Putting Together the Clues How Elizabeth Warren Out-Trumps Trump
By Murray Dawes in Albert Park It’s that time of year again. Time to face up to the fact the little mining stock you thought was going to the moon is actually a dog with fleas. Dump it before the end of the tax year to take the tax write off and move on. You can always buy it back if you are determined to lose more money on it at a later stage. The flipside of tax loss selling season is that a few bargains can be had for the astute. Companies with good long-term prospects that have had a poor year can end up being given away once the tax loss selling reaches a crescendo. It can be a good time to have some powder dry waiting on the sidelines to snap a few shares up if the selling goes too far. Just to give you an example, one company I have my eye on as we head into the end of the financial year is Structural Monitoring Systems [ASX:SMN]. The chart looks very sick in the short term, but when you look at the very long term, the price is falling back towards what should be strong support. ..............................Advertisement.............................. | Old Vlad HATES this stuff… See these black flakes? One tiny Aussie upstart has developed a way to make them charge any battery-powered car near instantly. And then power that same car for thousands of kilometres in a single hit. | | Source: Proactive Investors Australia | This breakthrough could eventually bring Vladimir Putin’s Russian oil empire to its knees. And make you up to 12 times your money along the way. How? |
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Primed for panic tax loss selling After a huge rally from 2014–17 on the back of the very serious prospects for its technology that monitors structures for cracks, it has gone into a long-term downtrend as a result of delays. There are exciting things happening and the company is getting closer to breakeven, but one look at the chart and it is clear there are a lot of frustrated underwater investors in the stock. My guess is that tax loss selling has already begun and a fall below 70 cents could see it accelerate as we head towards the end of June. The current price is 72.5 cents. You can see the green box that I have labelled as the ‘buy zone’. It is simply the 75–87.5% retracement of the prior rally from 2014–17. That is the zone where I see reversals most often after a serious shake out. It is the spot where investors in the stock are either out of the money or near breakeven. If you have ever done any trading or investing, I am sure you know the sinking feeling of watching a stock that you were well in the money on racing back towards your entry point. For example, if you had bought SMN in 2015 at 60 cents and then watched it rally to $3.00 over the next two years and then back to 70 cents, how would you be feeling right now? You’d probably be kicking yourself for not taking profit when it was at $3.00 and you would be feeling nervous that your position was about to go out of the money after spending years looking fantastic. The temptation to sell in disgust would be extreme. The feeling would be worse if you had bought the stock above $2.00 and each day you look at the stock price it moves a little lower. I’d imagine you would be getting pretty close to your pain threshold. Everything I am describing is the main reason why I believe large waves in a trend so often see a substantial correction before carrying on. When you see 75–87.5% of the previous wave corrected nearly everyone who bought during the up-wave would be sorely tempted to dump the stock. Weak hands would be shaken out. That’s the point we are at right now with SMN. Add in some tax loss selling and you can see why I wouldn’t be surprised to see the stock trading around 50–60 cents over the next few weeks. But I will be a keen buyer if it does get down there. Especially if we see a weekly or monthly buy pivot from the buy zone. The buy pivot is necessary to prove that there has been a shift in momentum in the short term. I am tempted to catch the falling knife with this stock because any positive announcement from here could see the stock change course very rapidly, but I have found over many years that the fear of missing out usually leads to rushed trades and they don’t often end well. Structural Monitoring Systems has a very interesting story to tell. They have developed a technology that can monitor for cracks remotely. I am sure you can imagine how useful it would be for an airline to be able to monitor the structure of their airplanes at key points where fractures often occur without needing to pull things apart at regular intervals to do inspections. I am also sure you can imagine the immense regulatory hurdles that the technology would need to navigate before being accepted as a valid form of inspection for aircrafts. They are nearing the end of that journey and have some interesting projects in the wings. The barriers to entry for competitors are enormous. If their technology becomes the standard world-wide then the sky’s the limit. No wonder they rallied from nothing to $3.00 a few years ago. One