Tuesday, January 24, 2012

Sotheby's Looking Ahead

In October 2007 Sotheby's (BID) reached a high of $57 then the recession hit and its shares dropped violently they bottomed out with the rest of the market in March 2009 at a price of $6.47.  Not all investors go to the bond market during a crash some move to museum quality art to hedge the storm.  Sotheby's as a stock is fairly volatile with a beta of 2.33 but does offer an alternative to other forms of investing. 

The art world is performing well as the affluent are still buying, yet the world of art doesn't offer too much for the average working class.  To serve the small percentage of the extremely wealthy, art galleries & auction houses do not need to employ a massive amount of staff.  As for returns the Mei Moses Art Index states it has performed much better than securities and bonds with returns above 10% yet we must consider the expense that comes with insuring expensive million dollar art, commissions and taxes.

The coming year seems quite profitable for Sotheby's and Christie's they are expecting big sales in London even with the high unemployment and european concerns.  The auctions have delivered results despite worries but the wealthy Chinese have been the ones raising the paddle.  Sales have also been strong in New York with auctions setting records in December 2011. 

The Chinese art market is hot some of their new artists are going straight to auction and being snatched up at high prices by the extremely wealthy Chinese buyers.  Qi Baishi made the top five list on Artprice.  Of the total global art revenue China snatches up the largest amount with about 40% the U.S. comes in at second with 25%.  The Chinese are buying their own artists' work and giving them the Midas touch, making them the modern masters of the universe.  With China's low unemployment rate at 4.10 and their consumer confidence at 97 it is not hard to see why they are buying at will and making their artists boom in a small amount of time.

There are concerns that other luxury good providers are facing tough quarters due to the decrease in sales from Europe and the U.S. due to the economic concerns, this may eventually catch up with the art world.  Despite this investors are betting that Sotheby's stock price will move above $36 by April, call options activity on the stock have increased steadily.

Faith in Chinese contemporary art is strong for now, but if the Chinese market were to cool down and the art market were to crash, contemporary art prices would fall the hardest as it would be hard to prove their value.  Back in the last week of September 2011 Sotheby's hit a 52 week low of $28 partly because of the fear that China was cooling down.  China plays a big role in the sale of luxury goods they are snatching up alternatives to stocks & bonds they like art but they are also getting creative and buying gems, wine as well as other luxury goods to invest in.

Wednesday, January 18, 2012

Day Trading Basics

Many times I have seen speculators turn small losses into catastrophic ones all because they lacked the discipline to exit a bad trade.  Discipline is what separates a good day trader from a bad day trader.  Most day traders only trade the Dow Jones of course some also trade the Nasdaq.  A day trader trades  stocks that have a minimum volume of 1-5 million shares and a stock that moves significantly from the day's low to the day's high.  There is no universal definition of what a day trader should follow but there are some basic rules all do adhere to.  A day trader must have at least $25,000 in his/her account at all times.  A day trader will keep a stock for a few seconds, minutes or hours but will not keep a stock overnight because of the lack of control on the stock's movement and their inability to exit overnight.

Some day traders will not speculate on risky securities such as pharmaceuticals moving through the clinical trial stages they prefer to watch from the side lines.  A day trader should set rules for himself and always follow them.  A day trader should not let his position move against him more than 5% -7%, for example if a trader purchases 1000 shares of security ABC at $20 (1000shares @ $20 = $20,000) and the stock begins to drop and move against him the trader should have pre set a price to which he will not let the stock move below.  Following the 7% rule he would exit before or at the stock price of $18.60 ($18,600) for a loss of $1,400 ($20,000 x 7% = $1,400) but no more than that. 

It is important to stick to your rules, it is better to take a small loss than a huge loss.  Most day traders let their losses become larger without exiting and they seem to have trouble letting their winning stocks rise often selling them too fast and taking very small profits.  I have seen day traders turn a $30,000 profit into a $40,000 loss because they did not stick to their rules or for lack of rules.  I have seen men in their mid life take $100,000 from their joint savings account to become day traders without studying the art and in a few weeks evaporate their day trading accounts to less than $20,000.  I have seen young men open accounts with brokerage firms that offer them high leverage, walk out with substantial losses that will not let them return to try again nor learn because the losses were too large and often too fast.

What they all had in common was the lack of training and discipline, most don't know if they want to be day traders or long term traders.  Some begin as day traders until the moment a stock turns against them then they all of a sudden become long term traders.  The problem is that day traders trade on margin which allows them to speculate with borrowed money and stock if they choose to use it.  Most traders choose to borrow funds but it is usually the inexperienced that decide to use all of their leverage even when they can not afford to repay or meet a margin call

A day trader should never hold on to losing stocks to such a point where his positions will make him vulnerable to a margin call.  During the summer with the U.S. downgrade and the European debt crisis brokerage houses added a little insult to injury by raising their margin requirements resulting in day traders being demanded to exit trades faster not giving them an opportunity to recover from losses.  Most day traders speculating with out adequate funds lost huge amounts of money and did not have the proper funds to feed their accounts to recover from the rollercoaster ride we experienced in the second half of 2011. 

Day trading without a plan is a recipe for disaster, not being able to exit trades profitably or with small losses is surely to end up in a short day trading career.  Investors who choose to buy stocks for the long term do buy stocks and hold them often for life and that is fine, a long term trader knows the market will fluctuate and will only change his positions a few times but will mostly sit back and watch his securities grow over the years.

Sunday, January 8, 2012

Social Media Statistics Part 2

The social media is here to stay connecting the world in one online platform.  Those who choose to ignore it will find themselves with difficulty accessing important information.  Whether it is good for society is unclear but that it facilitates the flow of information and has the power to change industries is clear.  About 8 years ago the blogging revolution began and that explains why it is most popular with the younger generation.

According to Sysomos 2010 research "Inside Blog Demographics" bloggers aged 21 - 35 are the most active they account for a little more than 50% of the blogging population.  They are followed by the 20yr olds and under who make up about 20% of the blogging community.  The 36 - 50 year olds make up about 20% as well but those aged 51 or older make up less than 8% of the blogging scene.

When it comes to gender differences their is an equal presence women make up a slighly higher number at about 50.9%.  Most bloggers are located in the U.S. and make up about 30% of the blogging population the U.K. comes in at second place with about 7% of the blogging population. Japan makes up about 5% of the blogging population and Spain accounts for a little more than 3%.

From the large U.S. blogging population 14% of the bloggers reside in California and New York comes in second with 7%.

According to Nielsen online video consumption continues to grow tremendously in the U.S. more than doubling from 2008 - 2009.  Sysomos conducted a study with more than 100 million blog posts and explored the use of video services the bloggers used from July to September 2009.  Of the videos embedded on blog posts YouTube was the most popular video sharing service accounting for more than 80% of linked videos, the runners up were Vimeo and Dailymotion.  Those in Oceania and Asia are more likely to use YouTube at a rate of about 90% of all links to blogs and less likely to use other video services.

The U.S., Brazil, Spain, U.K. and Canada are the countries with the largest number of bloggers embedding videos.  New York, London and Madrid is where the most active bloggers who link videos live.  The most active days for embedding videos are Tuesday and Wednesday from about 11am to 1pm.  The weekend seems to be the least active time to post blogs or embed videos.

Blogs are back and they are better than ever!