth wrote:Image

This chart is kind of interesting. They aligned the immediate lows following market crashes in 1929 (great depression), 1974 (arab oil embargo), 2002 (tech crash), and 2008/2009 (current market).

It seems, if history is any guide, that there are two likely ways it can go. We have been tracking 1929 very closely, and right around this point it started the first of several legs down.

Alternatively, if things go like 1974 or 2002 then we have seen the immediate bottom already.


The thing that immediately strikes me when looking at the chart is how much more wealth was lost in the 1929 crash. 90%. Ninety percent.

Ouch!

We only lost 25% of the wealth when we hit our low point, which is, oddly enough, about what the other two crashes lost as well. It's fairly reasonable to conclude that the much more drastic decline of the great depression might have made it much harder to recover.

I'd ALSO note that things like the FCC existed for the S&P 500 lows, and our current one. It may just be possible that these declines recovered better because of such programs protecting our wealth. How many people became bankrupt because of bank failures in the great depression, that today have protected savings and can still invest and attempt to recover?
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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 4:50 am

Sarvis,

You make a good point in your last paragraph (though I think you meant FDIC). While there are arguments that the FDIC causes more harm than good (see here), it seems likely that it (along with similar programs) tends to even things out so that you don't have a catastrophic systemic failure like what we saw during the Great Depression. So perhaps instead of 7 or 8 horrible years we'll see 15-20 really lousy ones. Either way, nobody is getting off scot free after the greatest credit bubble in history. There isn't any financial or political hocus pocus sufficient to keep us from having some prolonged and harsh pain.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Kifle » Tue Aug 18, 2009 8:02 am

^^ that's pretty much what I was saying, only not very well apparently. The only thing that I forgot to include was the foreign investors. I think this is the only way for the market to completely crash. I think the American trust, and I use the term loosely, in the market is too high (in that you can make money when available stocks are at high volume/low prices); however, with the multiple other world markets and growing countries, losing foreign investment is probably the only thing to really watch for if you want to predict another 1929.

Another way to look at it, though, is people realizing that it is much safer at this point in time to stop pumping their 401ks and putting their money into mid-high yield savings accounts due to the safety of the investment (FDIC). I think I fall into this boat. If I had watched my and my wife's 401ks closer through this, I would have more than likely started pulling out and stashing the money in an IRA and savings... maybe even bonds. At this point, we've lost so much, I'm just crossing my fingers, putting little bits in, and hoping that the same amount of investment dollars yields a higher return than previously due to the lows and that the other money recovers to a respectable percentage. Afterwards, I'll probably transition slowly to a new type of investment structure.
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Re: Stock trading thread

Postby fobble » Tue Aug 18, 2009 12:57 pm

Time will tell us the answer on whether....

1. We bottomed out and begun some recovery (V, W, or whatever)
2. We didn't bottom out.
3. There is too much optimism
4. There is too much pessimism

...and then we can come back on this thread and point out to each other who was right and who was wrong on their prediction of the market and economy.


Personally I believe we past the worst bottom of this recession. With Commercial Real Estate hurting big time still, amount of Credit Card Debt that will default, number of unemployed Americans, and slow growth rate of employment... I think there will be more and big enough dips along the way to put a break on V shaped recovery and I don't believe in V shaped recovery from this recession. However I do believe in a slow W shaped recovery and I don't think we'll have another crazy dive like we did about 2 years ago with start of Residential Real Estate crash.

Key factor for me is that during these volatile markets is where great opportunities and great risks both reside at. I'm taking on the greater than normal risk of failure for opportunity at greater than normal return.
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Re: Stock trading thread

Postby Ragorn » Tue Aug 18, 2009 1:59 pm

The DOW lost more than 25% of its value from high to low... we had a series of 10-25% drops, and a steady bleed that all contributed to about a 60% drop in total value from the low 14,000s to the low 6,000s.

