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Articles by Donald E. L. Johnson

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Today is Friday, April 18, 2014

Speculation


Is high frequency trading (HFT) useful? How is it risky?

Is high frequency trading of stocks useful? Is it risky? My thoughts:

Posted by Donald E. L. Johnson on 04/05/14 at 09:59 AM
EthicsTrustSpeculationTrading StylesStocksTechnology • (0) CommentsRead More

Michael Lewis’ ‘Flash Boys’ shows SEC must revise high frequency trading rules

High frequencty trading on the stock exchanges has become a very controversial issue for Wall Street and speculators. Last week, Michael Lewis published his new book, Flash Boys, and took the debate to a new level. I've watched CNBC and Fox Business TV interviews and discussions and read stories about the debate and the book, but I haven't read the book yet. In response to a story on Politico.com this morning, I thought about the issue and decided the market is probably more manipulated than rigged. And I see the deals the exchanges give HFT funds as the same as the volume discounts Walmart and the Federal government get from their vendors. But the Securities and Exchange Commission, which wrote the rules that guide HFT funds, needs to update them. My thoughts:

Posted by Donald E. L. Johnson on 04/05/14 at 09:43 AM
EthicsTrustMediaFinancial MediaMutual FundsSpeculationTrading StylesStocksTechnology • (0) CommentsRead More

CNBC, Fox Business reporters, commentators flacking for high frequency traders, rigged markets

High frequency stock traders, the stock exchanges and big Wall Street banks have rigged the stock markets against individual traders, their mutual funds, pension funds and exchange traded funds, and the business channels, CNBC and Fox Business are flacking for the culprits.  In his new book, Flash Boys, and on CBS 60 Minutes, Michael Lewis calls the markets rigged. Mark Cuban, the owner of the Dallas Mavricks basketball team, brilliantlly agreed with Lewis and elaborated on the risks of HFT on CNBC as other panelists defended them. In response, Wall Street and the on air flacks and brokers are saying that while there is cheating and front running, so what? I think Lewis has more credibility and his book and TV appearances will force the SEC and Congress  to stop defending those who are stealing trading information from individuals and regulate them. LINKs: Search the web for "The Market is Rigged."

Posted by Donald E. L. Johnson on 03/31/14 at 12:04 PM
EthicsTrustSpeculationStocks • (0) CommentsPermalink

Why advertisers probably won’t use twitter and probably should not

twitter just announced that it plans to raise about $1 billion in an initial public offering of non-voting shares to the public. The IPO announcement has brought out the sharks in the advertising and stock picking worlds. In short, twitter doesn't look like a very good platform for its members, advertisers or speculators. But a bunch of twitter groupies (angels) probably will buy the stock even though the company is yet to make a profit and its growth is slowing.

When I want to mini blog on politics or sports, I use twitter. When I want to promote a post on my blog, I use twitter and/or Facebook. I am a fairly heavy user of twitter (6,900 tweets) and Facebook for mini-blogging about politics, but not about stocks or products.

When I want a product review, I go to Amazon.com. Great reviews, lots of opinions. The writing is as good, in some cases, as you'll see in computer and car mags.

When I want to talk to my real friends, some high school buddies and Colorado Republicans, I use FaceBook, my blog and email, if not a lunch date, etc..
 When I want to get into discussions about products, politics, sports, health insurance, travel, hobbies, etc., there is nothing like the good old fashioned (1998- ) message board or forum.
When I want to send personal messages, I use e-mail.
If I want to sell something, there's nothing like Google Adsense, eBay, Amazon, Apple's app store or Craigslist.org.
I just searched twitter for printers because we all buy them at one time or another. #printers is unhelpful. Then I tried a brand, and all I got was that company's ads. No conversations, opinions, suggestions, rating. I won't go back to twitter for that kind of information. Facebook pages don't seem to be any more useful. 

So as a small business, I'd probably continue to use Google's Adsense, Craig'slist.org, Amazon, ebay and maybe LinkeIn if I was selling services.
For car, health and property & casualty insurance, none of the above make much sense to me as a marketer unless I' was trying to drive some traffic to my web site. I'd use TV, Radio and direct mail. Same goes for consumer electronics, foods, drugs, investments, etc.
What social marketers seem to be forgetting is that most people who write well enough to be comfortable on twitter, Facebook, etc., are smart enough to shop, ask questions, demand answers and use Amazon, eBay, Craigslist and the web sites of retailers and producers of goods and services. We're not going to be swayed or even attracted by banner ads, annoying display ads or marketers' trolls.

