There's something about trees; and something attractive about being able to touch, taste1, and smell my investment. While thinking about non-traditional investments2 the thought of timber came up. Sure sure, the idea of being a baron hearkens to the good ole days of capitalism during the turn of the century. You know, when a couple rich folks controlled huge population sections of our country. They set living standards, manipulated others actions, and even told them how to spend their free time (at a baron owned attraction naturally!). Not a pleasant experience for most in our country; nor one that should be repeated. Indeed, I think capitalism's best years are still ahead of it. A time when it's true vision of free markets, independent people and ideas, will be more fully realized. It will (as things always seem to) come of necessity and not by active choice.
As for the trees, they represent an investment into raw land. Growing trees for a paperless world! I think there will always be some demand for wood, especially slow growing dense wood. Have you seen those Japanese coffee tables? The earth's old growth forests have long since been logged. It saddens me thinking of all the wasteful practices that have led us to this state of affairs. Still it represents a *possible* investment opportunity. A list of reasons for investing include:
1) Good quality hardwood is expensive
2) Timber is a long-term investment (read risk!)
3) Land is a finite resource and *hopefully* will always be > 0
4) Trees don't need constant attention, so this can be a more passive investment
5) Finally, I want to own some land
The reasons not to invest can be just as numerous. Ongoing costs and liabilities of physical ownership, potential disaster risk (disease, drought, storm, fire, etc), and lack of ROI.
So while I am still on the fence (a wooden fence) about investing or not the broader idea of land ownership does spark more ideas than just timber. Anyone wanna buy some rental houses? Beachfront speculation property? How about farmland? All of these have the potential for being a good investment because they could all yield income without losing their principal value.
1. I won't be eating the leaves or bark, but maple syrup is GOOD!
2. Now I sound like a CFP!
Showing posts with label idea. Show all posts
Showing posts with label idea. Show all posts
7.15.2010
7.13.2010
Got change for a euro?
Since my last post on speculating the euro's direction, it has taken a huge down and now up swing. As I mentioned I rode the downward trend and have been sitting on the sidelines since watching it regain its strength. I am not sure what the future holds for the euro, which is why I'm sitting on the sidelines. I'm hesitant to go long, but the market action clearly doesn't leave room to short the currency.
The MSM seems to have moved on, and most of the bad news seems priced in paving the way for the bull market to keep on roaring along. It's kind of an eerie midsummer sleep1. I am not enthusiastic about jumping in to any market at this point. Things can turn on you in a hurry.
1. Don't wake the bear!
The MSM seems to have moved on, and most of the bad news seems priced in paving the way for the bull market to keep on roaring along. It's kind of an eerie midsummer sleep1. I am not enthusiastic about jumping in to any market at this point. Things can turn on you in a hurry.
1. Don't wake the bear!
6.16.2010
Forex Market Participants
Many traders are interested in the big players actions. They assume the big players represent the 'smart' money or that perhaps they are more informed. This may be true in the case of the stock market. However, in the case of forex I don't believe it to be true.
Take the classic example of George Soros and others versus the Bank of England. Or the Tokyo housewives of Japan shorting the yen despite the governments large scale interventions. Clearly the big players paid dearly in these cases. Nevertheless, the commitment of traders report acts as a weekly guide of big players for currencies. Since forex has no central exchange, it's impossible to get any such report directly for the forex market1. However the futures and options markets for currencies do have a central exchange and therefore a report. It is published weekly by the CFTC and cane be found here:
http://www.cftc.gov/dea/options/deacmelof.htm
1. Even if trading forex on an ECN, we're really only interacting with a subset of the overall market.
Take the classic example of George Soros and others versus the Bank of England. Or the Tokyo housewives of Japan shorting the yen despite the governments large scale interventions. Clearly the big players paid dearly in these cases. Nevertheless, the commitment of traders report acts as a weekly guide of big players for currencies. Since forex has no central exchange, it's impossible to get any such report directly for the forex market1. However the futures and options markets for currencies do have a central exchange and therefore a report. It is published weekly by the CFTC and cane be found here:
http://www.cftc.gov/dea/options/deacmelof.htm
1. Even if trading forex on an ECN, we're really only interacting with a subset of the overall market.
4.09.2010
Investing like Nassim Taleb
George @ OnlineInvestingAI recently finished Taleb's first book called Fooled by Randomness. I was once again reminded of Taleb's trading strategies, and reminded myself to continue my own contrarian bent. I'm going to assume you know who Nassim Taleb is, and instead are curious how one might invest given this new strategy.
