GordonGekko's blog

AFS TRINITY XH-150

GordonGekko — Mon, 04 Feb 2008 19:25:01 -0500

150 miles per gallon
87 miles per hour using only electric motor
40 miles with electrical power alone

They took SUV and added electronics that you can just buy of the shelf.The price? $8700 more than gas only SUV.This is not a concept.This is real!

http://www.afstrinity.com/video.htm

Microsoft's biggest nightmare by Nicholas Carr

GordonGekko — Fri, 01 Feb 2008 18:46:28 -0500

Google data center under construction in The Dalles, Ore.

The next sea change is upon us.New revolution in computing is under way, and it threatens Microsoft’s traditional business.

What is happening to computing today is a revolution, the biggest upheaval since the invention of the PC in the 1970s. But it is not without precedent. It bears a close resemblance to what happened to mechanical power 100 years ago.

Large, windowless warehouses, each the size of a football field and adorned with cooling towers, dominated the site. An article in the International Herald Tribune described the complex as “looming like an information-age nuclear plant”.

What Google is building is a vast computing centre, by all accounts the largest and most sophisticated on the planet. Designed to house tens of thousands of PCs, all wired together to work as a single supercomputer, it is, indeed, the information-processing equivalent of a nuclear power station, able to pump data and software into millions of homes and businesses.

The Oregon centre, now largely complete, is just one of dozens of “server farms” that the company has built around the world, holding an estimated 500,000 computers.

But Google is not just using its computing grid to process web searches. It is also supplying services such as word processing, spreadsheets, and e-mail – programs that have long been the mainstays of Microsoft’s profitability.

No corporate computing system, not even those operated by big companies, can match the efficiency, speed, and flexibility of plants such as Google’s. One analyst estimates that Google can carry out a computing task for one-tenth of what it costs a typical company.

That is why the big data centres make Bill Gates and other technology executives so nervous.

Nicholas Carr is the author of ‘The Big Switch: Rewiring the World, from Edison to Google’, from which this article is adapted

The summer of 2009

GordonGekko — Tue, 29 Jan 2008 18:07:47 -0500

The BlueCar, a concept which has been presented at several European autoshows, can run 250 km (155.3 miles) between charges, has a top speed of 125 km per hour and can accelerate from zero to 60 km per hour in 6.3 seconds.

Cedric Bollore said on Thursday Pininfarina would produce cars from 2009 and, from 2012, at a rate of 15,000 cars per year.

The 36 million euro ($52.8 million) factory, will produce 100,000 supercapacitators -- electric energy storage elements -- per year, and production can be ramped up quickly.Investments in the project so far total at least 250 million euros, Bollore said during a trip to the site.

Vincent Bollore

The pendulum always swings back.

GordonGekko — Sun, 27 Jan 2008 18:57:56 -0500

The pendulum always swings back. There is no such thing as a new paradigm shift.
This site is so funny: http://bankcollapse.com/

Here is how you can purchase physical gold in London:If you are in London, you can come into their offices and purchase gold over the counter. Their offices are open for trading Monday to Friday from 9.30am to 4.30 pm.You can pay cash.

Here is where you can store it: oldest one http://www.thesilvervaults.com/ and modern: http://www.metropolitansafedeposits.co.uk/

FAS 157

GordonGekko — Mon, 21 Jan 2008 15:49:34 -0500

The U.S. Financial Accounting Standards Board Rule 157, which is effective for fiscal years that begin after November 15, 2007, will make it harder for companies to avoid putting market prices on securities considered hardest to value, known as Level 3 assets, the wire service reported.

Janjuah noted that, for example, Morgan Stanley has the equivalent of 251 percent of its equity in Level 3 assets, Goldman Sachs has 185 percent, Lehman Brothers has 159 percent and Citigroup has 105 percent, according to Bloomberg.

