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My Watchlist

Haven’t spend extensive time researching lately.  The weather so nice today, I sat outside reading through some IBD by the pool.  Too bad it’s going to rain again tomorrow.  Market remains to be in correction, but I’m starting to watch for stocks to form a base and getting ready to break out.

  • Missed the base in PCLN, not comfortable with high dollar stocks like this.  I think I’m going to stay away still.
  • CAGC looks too crazy for me at this point.  Hopefully we’ll see a base forming around the $20 mark w/ convincing volume first and not miss the boat.
  • GMCR looks like a solid base forming in this $80 – $84 tight range.  I like this chart.  It just feels like any day now it’ll break out.
  • CAAS was a painful hold around the $15 range, barely eeking out a gain right now.  Turning around w/ higher volume now
  • HMIN reports this week I think.  Could be very interesting.
  • RAX hmm… cloud computing, interesting.  It’s forming a new base but has trouble break through the resistance line
  • SIRO asking my brother-in-law and orthodontist the next time I visit them.
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My Art Collection

One of the cool things I get to do when I come back home to Taiwan is visit w/ some of my parents’ more accomplished friends.  There’s one that’s in manufacturing like us, Mr. Y, who didn’t have kids so they have always viewed my sister and me as their own.  He’s an avid squash player and every time he sees me I would go play w/ him and get my ass whooped.  I’m meeting w/ another one, Mr. L, tomorrow that’s an advance photography amateur who was CFO at a company that supplies parts to Apple.  One of the more intriguing guys though, Mr. C, has become somewhat of a connoisseur in the art world.  He particularly likes Asian art and the ones that exemplify Asian culture or values.

To me, it’s a fascinating world.  Not just the art itself but the world of these auction houses like Sotheby’s and Christie’s: the business model, the economics behind it (it’s supply and demand… uh, on demand?), and just about every little facet.  Not to down play the art aspect, b/c it is really cool expensive.  I think it’d be rude of me to disclose the amount of some of these pieces cost in his house and all together how much he invested stored away elsewhere.  To me, art is a form of communication, albeit a rather abstract one sometimes.  It’s like a game of detective w/ clues everywhere.  Who is the artist?  What was his personality like?  What kind of time or background was he brought up in that could’ve layed seed to his point of view?  What was he thinking when he made this piece?

I asked him a lot of questions.  Much to my surprise these auction houses charges a 25/10 percentage commission.  Think about real estate, which is 6% w/ the buyer and the seller’s agent both getting 3%.  He told me that Sotheby’s charges 10% of final sold price from the seller and 25% from the bidder. HOLY CRAP!  Some of these pieces go for $3-7 million easily.  Say if it’s $5 million, 25% commission is $1.25 million.  Even just the crate that they ship it in is couple of hundreds of dollars.

What I didn’t have time to get into is whether the auction houses are essentially the ones creating supply and demand or collectors like himself influences the market more.  Are we all to assume that all the art collectors out there know the proper valuation for each piece, or is the prices much more at the whim of Sotheby’s who in turn tells art collectors which piece is valued more than the others?  If an artist suddenly passed away and many collectors are looking to cash in, would the auction house intentionally withheld some of the art works, hence curbing supply?  I know for some of the artists’ works he’s practically cornered the market himself.  He has told me how he did it but again, I don’t think it’s something I can disclose here.

As a side note, he asserted that Sotheby’s stock (BID) is a leading indicator for the stock market.  He contended that this is where 20% of the world’s population controlled 80% of the wealth.  If all the cashflow from this pool dries up, something’s wrong.  The big fall auction in 2008 did not meet expectation and soon followed the Lehman Brothers bankruptcy.  Looking at the chart, I think many companies were already showing signs of weakness prior to Sept 2008, so the data from just that year is inconclusive.  However, if you look at 2007, you can see the sharp drop in BID’s price in the fall.  Perhaps many of the world’s super rich were already preparing for the rough road ahead by tightening their wallets??