I'm still contributing to my 401(k), but only up to the maximum of my employer's match value. My employer matches 25% up to 4% of my income, so that 4% I contribute immediately takes a 25% profit. Even if the market fails to rise, and I actually LOSE 15% of my contribution, I'm still coming out ahead because of the employer match.
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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 4:51 pm

Yeah, employer match is just free money. Crazy not to take it.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Sarvis » Tue Aug 18, 2009 4:53 pm

Wish my employer matched... :(
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Re: Stock trading thread

Postby fobble » Tue Aug 18, 2009 6:26 pm

Ragorn wrote:The DOW lost more than 25% of its value from high to low... we had a series of 10-25% drops, and a steady bleed that all contributed to about a 60% drop in total value from the low 14,000s to the low 6,000s.

I'm still contributing to my 401(k), but only up to the maximum of my employer's match value. My employer matches 25% up to 4% of my income, so that 4% I contribute immediately takes a 25% profit. Even if the market fails to rise, and I actually LOSE 15% of my contribution, I'm still coming out ahead because of the employer match.


Don't forget about money saved on tax especially if your 401K contributions drop you to lower tax bracket!
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Re: Stock trading thread

Postby fobble » Tue Aug 18, 2009 6:30 pm

Sarvis wrote:Wish my employer matched... :(


If your employer does not match and if your 401K plan sucks. Keep in mind about Traditional IRA. Aside from limit on amount of contributions. No difference between 401K and Traditional IRA in terms of its tax benefits. But you have access to full brokerage...not limited by what your 401K plan (if your 401K plan is crappy). This is of course not advisable if you have sizable 401K already, in that case continue on socking money away to capitalize on power of compounding.
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Re: Stock trading thread

Postby Ragorn » Tue Aug 18, 2009 7:27 pm

fobble wrote:
Ragorn wrote:The DOW lost more than 25% of its value from high to low... we had a series of 10-25% drops, and a steady bleed that all contributed to about a 60% drop in total value from the low 14,000s to the low 6,000s.

I'm still contributing to my 401(k), but only up to the maximum of my employer's match value. My employer matches 25% up to 4% of my income, so that 4% I contribute immediately takes a 25% profit. Even if the market fails to rise, and I actually LOSE 15% of my contribution, I'm still coming out ahead because of the employer match.


Don't forget about money saved on tax especially if your 401K contributions drop you to lower tax bracket!

Image
TAXES DO NOT WORK THAT WAY

If the tax bracket cutoff is $60I make $60,300, then $60,000 of what I make is taxed in one bracket and $300 is taxed in the next higher bracket. Dropping my taxable income to $59,999 doesn't miraculously save me a huge pile of money on my federal income taxes. So yeah, I'll save the taxes on the $301 I put in my retirement fund... but I just have to pay them later when I withdraw anyway.

Oh and if you're employer doesn't match, there is literally zero reason why you would ever want to use a 401(k) over a Roth IRA.
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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 11:17 pm

Thanks for saving me the trouble Ragorn. That is one of my pet peeves as well. I love hearing from friends and family members about how they need to make less money the rest of the year or -omigosh- they might end up in a higher tax bracket. By love hearing about it I mean it makes me want to bash my head in.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Corth » Tue Aug 18, 2009 11:21 pm

BUT - 401k or IRA contributions can lower you Adjustd Gross Income, which can have significant tax savings beyond just not being taxed on the contribution. For instance, tax deductibility of certain things are phased out over a certain AGI. Private mortgage insurance is tax deductible for people up to 100k AGI. It then gets phased out up to 109k AGI. At 110k AGI you can't deduct for it. Thus, if you were at 110k AGI, it would behoove you to contribute $10k to a qualified retirement vehicle that takes before tax dollars.

Likewise, I believe there is a phaseout for student loan interest deductibility. Also, certain tax credits. New York just announced a first time homebuyer tax credit program which is incredibly lucrative (in many cases better than the $8k federal credit), but if you make more than around $140k AGI then you don't qualify. Contributing money to an IRA or 401k would be a smart way to get oneself back to eligibility.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Ragorn » Wed Aug 19, 2009 3:37 am

Corth wrote:Thanks for saving me the trouble Ragorn. That is one of my pet peeves as well. I love hearing from friends and family members about how they need to make less money the rest of the year or -omigosh- they might end up in a higher tax bracket. By love hearing about it I mean it makes me want to bash my head in.

Yes I know, especially the conservative WHARRRGARBL about Obama taxing people who make over $250k "so I should just make $249,999 and LOLBEAT THE SYSTEM!!"

