Feelings About Experts

I find experts in many fields that I participate in life. The medical field, transportation industry, the food industry. These experts I trust because they have had consistent success in their particular line of work for many years. In the investment arena, however, there is a proliferation of stock market experts who are very unsuccessful. They may beat the S7\& P 500 one year and fail in their attempts for the next 10 years. It's all quantitative now.  Its all about the beloved algorithms that have replaced humans in the stock market. Humans have to put together those algorithms and the software programs that run the trading platforms but the trading firms that hold the securities from which these algorithms are based continue to laugh all the way to the bank.

If an investor could afford to buy all of the stock outstanding in Apple Computer what would he do with it? Nothing..... unless he had buyers for that stock. To me, initially there is a demand for Apple Computer stock given the media hyping its products and the demand for Apple's products.  This creates the demand for Apple stock because people want to make money since Apple is selling so much product.  The investor who owns all of Apple's stock realizes this and sells it to investors at , say, $100 per share. The investor in Apple seeing such demand for Apple stock keeps raising the asking price until he has no more shares left. The price of Apple stock is, say, $300. This is a great return for those investors who bought at 100 or 200 or even 250. Obviously, other people who bought are selling too but for simplicity sake everybody holds the stock.

The investor realizing he wants to keep his monopoly of holding the outstanding shares in Apple, was shorting Apple stock at the highs as he was running out of shares. Why/  He needs those shares back and needs those investor= who bought from him to sell Apple shares back to him. How does that happen?  He lowers the price dramatically after the close in the market on any excuse he can find... analysts projections not meeting expectations, sales softer than anticipated, economic climate not as bright...anything.  Peeole who bought Apple realize at the open of trading after such gloomy information is disseminated that their shares have lost maybe 20 % or more in value and start to panic and sell their shares throughout the day. For every seller there has to be a buyer and that investor who monopolizes Apple stock is more than happy to buy those shares thereby covering his short sales.

This scenario, I believe, and not vin this simplistic sense, continuously occurs in the stock market  and is blown off by the media.by some excuse that keeps investors happy.

So you quantitative and fundamental analyst out there, have fun number crunching.  The only numbers that mean anything to me are the black numbers in my investment account.

Much Ado About Nothing

As an investor whom, I guess, has made two mistakes so far, I am not panicked in any way about my mission, although I feel I have wasted some time being patient. Today, the other stock I hold in my portfolio, a company called Cleveland BioLabs Inc.(CBLI) announced third quarter earnings today. Like many biopharmaceutical companies, stock price has nothing at all to do with earnings as it does with prospective news. CBLI posted a lesser net loss than a year ago but less revenues also. This company has never been profitable since its inception,so why would anyone invest in CBLI? Let me give you my theory. Some institutions hold substantial amounts of stock in this company. These institutions make a living trading securities. Institutions trading CBLI have not covered their short positions in this company for the simple fact that there is no volume changing hands at current price levels. Today's volume was a little higher than the median volume traded in CBLI but nothing to get excited about after its earnings announcement today. Until I see excessive volume at these price levels will I begin to get enthused. My feeling is that based on what the information given in  today;s earnings report,there is a positive hint of potential growth. A Phase 1 study of Entolimod, the drug that CBLI is putting its hopes,will be completed in the first half of 2015. My hope is that the price of CBLI will at least double by the first half of next year based on the potential success of these trials.
Investing in CBLI is not for the feint of heart but neither is investing in general. To be successful investor,one has to think like the institutions who hold the inventory of stocks in the companyone is invested..and even then you are guessing human nature.

Off We Go

 Friday was a good day for investors in Service Source International (SREV). What makes me feel better about Friday's trading day was the way the institutions in SREV distributed the stock during the day. Although the trading volume was a little less than expected, this leads me to believe that in the short-term, more shares  will be distributed at higher levels. I do not expect the price of SREV to go much higher than $5.00 or $5.50 for the next three months when the next earnings report is announced at the end of January. What I find kind of peculiar is that Zacks or thestreet.com did not mention why the stck was up on Friday. To me, it is probably another indication that market makers are quietly taking SREV higher. I feel better that SREV is closer to my $4.60 entry price and hope to be making a profit along with the institutions that trade and hold this stock for their investment accounts.

The other stock I hold is Cleveland BioLabs Inc. (CBLI). I purchased 300 shares of this biotechnology stock back in April, the same day I purchased SREV. I purchased these shares at %0.50 per share as my speculation hunch so to speak. The earnings are atrocious as it is awaiting FDA approval of its main cancer drug. I really don't care what the drug is but I am intensely fascinated at the politics of these pharmaceutical companies and the games that the United States Federal Government plays a part. I feel that , like SREV, the quarterly earnings report will be the driving force in the price of CBLI stock. Unlike SREV, the FDA can, at any time release information that will let investors know if CBLI's cancer drug will pass one of its trials.

