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Newbie Lessons - All your questions answered

Discussion in 'Beginner's Lounge' started by Sir Osisofliver, Feb 12, 2009.

  1. skc

    skc Goldmember

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    Pretty hard finding short setup? Or pretty hard finding short borrow in JBH? We don't have any :banghead:
     
  2. DeepState

    DeepState Multi-Strategy, Quant and Fundamental

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    skc, can you outline where are you sourcing borrow from and under what terms are you getting it in general?
     
  3. skc

    skc Goldmember

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    My shorts with the prop firm come from one of the major prime brokers. Most of the ASX200 are available bar a few really popular ones (e.g. MND, JBH, and LYC back in the days). And we can email special requests if they are not on the list. There is a blanket borrow fee which I can't disclose here, and sometimes more exotic names attract higher costs. Sorry about the generic response but it's company's business so I can't disclose too much here.

    With personal stuff, I typically use IG as my CFD provider. They source from a number of prime brokers and can actually have a larger list than my shop. Borrow costs from them is usually free except a few specific (popular) ones. They are also overseas borrows so no franking credits on ex-div in most instances.

    Interactive Brokers are offer some shorts but usually in the most active names only. I haven't really shorted with them.

    This is probably quite off-topic so may be worth a new thread if you are looking for more on where to find shorts.
     
  4. DeepState

    DeepState Multi-Strategy, Quant and Fundamental

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    Aren't we newbies? :confused:. Actually, perhaps the mechanics of this might be of interest/relevance given it is a genuine trading issue which will be incurred by newbies too.

    Thanks. IG uses UBS for the majority of its services in relation to borrow. It was also my experience that UBS had the best access although I was pretty happy with others. It was also my experience that the charges being levied as retail cost recovery are quite a bit higher than what I used to incur. Sec lending revenue had been squashed to near nothing several years ago.

    FYI IG charges for borrow over and above the financing fee (and bro') if held overnight. This is buried pretty deep into their doco. For a stock like BHP the borrow cost is 1%...which includes the admin charge (0.5%). I have been able to request locate in special situations which they managed to secure for me.

    2014-08-19 19_37_57-Share CFDs.png

    Was just wondering if you had better options.


    Thanks, I'll sign off.
     
  5. skyQuake

    skyQuake

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    Yep I remember that 0.5% admin charge... Game changer.

    For those still interested, IG publishes a lost of stocks tradable, and whether its shortable:

    http://www.marketdatasystems.com/content/files/Tiered Margin.xls

    Good thing with them is that they can have inhouse borrow from client longs when there is no real borrow floating around elsewhere

    Both! I never touch JBH normally so I was ok to short them pa through IG
     
  6. skc

    skc Goldmember

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    Dam... I've forgotten about them. :banghead:

    I captured this chart but didn't post it since they report today. But that would have been a good short on open today.

    Capture2.JPG
     
  7. skc

    skc Goldmember

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    On second thought... that's 0.5% per annum. Not on full trade value.
     
  8. Sir Osisofliver

    Sir Osisofliver

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    Hi Newbies et al,

    So I thought I would pop in and say G'day to all the guys and gals and have a chat. So what are we going to talk about?

    Well I did say I was going dark on commentary on JBH until the trade was completed...which is true...and the trade is not yet completed...so don't ask me what I think about it. Legalese disclaimer inserted here.

    I'd be interested in hearing if any ASF'ers actually did take a position and what that position was, because we can talk about your position, just not my position.

    So this discussion will be about how we maintain objectivity in an ongoing trade position. Ah yes those pesky emotions once again skewing how we look at our positions. I find this is the hardest part for a new trader, when there is real money on the table and it's not just a theoretical exercise any more.

    It becomes particularly relevant when using any kind of leveraged position via a derivative. (which we've generally had to do to go short in JBH). That derivative generally means we are swinging around a pretty big lever and for some people that enhances their emotional aspects in trade as well.

