Daily Investment Interpretations

February 4, 2011

2011-2-4 (Friday) The market indices have dipped for the past two days, and then soldiered on to higher highs.  The NASDAQ Composite climbed 15.42 points (0.58%) to 2,769.30. The Dow gained 29.89 points (0.25%) to end at 12,092.15, while the S&P 500 added 3.77 points (0.29%) to close at: 1,310.87. Oil closed down a little at $89.12 a barrel , while Gold ended at $1,349. The VIX dropped to 15.93.
    Once again, it's almost midnight so I'll have to be brief.
    I've been experimenting with TopStock Portfolios' Stock-a-Day trading system. One little technicality that I've encountered is that Richard Meiers send his stock trade instructions two-to-four minutes before the markets open. By the time you get his email, open the associated web page and read it, and then actually buy the stock, you may not get the opening price... and prices tend to move very rapidly in that first minute. Still, that's a small matter, and of course, the price of the stock could move up or it could move down in that first minute. Generally, though, that's a footnote to what appears to be a very successful service. Mr. Meiers computes his gain for the 1 months he's been in operation to be 24.66%, which is much less than my computations predict. But I'm treating his individual stock percentage gains as though they occurred sequentially, , whereas I imagine that his calculations are predicated upon the return on the maximum amount of capital he has to invest at any one time in order to achieve his objectives. (The maximum number of stocks that he had in play at any one time between December 15th and January 15th was, I think, 7 stocks.) This means that when he has only one stock in play, the other 6/7ths of his capital is sitting idle.  
    The scheme I'm planning to try, in an effort to keep all my money invested in Mr. Meiers' stocks, is this. Monday morning, he may proffer a new stock choice. My strategy would be to put all my money in that new first stock choice Then if he recommended a second stock on Tuesday, I'd sell half my shares of the first stock and invest that half in the second stock This would cost me sales commissions, but I might be able to time my sale and my purchase, selling half of the first stock at a moment when its price is momentarily up and reinvesting that half in the second stock at a time when the second stock is momentarily down, in an effort to offset the slight sales commissions. On the third day, if Mr. Meiers added, for example, two more stocks, I would sell half of each of the first two stocks (bringing them down to a quarter each of my initial investment) to get the money to buy the third and fourth stocks. That would generate more sales fees, so this might not work all that well, but it would keep all my investment money at work except for times like tonight when Mr. Meiers' recommended portfolio is 100% in cash. 
    At this juncture, it's not a problem for me because I'm only investing a very small fraction of my investment capital while I check this investment service to make sure that it works.
    I've also made "variations on a theme" on Mr. Meiers' recommendations. For example, at the moment the markets opened on Wednesday, I bought 40 February 19th at-the-money calls on his selected stock for a price of $123 a call. Then later on Wednesday, the stock rose smartly, and I sold my 40 calls for an $824 profit after the price of the stock had peaked and had  begun to fall. Next, I made what could have proved to be a very expensive mistake: yesterday, I bought 50 more calls for $151 a call... $7,550 worth of calls. The stock continued to fall, and by the end of the day, I was about $1,000 in the hole. I was depressed last night. Then this morning. Mr. Meiers decided to close out his position in the stock at a small profit, and I was really left in left field. I nervously tried to convince myself that this stock would rise again, but I didn't really believe me. Finally, this afternoon, almost at the end of the trading day, I glanced at my screen and there were my option right back at $151 a contract! I quickly parted company with all my calls and walked away neither richer or poorer than when I had strayed from the straight and narrow. From now on, if I decide to take profits before Mr. Meiers leads us out the briar patch, I won't buy back in unless I can re-purchase the stock at or below the opening price at which he originally recommended it. 
    There's more but it's one am. I'll have to finish tomorrow.