CBLI trades today, November 2, 2014 at $0.51 per share. Since I have own CBLI, the stock price has traded as high as $0.72 per share and $9.37 per share. On Wednesday November 5, CBLI will announce its third quarter earnings and it will be interesting to see what happens to CBLI's stock price if anything. The volume is quite light which to me means more of the same $0.40 to &0.50 trading range. My goal in this stock is to see it double and never look back. I am still at ground zero on this one. Let;s wait until Wednesday.

Meanwhile, I will begin looking for a stock for my son to invest. With interest rates so low,mhe wanys his money to work harder than 0.1% annually. He's young and wants his money to work hard for him. The stock market journey continues...

Awaiting A New Morning

What I find out about the market is not what the media is reporting but the movement of stock prices silently before the media reports anything. Case in point: Service Source International (SREV), the cloud company that I own 100 shares. After today's close in the market, third quarter earnings were being announced by SREV and  nothing had been written as of this moment. After hours trading has the the stock up 15 cents from the close of $3.35.With less than 1 million shares being traded today, one would think not much will happen tomorrow. I will dispute that notion and, as the previous two quarters have shown, volume tomorrow will be over at least 4 million shares and we may even see SREV trade at the $4.00 level. All this can happen in the first half hour of trading at SREV's opening tomorrow.

Why? My guess  is that the short covering by institutions  in SREV  and investors dumping this stock at the $3.00 to $4.00 level over the past three months has created quite a substantial inventory for those firms who are making a market in SREV. The only course of action and, the only reason many of these firms exist, is to start making some profits on the long side and start relinquishing these shares at a 25% higher price at the opening, maybe, and let the stock price guide the earnings information. I can almost guarantee that Zacks Investment Research and the Street.com will be reporting something tomorrow morning as to why SREV is substantially higher. In little more than 12 hours, investors in SREV will know and be a happier lot..

Diary of a Market Mad Man

So its been since January 2014 since I have written anything about the stock market.  Today, I have decided that I have had enough of the balderdash that makes up financial analysis. I am simply tired of reading reactive articles about the market. Since this blog has no readers, I will treat this as my diary and write about my feelings and emotions about concerning the pariahs of the eastern banking establishment and what they want me to believe. I also have decided to apply the theories I have subscribed to for over 30 years and invest on my own.

I am an incredible case study of a typical investor. Thinking that investing in the cloud would be my pathway to stock market success, I found a relatively new company called Service Source International (SREV). Not caring about revenues, earnings, or any financial forecasts about this company, I looked at what happened on May 2, 2014. On May 1st SREV closed for the evening at $6,25 per share. The opening on May 2 saw SREV's share price fall $1.58 or a decline of 25% of  market value in this company. Most investors got clobbered that day. My reaction was simply this: Who bought?  SREV typically trades 500,000 shares per day with 1 million shares occasionally trading every now and then. On May 2, 17 million shares traded. Thats nearly 35 times the daily volume.  If everyone was running for the exits on SREV, who was buying or better yet who was covering their short sales?Yes, May 1 was an earnings announcement that did not fall in favor of the analysts in SREV,

Letting the dust settle to determine if the firms holding the float in SREV stock were going to drop this stock any further, I decided on May 28 to buy this stock at $4.60 knowing full well that not much would happen until the next earnings announce which was due in the beginning of August.

True to form, on July 31 2014, second quarter earnings was being announced at the close of the market. This prevents the poor idiots like me from getting out of this stock when the major firms holding shares in SREV need to drop the price so they can profit from their short covering activities.
On July 31  SREV closed at $4.43 per share. The opening bell saw SREV down $0.72 per share closing at $3.39 per share a loss of 23% in one day.Trading volume was substantial in that over 8 million shares or 16 times the daily trading volume exchanged hands that day. Again, who was buying? Some firms needed to pad their inventories for the coming demand in SREV that will be no doubt created when these firms, market makers or dark poolsm decide to start raising prices.

Which brings us to today. Tomorrow,SREV will announce 3rd quarter earnings at the close of the market. There will be no way to get in or out of SREV. Noticing the price of SREV today at $3.23,there's not much farther down SREV can fall. My guess is that positive statements about earnings will allow the firms holding substantial interests in SREV to raise prices dramatically (maybe $1,00 per share or more) on heavy volume. Zacks Investment Research has already warned investors that SREV could be a bargain.right now. Can't wait to seethe action in the next two days.

