Why many investors buy at the wrong time

Monday, 18 December 2017
Melbourne, Australia
By Bernd Struben

  • One of you will always be wrong
  • Navigating the crypto pitfalls
  • These results speak for themselves

No, the stock market isn’t really like a supermarket. At all.’

Your editor, over the weekend

When people find out what I do for a living, I’m often asked if I have any hot stock tips for them.

The answer is generally yes. But I’d lose my job if I shared these tips…or if I invested in them myself.

This is part of the contract every employee of Port Phillip Publishing signs on day one. That’s to ensure we avoid any conflicts of interest or seeming impropriety.

I can offer general advice. And ruminate on the direction of bitcoin, gold, crude oil, and pork futures. But I generally try to avoid talking shop at social events.

At a backyard barbecue over the weekend though, I was drawn into a conversation about what stock markets really are. And soon I found myself uttering these words: ‘No, the stock market isn’t really like a supermarket. At all.’

A mate had made that analogy in describing how he’d hunt for bargains in the stock market, much like you might hunt for sales at the grocery store.

The difference, of course, is that you consume what you buy at the store. Whether that’s bananas or a new pair of shoes.

And unlike cheap bananas, buying cheap stocks is often a mistake. As Quant Trader’s Jason McIntosh explains here.

More after the markets.

Markets

Over the weekend, the Dow Jones Industrial Average closed up 60.00 points, or 0.24%.

The S&P 500 rose 4.00 points, or 0.5%.

In Europe, the Euro Stoxx 50 index finished up 4.31 points, or 0.12%. Meanwhile, the FTSE 100 gained 0.57%, and Germany’s DAX rose 35.48 points, or 0.27%.

In Asian markets, Japan’s Nikkei 225 index is up 304.58 points, or 1.35%. And China’s CSI 300 is up 0.02%.

In Australia, the S&P/ASX 200 is up 40.73 points, or 0.68%.

On the commodities markets, West Texas Intermediate crude oil is US$57.41 per barrel. Brent crude is US$63.33 per barrel.

Gold is trading for US$1,254.04 (AU$1,639.48) per troy ounce. Silver is US$16.03 (AU$20.96) per troy ounce.

One bitcoin is worth US$19,059.40.

The Aussie dollar is worth 76.49 US cents.

One of you will always be wrong

Unlike buying groceries, you buy shares in a company with the intention of selling those same shares to another investor later. Hopefully for more than you paid.

Ideally a lot more.

If you’re a long-term investor that could be 10 or more years down the road. Or you may even pass your shares onto your kids in your Will. If you’re a trader, you might only hold onto your shares for a few weeks…or less.

Either way, for every seller there’s a buyer. The buyer believes the share price of the stocks they’re buying will go up. While the seller believes the opposite.

Granted, that’s oversimplifying things a bit. You may, for example, be selling for tax reasons. Or because you need access to funds.

But in general, when you buy what you see as a bargain stock, someone else sees it as one to get rid of. And when you’re looking to unload a stock — whether for a profit or a loss — someone else believes it’s set to go up.

The thing here is that you can’t both be right. Assuming the stock makes a significant move up or down, either the buyer or seller is going to regret their actions.

The million dollar question then is, how can you best determine when to buy and when to sell your shares?

Our in-house quant trading pro, Jason McIntosh has put together a free, five part video training series to address precisely that question.

It’s called ‘Trade Secrets’. During the course of the information sessions, Jason will teach you six habits to help you trade the ASX like a pro.

You can watch the first of the five free videos by clicking here.

In this first instalment, Jason explains why looking for market turning points is a waste of time that will make you poor. And — unlike those new shoes — why you should never buy a stock when its price is falling.

We’ll release a new edition of ‘Trade Secrets’ each day this week as we head into the Christmas holidays. Click here to watch part one now.

Navigating the crypto pitfalls

I can’t recall the last Port Phillip Insider that didn’t at least make some mention of bitcoin, cryptos and blockchain.

Today’s is no exception.

As you probably know, two weeks ago the US Commodity Futures Trading Commission (CFTC) enabled futures trading in bitcoin.

Last week Cboe Global Markets Inc became the first exchange to offer bitcoin futures. Over the weekend, the much larger CME Group Inc joined the party.