First a quick note. You need to look at all of you liquid assets as investable. Meaning, ideally you will want to calculate the percentages below against your total net worth -- not just simply money you can afford to lose.
The basic idea is to take 10%-20% of funds and buy out of the money options for pennies, and reap big when crazy events happen. Since you don't know when (and no one does) "Black Swans" will happen, you will slowly bleed money to the sellers of these options. The other 80% of your money place into the safest investments you can think of. Don't be so naive as to think US government debt is the way to go here. I would recommend (as would Taleb) buying government debt from several large and "safe" countries of your own choosing. You could try and diversify here, but if you've read Taleb's book(s), you'd simply be fooling yourself. If the US defaulted on there debt, who or what would be left in good shape? Don't misread me here. A US default is only a black swan away from occurring :-) The key is to try and minimize the risk on most of your money, while maximizing the risk on the invested 10-20%. When (not if) a black swan strikes again, you'll profit very nicely.
First a quick note. You need to look at all of you liquid assets as investable. Meaning, ideally you will want to calculate the percentages below against your total net worth -- not just simply money you can afford to lose.
The basic idea is to take 10%-20% of funds and buy out of the money options for pennies, and reap big when crazy events happen. Since you don't know when (and no one does) "Black Swans" will happen, you will slowly bleed money to the sellers of these options. The other 80% of your money place into the safest investments you can think of. Don't be so naive as to think US government debt is the way to go here. I would recommend (as would Taleb) buying government debt from several large and "safe" countries of your own choosing. You could try and diversify here, but if you've read Taleb's book(s), you'd simply be fooling yourself. If the US defaulted on there debt, who or what would be left in good shape? Don't misread me here. A US default is only a black swan away from occurring :-) The key is to try and minimize the risk on most of your money, while maximizing the risk on the invested 10-20%. When (not if) a black swan strikes again, you'll profit very nicely.
4.02.2010
Trader Personalities
Are the best traders the ones that are independent? Perhaps they are those who can find and exploit an edge1? I suppose the typical answer for someone who makes a good trader is a middle or right brained person2 who is good at math, buries emotions, and doesn't get stressed. And odd combination to be sure.
1. An advantage; real, perceived or otherwise.
2. Someone who is entirely logically oriented will not find success in trading IMHO. They would seek to find an answer where there is none. People are unpredictable; tis the only predictable thing about them!
1. An advantage; real, perceived or otherwise.
2. Someone who is entirely logically oriented will not find success in trading IMHO. They would seek to find an answer where there is none. People are unpredictable; tis the only predictable thing about them!
4.01.2010
We're all self-employed
I was reminded today of that simple little fact. Yes we are all self-employed. Before someone balks at this notion, I would say the majority of people trade there time (finite resource) for money (infinite resource) directly. If they ever cease trading there time, the money also ceases. This can be a real problem when you can no longer trade your time, but still require money. I evaluated this thought of exchanging my time for money, and in a true traders perspective, found it a poor return on assets. This blog was founded on the idea that there had to be a better way of providing for my needs than a direct exchange of my time for money1.I think anyone who has ever resold the same piece of “time”, aka work, would agree. Artists, writers, musicians, etc all understand the idea of reselling the same time block. The idea here is to create something that you can utilize for income, without having to spend the same amount of time as the initial outlay. Sounds a lot like passive income, and to a large extent it is. These folks are multiplying there monetary returns on there time by reselling that same time block again and again. Sometimes this resale requires no more time input, resulting in a truly passive income stream. Generally however, I would guess a small amount of time is required to continue to see the return. All said, we should seek to do the same as traders.
Whether your on an automated or manual setup, it's likely your seeing a better than 1 to 1 return on your time spent versus money earned. Trading in general requires upfront commitment, but the returns on that time spent allow you achieve a similar enhanced monetary return in exchange for your time. Unfortunately, even in this digital world I don't have the "dream" job of reselling my work again and again, a la a musician or writer. At least not yet. Happy trading.
1. Read steps 1, 2, and 3; especially step 2.
Whether your on an automated or manual setup, it's likely your seeing a better than 1 to 1 return on your time spent versus money earned. Trading in general requires upfront commitment, but the returns on that time spent allow you achieve a similar enhanced monetary return in exchange for your time. Unfortunately, even in this digital world I don't have the "dream" job of reselling my work again and again, a la a musician or writer. At least not yet. Happy trading.