of the major reasons they fell from grace though, was that insiders were selling the stock above $2.00 while they were telling the market they wouldn’t sell. That is a big cross against management, and I am pretty sure a lot of larger investors dumped the stock as a result of the loss of trust. When corporate governance is a major issue and trust has been lost it can be a long road back. Especially for larger investors and money managers. But if that issue has been taken care of and the technology is finally commercialised with the potential of moving into other sectors, I could see the coming tax loss selling as a great opportunity to get on board. Murray Dawes, Editor, Alpha Wave Trader ..............................Advertisement.............................. | ‘5G will be as revolutionary as electricity’ Qualcomm In June 2019, the most disruptive tech advancement in 27 years looks set to officially hit Aussie shores. And I believe the ASX-listed companies helping to build it could better than QUADRUPLE your money in the next 12–18 months…starting with the flip of a switch! Get ready for… THE 5G INVASION Click here for the full story | .......................................................................... |
Putting Together the Clues By Matt Hibbard One of the harder things about share investing is the uncertainty. The uncertainty applies to a number of things. How will profits look a year from now? Are management on the right track? How will the company fare against its competitors? For income investors, there is an added worry. That is, if the company can maintain its history of paying dividends. Beyond the company itself, lies other concerns. Not only the health of the local market and economy, but how the global economy is tracking as well. Then there is the uncertainty about how your stocks will perform against the overall market. For example, if the market made a big move either way, how would your shares hold up? Maybe they could tumble faster and further than the market. Or lag the market on the way up. If you have followed a stock for a period of time, you may already have a feel for how it will perform under different conditions. However, if you do not know a stock very well, there is another way to gauge how it might react…its ‘beta’. A speedometer for stocks Beta measures how one stock moves against the market as a whole. If a stock has a beta of one, then it will generally mirror the index. If the index rallies 2%, then a stock with a beta of one will also likely rally by 2%. Note, though, that I say ‘likely’. Beta is a historical measurement. And as you know, there is no guarantee that what happened in the past will repeat itself in the future. However, it does help provide a clue. A stock with a beta of less than one, will move more slowly than the overall market. While a stock with a beta above one, will move about more rapidly than the market. For example, the Commonwealth Bank Ltd [ASX:CBA] has a beta of 0.95. Meaning that it is around 5% less volatile than the market. By comparison, the faster moving Afterpay Touch [ASX:APT] has a beta of 1.17, meaning that it is 17% more volatile than the market. It is something you would expect. Fast growing companies will typically have a higher beta than more established ones. When the market is rallying strongly, these high growth stocks will often outrun the market. The downside is that they can also fall much more quickly, if the market goes the other way. Because beta comes from past performance, it can only act as a guide. What’s more, the beta is continually changing — even sometimes only slightly — as the share price moves about each day. Nevertheless, beta can be a good quick gauge to check out just how volatile a stock is. Also a tool for option traders. While share investors use beta to determine a share’s volatility, option traders have a similar tool called ‘delta’. Just like a stock’s beta, delta gives you an indication of how an option’s price will move. Again, like delta, though, it is not a guarantee — it is only a guide. More specifically, delta tells you how much an option price should move in relation to the underlying share price. An option with a delta of 0.5 means that the option’s price will move at half the rate of the underlying share price. For example, if a CBA option had a delta of 0.5, it should move 50 cents for every $1 move in CBA shares. Unlike the aforementioned delta, however, an option’s delta cannot be higher than one. Another difference is that option deltas can be both positive and negative. As the value of a share price increases, so too will the value of a call option. If the share price falls, so too will the value of the call option. Because of that correlation, the delta of a call option is positive, ranging between zero and one. A put option, however, is the opposite. If a share price rallies, the value of a put option decreases. And, if the share price falls, the value of the put option increases. Because of that, the delta of a put option is negative, ranging from zero to minus one. Neither beta nor delta guarantee what a share or option price will do in the future. And because the markets are always moving, both delta and beta are always changing, too. However, they can be a handy tool. They help provide a clue about how the market expects their prices to react, to moves in the underlying shares and market. All the best, Matt Hibbard Editor, Options Trader ..............................Advertisement.............................. | What is AUSTRALIA’S ‘POTEMKIN’ COMPLEX? And why it should make you nervous. Click here to find out | .......................................................................... |
