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Archive for August, 2007

Or rather, some Nintendo.

This past year I’ve had the fortunate opportunity to play the Nintendo Wii.  I’ve got to tell you that I enjoy playing it.  The tennis game on it is my favorite, along with the boxing competition where the training coach throws balls at you and you have to dodge them.  It’s made me think about buying my own Wii.

My preference for playing the Wii has made me think about buying stock in Nintendo.  I’ve thought about buying Nintendo shares for a long time, probably for the past 6 months.  If the Wii can make a non-gamer (or rather, former gamer) like me think about buying a system, then it is probably doing the same with many other people and especially for the upcoming holiday season.

Nintendo shares have looked pretty good for the past year or so.  The stock looks like a decent buy and after this market sell-off, the shares are starting to look attractive.  I only have enough money to buy one more stock so I need to make sure that the one I acquire is decent value.

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I was talking to a friend of mine in Seattle who was asking me where I planned to live. You see, in Seattle, there are two places you can live — the east side or the west side. The terms refer to the west side of Lake Washington which is Seattle. Basically, living on the west side means living in downtown Seattle. The other is living on the east side of Lake Washington which is the suburbs, it is the Bellevue/Redmond/Kirkland area.

There are more happening things living in Seattle but I don’t really want to have to commute across the lake. However, my friend suggested to me that I live should live on the west side because where the cool, hip and happening things are and therefore that’s where I should live.

I said to my friend "You know Mike, back in Winnipeg, we have an old saying… west side sucks!"

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They’re calling again…

I’m going to be moving to Seattle in the next week and a half. I’ll finally have realized my lifelong dream (well, not really) of living on the west coast. It’s a move related to my job; rather than working out of Winnipeg I’ll be working out of Seattle. Woo-hoo!

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I’m currently reading Atlas Shrugged, by Ayn Rand.  It’s a novel about a man who tries to stop the world… and does.  It is Rand’s philosophy about capitalism and money.

A few years ago, one of my family members (not my mother) used to routinely say that money is the root of all evil.  How wrong this person was, according Rand.

In Atlas Shrugged, a character by the name of Francisco d’Anconia launches into a speech against the people who claim that money is the root of all evil.  Allow me to quote some passages:


Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value.  Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force.  Money is made possible only by men who produce.  Is this what you consider evil?

To trade by means of money is the code of the men of good will.  Money rests on the axiom that every man is the owner of his mind and his effort…  This is the code of existence whose tool and symbol is money.  Is this what you conside revil?

Money demands of you the higest virtues, if you wish to make it or to keep it.  Men who have no courage, pride or no moral sense of their right to their money and are not willing to defend it as they defend their life will not remain rich for long.

Run for your life from any man who tells you that money is evil.  That sentence is the leper’s bell of an approaching looter.


Rand’s point essentially is that people who work hard, produce good results and provide a product that people want have a right to their own money.  They are the builders of society (ie, they are holding up the world).  Thus, the acquisition of money is a virtue, no a character flaw.  Those who say that money is evil are generally the ones that don’t produce and try to steal it from those that do; in other words, they are the ones who are evil.

BTW, Hugo Chavez, president of Venezuela, is a looter. 

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The market has taken a huge pounding lately, mostly fueled by the credit crunch due to losses by hedge funds in subprime mortgages.  I’ve seen some brutally swift corrections in my short time in the market, and this ranks with the best (or worst) of them.  The drops haven’t been as big as what they were they were in February – March, but they are lasting a little longer this time.  My positions are definitely taking a beating, every stock I’m in is down 15-20% from its high last month.
 
I’ve been watching the market internal indicators trying to get a read on when we might see a good time to buy.  I was smart enough to not get back in when the market "confirmed its rally" earlier this month.  I learned from the June 2006 debacle.  On the other hand, I’m staying long in all my existing positions because I don’t like to trade too often (due to ridiculous trading fees and not enough time during the day to watch the market).  Maybe I can pick up a bargain, so what are the indicators telling me?
 
There are three things that are suspicious:
  1. The put/call ratio has spiked above 1.0 consistently in recent days.  This is a contrary indicator indicator extreme bearishness in the market.
  2. The McClellan Oscillator is an indicator that is ratio of stocks advancing and declining.  The market made a fresh low today, but the oscillator did not.  Last time that happened was in March when the market bottomed.
  3. The VIX, an indicator of Volatility, just hit 30 today.  It hasn’t been this high since early 2003, near the end of the bear market.  In my book I won in a contest last year, the writers suggest that when the VIX hits 30, it is a good time to buy.

So, the market looks like a mess right now and everything looks bad.  However, extreme bearishness often suggests a reversal is near.  I’ve gotten burned on reversals a lot in my earlier days in trading and I have learned from my mistakes.  I think now might be a good time to add to some of my existing positions, and pick up maybe one or two more.