BUT - 401k or IRA contributions can lower you Adjustd Gross Income, which can have significant tax savings beyond just not being taxed on the contribution. For instance, tax deductibility of certain things are phased out over a certain AGI. Private mortgage insurance is tax deductible for people up to 100k AGI. It then gets phased out up to 109k AGI. At 110k AGI you can't deduct for it. Thus, if you were at 110k AGI, it would behoove you to contribute $10k to a qualified retirement vehicle that takes before tax dollars.

Yeah, you have a point there. There could be hidden benefits.
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Re: Stock trading thread

Postby fobble » Wed Aug 19, 2009 4:28 am

Ragorn wrote:
fobble wrote:
Ragorn wrote:The DOW lost more than 25% of its value from high to low... we had a series of 10-25% drops, and a steady bleed that all contributed to about a 60% drop in total value from the low 14,000s to the low 6,000s.

I'm still contributing to my 401(k), but only up to the maximum of my employer's match value. My employer matches 25% up to 4% of my income, so that 4% I contribute immediately takes a 25% profit. Even if the market fails to rise, and I actually LOSE 15% of my contribution, I'm still coming out ahead because of the employer match.


Don't forget about money saved on tax especially if your 401K contributions drop you to lower tax bracket!

Image
TAXES DO NOT WORK THAT WAY

If the tax bracket cutoff is $60I make $60,300, then $60,000 of what I make is taxed in one bracket and $300 is taxed in the next higher bracket. Dropping my taxable income to $59,999 doesn't miraculously save me a huge pile of money on my federal income taxes. So yeah, I'll save the taxes on the $301 I put in my retirement fund... but I just have to pay them later when I withdraw anyway.


It definitely does not much notable difference if you are say few bucks below or above the tax table in your example. However it does add up depending how much tax deductible you put in to drop you into the lower tax table. More you put in to make yourself drop into lower tax table, the more you save on tax. As for withdrawal, yes that is taxable but that's different from tax you save now.

Here's an example using 2007 Federal Tax Rate Schedule http://www.irs.gov/formspubs/article/0, ... 72,00.html

Situation
Let's assume I'm single and at end of the year my taxable income was at $ 170,000. This would put me in 160,850 to 349,700 tax table single. Compared that to me putting 10,000 into tax deductible accounts. Let's do the math and compare (I'm going to round to nearest dollar to make it simpler)

Scenario 1
1. Without tax deductible account and taxable income of $ 170,000
39,149 plus 33% of amt over 160,850
(170,000 - 160,850) x 33% = $ 3,020
$ 39,149 + $ 3,020 = $ 42,169
Total Federal Tax Income Due: $ 42,169

Scenario 2
2. With tax account account of $ 10,000 therefore dropping my taxable income to $ 160,000
15,699 plus 28% of amt over 77,100
(160,000 - 77,100) x 28% = 23,212
$ 15,699 + $ 23,212 = $ 38,911
Total Federal Tax Income Due: $ 38,911

42,169 - 38,911 is difference of $ 3,258 I'd be saving myself in Federal Taxes.

And this is where the power of tax deductible accounts come in. More you sock away into tax deductible especially near the tax table. Greater your tax savings.
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Re: Stock trading thread

Postby fobble » Thu Aug 20, 2009 3:09 pm

I just dumped all my stock holdings.

My forecast is that with unemployment data was worse than expected and non-farm payroll is scheduled for Sept 4th release. I believe that report is going to worse than expected as well and if that's the case there should be dip. Doing my profit taking now and going to wait it out.

Took loss on FAS but thanks to C brought me into positive gains on overall.
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Re: Stock trading thread

Postby Ragorn » Thu Aug 20, 2009 4:32 pm

fobble wrote:42,169 - 38,911 is difference of $ 3,258 I'd be saving myself in Federal Taxes.

And this is where the power of tax deductible accounts come in. More you sock away into tax deductible especially near the tax table. Greater your tax savings.

Yes, but that account is very like not tax deductible... it's tax deferred. So when you withdraw that $10,000 later, you're taxed on it as regular capital income and you end up paying back that $3,258.

That's why Roth IRAs are beneficial. You're taxed on the money now... so you pay your $3,258 when you receive it as income and pay it into the IRA. But if, in 30 years, that $10,000 becomes $30,000, you don't pay tax when you withdraw it.