The art auction world is most active in the spring and fall.  Hopefully I can go w/ him on a trip to New York or Hong Kong after I get done w/ the GMAT.

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My Asphalt

A while back I noticed there are quite a few road paving construction projects going on everywhere I go and not just in Austin but in various cities I visited outside of Texas as well.  Some of the highways were perfectly fine before but they were still repaving it for some reason.

I did a little research for asphalt companies and found TransMontaigne Partners (TLP), Holly Corp (HOC), Valero (VLO), and NuStar Energy (NS).  If I did my job right I would’ve followed the news closer regarding the stimulus bill and gone into the 10-K’s and found exactly what portion of the company’s business is in asphalt b/c these guys are mostly refiners and asphalt is just a part of the product matrix.  By the time I caught on I had missed a lot of the move so I can’t exactly say this was a spectacular find.  TLP and HOC did do pretty well though.

Now that a lot of these companies, along w/ construction companies like FLR, ACM, URS and GVA have tanked quite a bit in response to bleak prospect of more stimulus money and projects maybe they’ll be back in favor if we hear more gov’t money going into public construction?  At this moment, I’m a little late again to take a short position.  The upside doesn’t quite justify the risk in my opinion.

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My Coffee Trade

Chalk this up to another Seattle inspired post I suppose.  Seattle has tons of coffee places, including of course Starbucks.  During my visit in May I stopped by this coffee stand everybody was raving about on Yelp call Monorail Espresso.  I hung out for a while to chat w/ the barista, who is just a nice old man (not like the spiked-up hair eyebrow ring hipster punks in Austin).  I asked him what is the deal w/ the coffee culture in Seattle, and he told me that it has to do w/ the water having a certain quality that’s just really nice for brewing coffee.  Another reason is the Scandinavian heritage of the city and that culture’s affinity for tea and coffee.  I believe the 2nd part more, b/c it’s damn cold and Seattle also has this troll sculpture/statue under a bridge, which has to do w/ Norweigian? Swedish? folklore.

Anyway, DDRX, GMCR, and PEET has been my play and a little bit of CBOU.  I lost a lot of money shorting some of these stocks at first… it was so frustrating.  I thought they were total crap but I was fighting the trend.  Since them I’ve traded them on both sides.  I covered my PEET short not too long after the break out seems to fading but covered it after it broke $40 and I covered my DDRX long as well then switch into a very small GMCR short position.  I don’t have a good read on the stock, at least intraday it moves weird.  Of course now there are TWO offers on the table for DDRX, no more long positions, from GMCR and PEET, again, no short… Yeah, I made some on the GMCR but the other is making me look like a fool.

I believe DDRX gave PEET an extension to match GMCR’s offer by Monday.  Personally, I don’t think PEET should do it and instead focus on growing organically.  They’re doing quite well and my friends that are real java snobs all seem to prefer Peet’s over, achem, Starbucks.  Starbucks is really just too sweet.  Especially their holiday drinks.  Men’s Health put like at least 3 of them on their worst drinks list (health and calories wise).  I’ve grown a real distaste for their chai latte ever since I visited The Crumpet Shop, again, in Seattle.  In all seriousness, they have this awesome goosenberry crumpet and the chai tea is just spot on.  Look at me, getting off track again.  The play here: look for DDRX to reject one of the company’s bid and buy that one.  Not touching DDRX and SBUX, which has rebounded nicely after answering competition fro MCD.

Oh, and the nice old man (I think his name was Kosta), he has B.S. 1980 or something on his menu board.  He told me the BS stands for before Starbucks, as in he opened before SBUX… I went home and looked it up, heh, SBUX was founded way before that.  The date he was referring to I think when Howard Schultz joined the company and it really took off.

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My Black Friday

First of all, I started wondering today why do they call Friday after Thanksgiving Black Friday.  My parents joked around that it could be b/c it’s pitch black outside while you’re waiting in line at 3 a.m. or the sticker price falls off the cliff like stock prices during a crash like Black Tuesday or Black Friday.  After doing a little search online, it seems like there are two prevailing answers.  First answer is that this Friday kicks off the shopping season and b/c of this many stores turn profitable, or in a different expression, in the black (as opposed to red, losing money).  The second answer is this kind of expression is used by the police department or bus/cab drivers to refer to heavy traffic.