    To highlight this discussion I'll be using some quotes from here on ASF, in the JBH thread. Please note - I'm not picking on anyone. If I use your post from the JBH thread I am doing so to highlight a psychological point and I'd like to sincerely thank you for contributing. I can talk about price action in shares, demonstrate a successful trade, pre-empt a trade and use charts and fundamental information to explain price movements, and there's lots of this around the forum...

    It's significantly more difficult to actually show the mind set of those involved in the auction process that is the market. So once again, Thank-you very much for demonstrating a very, very useful lesson to learn. So for Newbies, (and others interested), let get out our styling listening caps on as we examine the below...

    Ok you can ignore all posts in the thread prior to #325 which occurred on the 11th of August...the date on which I started talking about JBH (post #817 back on page 41).

    One of the first things to occur in the JBH thread was a comment by Junior, quoting a research analyst. This is not an exhaustive process, we have one comment from an Analyst (who is himself or herself subject to their own emotional and and analytical bias). There are seven major broking or analysis houses that cover JBH. At the time of the August 11 announcement most of them updated their research....prior to this research the intrinsic value average across all seven was ~$20.70, post the August 11 announcement the intrinsic value (Assume the price target) across them dropped to ~$18.00. Interesting to note that the spread of those numbers however increased, with Morgan Stanley up at the $21 price target, and Morningstar with a fair value of $12.....that's a pretty wide margin I'm sure you agree.

    So, look at the commentary in the JBH thread. We have one analyst viewpoint, and some chatting in there about whether they called it correct or not, and what people think might happen. This is exactly what is occurring in the market in the form of price action. Buyers and sellers are reading the research reports, doing technical analysis, talking to their brokers or whatever it is they do, and taking an action based on that and other factors (IE what they think will happen). It's important to realize that this view is just one voice among the many. They who shout the loudest will form the majority view and the likely direction of the share price.

    In the first few posts, the direction certainly seems to be "Down" with comments from McCoy Pauley, DB94, skc, and Notting all expressing a degree of uncertainty in relation to the share.

    What happens next (on the 20th of August - by now the JBH share closed at $16.72) is we start to see some voices with a differing opinion, Sammy84, TPI make comments that express a divergence (meaning a potential price movement in an opposing direction), and "oversold", one a technical expression and one a fundamental expression. By now in the Newbie thread, I've just gone dark on commentary, Tech/A has done a lovely chart analysis and the prevailing view appears to be "down".

    Notice the commentary from TPI in particular in the JBH thread (TPI once again I am not picking on you and no offence is intended) The next several posts all appear to be justifications or evidence based around supporting his viewpoint, that JBH appears oversold. (I'll say it once again.... They who shout the loudest will form the majority view and the likely direction of the share price.)

    We then get Tech/A with his usual brevity. (One criticism Tech is you do seem short with the newbs or less experience, but I understand how frustrating it can be talking to people and brevity makes sure you don't waste your time). Note that Tech doesn't come right out and say "you're an idiot", he wants to know whether TPI has protected against downside risk....turns out he had...as we are told on the 27th of August, well done TPI. He then goes on to say a bunch of anecdotal and fundamental-based reasons about why he thinks he got it wrong and when he might revisit in the future. (Notice that TPI is only trading long, he has limited his choices to 1/3 of potential price direction in a stock he appears very familiar with).

    goccipgp then makes a comment...pretty terse, making a fundametal statement about p/e and relative value for the Fundies, and a support levels and the like for the techies...and then mentions a commercial information provider. They who shout the loudest will form the majority view and the likely direction of the share price. (who's shouting here?)

    Galumay and Porper kind of hose that down, providing their own view about support and resistance levels and then....

    Hiddencow! In - Long term - over 5% dividend yield....Tech/A unfortunately this time say's "you're being foolish".
    Question for the newbies. How do you think the relative time period involved influences the decision process here? Hiddencow would not be alone as a long-term (20+ year) investor in thinking that an over 5% dividend yield was "attractive". Do you think Tech/A (or most other people) are working to the same time frame? How does this influence the relative merit of the decision process? Now imagine that Hiddencow! operates inside a 15% taxation environment, has half a billion dollars up his sleeve that is looking for a home, can make additional yield by employing options strategies and other activities.