On the other hand, Merrill Lynch has Level 3 assets equal to 38 percent of its equity. As a result, Janjuah believes Merrill ''may well come out of all of this in the best health.''

http://www.cfo.com/article.cfm/10097878/c_10098290

World Agricultural Supply and Demand Estimates

GordonGekko — Mon, 10 Dec 2007 19:45:20 -0500

Here is the link

WHEAT:

At 109.8 million tons, 2007/08 world ending stocks remain the lowest in 30 years.

RICE:

World ending stocks are the lowest since 1983/84, and at 17.5 percent,The stocks-to-use ratio is the lowest since 1981/82.

SUGAR:

Given the final stocks estimate, the residual statistical discrepancy between supply and use amounts to negative 121,000 tons of use.

Global,Long/Short,Leveraged,Multi (ETF,ETC,Currency),risk optimal strategy

GordonGekko — Fri, 07 Dec 2007 20:32:20 -0500

''If you put a thousand people in barrels and push them over Niagara Falls, some of them will survive. And if you take those guys and push them over again, some of them will survive. And then they’ll write books about how to survive being pushed over Niagara Falls in a barrel.'' Merryn Webb

If you compare Warren Buffett's stock pick PetroChina (PTR) to iShares FTSE/Xinhua China 25 Index (FXI) you get interesting results in 1 year, 2 year or 3 year period you would do better if you choosed Chinese ETF rather than company (PTR) itself.

You get this offer: To work for Warren Buffett as a portfolio manager with this condition - he gives you % from what you earn above S&P 500.

What this offer actually mean? It means if you can find him any economy that will do better than US economy he will pay you every year % from the difference between US and other economy.

If you choosed Egypt's index then from 1998 you would be on vacation and what more Buffett would pay you money every year.

See how funny this guru US-sector competition is.So many hours and hard work and at the end it is just bet on US economy.

This brings me to my other point: hedge funds. I will skip their salaries FTSE summarized hedge funds into 3 groups so I will use their summary.

Directional
Equity Hedge
CTA/Managed Futures
Global Macro

Non-Directional
Equity Arbitrage
Fixed Income Relative Value
Convertible Arbitrage

Event Driven
Merger Arbitrage
Distressed & Opportunities

If you buy global ETF as mutual fund portfolio manager then people will pay you 1.5% p.a.,but if you call it global macro hedge fund strategy then people they will pay you 1.5% p.a. + 25% from new water mark profit.

The other option you have as a mutual fund portfolio manager is to buy ETC or if you want to squeeze more money from people then you can call your strategy CTA/MAnaged Futures.

You can buy inverse ETF (Proshares Ultrashort ETF),but because you want to earn as much as possible then the best thing for you would be to call your strategy equity hedge - you have some shorts in your portfolio and now you can squeeze their money.

Last thing is the best why? Because it sounds professional. Convertible,merger,arbitrage etc. Here people pay for your knowledge that you can use leverage on both sides long and short :)

Sometimes there are bankruptcies in the worst performing sector. If you buy this sector ETF then you can call your ETF pick distressed & opportunities hedge fund startegy.

I want to look professional as well so I called my strategy:
Global,Long/Short,Leveraged,Multi (ETF,ETC,Currency),risk optimal strategy

Why risk optimal?
There are some suprises on the road:cooked accounting, lawsuits,sector downturn,political suprises etc.There should be some effort to limit the downsize as well.

So what about:

Global:33% Europe/America;33% Asia;33%Middle east/Africa
Long/Short:I blogged about it before but there are reasons why hedge funds are usually Long and Short at one time
Leveraged:100%Long and 30% Short= 130% = 30% Leverage
Multi:70%ETF,30%ETC;(stocks have commodity exposure = 70%ETF:30%ETC) EUR,USD,TKY,YEN,CAD,Yuan
Risk optimal: as I showed in my previous blog posts.Strategy: single US dollar,US economy,long only didn't prove to be best in high interest rates,USA downturn.

I think that this strategy should force you to think in more possibilities,mind models and after some time it should give users required flexibility.

Write me what you think !