1. Read steps 1, 2, and 3; especially step 2.
3.31.2010
Timeframes
Does long term trading really work? I struggled for a long time during my first trading attempts wondering this question. It seemed to me longer term trading was inherently more risky than short term1. After all, I can't know what will happen 5 mins from now, let alone 5 days or weeks. However, stats geeks would tell me I can predict with greater certainty what will happen in 5 mins than 5 weeks2. And thus it seemed to me that short term was the way to go.
I had a good run for some time manual trading short term; however automated trading short term setups seemed to be an on-again, off-again sort of feeling. One week, I would win 90%. The next week, I could lose 90%. Plus, the concept behind why I would be entering positions in such a short term way was non-existent and flawed. I was simply guessing, hoping perhaps, and I had a risk/reward ratio that required a high win rate to succeed. Needless to say, the effect on my account was a slow drain, with nice profit spikes during those weeks where everything just clicked.
My current philosophy I suppose is that long term trading can and does work. However, I believe my initial analysis about higher risk was correct. If I trade long term with a poor risk reward ratio and with a short term viewpoint, then I have simply increased my risk. What I was missing initially was an entirely different way of trading. I suppose the "happy" way to think about longer term trading is that it gives you more possibilities of taking profit. In theory, if we can wait long enough, everything eventually comes around to profit. Or as price over time approaches infinity my win ratio becomes 100%3.
1. Without going crazy on definitions, I'm simply going to say "long-term" is anything more than a couple days
2. And they would be wrong. People's actions aren't a Gaussian distribution.
3. If your buying that idea, let me tell you about a system I would sell you. You see if you simply double up your bet each time, eventually you win. It's called a martingale, and ...
I had a good run for some time manual trading short term; however automated trading short term setups seemed to be an on-again, off-again sort of feeling. One week, I would win 90%. The next week, I could lose 90%. Plus, the concept behind why I would be entering positions in such a short term way was non-existent and flawed. I was simply guessing, hoping perhaps, and I had a risk/reward ratio that required a high win rate to succeed. Needless to say, the effect on my account was a slow drain, with nice profit spikes during those weeks where everything just clicked.
My current philosophy I suppose is that long term trading can and does work. However, I believe my initial analysis about higher risk was correct. If I trade long term with a poor risk reward ratio and with a short term viewpoint, then I have simply increased my risk. What I was missing initially was an entirely different way of trading. I suppose the "happy" way to think about longer term trading is that it gives you more possibilities of taking profit. In theory, if we can wait long enough, everything eventually comes around to profit. Or as price over time approaches infinity my win ratio becomes 100%3.
1. Without going crazy on definitions, I'm simply going to say "long-term" is anything more than a couple days
2. And they would be wrong. People's actions aren't a Gaussian distribution.
3. If your buying that idea, let me tell you about a system I would sell you. You see if you simply double up your bet each time, eventually you win. It's called a martingale, and ...
3.28.2010
Profit and the Mob
Profiting from a trade doesn't mean you are/were right; don't buy into this fallacy. It simply means others also traded the same way as you, during the same time you were vested. This brings up an odd perspective on the manual trader. There are traders who put in long1 hours manually trading the news, or fundamentals. Many of these folks are your classic stock market gurus who form an opinion on a company or sector as a whole and trade that opinion in those instruments. Yet it appears their ability to generate a profit from these activities is simply because they think the same way as others do; aka they are part of the mob.
In other words, if we view an instrument in the market at any time, we can think of the price as a representation of a random2 slice of people's opinions. The best traders are the ones who simply align themselves closest to the opinions of there peers within that instrument. Make sense?
Your paradox for the day - How can following the mob make you a profitable trader, when 95% of the mob loses money? It would seem the key to success in manual trading is to follow the mob, but be a mob leader.
1. If you trade the non-farm payrolls announcement exclusively, you only work 1 hour a month!
2. This is perhaps a topic for another post. However, market participants are not random. They certainly are not constant, but I think statistics are valid here for who is participating. For this reason, we can gain insight into who is making up our market, and according to my theory presented above, adopt their style of thinking for profit.