    Then there's a bit of argy bargy, and some mod noise about staying on topic. (shares in JBH now closed at $15.49)

    Boggo, Tech/A and now Julia, are now more fully detailing to a persistent Hiddencow the potential danger of what he's doing and using technical and fundamental information and anecdotal experience.

    There's then some more argy bargy and voices predominantly from a fundamental viewpoint about relative value.

    Then we get some more anecdotal evidence and fundamentals which might explain a falling shareprice from TPI, and Tech asks hiddencow how's s/she is going in trade. There's some snark (gotta love the internet) and Hiddenco re-affirms his/her long term view. (once again do you think these two very different investors/traders are operating on the same time period and valuing the relative aspects of the share under the same basis?) this is what is happening in the broader market as well.

    Just like the market (auction) there will be differences of opinion that have to do with the time period being a major factor in the decision making process. Just like the market it's the loudest voice that determines the directionality of the share price.

    Last comment by Burglar is some more media/analyst words on the 1st of October.....shares were $15.52 on the close.

    As I type this JBH is trading at $14.58

    Those in a short position are now significantly in profit.
    Those in a long position are showing a capital loss.

    So how do we maintain objectivity?

    So what's the emotional state of each investor/trader and how will this influence future price action? Because the profit or loss of each investor is only determined by the exit of the position, whether that is now or in 20 years time.

    It's important to realize the impact of our proposed time period has on our decision making process, and this is directly related to financial risk. Plan or estimate how long you will hold a position. From my outside perspective, Hiddencow has an expectation around yield and price movement over a long-term time frame. As long as the yield is maintained he doesn't seem overly concerned about price fluctuations...because such fluctuations are secondary to him/her and the type of investing s/he does. S/he has made no mention of stops, so the relative fluctuation in capital value appears immaterial to the decision process.

    To those who are short-term, system or hard rule orientated this looks like sheer madness...madness I tells ya!!!! Doesn't change the fact that there are a lot of hiddencows around and their voices are part of the auction process. I know investors who are the bottom drawer types. Buy the stock, chuck it in a drawer and check it out in ten years time and collect the div in the interim.

    What to expect...well it still appears that the sellers are yelling the loudest, given the movement of the share price, but we can expect more value investors to start to chime in, (at this point the p/e is now 11.50 and the yield on JBH is 5.8% with 100% franking and stability ratio of 98.6%), these voices will get louder, as those numbers show further improvement in a falling share price environment.

    At some point the scales will shift, the voice that yells the loudest will be calling for an accumulation of the shares. The real question is once again one of time and expectation. At this point you can be assured that I have moved my stop position. I am now comfortable (because I have relatively low risk compared to my original entry), for were a counter-trend rally to occur, I will still make a profit in the position, so by doing so I am maintaining my objectivity in trade.

    Note the relative urgency of the voices (and the emotions and snark) as people get further into and out of profit. To me it's just a number. I'll maintain a target price, but it's subject to review and careful movement of stop levels and I tend to ignore a whole bunch of media and analyst reports when in trade.

    What do you do to maintain your objectivity?

    Cheers

    Sir O
     
  9. Craton

    Craton Mostly passive, contrarian.

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    G'day Sir O

    Interesting and thought provoking as always.

    Certainly the time frame comes into play be it short, med or long term. For those that have little or no time to learn (or perhaps don't have the desire) to become a trader and/or have little spare cash to invest, the longer route may prove to be the best way forward.

    For those that have greater experience, are more proficient, have time to spare then a shorter time frame may suit their skills.

    So too, should a position turn sour then a stop might be triggered against a planned time objective. However, I do understand that by having a longer time span envisioned that this may be perceived to de-risk a position.