The worst performing commodities

GordonGekko — Thu, 06 Dec 2007 20:40:04 -0500

The worst performing commodities are: (bloomberg symbols)

10 years (per annum)
Coffee     -13.2% (COFF:LN)
Cotton     -12.8% (COTN:LN)
Sugar      -1.2%   (SUGA:LN)
You have all of these in 1 ETF (Softs) under bloomberg symbol: AIGS:LN
Natural gas -12.6% (NGAS:LN)

The best performing commodities are:

10 years (per annum)
Nickel        24.1% (NICK:LN)
Crude oil   18.6% (CRUD:LN)
Copper      16.6% (COPA:LN)
Platinum   14.17% (PHPT:LN)

http://www.etfsecurities.com/en/securities/etfs_performance.asp
http://www.djindexes.com/mdsidx/downloads/aig/Commodity_Monthly_Performance.pdf (page 2)

Fantasy Financials Inc: the last cut is the deepest !

GordonGekko — Tue, 04 Dec 2007 20:39:10 -0500

Thanks to smtkr, I had a chance to hear Jim Rogers investment recommendations:

BUY
RJA- ELEMENTS Rogers Intl Commodity Agric ETN
RJI- ELEMENTS Rogers Intl Commodity ETN
FXF- currency shares swiss franc (100 swiss francs per share)
FXY - currency shares japanese yen (10 000 yen per share)
IDU,XLU- utilities

SELL SHORT
Investment banks-C,FNM,MER,BSC (Level 3 accounting, level 3 assets)
Housebuilders-

Speculative rated builders:SPF,WCI,HOV,OHB,BZH
Not prepared:MTH,PHM,MHO
Likely survivors:CTX,DHI,LEN
Well prepared:NVR,MDC,KBH,RYL,TOL

Short selling
The idea is to sell when things are bad and will get worse due to some fundamental on the way.Question must not be if it gets worse,but when it gets worse.

Here is beautiful link about LEN.
Here great link about level 3 mark to make believe.

ETFs and Jim Rogers

GordonGekko — Tue, 04 Dec 2007 04:01:23 -0500

Jim Rogers
Jim Rogers International Commodity index has outperformed the DJ-AIG Commodity Index handily over the past five years, delivering 21.63% compound returns against 15.19% for the better-known DJ-AIG.

The Rogers International Commodity Index (RJI)
ELEMENTS Rogers Intl Commodity Agric ETN (RJA)
ELEMENTS Rogers Intl Commodity Enrgy ETN (RJN)
ELEMENTS Rogers Intl Commodity Metal ETN (RJZ)

Rogers Commodity Index Components and Weights
Agriculture (34.90%)		Energy (44.00%)		Grain (21.10%)
Wheat	20.06%	Crude Oil	47.73%	Aluminum	18.96%
Corn	13.61%	ICE Brent Oil	31.82%	Copper	18.89%
Cotton	11.60%	RBOB Gas	6.82%	Gold	14.22%
Soybeans	8.60%	Natural Gas	6.82%	Zinc	9.48%
Sugar	5.73%	Heating Oil	4.09%	Silver	9.48%
Soybean oil	5.73%	ICE Gas Oil	2.73%	Lead	9.48%
Live Cattle	5.73%			Platinum	8.53%
Coffee	5.73%			Tin	4.74%
Rubber	2.87%			Nickel	4.74%
Lumber	2.87%			Palladium	1.42%
Lean Hogs	2.87%
Cocoa	2.87%
Soybean Meal	2.15%
Canola	1.92%
Orange Juice	1.89%
Adzuki Beans	1.43%
Rice	1.43%
Oats	1.43%
Barley	0.77%
Greasy Wool	0.72%

Market Vectors Steel ETF (SLX)
Claymore/Clear Global Timber Index ETF (CUT)
iPath DJ AIG Livestock TR Sub-Idx ETN (COW)
iPath DJ AIG Nickel TR Sub-Idx ETN (JJN)
iPath DJ AIG Copper TR Sub-Idx ETN (JJC)
iPath S&P GSCI Crude Oil Tot Ret Idx ETN (OIL)
iPath DJ AIG Natural Gas TR Sub-Idx ETN (GAZ)

From $100 to $30 000 through Asian financial crisis

GordonGekko — Fri, 30 Nov 2007 04:15:26 -0500

In July 1964,the Hang Seng newspaper company in Hong Kong launched its famous stock market index.If you had invested $100 in the member companies expecting them to surge in value short term,you would have been disappointed:in the subsequent four years,the market sank by a third.