Marketers, of course, are under pressure from their clients to use social media, and they're pressuring their clients to use social media or be left out. The herd has been moving into social media for more than a decade (CompuServe, message boards, news and topic sites and then FaceBook and twitter.) To me, it seems they'd better be sure that they're not the lemmings who are being led to the last cliff.
But, then, I'm not in marketing today, and I'm old fashioned as a marketer and as a consumer. Retired. The kids are having their fun making money with twitter and Facebook, and they probably are helping some clients. But I keep thinking that a lot of clueless CEOs are being had.

Posted by Donald E. L. Johnson on 10/05/13 at 07:37 AM
MediaSpeculationStocksPermalink

Emily Lambert’s “The Futures, the rise of the speculator. . .” is disappointing

During the 60s and 70s I wrote hundreds of stories and weekly columns about the futures markets, the Chicago Board of Trade, Chicago Mercantile Exchange, Chicago Options Exchange and several of the characters mentioned in "The Futures, the rise of the speculator and the origins of the world's biggest markets," by Emilly Lambert, a Chicago-based reporter for Forbes.

 
I give the book only two stars for several reasons:
 
1. It's useless and barely entertaining for history buffs and Chicago traders.
2. It's shallow. There's not a chart or table in the book. Volume, open interest and other stats tell interesting stories.
3. It slams Leo Melamed, who I was the first to profile in depth while I was a business reporter for the Chicago Sun-Times. He isn't quoted in the book, which means his enemies told his story for him, and he refused to comment, angering the author.
4. The book profiles members of the exchanges as members of families and tribes. They were much more than that.
5. Lambert is unable to profile an exchange floor trader in a way that shows what kind of person succeeds as a floor trader or as an off-floor speculator.
6. Retail customers are almost totally ignored.
7. The folks who run commercial hedging operations for Cargill and other companies aren't profiled, described in any detail or given much credit for all of the committee work and time they put into exchange politics and development.
8. Descriptions of farmers who hedge or those who don't are missing. The book really down plays the huge role futures prices play in the lives of farmers, agribusinesses, banks, currency traders, petroleum company managers and the U.S. and world economies. 
9. Where are the commission brokers? They played huge roles in helping hedgers and speculators lose money while they and the floor brokers did very well.
10. This is one of the most poorly written and structured business and history books I"ve read in a long time. Some people are meant to write articles and columns, and some are meant to write books. Lambert is the former, not the latter. While the author cites her library research, her book looks like the work of a reporter who prefers to talk to people and suck up to some while slamming others. Most of the history of futures exchanges that you get from this book is in the introductory chapters of many books about trading futures.
 
I don't and never have traded futures, but I do trade options and covered Joe Sullivan as he worked on the development of the CBOE. As a reporter and columnist, I saw how dangerous and risky futures markets are for retail speculators, and they're even riskier today than they were 35 to 47 years ago.
Posted by Donald E. L. Johnson on 11/28/12 at 08:07 PM
AgricultureFutures MarketsBooksSpeculationPermalink

Taxes: Why you don’t want to trade commodity ETFs

Everyone knows how complex the state and federal tax codes are. The Wall Street Journal warns speculators to avoid trading commodity Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) and those that own multilateral partnerships because the cost of preparing tax reports on those trades quite likely will exceed trading profits. (Paid sub required.) 

It's better to trade the stocks of companies that produce and process commodities and the stocks of multilateral partnerships than the ETFs and ETNs that own them.

Posted by Donald E. L. Johnson on 06/25/11 at 09:42 AM
SpeculationTaxesPermalink

7 Colorado stocks look strong on their charts: MWE, PENX, Q, TWTC, TIE, WLL, XEC

If you’re a chart or technical trader who buys and sells stocks based on their technicals regardless of their fundamentals, you might like the seven Colorado-based stocks listed below.

Out of 75 Colorado-based stocks that I screened, these seven are 

Posted by Donald E. L. Johnson on 12/17/09 at 09:30 PM
SpeculationTechnical AnalysisStocksColorado StocksEnergy StocksRead More

Aetna, Wellpoint, Humana fall on health insurance reform news

Aetna, Wellpoint, Humana, Cigna and other health insurers are continuing to fall under pressure from political attacks by Congressional leaders and President Obama.  The politicians are trying to create a government-run public option health plan (government HMO, PPO, Fannie Med) that would compete with the nation’s 1,300 insurers. And they are moving to take anti-trust exemptions away from health insurers. How important the latter move is to insurers is hard to tell at this point. More about that later.  Wellpoint’s hourly, daily, weekly and point and figure charts all are very bearish. At the moment, it’s trading at $46.47, down 1.13% on the day. It’s bearish point and figure price objective is $34. The point and figure price objective shows that there are way more buyers than sellers of the stock. The P&F price objective is not a prediction, and it often is overshot on both the bullish and bearish sides. Stocks reach their P&F price objectives about 70% of the time, and the objectives can change quickly after prices stage sudden trend reversals.  Links Charts for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH, VHT Click on a stock’s chart to see hourly, daily, weekly and point and figure charts like these for Wellpoint. Good time to buy health insurers, pubic option futures contract? Well, I was a little early on this call.


