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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: whitepine who wrote (22901)	3/13/2005 2:25:14 AM
From: energyplay	Read Replies (1) \| Respond to of 23153

The only CanRoy I know that really cratered was Paramount, pmt.to , PMGYF. Alberta took away some of their wells to save the gas for pumping heavy oil. I did not own it, so I missed getting clobbered, then a few days later bough a bunch of Paramount. I agree the odds are MUCH less of a CanRoy dropping than most other companies. By the way, I have also bought Biogen, BIIB, after the huge drop. I will agree with Bull Derrick that playing cycles is a nice way to make money. This works well in heavy industries with long lead times and large visible assests, like ofshore rigs, pipelines, etc.

To: whitepine who wrote (22901)	3/13/2005 10:04:36 AM
From: bull_derrick	Read Replies (2) \| Respond to of 23153

Whitepine, I'm familiar with ELN and you asked about the gap down. I owned a whole bunch in the 1's, sold in the 3's, and then sold a bunch of 5 puts short awhile back and made 100% returns on those options. You asked why a stock like that could drop 50% pre-open but the real question is how ELN could have been trading in the 20's when the fair value was always in the 4-6 buck range? I sold ELN short for one day and stopped myself out around the 17.5 range. In the short term that looked like an astute thing to do (stop myself out) but in the long term my instincts were right. I'm a crummy short seller because I lack the same conviction on the short side as the long side. Part of the confusion among investors is that there are many untruths sold as fact from the smart money to the public. One of these is PE ratios. As I said previously, I like cyclicals but because of lag times in historical reporting, PE's don't always follow future performance. A poster on Yahoo once posted that with cyclicals, you want to buy when PE's are very high or non-existent and you want to sell when PE's are low. At that time, that sounded very illogical but I thought about it for awhile and completely agree with that now. Yet, if you read an investment book that espouses FA, you'll read that low PE's spell buying opportunities. As an example, I bought NBR for the first time in mid-1998 around 20 a share. The PE was very low and I naively sensed a buying opportunity. I was about six months early for the party and the stock went to 12 before it bottomed. This is because NBR at that time was living off of its contract backlog from the 1997 peak but six months later business was nowhere to be found. In 1998, the PE was low. In 1999, the PE was very high because Nabors was barely profitable. The other thing written on this board that may not be totally accurate is the concept that price is determined by demand or supply. In this context, I'm talking about short term price differences, not multi year valuations. I posted a note on Dabum's board once about this phenomenon, that one must think from the perspective of the specialist (or market makers if on Nasdaq). The opinion was offered that the price would go up if demand goes up, however there's two types of demand. One type of demand is the bid that's below the inside ask and the other type of bid that's hitting the ask. Now, I'm writing in context of a normal trading day and not a news-day when some surprise has overtaken the market. In the case of a bid below the inside ask, this demand is supportive of the quoted price because the specialist has to fill that order typically by selling his own inventory with no guarantees that he'll be able to drive the price down and replace the inventory at a lower cost to make a profit. On the other hand, if someone buys the specialist's inventory at the ask, he has less inventory to sell and thus his incentive is to try and lower the bid/ask and scare someone into selling him some replenishment inventory at a lower cost. Someone looking at the chart would see the price drop and assume there's more sellers than buyers but the truth was that there was a buyer who anxiously bought the specialists inventory. This is completely opposite of every investment book I have ever read but I've observed it thousands of times with my own trades. For example, I sometimes trade DRRA and the market makers there follow this classical rule of opposite trading. I learned quickly that to throw an offer out that was higher than market price was a guarantee to never get filled. On the other hand, selling 500 or 1000 shares a trade to the inside bid gave the market maker inventory where they'd have the incentive to raise the market bid/ask, make the stock look like it's strong and sell the shares at a profit to some chump that thought the stock had a big buyer. I once had a 15,000 share position on the company and sold 500-1000 shares to the bid all day. The stock ended up 6% for the day when the rest of the market ended on a down day. To someone looking at the chart, it looked like a big buyer had entered the market but it was actually a big seller leaving. When one understands the trading from the specialist's perspective, some things that didn't make sense start to make sense. For example on TOL, I believe one of the most supportive things to the price is the insider selling. As the execs dump their shares from their stock options onto the specialist, is he going to make money by driving the price down? He already owns the shares at the market price, so he does what he can to make money, namely driving the price up to trip up stops from short sellers and then re-selling the insiders shares at a profit. Conventional wisdom would say that insiders selling is a negative to price and it may be so over the long term but if one thinks from the specialist's perspective, things start to make sense.

To: whitepine who wrote (22901)	3/14/2005 11:44:28 AM
From: kodiak_bull	Read Replies (1) \| Respond to of 23153

WP, Here, I think, is the basic problem and why we will continue to write "past" each other. Your statement: "I’m only secondarily concerned with making money. I first want to know and define the process for determining the root, base level below which a stock IS very unlikely to fall" I don't know if being primarily concerned with making money is an absolute requirement in speculation, but it should not be a secondary concern. The primary concern should always be to be trading properly, with a proper approach and in a proper frame of mind; it is said that if that happens, then profits will naturally follow. This, I believe. As in my extended golf analogy, my primary concern is to be constantly improving the 6 or 7 areas of golf, but my secondary primary concern, if I may, is to improve my score (trade for profits). Your statement, if I may paraphrase it into golf terms, is: "I’m only secondarily concerned with scoring well. I first want to know and define the process for determining the statistical probability that I will lose more than 4 golf balls while playing a round of golf." As for your primary concern, "to know and define the process for determining" a base price below which the price will not fall, I can't help but note that this goal of yours seems to me to be an academic goal and an impossible thing to do. What's more, I think it's almost impossible that, if accomplished, it could make a speculator any money at all. Let's say that we discover this formula and it states that MSFT has a 99% chance of trading above $15 for 2005. The formula says nothing else, just a 99% chance that MSFT will not lose more than 40% of its value this year. What can you do with that information? You can't buy the stock or buy calls, and it really gives you no information on whether to go short or buy puts. If you wanted to write (short) puts on MSFT, with safety, you'd find that there is no bid on the 2006 $17 calls, or anything with a lower strike. So, in my mind, not only is the information impossible to find without a crystal ball, but it would be almost useless to have it. Golf is a game, speculation is a game. Both are much simpler than their practitioners understand (note, "simpler," not "easier"). Kb