But if you had taken a long-term view and held on to your investment through the Asian financial crisis of 1997 until early this month,you would have been much happier:that $100 would have been worth more than $30 000.

By comparison,in the same period,$100 invested in Dow Jones industrial average would have only risen to $1500.

The Tokyo stock market peaked in December 1989 at the height of what the Japanese call the bubble economy.The Nikkei 225 average hit 38915 years later,but now is worth less than half that.

China is a big country.With a market of 1.3bn people,it is not suprising that China Mobile,for example,is the worlds most valuable telecoms company.China Mobile customers send 2bn text messages saying Happy New Year.

The strongest growth in Chinese exports actually has been going to Latin America,Africa and to the Middle East,rather than to US itself.

Any market downturns in the US shoiuld have less of an effect on Asia than in the past.It is not going to derail Asian growth because domestic demand is very strong.

Article written for financial times by Andrew Wood.

Are semiconductors next subprime lenders ?

GordonGekko — Thu, 29 Nov 2007 19:20:32 -0500

If I short 1 stock worth 10$ and it goes down to 1$. What will be my return on investment ?
My return will be 90%.

If I short 1 stock worth 100$ and it goes down to 1$. What will be my return on investment ?
My return will be 99%.

How this hedge fund could earn 1000% by shorting subprime lenders?
The fund was buying out of the money put options!

IMH,IMB,DFC,CFC are now selling for 1/6 of their 52 week max value.

IF this will be the same with cyclical semiconductors then WFR,CY will be selling for 1/6 of their max value.

CY will be 7$
WFR will be 14$

It means that if you buy put options with expiration 2010 then you make on WSYMC 530% and on
ZYGMH 456%.It's not bad if you realize that you have 778 days to prove that you are right.

So, are semiconductors next subprime lenders ?

Hedge fund strategies

GordonGekko — Wed, 28 Nov 2007 11:24:49 -0500

Whitebox Intermarket Fund Ltd

The core of the strategy is long small to mid capi short ETF's and/or Indexes that we feel are most relevant to the company based on qualitative analysis of SEC filings and other research. In addition up to 20% of Fund equity can be in structured deals. The use of ETF's and index hedging is done to dampen beta and provide some market neutrality. The names will be weighted relative to the turnover of each company's float with a tilt to the more liquid companies.

Parrot Trading Partners
The "Calendar Condor" strategy employed by Parrot Trading Partners: The basic strategy is to employ the use of diagonal calendar spreads. The manager will purchase puts and calls in the deferred months, and sell offsetting puts and calls in the nearby months, in order to maintain a resonably balanced delta neutral position. The objective is to allow the time premium to bleed off the nearby months at a much more rapid pace than the ime premium bleeds off the deferred months. All of these trades involve S&P futures options contracts. Decision Making Process and Risk Quantification We evaluate the market at the beginning and end of each day based on the following: 1. Market position within its current trend or trading range 2. Size of account and status of contributions and withdrawals 3. Delta neutrality 4. Vega and Gamma risk 5. Number of days to expiration of short option positions Utilizing these factors, we adjust our position to maintain an appropriate risk/reward parameter, which will usually generate a consistent series of positive returns over a 60-90 day horizon. We quantify risk by measuring Delta, Vega, and Gamma relative to the present market position. We manage our risk by maintaining reasonably Delta neutral and managing our positions on a daily basis. When necessary, we adjust to movements in the market for 2-3 week trends so that we do not have to trade intraday.