Investing by asset allocation doesn’t work in big bear markets

Conservative investors have used asset allocation strategies to minimize their risks for decades, but I’ve always been suspicious of them because most stocks historically have moved together and because the strategy looked like a good excuse for brokers to churn clients’ accounts to generate commissions.

Last year, asset allocation by industry sector as well as by asset class failed to protect speculators against the big declines in the market. Indeed, some asset allocation strategies saddled investors with bigger losses than the overall stock market suffered.

This is a typical portfolio diversification strategy that I blogged on in April.

Posted by Donald E. L. Johnson on 07/10/09 at 03:33 PM
SpeculationStocksPermalink

Institutional commodity index speculators distort wheat futures markets, Senate panel reports

Large institutional specualtors that only buy indexes tied to wheat futures contracts on the Chicago Board of Trade and other exchanges distort the futures markets so that they ruin the price-hedging effectiveness of the futures contracts for farmers and food manufactures who use the markets to hedge their price risks, according to a report issued by the U.S. Senate’s Permanent Subcommitte on Investigations. The CBOT is owned by the Chicago Mercantile Exchange (CME).

Simply put, pension funds and hedge funds that only buy and never short the futures markets have increased the cost of foodstuffs for the whole world, and similar speculation has increased the cost of energy and probably the costs of metals and other commodities.

Call this the Jim Rogers effect, because his mutual funds and book, Hot Commodities (Random House, 2004, 252 pp.), convinced the institutional investors that they could hedge against inflation buy buying commodities.

From the 174-pp. report’s executive summary:

Posted by Donald E. L. Johnson on 06/24/09 at 07:42 AM
AgricultureFutures MarketsSpeculationRead More

Investment committees make bad decisions for clubs, colleges, mutual funds and charities

It’s becoming better known that letting a financial adviser, or stock broker, make your investment decisions for you is a bad idea, especially when you have the work ethic and incentives to manage your own money.

What probably isn’t as well known is that many, if not most, so-called investment committees make lousy money management decisions. Indeed, in his Wall Street Journal article (April 25, 2009), “How group decisions end up wrong-footed,” Jason Zweig’s most important graphs discuss the history of group decision making and why they usually go wrong:

Posted by Donald E. L. Johnson on 05/04/09 at 03:01 PM
Mutual FundsSpeculationStocksRead More

Professionals are questioning the seven-week rally; are black boxes distorting the markets?

A long-time portfolio manager, financial advisor and publisher of the widely-followed Cara Community blog, Bill Cara, wonders what is going on in the markets, which have rallied for seven weeks on relatively modest volume.

He writes:

 

Posted by Donald E. L. Johnson on 05/02/09 at 12:06 PM
SpeculationTechnical AnalysisRead More

How to diversify a portfolio

Jane Bryant Quinn reports on what Mark Kritzman, chief executive of Windham Capital Management in Cambridge, Mass., thinks investors should do to diversify their portfolios.

She concludes:

 

Posted by Donald E. L. Johnson on 04/25/09 at 02:37 PM
SpeculationStocksRead More

Questions to ask stock brokers and financial advisers

Stock brokers, financial advisers and mutual funds have failed their clients over the last 24 months, and most should be fired.

I’ve been saying this since last year. And the commenters who responded to Howard Gold’s article at http://www.marketwatch.com seem to feel the same way.

Questions to ask article writers, TV stock touts and commission-paid brokers (financial advisers):

Posted by Donald E. L. Johnson on 04/11/09 at 01:21 PM
SpeculationStocksRead More

Bond markets predicting another 17% drop in industrial production and 7.8 million job loss in 2009

The bond markets are predicting the U.S. economy will see another 17% drop in industrial production by yearend.

And another 7.8 million jobs are likely to be lost. We’ve already lost 5.1 million.

Those predictions come from an econometric model based on the bond market’s pricing, which has been very accurate in forecasting the economy since 1973, The Wall Street Journal reports here.

Impact graphs from wsj.com:

Posted by Donald E. L. Johnson on 04/10/09 at 08:44 PM
EconomySpeculationFundamental AnalysisRead More
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