Personally… the first explanation makes sense, but to think a retailer is losing money 10 out of 12 months or just this one day is ludicrous.  I mean, it’s gotta be some shitty ass store.  How many Montgomery Wards and Circuit City’s are out there?  Let me know and I’ll short the hell out of it.

Anyway, something more interesting than bargains and steals is the market today.  We got half of a day to catch up to events outside the US.  Man, if there are more days like this, I might have to consider spend more time trading.  The US Dollar strengthened quite a bit on Wednesday I believe; I think I saw it @ > 1.51 vs the Euro sometime during the day but over the course of Thursday it weakened significantly.  Most traders I believe are aware of this inverse relationship btwn the Dollar and the stock market, I won’t go into the different reasoning and theories.  Huge gap down, market trying to rebound and then fizzle out at the end and close below intraday low.  I personally was thinking the support would come in close to the 10,000 on the Dow but maybe 10,300.  We’ll have to see how the market reacts on Monday.

Side note: I got some Euros @ a Barclays in Spain last November @ almost exactly 1.25 rate.  Since currencies often trade around nice whole even numbers, I was pretty convinced this was the low and I’ve been holding on to them ever since.  I’ll admit, part of it is so I have a story to tell when I’m out at bars 😛

I’m currently long some Chinese stocks, BIDU, CTRP, HMIN, entry price $353.05, $54.82, and $28.20.  I started getting in some shares of PWRD around $43.50 but it doesn’t look like it’s going to work very well.  I’m also short oil and refiners, but VERY cautiously since the Dollar is weak and weak Dollar boosts commodity prices.  I’m watching oil closely @ the $80 mark and my basis for shorting the refiners are that their crack spread is under attack.  Avg long price for DTO is just under $63 and my limit cover orders @ $70 got hit so I exited out part of my position already.  Wish I had set some higher than $70 this morning.  This is an ultra inverse so I’m watching this position very carefully.  All my refiners trades are mostly flat except for VLO, which has been working well.  CVX and XOM is not working.  I might close out these two positions.

That’s it for now.  Until next time!  I know I need to write about the rest of my B-school visits and continue the Kershner-Assent posts.  It seems like somebody, either prospective or current traders, caught wind of that comparison post I wrote and caused a spike in my readers.  They’re coming, I promise.

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My Dark & Twisty

I’m in Seattle right now. While I was driving back to my buddy’s place from UW I saw one of the stores had a sign outside that said: “Don’t worry about what other people think; they don’t do it very often.” I liked it so much I decided to post it here.

Seattle is beautiful.  I visited during Memorial Day and it was in the mid-70’s temperature wise and not one single drop of rain.  I knew that if I wanted to move here I need to see if I can deal w/ a more typical weather.  It has a lot in common w/ Austin such as the liberal, free-spirit, counter-culture attitude.  It is also very outdoorsy.  You’re surrounded by trees and water.  I can’t decide if Seattle is a city that just so happens to be right there w/ all these trees or all these trees happens to be right in the city.

Since I don’t have an iPhone yet, I can’t really keep up w/ all the news and the market.  I would catch a glimpse of data here and there but it’s like seeing a few pieces of the jigsaw puzzle, you can’t really tell what the big picture is like.  Seems like it’s still the same story, going up but w/ low volume.  This 10,000 level w/ the Dow is interesting.  Unless we find support and consolidate here I wouldn’t buy right now as a breakout trade.  There’s a higher chance that you buy now you’ll get punked on a sell off.

It’s been a good trip so far and I’ve done my job of planning everything out in advance very well w/ my flights, appointments, rental cars, etc.  Good job me!  My buddy is in the physical therapy program here @ UW and he’s almost constantly studying.  I know I’ll have more down time to get on the computer when he’s busy and I’ve already been here before.  I’ll try to make a few posts about some of the schools I’ve already visited.

