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A scientist, trying to save a little on the side. I am interested in high alpha trading strategies requiring little time commitment.
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  • On Alleged Red State Fiscal Hypocrisy

    The paper "Why do Red States Vote Republican While Blue States Pay the Bills?" makes for some interesting reading. It analyzes the data to verify the well-known phenomenon that states which vote Republican take in many more Federal dollars than they pay back. Does this imply that Republicans are hypocrites?

    I think it's just as likely that the Senate votes from low-population states are up for auction, low-population states tend to be sparsely-populated, and sparsely-populated states tend to be Republican. Note that Texas (mostly red) pays more than it takes in, whereas Hawaii (mostly blue) takes in 50% more than it pays. Finally, Washington, DC, which is almost entirely blue, takes in 5 times more than it pays; perhaps, this can be excused because it is the seat of government.

    This is an important topic because of the budget crunches facing state and local governments. If California were to pay as much as it received in federal dollars, it could close its current $16 billion budget deficit nearly 3 times. The insolvency abetted by California's generosity could have dire consequences for state and municipal bond markets, echoing the situation in the Eurozone.

    However, if you wish for austerity in the US, be careful what you wish for -- those bearing the costs may be different than those you had in mind.

    May 19 5:13 AM | Link | Comment!
  • Observations On Trend Trading And Choice Of Market
    Intermediate-term trend following (i.e, trying to catch moves a few weeks to a few months in length) in stock market indexes is singularly useful if you are also playing individual stock breakouts and want to stay on the right side of the market.

    However, if you don't trade individual stocks, there may be other markets which have cleaner intermediate-term trends, such as commodities. And, if you are willing to trade short-term swings, you don't need the aggravation of intermediate term trend following at all -- if you catch every move, you'll never miss a big one, with smaller risk to boot. (Compare, for example, the GLD chart with the SPY chart.)

    Then, the key to maximizing gains is to trade markets with clean short-term swings and the potential for big moves. Historically, such markets have certain characteristics:

    1. Deep
    2. Liquid
    3. Long-term up-trend
    And, historically, these have been leading stocks during most market conditions, and commodities such as gold and oil during bear markets with easy money.

    Originally by Stifel Nicolaus ca. Jan. 2010

    As of this writing, "quantitative easing" and other central bank policy interventions have reduced confidence in fiat money, putting a premium on gold and silver. However, every commodity has its own story: in the future, as the 3rd world develops and becomes more energy-hungry, oil may become a big trender as it was right before the 2008 crash. And, if the destruction of fiat money really is nigh, productive assets like farmland may temporarily spike.

    The key as a short-term trader is to stay agile in one's selection of markets, while not forgetting historically-derived trading principles and one's personal trading constraints.

    Feb 07 5:11 AM | Link | Comment!
  • Schwab margin accounts and (re)hypothetication
    After chatting with the Schwab staff, I got clarification on their (re)hypothecation policies for margin accounts.

    1)  They only lend out assets from your account if you have a margin balance, i.e. you owe Schwab money.

    2) The only lend the assets internally, e.g. to other traders for shorts, not to cover external debts.

    Hope this helps!

    Dec 12 8:25 AM | Link | 4 Comments
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