Eric Sprott & Ken Heebner

GordonGekko — Tue, 27 Nov 2007 19:58:05 -0500

Return                                      1 year            3 year        5 year

Sprott Gold & Precious              -13.15%         19.05%      25.49%
Minerals

StreetTRACKS Gold shares         29.25%         21.53%
(GLD)

Sprott Canadian Equity fund      32.97%          29.4%        29.72%

S&P/TSX Composite                   21.43%         20.74%       20.92%
Total return index

If you have long only stock pick strategy, then it's better to think about your individual stock picks as sector & country picks.

Here is the king of all gurus:Ken Heebner.

Ken Heebner's (CGMFX) returns are:

YTD         3 year        5 year
60.39%    31.59%      32.10

He concentrated on homebuilders from 2001 to 2005 and airlines in the late 1990s. Heebner also bet against technology and telephone stocks in 2000, before the collapse of Nasdaq Composite. A surge in commodity demand from Asia led Heebner to quadruple his holdings in mining and metals companies this past year, to 25 percent.

His fund has huge sector bets and has ability to short .Fund has more than three fourths of its assets in cyclicals:energy and industrial stocks.Top 10 holdings accounts for more than half of assets.

Pairs trading: hedging out the industry risk

GordonGekko — Sat, 24 Nov 2007 18:59:46 -0500

A stock trader believes that the stock price of FOO, Inc., will rise over the next month, due to this company's new and efficient method of producing widgets. He wants to buy FOO shares to profit from their expected price increase. But FOO is part of the highly volatile widget industry. If the trader simply bought the shares based on his belief that the FOO shares were underpriced, the trade would be a speculation.

Since the trader is interested in the company, rather than the industry, he wants to hedge out the industry risk by short selling an equal value (number of shares × price) of the shares of FOO's direct competitor, BAR.

In a highly developed market like Australia, industry rationalisation has led to many sectors of the economy being dominated by only a handful of major businesses. In banking there are the “Four Pillars” (Westpac, CBA, ANZ and NAB); in telecommunications Optus and Telstra have dominant market shares; and in mining BHP and RIO tower over the competition. In these industries share price movements are often affected by economic factors external to the companies themselves.

If economic factors external to the companies had a negative impact on the industry as a whole then the short position would act as a natural hedge to the long position neutralising to a certain extent any adverse price movements in both stocks.

Case Study

The first day the trader's portfolio is:

Long 1000 shares of FOO at $1 each
Short 500 shares of BAR at $2 each

(Notice that the trader has sold short the same value of shares.)

On the second day, a favorable news story about the widgets industry is published and the value of all widgets stock goes up. FOO, however, because it is a stronger company, goes up by 10%, while BAR goes up by just 5%:

Long 1000 shares of FOO at $1.10 each — $100 profit
Short 500 shares of BAR at $2.10 each — $50 loss

(In a short position, the investor loses money when the price goes up.)

The trader might regret the hedge on day two, since it reduced the profits on the FOO position. But on the third day, an unfavorable news story is published about the health effects of widgets, and all widgets stocks crash -- 50% is wiped off the value of the widgets industry in the course of a few hours. Nevertheless, since FOO is the better company, it suffers less than BAR:

Value of long position (FOO):

Day 1 — $1000
Day 2 — $1100
Day 3 — $550 => $450 loss

Value of short position (BAR):

Day 1 — $1000
Day 2 — $1050
Day 3 — $525

Without the hedge, the trader would have lost $450. But the hedge - the short sale of BAR - gives a profit of $475, for a net profit of $25 during a dramatic market collapse.

There were many articles about who is best&worst prepared for a downturn between housebuilders: mdc vs dhom; subprime lenders- CFC vs AHM; investment banks etc. I feel really sad that I didn't know about this hedging strategy before.

PS:statements were from these two websites:
http://en.wikipedia.org/wiki/Hedge_(finance)
http://www.macquarie.com.au/emg/prime/strategies_using_prime/pairs_trading.htm