The whole dark & twisty thing?  It’s a reference to Grey’s Anatomy.  I don’t watch it often but all my female friends do and I picked that up from them.

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My Comparison

I’ve been meaning to write a post comparing Kershner and Assent. This is mainly for the folks in Austin I suppose although Assent has offices in other cities and Kershner does have an office in China. I think what I’ll do is break it up into pieces b/c the amount of thought and writing that would do the entry justice was probably the main reason why I put it off. Also I felt it would not be a fair evaluation, more so for Assent’s part b/c I spent almost two years at Kershner and only about three months at Assent, but I figure any bit of information for the folks out there considering joining a prop trading would be helpful.  There really isn’t enough transparent information for people to make a decision in my opinion.  I only went with Kershner b/c I knew people there and I felt I would be more comfortable having their support.

What I’ll do is talk about each firm in general a little bit, then compare the trading platform, trading tools, technology, training, support system, and management/administration.

I’m not exactly sure how many traders Kershner has right now, especially since they had a round of lay offs from what I heard.  When I left in April there were probably around 120-140 traders and especially early in the year we were hiring traders pretty aggressively.  At Assent, roughly counting the rows of computer stations, it seems to be around 100 as well, although I can’t tell sometimes if people actually sit in some of these stations b/c they were hardly there or they’d just trade the open and leave.

One of the biggest differentiators is probably the split.  At Assent, what you make is 100% yours after your fees, which is about $2,000 a month.  They waive some of the fees the first three months you are there at Assent, so it’s probably more like $1,000.  What you lost, unfortunately is also 100% yours.  Your seat fee is about the same at Kershner, except your split is at 45% and that if you were losing money and decided to leave or got laid off the firm would end up eating the losses.  With Assent’s structure, you’d have to put up a deposit and your commission fees would be lower the more capital you put in compared to Kershner, where you don’t have to put up any capital of your own.  I’m not sure if there’s an actual interview process at Assent since I knew traders there and was an experienced trader I just went in to talk to the guys that ran the office and signed up for an account.  The interview process seems to get more and more rigorous at Kershner compared to when I first interviewed my senior year in college.  Now there’s like a panel of people from management, HR and coaches.  The interview I had was just chatting w/ the coaches that were looking to pick up rookies and if they like the answer you gave them and what you bring to the table you’ll get picked for their team.

The offices are pretty much the same: rows of computers w/ CNBC around the trading floor.

Kershner had restructured as of last October or November to where people no longer need their licenses like Series 7, 63 and 51, which is probably why they had to beef up the interview process to have proper barrier to entry.  At Assent you still need these licenses and as far I as know you have to pay for them yourselves, which means you better pass the first time.  It’s really not that much, probably couple hundreds of dollars.  Sorry I don’t have a more exact figure for you guys.

As I had mentioned in the interview process, Kershner has this “pod” system, where each pod is usually head up by one or two coaches.  Each coach has their own style so depending on who you have, some might just leave you along and only step in when he sees you struggling while some are more active.  My team was more on the active side and we would periodically have meetings as well to share ideas, educate each other and help other traders to do better.  You are more or less left to your own devices, whether you know friends that trade there or just your neighbors, they are all you got to navigate through your first few months.

I personally like the system Kershner had b/c I started out w/ a friend I knew from college already and whenever you have questions or are struggling you can turn to your teammate for advice or just words of encouragement.  We would all get on a conference call on Skype and call out trades or just things we see that’s interesting.  It’s also a lot more fun b/c we joke around and play ball during break or after work.  Yeah, I know… people do that at Assent, too.  I wasn’t really trading full-time when I switched over to Assent and the few people I knew or sit around me would either not show up at all or take off when I’m free, which is after the opening hour.  No matter where you decided to join, it is critical to have that support system.

That’s it for now.  I’ll write about some of the other topics I mentioned later.  If there’s anything else you’d like to know about just shoot me a msg in the comment section and I’ll answer them to the best of my ability.

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