In other words, if we view an instrument in the market at any time, we can think of the price as a representation of a random2 slice of people's opinions. The best traders are the ones who simply align themselves closest to the opinions of there peers within that instrument. Make sense?
Your paradox for the day - How can following the mob make you a profitable trader, when 95% of the mob loses money? It would seem the key to success in manual trading is to follow the mob, but be a mob leader.
1. If you trade the non-farm payrolls announcement exclusively, you only work 1 hour a month!
2. This is perhaps a topic for another post. However, market participants are not random. They certainly are not constant, but I think statistics are valid here for who is participating. For this reason, we can gain insight into who is making up our market, and according to my theory presented above, adopt their style of thinking for profit.
3.20.2010
Behavioral Analysis Trading
An idea has popped into my head regarding the other factor at work in a market. Until now, I had thought of price only as a function of time. I failed to really appreciate the human side of the equation. Ultimately human emotion drives the market. Right? After all, the decision to buy or sell is made by a human, and collectively those decisions become price movements. I've never taken the time to study human behavior in markets. Perhaps, just perhaps, there is an edge to be gained in doing so.
I can admit, I am not the typical consumer. I've realized I wouldn't have done well in the entrepreneurial world - merely because of my inability to understand people. Pick on anything you like; myself having been in IT for the dot com boom, I thought I might have a chance at starting something. Code it and they will come! However having seen sites like Myspace and Facebook do well, I realize how out of touch I am. Who would post all there personal details on some random companies site? And why communicate inside such a black box? Evidently there is a reason, since so many are doing it2.
Which brings us back to trading. Have you ever thought about why someone would take the flip side of your trade? How does TraderX1 make his trading decisions? Even a machine must be programmed. How does he trade? And does it matter to me? His decision, just like my own, moves the market! Given my choice to be proactive or reactive in my trading I have often sought to be reactive. Try and let the price set itself, and attempt to profit accordingly. I think being proactive is possible, and thinking about behavior could help that.
If your convinced at this point that this could play a role in your trading, I'll attempt to leave you with something. When this idea popped into my head, I immediately thought of Google Trends. It's sometimes shocking to see what the latest thing is on peoples minds (at least viewed thru google). The top searches and hot topics list are ever changing as the news disseminates what people should be thinking about today. Presumably this critical mass googles the sound bites, and thus you can "rank" the news on importance to the general populace. I would bet you the marketed media of the day is always in the top 5. Of course if you take that bet, I wouldn't have to worry about trading anymore. I'd be rich! Now, we simply need the same polling of currency traders.
1. Ok, I couldn't resist a Nick Leeson reference.
2. I suppose marketing to "con"-vince enough people into using the site until you reach a critical mass was the game plan here. Now people signup and use social networks simply because everyone else is. Amazing.
I can admit, I am not the typical consumer. I've realized I wouldn't have done well in the entrepreneurial world - merely because of my inability to understand people. Pick on anything you like; myself having been in IT for the dot com boom, I thought I might have a chance at starting something. Code it and they will come! However having seen sites like Myspace and Facebook do well, I realize how out of touch I am. Who would post all there personal details on some random companies site? And why communicate inside such a black box? Evidently there is a reason, since so many are doing it2.
Which brings us back to trading. Have you ever thought about why someone would take the flip side of your trade? How does TraderX1 make his trading decisions? Even a machine must be programmed. How does he trade? And does it matter to me? His decision, just like my own, moves the market! Given my choice to be proactive or reactive in my trading I have often sought to be reactive. Try and let the price set itself, and attempt to profit accordingly. I think being proactive is possible, and thinking about behavior could help that.
If your convinced at this point that this could play a role in your trading, I'll attempt to leave you with something. When this idea popped into my head, I immediately thought of Google Trends. It's sometimes shocking to see what the latest thing is on peoples minds (at least viewed thru google). The top searches and hot topics list are ever changing as the news disseminates what people should be thinking about today. Presumably this critical mass googles the sound bites, and thus you can "rank" the news on importance to the general populace. I would bet you the marketed media of the day is always in the top 5. Of course if you take that bet, I wouldn't have to worry about trading anymore. I'd be rich! Now, we simply need the same polling of currency traders.
1. Ok, I couldn't resist a Nick Leeson reference.
2. I suppose marketing to "con"-vince enough people into using the site until you reach a critical mass was the game plan here. Now people signup and use social networks simply because everyone else is. Amazing.
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