How Elizabeth Warren Out-Trumps Trump By Bill Bonner in Yougal, Ireland How to beat Trump at his own game? The question has been gnawing at the guts of the Democratic party for the last two years. Match him tweet for tweet, insult for insult? Pander? Treat politics like reality TV or professional wrasslin’? How do you out-Trump Trump? How do you steal his thunder…and recapture those formerly Democrat voters in Wisconsin, Pennsylvania, Illinois, and Ohio? Can you keep the heart of Trumpismo…and add a brain? Swamp Seamstress No greater flattery has been offered to Donald Trump than by Elizabeth Warren. She’s stolen the dumbest elements of the president’s policy bungles and made them her presidential campaign platform. She’s taken not only the heart of Trump’s creed, but the steel-toed boot. And as for the brain…it is the brain of a self-aggrandising, manipulative huckster with a PhD. Our beat is money. But money flows through the veins and arteries of politics. The more money it gets, the more aggressive and destructive it becomes. Mr. Trump is one of the most ambitious politicians in American history. He wants to control where, how, and with whom we do business…how much interest we pay on our loans…and even how much stocks are worth. The Dow would be 10,000 points higher, says he, if the Fed had listened to him. But along cometh the Massachusetts senator with even more buffoonery. She aims to boss us around even more. And she has a plan for everything; all of them are ghastly. Planning…planning…planning…a $100 billion plan to fight drugs…$150 billion a year for Green Manufacturing…a $600 billion student debt jubilee…a $700 billion childcare plan…a plan for this…a plan for that… And stitching them all together would be a collection of bureaucrat/lobbyist/insider seamstresses at a new Swamp edifice, the Department of Economic Development (DED). The new DED…pronounced ‘dead’…would function like the GOSPLAN — the centralised agency that oversaw economic planning in the old Soviet Union — stifling any attempt at genuine enterprise. Central planning, managed trade, manipulated currency, even the fake ‘drain the Swamp’ program (while actually giving more power to unelected Deep Staters) — she calls her collection of misbegotten proposals an ‘agenda for economic patriotism.’ Four-Year Plan But people make win-win deals with each other…doing their best to earn a living and get ahead. That’s how an economy works. Patriotism just disguises a power grab. Like a wash of sweetish cologne on a corpse, it hides the odor of a decaying economy…while the rot continues. Ms. Warren might save herself some trouble by just searching the archives for one of the Soviet Union’s Five-Year Plans…or if she wants to stick with the four-year election cycle, she might brush up on her German. In 1936, Adolf Hitler appointed Hermann Göring to come up with a four-year economic plan. The plan had most of the elements Ms Warren claims to want — creating jobs, building infrastructure, making Germans buy products made by Germans, and even getting control of big business. She could probably save time by simply having it translated. Of course, the German plan was a total failure…as central planning always is. As the Soviet Union demonstrated, central planning can turn out tanks and rivets, but it can’t make the products and services a consumer economy really wants. And for an obvious reason; it produces what the central planners want, not what consumers want. Centralised planning merely hijacks decentralized planning. Peter makes a deal with Paul. Both expect to gain. Win-win, in other words. Both will be better off. Then, along come the central planners. ‘The deal is off,’ they say. The feds force Peter to pay Paul for nothing. Obviously, Paul is happy and promises to launch a government agency to help Peter’s business. But Peter is fed up. He closes his business, fires his employees, and retires early. Overall, the economy is worse off. ‘Economic patriotism’ is catnip for scalawag politicians. It is poison for the rest of us. Regards, Bill Bonner ..............................Advertisement.............................. | How you could pocket a royal fortune thanks to ‘Paladin 2.0’ Paladin Energy was one of the greatest ASX success stories of the early 2000s. A well-timed, $500 stake in this Aussie uranium play could have mushroomed into $668,245! Today, a new Paladin-sized uranium play has emerged, and it could mushroom a small stake into a royal fortune. Click here for all the details. |
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