8:30 AM. Friday, June 27, 2003: Little has generated more interest than my kindly gray-haired trader's "system" of trading E-Mini S&P 500 futures. He dropped by for lunch on Wednesday. He doesn't trade on FOMC meeting days -- another of his rules. He says it's too frenetic and too unpredictable. He sent me his chart of E-Mini S&P 500 futures on Wednesday, June 25, 2003. E-Mini futures are traded on the Chicago Mercantile Exchange. The candlesticks are one minute movements. Red means it went down in that minute. Blue means it went up. The top and the bottom of the candlesticks are where the minute opened and closed. Lines protruding from the top or the bottom shows where it went during that minute, i.e. Above or below the close or the open.
The green line represents Stochastics and the line at the bottom is the Oscillator, sort of a moving average. Never trade on an FOMC meeting day. That's the rule. You can clearly see why it's crazy to trade on this day. Look at the flatness of the candlesticks... until around 2:00 PM -- just before the FOMC announcement is made... Then the E-Minis go up and down, and down and up -- as though investors were unhappy with the Fed's decision. Then, two minutes later, they change their mind and are happy. Then a few minutes later they are unhappy... All within the space of a few minutes. Because you can't predict this stuff, it's hard to trade it. So don't.
Irrespective... my friend tells me there was a Sell Short signal at 3:04 PM. See if you can pick it.
Actually, this is not the chart he sent me. I photoshopped its size down. This one looks horrible. For the real, much larger, prettier chart plus one of the following day, i.e. yesterday, Click here. You'll need a broadband -- cable modem or DSL -- line. The BIG charts are huge and will take a minute or two to download on dial-up. As I've mentioned before, my gray-haired trader earns 15% per month plus trading these things. He looks for buying signals and selling signals, takes his two point gain and does it again and again. I've explained what he does in previous columns. I can theoretically understand what he does. But I don't believe I could do it. I lack the discipline or the brain. I remain in awe of his skills.
I'm fascinated by lighting: New York City has just replaced the incandescent traffic lights on my corner with light emitting diodes (LEDs). I took these pictures last night with my new digital camera, a Nikon D100.
The case for for LED technology is so overwhelming you'll soon see LEDs on
every traffic light in the U.S. There are two BIG savings:
1. Relamping. New York will now relamp the city every 10 years,
instead of the two years it's been doing. Figure the savings in truck rolls
and people.
2. Energy savings of 75%. That's huge when you figure there are thousands
in a typical city and the things run 24 hours a day.
Side benefit: LEDs are much brighter. Perhaps we'll have fewer accidents.
I can't find a company whose fortunes are tied to LEDs. I'm still looking.
A billion here. A billion there. Pretty soon it adds up to some real
money. The New York Times wrote this morning: "Some 300 companies
that sold new shares to the public during the late 1990's agreed yesterday
to pay $1 billion to settle an investor lawsuit contending that the stock
offerings' prices were artificially inflated. But under the terms of the deal,
which has not been approved by all the parties, the companies — mostly
technology concerns — will pay nothing if the investors also win a settlement
of at least $1 billion from the brokerage firms that underwrote the stock
offerings and are also being sued."
In case you didn't know, back in the Tech Boom, companies and brokerage
firms made misleading statements that artificially inflated prices of IPOs,
profited by kickbacks from investors who were allocated shares of the hot
issues and defrauded investors who lost money when those stocks later plummeted.
Specifically, the plaintiffs claim underwriters allocated shares of IPOs to
investors who signaled plans to buy additional shares after the initial offering,
in a move known as "laddering," and charged higher brokerage commissions
to execute those trades. According to the Times, Wall Street has come under
heavy under fire for its practices with respect to IPOs. Ten large firms have
agreed as part of a global settlement to change some of their IPO practices
and regulators are looking to reform the practices of the overall industry
through additional regulation.
Why investors ever hung onto some the IPO crap that was peddled in the late 1990s is beyond me. Something to do with greed and laziness. ... Oh, I remember, in those old days, they were telling us " Buy and Hold." What a quaint idea.
