Nicholas Colas On Why The "Keith Richards" Stock Market May Presage A Return To Old School Investing

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Mon, 11/01/2010 - 23:47 | 692405 gwar5
gwar5's picture

Keith Richards investing? Never trust anybody over 30 that looks 90.

Tue, 11/02/2010 - 00:01 | 692426 zen0
zen0's picture

He almost is 90

Tue, 11/02/2010 - 00:00 | 692425 zen0
zen0's picture

Uranium and alternative energy.

 

Bitch people.

Tue, 11/02/2010 - 01:47 | 692522 Trifecta Man
Trifecta Man's picture

In this environment you can still beat the HFT computers.  The computers are very short term oriented.  You got to think long term.  Where is the long term growth?  Where is supply limited or even declining?  Pick a few stocks in that sector.  Buy and hold.

Example, the Fed is going to keep printing money.  So supply of dollars will go up, a lot.  So the long term trend is dollar down.  What are alternatives to dollars?  (I figured that out in 2003.)  Gold and Silver for two examples.  Buy some good gold and silver stocks.

Knowing this, this summer I bought 2500 shares of Silver Wheaton SLW, at about $18 while the stock was just meandering sideways.   I have already made over 50% paper profits.  (By the way I am not selling.)

That's not long term for you?  Back in 2005, I bought 500 shares.  I have a 900% paper profit in them.  Still have them.

Just luck?  That same year I bought Silvercorp SVM.  Split adjusted I am up 1100% on those 4500 shares.  Still have them.

In a long term bullish sector, you buy the dips.

But it's my guess that gold and silver will soon explode higher, as the manipulation on the COMEX comes to an end.

Tue, 11/02/2010 - 02:33 | 692555 Buddha_Gorilla
Buddha_Gorilla's picture

The plural of anecdote is not data, and what you describe is most likely luck.   I thought Taleb's Fooled by Randomness was required reading here on ZH.  BTW, any reason you didn't "back up the truck" on SLW in 2008 when your shares were worth less than you paid for them?  

 

Tue, 11/02/2010 - 09:53 | 692940 Trifecta Man
Trifecta Man's picture

No, effort.  Any reason why you didn't?

Tue, 11/02/2010 - 07:31 | 692675 Xedus129
Xedus129's picture

1111_1111_1111_1111_1111_1111_1111_1111  oh shit.  

Tue, 11/02/2010 - 02:24 | 692548 halvord
halvord's picture

Never trust anyone who plays Vegas.

Tue, 11/02/2010 - 04:37 | 692603 Bartanist
Bartanist's picture

There are ways to fix the market for investors, if that is intent ... but fixing the market requires killing liquidity.

1. Run the market 100% through computer matching of orders. To make it efficient, ALL market participants must be able to see all orders on all exchanges so they can buy or sell without using market orders. Participants can only place orders with a fill price range and the computers must fill from the best price first. Make it illegal to hide volume on open orders and only display the best price, not the reserve price.

2. Eliminate ALL market making and specialist activity. Make market making illegal. Market making KILLS PRICE DISCOVERY.

3. Eliminate all ETFs and non-equity equities that are really just casino bets and not investments. This will return liquidity to the equities themselves and make stock picking more important.

4. Obviously all HFT computers need to be turned off and all manipulative techniques commonly used today to smooth markets and increase liquidity must be made illegal.

5. Make all shorting illegal because in a real market, all it does is distort supply and demand and allow market makers to function ... selling more inventory than they own. Without market makers, there will be no need for shorting in the market.

6. Set up a separate betting parlor for Wall Street outside of the stock market that allows then to bet on the color of Ben Bernanke's tie and other similar prop bets they are currently involved in, but make bets tied to stocks illegal.

But my guess is that making the market a REAL market instead of a crooked casino is not in the best interest of Wall Street and this will never happen. (sarcasm on) Why would they want the market to be a method to raise equity and to participate in the growth of companies? That would be like REAL investing and not casino betting ... kind of boring. (sarcasm off)

Tue, 11/02/2010 - 06:44 | 692655 aheady
aheady's picture

Ha! Am in the process of reading Mr. Richards' autobiography. Highly recommended.

Tue, 11/02/2010 - 07:33 | 692676 uberfinch
uberfinch's picture

How, exactly, do we return to the good old days of stock picking when, thanks to ETFs and HFT, the correlation amongst all securities is >0.9?

Tue, 11/02/2010 - 07:56 | 692694 Slartibartfast
Slartibartfast's picture

How about the Luddite Exchange (LUD-X)...no HFTs allowed?

Tue, 11/02/2010 - 08:19 | 692723 Revolution_star...
Revolution_starts_now's picture

Did someone take the check book away from Ben? until then, you are better off out than in. This will take 3 to 5 years atleast and wipe out just about everybody along the way.

 

In this case it's better to fade away, otherwise you will burn out.

Tue, 11/02/2010 - 08:36 | 692756 Chemba
Chemba's picture

An individaul can not out trade the HFT algos.  However, the pervasiveness of HFT trading creates investing opportunities as individual stocks diverge from intrinsic cash flow value.  The algorithms do not much care about valuation and to the extent they do are very simplistic.  That is what creates opportunity.  Plenty of recent examples, e.g. MSFT at $23

Tue, 11/02/2010 - 08:50 | 692783 americanspirit
americanspirit's picture

"the removal of the Fed and its tentacular influence on stocks" - I would prefer "testicular grip" to "tentacular influence".

Tue, 11/02/2010 - 10:18 | 693011 cowdiddly
cowdiddly's picture

Delusional. Like Keith Richards was rumored to need a blood transfusion for a heroin addiction, the author is indeed strung out on hopium. I like to view this market as more of a Led Zeppelin market, a bag of hot air waiting for a disaster of perhaps the Pink Floyd market where pigs fly. Rolling Stone? I don't think so.

Tue, 11/02/2010 - 13:21 | 693666 badnews...buyspus
badnews...buyspus's picture

Hey Colas, you stated;

The cost to trade U.S. equities has fallen close to zero, so trading around existing positions with HFT strategies is a viable area of incremental alpha to traditional managers.

The cost of trading equities are the profits that Getco, Citadel, GS and all the other HFT's make on that trade.

And, the gooberment will never get out of the economy.

 

Tue, 11/02/2010 - 14:26 | 693898 Ned Zeppelin
Ned Zeppelin's picture

Keith looks bad. Last time the Stones meant anything was Some Girls. Although Keith's solo efforts were worthwhile, and his turn with George Jones on "Say It's Not You" is a gem.

What was the question?

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