Would you rather be taxed on $10,000 now, or taxed on $30,000 later?
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Re: Stock trading thread

Postby Corth » Thu Aug 20, 2009 4:42 pm

It often makes more sense to be taxed later. Presumably when you are retired you won't have as much income, so the marginal increase in income from the retirement account will be taxed at a lesser rate than it would be now.

Keep in mind that if you are taxed now, you are starting off with a lesser amount of money then if you are taxed later, so it has to grow that much more in order to appreciate to a significant level. Lets assume you have $10k and then compare the tax now verses tax later examples.

Taxed now: If you start with $10k but pay taxes on it now (assume 25% current marginal rate), then you are really starting with $7.5k. If you get a constant 7% return, you will have approximately $30k after 20 years, which you can then withdraw tax free.

Taxed later: You start with $10k which is not taxed now. If you get the same constant 7% return for 20 years you will have approximately $40k which will be taxed upon withdrawal (hopefully) at a lower rate than you are at now. Lets say 15% - so you walk away with $34k

With this example, being taxed later is advantageous. The difference is really whether you will pay a higher percent on the money now or later. If you are being taxed at a higher rate now, then you are better off being taxed later - and vice versa.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: Stock trading thread

Postby Ragorn » Thu Aug 20, 2009 4:54 pm

Corth wrote:Taxed now: If you start with $10k but pay taxes on it now (assume 25% current marginal rate), then you are really starting with $7.5k. If you get 7% return, you will have approximately $30k after 20 years, which you can then withdraw tax free.

Taxed later: You start with $10k which is not taxed now. If you get a 7% return for 20 years you will have approximately $40k which will be taxed upon withdrawal (hopefully) at a lower rate than you are at now. Lets say 15% - so you walk away with $36k

With this example, being taxed later is advantageous. The difference is really whether you will pay a higher percent on the money now or later. If you are being taxed at a higher rate now, then you are better off being taxed later - and vice versa.

Ok, it depends on what you project your tax rate to be when you withdraw the money. Thing is, if you're talking about a $10k investment, then you may end up being in a lower tax bracket when you withdraw the $38k later in life.

But if you're talking about a 401(k), where you may end up with $100k in your account at retirement age, then withdrawing that money puts you in a pretty serious tax bracket. Probably better to pay the tax up front in that case.
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Re: Stock trading thread

Postby Sarvis » Thu Aug 20, 2009 5:39 pm

fobble wrote:I just dumped all my stock holdings.

My forecast is that with unemployment data was worse than expected and non-farm payroll is scheduled for Sept 4th release. I believe that report is going to worse than expected as well and if that's the case there should be dip. Doing my profit taking now and going to wait it out.

Took loss on FAS but thanks to C brought me into positive gains on overall.


This may have been bad timing... should have waited until the end of the day.

Then again, if I'd known that for sure I would have bought some when I woke up this morning. :(
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Re: Stock trading thread

Postby Corth » Thu Aug 20, 2009 5:49 pm

Ragorn wrote:
Corth wrote:Taxed now: If you start with $10k but pay taxes on it now (assume 25% current marginal rate), then you are really starting with $7.5k. If you get 7% return, you will have approximately $30k after 20 years, which you can then withdraw tax free.

Taxed later: You start with $10k which is not taxed now. If you get a 7% return for 20 years you will have approximately $40k which will be taxed upon withdrawal (hopefully) at a lower rate than you are at now. Lets say 15% - so you walk away with $36k

With this example, being taxed later is advantageous. The difference is really whether you will pay a higher percent on the money now or later. If you are being taxed at a higher rate now, then you are better off being taxed later - and vice versa.

Ok, it depends on what you project your tax rate to be when you withdraw the money. Thing is, if you're talking about a $10k investment, then you may end up being in a lower tax bracket when you withdraw the $38k later in life.

But if you're talking about a 401(k), where you may end up with $100k in your account at retirement age, then withdrawing that money puts you in a pretty serious tax bracket. Probably better to pay the tax up front in that case.


I think most people draw upon their retirement accounts a little bit at a time in order to avoid that scenario. Instead of taking it out all at once and showing an enormous amount of income for one year, you draw what you need to live off of.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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