Short the
dying industries. A reader, writes, "I bought the Fuji S2 instead
of the Nikon D100 (it takes my Nikon lenses). The camera body is the same,
Nikon sold the bodies to Fuji. The Fuji S2 has taken the country by storm.
I have not shot a roll of film since I bought the camera. In fact I closed
my photo lab and went completely digital.
Talk about an industry going down the tubes...film and processing are going
the way of the horse and buggy. According to "Photo Industry Reporter"
35mm SLR sales were 1.1 million units in 2001 and will be 900,000 in 2003.
Rolls of film sold were 960 million in 2001 and estimated at 800 million in
2003. But that's not the whole story, they estimate that 33 million households
will have a digital camera by the end of 2003.
The commercial side of the business was lost to digital years ago. The real estate brokers, insurance adjusters and the like (people who used film 7 days a week) went digital years ago. The only thing left is the consumer side (mom shooting birthdays) and Walmart and Sam's Club are grabbing market share. In our small town in Maine (Bangor) Walmart has put in 3 new Fuji Frontier 370 mini labs. Who knows what they pay for the machines. Let's say it's $100,000 each. They are selling 8 x 10s for $1.96. Seems like you have to do a lot just to get to break even. In fact, take your digital images to Sam's Club and get photos done on the the Frontier 370 lab, they are fantastic. I sell those $1.96 8 x 10s for $50."
Insights for
Friday:
+ iRider really is a superior Internet browser. Get your free trial
version from iRider.com. I'll
be completely off Microsoft's buggy, memory-intensive Internet Explorer by
lunchtime. Yippee.
+ Wimbledon tennis continues this weekend.
+ The Economist's latest Technology Quarterly is really neat.
It covers OLED screens to nano-technology. No obvious stockmarket "buys."
But fascinating reading.
+ Digital cameras do an incredible job of compensating for awful light. This
is our local deli man, shot late last night under the most awful fluorescent
light you ever saw. Notice how the camera got rid of all the green. Even Hollywood
movies have a green tinge when shot in fluorescent light.
When God closes a door, She always opens a window. I lost or had stolen a small bag on Amtrak on Tuesday. It contained no equipment, just notes for my book. Yuch. I wasted time looking for it, contacting Amtrak and posting rewards. Now I'm recreating the notes, and better. There's always a silver lining.
I'm at Penn
Station looking for my bag. The Information window for the Long Island Railroad
is free. And the clerk looks bored.
Harry: What are the three dumbest questions you've ever been asked?
Clerk: (Suddenly smiling). Are you ready? Here they are:
+ What time
does the 10:44 to Huntington leave?
+ How many rides do I get on a ten-trip ticket?
+ When I go downstairs, will I be catching a train or a boat?
Our special,
tiny stocks are doing well: My list includes Align Technology, Cogent
Communications, Cypress Bioscience, Emagin, Gric Communications, IEC Electronics,
Imax Corp, Impax Labs, Independence Community Bank, Repligen, TiVo and
TriPath Imaging. I'm ecstatic I kicked out Sirius Satellite. The
thing is down 20% and its chart looks positively leprous. I remain mostly
in cash and bonds. But I have been putting a little money into real estate
syndications, which pay 8%-plus, and that one REIT/preferred combo I talked
about a couple of days ago.
It's not going to rain much this weekend.
Harry
Newton, photoshopped.
The
picture doesn't age. The person, sadly, does.
I
make my daily column (Monday through Fridays) freely available for three reasons:"
First, writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I'm hoping some of you will send me your personal
experiences. My personal monies remain 99.6% invested in bonds and cash, and
0.4% invested in common stock. Sadly, I also have monies invested in private
equity funds and leveraged buyout funds. All these funds are under water.
For now, I've written them all off. One day they may produce a few dollars
-- but that day is many, many years off. And meantime, none of the "managers"
will listen to any advice. That is the nature of those horrible beasts.
If you'd like to learn more about me, visit
www.HarryNewton.com.
To Email me