"It's not a F*ckin Game!"

For those of you who haven't seen the Jon Stewart vs. Jim Cramer Interview on the Daily Show, here's the link: "Get Ready to Buy Low! and Sell Die"

In the cordial discussion between Jon Stewart and his guest, Jim Cramer (financial analyst on CNBC), Jon points out how the financial goals of the Buy and Hold Investor are in direct conflict to the short term trading investors. Jon shows Jim several clips from Jim Cramer wherein Jim enumerates the different manipulation practices of hedge funds to achieve their short term trading goals.

To this Jon Stewart responds "It's not a F*ckin' Game!"

The problem that I saw with the interview is that "Wall Street Traders" or "Short term traders" were lumped in with "hedgefund manipulators" or "backroom dealers" or cocaine users or hookers.

Question: Is a Long term investor more noble than a Short term investor?

Answer: The length of the holding period has nothing to do with it. The key is, is the person or company an investor or gambler. An investor is an individual who does their homework and responds to those results. If as a short term trader (holding period of a few minutes to a few weeks or months), I respond to news and technical indicators and place a trade, then I've done my homework and I am an investor. If as a long term trader (holding period of 1 year or more) I throw a dart at a list of stocks and buy ACME company, because that's where my dart hit, then I a gambler not an investor. As a gambler then, if I lose all of my money, then I shouldn't be crying for the government to fix it or have the short term traders vilified because they made money on their homework.

Jon Stewart is right, "It's not a F*ckin' Game!". Long term investors need to stop thinking they can buy a stock and never stay on top of it. I know people who spend more time researching the best flat screen TV to buy, then they do studying the companies that they want to buy stock in.

Is stock manipulation wrong? Yes, and those who do it should be prosecuted for not playing by the rules. Are short term investors at fault for causing the downfall in the market? No. Are long term gamblers at fault for causing the downfall in the market? Yes. Are short term gamblers or manipulators at fault for causing the downfall in the market? Yes.

Remember, the length of holding period of any asset (gold, real estate, stocks, bonds, classic cars, tulips, etc.) is not the problem.

Risk Taker #2: Mark Cuban offers his own Stimulus Plan for Entrepreneurs (2/9/2009)

Risk Taker #2: Mark Cuban offers his own Stimulus Plan for Entrepreneurs (2/9/2009)

Here’s my response to the article I wrote entitled “Where have all the Risk-Takers gone?”, I decided to do a survey of financial risk-takers from history past who stepped in to save financial systems when markets were crashing.

Although Mark Cuban only posted this idea about a week ago, I think it's Brilliant! The best way to get this country's economy moving again, is to activate the self-interest of individuals to make money, which will generate economic activity from the ground up. The Federal Government has got it all wrong. They are throwing mountains of money at the problem trying to prop up failed institutions. If they would just invest 1% of the money they are giving away to corporations, to private entrepreneurs they would get the economy turned around in 6 months!

Read his proposal for yourself at: The Mark Cuban Stimulus Plan

Risk Taker #1: Nathan Rothschild saved the London stock Exchange (and England's Credit) (1815)

Risk Taker #1: Nathan Rothschild saved the London stock Exchange (and England's Credit) (1815).

Here's my response to the article I wrote entitled "Where have all the Risk-Takers gone?", I decided to do a survey of financial risk-takers from history past who stepped in to save financial systems when markets were crashing.

The Panic of the London Stock Exchange in 1815 was accelerated by the fear that Napolean had defeated the Duke of Wellington (General of the British Army). Nathan Rothschild stepped into the panic and was a buyer of stocks. He did this putting the entire financial backing of the House of Rothschild into the market when the market was collapsing. He did this also because he made a commitment to the governments of Europe that were fighting Napolean. Many theorize that England would have gone bankrupt were it not for Nathan Rothschild and Napolean would have had the advantage. Upon receiving news that Wellington had defeated Napolean, he shared the news with the market (and revealed his secret of carrier pigeons to transport the news) and it recovered, while making Rothschild the richest man in the world.

This was dramatized in a movie in 1934 entitled "The House of Rothschild". This move was nominated for an academy award:

(11/12) Nathan Rothschild: "Rich People have grave responsibilities and moral responsibilities that come with money. I'm buying on the stock exchange when everyone else is selling. I'm risking everything we have to save England. "

(12/12) "Dramatic Conclusion"

Here are the links to the other 10 parts of the movie if you'd like to watch it in it's entirety: (1/12), (2/12), (3/12), (4/12), (5/12), (6/12), (7/12), (8/12), (9/12), (10/12)

Where have all the Risk-Takers gone?

Where have all the Risk-Takers gone?

Everyone I talk to these days is frightened out of their skulls about the economy and what's going to happen with their money. So much money has been pulled out of every asset class and sitting in secure(?) instruments like Treasuries that they're willing to receive a negative to zero interest rate because they think Armageddon is going to happen. See: "Hedge Fund Redemptions may crash Q1 Markets".

If they really think Armageddon is going to happen, I'd recommend buying guns and ammo and stocking up on food and water, not hoarding cash!

The psychology of the world has been so affected by this negativity, it's almost like there is an actual virus infecting the minds of all of mankind. The depressive state expressed by the media and the blogs and the people I talk to is very strange, almost as if there is a spiritual darkness descending on all of us.