    If I had $15B to manage, my job would be different, better paid and indeed, my knowledge of the machinations of the "auction" would be a lot more intimate. My stress factor would also be higher no doubt. *tongue-in-cheek*

    Emotions and money make very bad bed fellows and getting the emotions sorted goes a long way for making good, solid decisions in all aspects of life. Doing so is not an easy process though is it?

    I go back to the reasons why I hold equities in the first place, why I hold a particular stock and yes, I do look at my time frame because I am reminded, for better or worse, I don't intend on selling any of the stocks I'm accumulating as my aim is to have a passive income in retirement and then, upon my leaving this mortal coil, leaving a trust in perpetuity for my descendants to grow from. Altruistic?

    Perhaps but it's what floats my boat as I know what it is like to start with $200, some hand tools and a dream. Of course all this may change without notice.

    My position in JBH is: zero.
     
  10. burglar

    burglar

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    And more from the Fool!
    http://www.fool.com.au/tickers/asx-jbh/

    No doubt in my mind that each and every article contains a single sentence which sort of says both "JB Hi-Fi’s quality business model" and "won’t go down without a fight."

    No matter which way it goes, "we were correct".
     
  11. PinguPingu

    PinguPingu

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    Gotta give Motley Fool credit for the SEO techniques. Almost every time I bring up the ASX200/All Ords or any ASX stock there articles always appear in the 'news' section on the side with some very click-bait titles. Must pick up a lot of subscribers via that.
     
  12. Craton

    Craton Mostly passive, contrarian.

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    Yep, and probably more so when stock prices tumble.
     
  13. Tooth Faerie

    Tooth Faerie

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    Sir O,

    I cannot express how much I appreciate your time and effort into educating us all. I hungrily digested the thread twice over and will read it again another time. It's ignited a new passion in me, to retire sooner.

    I have a newbie question.

    What investment strategies work before an oncoming recession?

    My newbie thoughts are:
    Share - generally will go down
    Property - will go down
    Government bonds - will go up
     
  14. burglar

    burglar

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    This is one post which refers:
    https://www.aussiestockforums.com/forums/showthread.php?t=14370&p=483900&viewfull=1#post483900
     
  15. Tooth Faerie

    Tooth Faerie

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    Please go easy on me everyone. I'm a total noob and I'm just going to have a stab at what "time" we are on the economic cycles.

    • Unemployment - High
    • Interest rates - Low
    • Property market - Slowing down
    • Fixed Interest - Bonds doing well recently


    Are we currently from 5 o'clock to 6 o'clock?

    I would really appreciate it if other people would give me some feedback. Especially where you think we're at in the overall cycle.
     
  16. burglar

    burglar

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    There are differing opinions on what constitutes a good strategy in a recession.

    1.) As you are in SirO's Thread, I had tried to point you to his strategy.
    That is to say, you hold your "Core" long positions!
    Then insure them against going down, by purchasing a Put Option.

    2.) Another strategy is running to cash/bonds.
    This is fraught with timing difficulties, ... when to get out ... when to re-enter.

    3.) And there is the "Buy and Hold" strategy.





    As for your question about the clock, I'll wait until SirO drops in.
     
  17. Tooth Faerie

    Tooth Faerie

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    Went through all 46 pages yet again and made some notes on the particular points above. This thread and its contributors are a absolutely goldmine of knowledge. :)
     
  18. The Falcon

    The Falcon

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    Really enjoyed Sir O's post of 13 OCT. Will look through the thread again tonight...great resource :)
     
  19. trancearc

    trancearc

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    Sir O

    Do you have any recommendation of the book for me to read please? I am very raw here and would like to learn more or at least know a little jargon in this currency trading.

    By the way, your writing inspires me to budget more carefully.

    Thank you.

    Trancearc
     
  20. StockTrader010

    StockTrader010

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    ForeX Trading for Maximum Profit: The Best Kept Secret Off Wall Street by Raghee Horner is a good book on FX
     
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