Undoubtedly, plenty of retail investors will take a punt on bitcoin futures. But the important thing here is that the move opens up bitcoin to institutional investors. The big boys who aren’t allowed to buy bitcoin on the unregulated crypto exchanges you and I can use.

That means a lot more investors could be exposed to bitcoin in 2018, whether they know it or not.

From Bloomberg:

The world’s biggest exchange just joined the bitcoin revolution…

CME got off to a faster start [than Cboe] with more efficient pricing. Its most-active contract changed hands 221 times in the first hour versus 570 during Cboe’s debut. But that’s a win because CME’s contracts are five times more valuable — they’re tied to five bitcoins compared with only one with Cboe’s futures. And CME’s futures were priced only about 2 percent higher than bitcoin itself; in the first day, Cboe’s got as much as 13 percent above, a sign trading was relatively inefficient.’

Many analysts expected derivatives trading to take the wind out of the world’s biggest digital currency. Just as many gold bugs blame paper trading in gold for the yellow metal’s lacklustre gains.

But, as you can see in the chart below, bitcoin continues to confound the would-be experts. And its prices headed the other direction.



chart image

Source: Bloomberg
Click to enlarge


Now the CFTC joins the chorus of cautionary voices over the risks involved. As Bloomberg reports:

The U.S. Commodity Futures Trading Commission issued a statement Friday detailing “the risks of virtual currency trading” and urged investors to educate themselves before buying into an asset class that has surged more than 1,700 percent this year.

The warning underscores that even as Washington makes it easier for bitcoin to move out of the shadows, worries remain that the mom-and-pop investors who’ve helped fuel its rise have little idea what they’re jumping into…

In addition to warning about the futures market, the CFTC on Friday also listed dangers on the spot market which include: manipulation, hacking of customer wallets, lack of regulation and volatility.

Do take heed of these warnings. Bitcoin and other cryptos like ethereum and litecoin remain incredibly volatile.

And as the CFTC notes, you should educate yourself and be aware of the potential pitfalls before investing in bitcoin…or any other asset.

These results speak for themselves

When it comes to cryptos, your first stop should be Sam Volkering’s Secret Crypto Network. In this entry level service, our crypto experts Sam Volkering and Ryan Dinse walk you through everything you need to know about the fast moving world of cryptos.

More than that, they warn you away from digital tokens they believe are worthless, overpriced, or downright scams. And they regularly recommend new cryptos to their subscribers.

They’ve made nine new crypto recommendations since the service launched in July this year. As of last Wednesday, the top performer was up 595.56% from their recommended entry date.

Only one token is currently showing a loss, down 14.46%.

Have a look at their performance table below. And remember, all of these tips were made since July. Several were made as recently as the end of November.



chart image

Source: Secret Crypto Network
Click to enlarge


Sam and Ryan’s results speak for themselves. Loudly.

You can check out their work at Secret Crypto Network here.

Of course, our Alliance Partners know all of this already. Not only do they have access to Secret Crypto Network, but to both of the premium crypto trading services we launched this year as well.

Sam Volkering’s Crypto Tech Investor takes your potential gains — and risks — in the crypto market to the next level. His focus in this service is on brand new cryptos and initial coin offerings (ICOs).

Ryan Dinse’s Extreme Crypto Trader uses a proprietary method Ryan spent months developing and back testing. He calls it ‘Flip Trading’. And once you see how it works, you may never buy or sell a cryptocurrency the same way again.

Both of these premium crypto services are now closed to new subscribers. But they are still part of our Alliance Partner offer…for life.

The doors to new Alliance Partners close at midnight tonight (AEDT). You can get all the details, and the full range of services you’ll get in this lifetime membership offer, here.

And finally…

In today’s Australian Tribune: ‘Did the Chinese Try to Fix the Bennelong Election?

Politics can be a fickle game. And elections are no exception.

With the Bennelong byelection held over the weekend, the Coalition’s John Alexander proved victorious. However, Labor received a 5% swing. The question now is, was there a third party influencing the election?  

With the current stand-off between Canberra and Beijing, a letter was sent to the Chinese community of Bennelong. It stated that they should vote against the Coalition, and for Labor’s Kristina Keneally…

The Australian Tribune is Port Phillip Publishing’s new, politically oriented newsletter and website.

If you’re fed up with reading sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

Or visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above and all the latest, uncensored political news from around the world.

Cheers,
Bernd