The upside is that with the falling of the old school financial institutions in this country, there are many new opportunities for entrepreneurs to fill the gap. Old business models are destroyed and new and improved ones will take their place. What will you do to contribute to a new and better society?

Perhaps there is something going on, but if YOU WANT TO return to living in caves and hunting for food, then keep on hoarding your money and not taking risk. It's only when we are all cooperating together in business transactions, in risk taking, in speculating, and investing that our society will thrive.

Sure, we've hit a rough patch. But enough with "The Sky is Falling" mentality. Start investing again and participate in the world economy.

One of my favorite quotes is by a 16th century author, John Donne. He said, "No man is an island, entire unto himself. Every man is a piece of the continent, a part of the main. Any man's death diminishes me, because I'm involved in all of mankind. Therefore, send not to know for whom the bell tolls. It tolls for thee."

The Bells are ringing for Risk-Takers. Are you ready to respond? The world needs you right now more than ever!

Protect your Capital while taking measured risks with Option Straddle Trades.

Merry Christmas and Happy holidays!

When to Sell?

When to Sell?

Question: "Your software identifies when the BIG STRADDLE TRADES are BOUGHT. When do you SELL?"

This is in many ways is a more difficult question to answer than "WHEN TO BUY?". The reason is that the BUY QUESTION is answered when there is a large contract trade of both the PUT and the CALL on the same strike that matches on the same minute. Because the BUY portion of the trade is confirmed by the BIG TRADER, there is not a whole lot of decision making required -- just put on the trade! The SELL portion of the trade is left up to me.

I have discovered that the best answer to the SELL QUESTION is when the desired return on Investment is achieved on EITHER THE CALL OR THE PUT. This is because the BIG TRADER does not sell out his position in the easily identifiable way as when the Straddle trade is bought. I currently have the minimum ROI set at 20%.

This has to be monitored via software and my software does it. My software notifies me when a SELL SIGNAL has been identified on either the CALL or the PUT and I place the trade. On most of the CALL or PUT options there are at least 10 signals per CALL or PUT option, so if you miss one, there will be others.

Sometimes I get the benefit of a GAP UP or GAP DOWN or a NEWS EVENT which causes the ROI to be much HIGHER than my TARGET ROI but generally if the ROI is hit, I close out the CALL or the PUT. "A bird in hand is worth two in the bush".

In my experience, 95% of the trades are closed out when the ROI is hit. However, 5% of the time, either the CALL or the PUT hits the target ROI, but the other leg of the straddle does not hit the ROI. In this case, I make the executive decision to close out the other leg to minimize the loss on the trade. But in my experience this is usually results in a loss of less than 10% on the total straddle purchase price. But, since this loss only happens 5% of the time and I'm getting 20% return (or more) on the other 95% of the trades, this minimizes the loss even more.

Check out the SELL SIGNALS generated to today's date with my software. If you have any questions or would like to discuss how you can make some serious money partnering with me, please email me at: Rob Mapstead.

Two Weeks Early!

Two weeks early!

"Panasonic to buy Sanyo in $9 billion deal" AP 12/19/2008 5:58 am ET

Lucky or Smart? See my comments made about Mergers & Acquisitions in 2009. Specifically go to the spreadsheet and see my analysis on Panasonic as one of the 14 M&A "BUYERS" in 2009. There are over 15,000 publicly traded stocks and I picked 1 of 14 to be a M&A "BUYER". It feels good to get it right.

Email Response to Mergers and Acquistions 2009

Email Response to Mergers and Acquisitions 2009

Below is an email response to my Blog about Mergers & Acquisitions in 2009 from a friend of mine who works at the investment group at a major bank. I respect his opinion and his insightful point of view. See if you agree.

Hey Rob,

I like the Blog – interesting read. Below are my thoughts on your M&A assumptions:

"1. We are in the bottom of the market (12/2008)" – Mildly agree, but I think we will see a number of significant corporate failures that will shock the market intermittently in 2009.

A lot of LBO transactions and leveraged acquisitions, particularly those completed in late 2006 and 2007 will experience difficulty in 2009 given declining EBITDA’s and covenant levels starting to ratchet down. These Company’s will not be able to refinance and will default as a result.

"2. The market/economy will recover in second half of 2009 or 1st half 2010" – I think any semblance of a recovery will not occur until 2010. While interest rates are near historic lows, it may not be sufficient to stimulate growth in 2009, given increasing unemployment rates, depressed house prices and most importantly weak consumer sentiment.

"3. Credit will remain tight through 2009" – Absolutely agree. When banks commence lending again it will be to larger investment grade companies. For lower rated, smaller, more levered companies it will be difficult to complete acquisitions that are EPS accretive given the high financing costs.

"4. Mergers & Acquisitions will be driven by companies with cash and those Companies will use that cash to buy cheap companies in their industry" – Agree.

Company's that have strong liquidity positions (balance sheet cash and capacity under their revolving credit facilities) will be in a strong position to acquire companies at depressed multiples.

"5. Premiums of at least 30% will have to be paid for the purchase of companies." - I would agree that premiums will be in the 30% area. With valuation multiples nearing historic low, premiums will be higher that the historical average as a result.

I think we will see a lot on industry consolidation in 2009 with the big players making a number of strategic acquisitions. I think this will be most prevalent in the energy sector and tech & services.

The premiums paid will factor in cash on balance sheet as the EV/EBITDA multiple is calculated on a net debt basis.

Hope you have an enjoyable and peaceful Christmas.

Regards,

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