Different Look at Today's Stock Market

Investors enter the stock market with the same hope as gamblers who enter a casino: the lure of the epic reward. In many ways the stock market is like a casino, investors play against the house. Like a drug, the investor wins a few times and develops a false confidence in his abilities to play the market and becomes a "user". Forgetting that on the other side of his or her transaction is an investment bank or a broker-dealer, the investor usually loses because his beliefs in the stock market are the very cause for his or her demise.

Investors, as I was taught in academia and further continue to read in blogs, message boards and financial articles, believe that demand creates price. We are continually browbeat into this way of investment thinking: a company's stock price with good sales, good profits and a good economy will always rise. As investors, we thought this way until October 1987, when after years of stock market gains, the rug was pulled out from under us. There was no economic calamity prior to this as I remember. In fact, it was in vogue to be associated with Wall Street. Since no looming vrecession or economic dirge really transpired, the stock market proceeded to rise for the next 10 years! Yet, somehow we lost venerable investment banking firms such as L. F.  Rothschild and Donaldson, Lufkin and Jenrette.

The eye opener for me was the market boom in internet stocks in the late 1990's and the turn of this century. Here is where I gave up on fundamental analysis and watched investment banks and broker dealers run rampant with price manipulation. Companies that had no earnings whatsoever and the calculation of these earning not yet conceived, were doubling and tripling weeks after their initial public stock offerings (IPO). Global Crossings was one of those internet companies who was touted by Merrill Lynch, and Morgan Stanley, two of the major investment houses on Wall Street. Not long after its IPO, the company disappeared because the company was poorly conceived at best. The NASDAQ Composite average crashed but the DJIA and the S& P 500 remained fairly intact and continued its upward ascent until 2008.

In September 2008 due to insane real estate lending practices by many major and regional banks, the housing market was crippled and the economy finally tumbled. All the major indices declined until March of 2009. What I find ironic and maybe coincidental was in October of 2008, the New York Stock Exchange  did away with the specialist system that had existed since the New York Stock Exchange (NYSE) was born. No longer would one firm be able to buy or sell a NYSE listed stock. Prior to this, a computer trading platform called Archipelago came to prominence in the mid 1990's and started funneling trading business away from the NYSE. So what did the NYSE do?  They bought the company. The damage had been done, however, and the NYSE specialists had lost their total control of  trading in NYSE listed stocks. Now broker-dealer firms that had sufficient capital were trading NYSE stocks for their own accounts. The specialist system on the NYSE was no more and no one really gave this much thought. I just find that the SEC filing in October 2008 changing specialists to designated market makers quite coincidental to the fall in the market. Such information may never be known. Similar to 1987, venerable Wall Street firms such as Lehman Brothers and Bears Stearns, disappeared nearly overnight.

So why this soliloquy? I am trying to illuminate facts that exist to me that the stock market is a business made up of investment banks and broker dealer firms who are not who they are portrayed to be. They are for profit firms and institutions who exist to make money playing a game by their own rules. We have pontificated and glamourized men like Michael Milken, Bernie Madoff, and Jordan Belfort.

In simplest terms, these firms' product are securities. They hold an inventory by buying securities at low levels, raising prices to get other investors to buy until their inventory becomes low or their bag of stocks are just about empty. Then at the highs, these firms will establish short sales because so many investors have purchased stock in street name and quickly drop the price of their stock to cover or buy back their shares and refill their bags of stock. This is why the stocks have rallied from the lows established in March of 2009.

What will continue this rally? Two things. The Dow Jones Industrial Average and stock splits. After following the Dow Jones Industrials Average on a daily basis for the past 31 years, I have experienced much turbulence in this bellwhether indicator and psychological barometer. Yes, the S & P 500 indicator is a better indicator of how the overall stock market is faring however, the Dow Jones Industrial Average (DJIA) is older and more revered as a market indicator. If one really looks at the DJIA, it is an average of 30 blue-chip companies and its average is calculated on a price-weighted basis. What does this mean? Simply, the companies' whose stock price is highest in the Average have more of an effect on the Average's price. The DJIA is not the same average of 10 years ago due to the replacement of some of its lower-priced components with much higher priced ones. The movements in the DJIA will become more exacerbated.

The fuel in the markets of the 1980's and particularly the 1990's are stock splits. In theory as I was taught, stock splits occurred because the price of a stock was too high for the average investor. Usually, a stock is split two shares for every one share outstanding. If you owned one shar of a stock priced at $10, you now had two shares at $5. Same amount right? yes, except the fact that the firms who now trade this stock for their living have twice as many shares and their bag of stocks have suddenly become full. In order to relinquish this inventory, their must raise prices to entice investors to buy stock and empty their bags. If one does research, stock splits are rare. Prices of many Dow components are $70 and above. Coca Cola recently split  2 for 1 and I would expect companies like Boeing and McDonalds to do the same.