Maybe not now… I think I’ll wait a week.

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Poker strategy

As I mentioned in my previous post, at my first attempt at playing No Limit Texas Hold ‘Em in Las Vegas, I managed to double my money.  It was only my fourth time playing poker for money in my life, and the third time I had won money.  I never thought it possible but I think I might have an aptitude for the game.

I picked up a poker magazine in the casino and started browsing through the articles and reading some interviews with the pros.  The one comment that really stuck with me was that in most games, you’ll make most of your money profiting from other people’s mistakes than through skills of your own.  During that game, I would agree.

I think I only won 4 hands out of 40 (at most one or two more that I can’t recall), but the times I won, I won really big.  Three times, I won it with a straight (five cards in sequence of odd suits).  The next time I put a guy out when he went all in and I won with a high card.

My strategy was to play only strong hands and go in big when I was sure I would win (as I did with three of my hands).  But even more so, I tried to avoid making big mistakes.  I never played weak hands and bailed out early when I knew I was outplayed.  I figured out quickly that most players weren’t bluffing when they bet big.

That’s where my strategy differed.  Whenever others had a strong hand, they went all in (ie, they bet all their chips).  I never did; most people correctly deduced that when somebody went all in it meant they had very strong hands.  This meant that the person betting against them would cut their losses and back out of the hand.  The better won the hand but their winnings were smaller.  When I had a strong hand, I would bet a bunch of larger chips but never went all in and this way managed to convince a lot of others to commit more of their hands than they otherwise might have.  I didn’t bet the whole hand, I bet enough such that they thought they might beat me and stay in the hand.  This resulted in a bigger pot than scaring them off.

I think that I experienced some success in poker the first night not because I am good with cards but because I have stock trading experience.  I cut my losses quickly (ie, bailed when I knew I had nothing) and maximized my gains (ie, by staying in hands when I had strength).

Jim Cramer is right – watch TV, get rich.  In this case, I won by learning from the guys on TV who play poker.  My success didn’t last, of course, but I think that means I need to stick to No Limit Hold ‘Em, there’s more opportunity for others to make mistakes.

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I just got back from Las Vegas where I spent a couple of days in the glitzy city.

I had three main goals in Vegas:

  1. Go and see a magician
  2. Go and see Cirque du Soleil
  3. Do a little bit of gambling

I’m happy to say I accomplished all three.  On the first day I was there, I went and saw Penn and Teller.  That was actually a very good show, and afterwards I got to chat with Teller for aboot 3 minutes.

The next day, I saw Nathan Burton in the afternoon.  He’s another Las Vegas magician.  He’s good, but he does mostly large stage illusions with making girls vanish or squish into small boxes.  It’s good, but I’ve seen it before.  What I liked about Penn and Teller was that they didn’t do this type of magic.

That evening, I went and saw Mystere: Cirque du Soleil.  Tickets for that was about $100.  That was an incredible show, the performers there are amazing and can do things I couldn’t even begin to imagine doing.  They must have to train forever.

Then there’s the part about gambling.  Before going to Vegas, I decided that I wasn’t going to play against the casino in any games because I know it’s rigged against me over the long run.  However, I walked by a game of poker and decided to get into the game.

I sat down and the buy-in was $100.  "Yikes!" I thought.  I was really, really uneasy about losing all of my money and decided I was going to bail out if I lost half of my cash.  I sat down to a table of No-Limit Texas Hold ‘Em.  An hour and a half later, I walked away with $214.  Yes, that’s right, not only did I not lose money, I managed to double it.  I originally had about $250, but I lost the next hand and decided that I was done and was going to walk away.  I think that was the right move.  My strategy was to only play strong hands and then bet aggressively when I was certain I was going to win.

The next day, before Cirque du Soleil, I decided to play some more poker.  I sat down (in a different casino) to play Limit Texas Hold ‘Em, a different game in which the rules are the same but the betting strategy is much different.  This time the results were much different.  I sat down with $100 and walked away with $30.  I played basically the same strategy as the previous day but things just didn’t go my way.  I played the strong hands (like the day before), but the cards never fell my way.  I tried bluffing twice but it didn’t work for me. 

There was not any single catastrophic loss, instead, it was just a steady stream of bleeding.  I was right to bail out of all the hands I stayed in early because had I stayed, I would have lost even more.  It was kind of frustrating because close to when I left, another girl sat down and won her first hand because she hit the cards in the flop.  I never once hit my flop.

Eventually, I said "Enough is enough."  I knew how much I was going to walk away with, and $30 was my limit.  Once I hit that, I knew I was finished and I was going to cut my losses.  Clearly, my strategy in Limit Hold ‘Em needs some work.  I saw one guy they night before burn through $200 in about an hour, I was not going to do the same.

But my poker winning percentage, lifetime, is still 60%.  Not bad for only playing 5 times in my life.

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