The Tasgall Group

We have talked in the past about having larger stop-loss threshholds than the actual expected reward, and the backlash on forums when this type of trade is even mentioned. The logic of the backlashers is that you have to have reward larger than your potential loss to win in the game of trading.

I wanted to explore the concept a little bit further and just think through the implications of what it means to put on a trade where your potential reward is smaller than your potential risk.

Let’s start with an example… If a stop is 2x the size of reward (e.g., a stop loss would be triggered at a loss of 10% but we’ve set a price target of 5%) then we have to get at least 70% of our trades correct to make money. (66.7% plus slippage and commissions, I’m guessing ~70% if not higher.) To me, this seems like a fairly high hurdle to start with, though it is certainly possible. (more…)

I just found this great bit of data on The Big Picture Real Estate blog, an enjoyable read. I’ll present it here as they did, since it’s just startling (these figures cited below are just out in Sept), and REITs are still chugging upward like little engines that could.

Housing by the numbers

There are quite a few ways to look at inflation and the general inflation expectation of various markets. Most people think of CPI or Core CPI as “inflation”, or they look at interest rates or the price of gold. Perhaps more important than the official statistics is what inflation expectations are…

There’s an easy way to see what the market expectations currently are for inflation — look at the relative performance of inflation adjusted bonds versus normal bonds. The easiest way to look at this is with a chart of TLT:TIP. (more…)

I’ve always wanted to write a post on the topic of probability in the markets but this guy summed it up pretty well.

I just noticed this… Sara Lee Completes Hanesbrands Spinoff.? The new Hanes stock is trading under the symbol HBI and is currently priced at a market cap around $2 billion.? The Sara Lee mother ship weighs in at a market cap of $11 billion (after the spinoff), so they basically just sold 18% of their company in one fell swoop.

Sara Lee has been going through some very painful restructuring, but the price makes it attractive to some value buyers right now.? It had a dividend yield over 4% earlier this year before they lowered their dividend — it’s currently yielding 2.5%, well above the market average.

I’m sure this information can be found in many places online, but I just got this via e-mail from TradingMarkets and found it to be a useful quick summary of what’s coming up this week. I’ve pasted it below and followed with my comments (brace yourselves, this is a very long post!!!):

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This chart jumped onto my leg and started to hump?it like a dog wearing plaid.? In other words,?the pattern I saw just couldn’t be ignored.

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It’s times like these that I’m reminded of that chapter in Practical Speculation about the market “Mad Lib” where you could mimick the media’s attempts to explain market movement by plugging in random investment terms into a stock article.

Today the stock market moved higher/lower on news of higher/lower inflation/confidence/oil.? This is certainly bullish/bearish for stocks/bonds.

Mr. Pundit,?in case you haven’t noticed, the stock market is asleep/on vacation in Mexico?and is merely twitching from a bad/good dream/enchilada dinner.? You choose.? This is a Mad Lib after all. (more…)

I thought I’d throw another log on the bondfire.? Get it?? Bondfire.? You know like bonfire.? Except it’s bond.? Man, I kill me.? I could pun on the word “bond” all day long.

Anyway, I’m the last person on earth that is really qualified to talk about bond trading or investing so I’m not trying to make any commentary about what should be done in that market.? I have zero real opinion one way or another personally.? But I only thought this article painted an interesting picture.? I’m not sure what timeframe is really involved here but it’s worth factoring in to any analysis.

Remember the wise words of Wu-Tang Financial…

FYI, both Fidelity and Vanguard posted 401K contributions yesterday.? Notice that it was a solid up day for nearly all markets.? What’s interesting is how both companies invested me and my significant other’s holdings on the same day, although typically my significant other is invested a couple days earlier, and my 401K is invested a few days later than this time of the month.? If I think of it, I’ll continue to report when there are significant 401K contribution events.? Food for thought that it’s not just oil going up or down that makes the markets move–I think overall cash flow is far more important!