taking some pain

brett steenbarger has a post up talking about why he does his taxes by hand. i have done the same thing over the last couple of years, for the same reasons he describes.

My favorite form of performance review is also my most painful. Every year I complete my income taxes–by hand. That means that I write out every single trade that I placed during the year in chronological order, along with its profit/loss (P/L). This past year, that meant reviewing approximately 240 trades, roughly one a day.

Yes, there are ways of capturing this information electronically to avoid the hand-numbing task of writing each transaction, but I choose the old-fashioned method. Writing the trades out makes me reflect on them: “What the hell happened here?” and “What was going on in the market then?” Writing the trades makes me sensitive, not only to their P/L, but to their sequencing: How many runs of winners and losers did I have? How far did I draw down during the year? How well did I trade after I had a losing period? What happened following winning periods?

faux streaming realtime quotes

a number of finance sites now have updating prices that appear on their pages. it’s a nice application of technology, and it looks really cool to see numbers within a story flash green or red and change. but all the prices are delayed, usually 15 min for NASDAQ and 20 min for other exchanges. in my mind, that turns a great application of technology into a really poor one. what is the point of having the numbers “update” as if they are realtime? the answer is that there IS no point, and in fact it is misleading to someone who does not know they are reading yesterday’s newspaper. of course, they can always scroll down to the fine print at the bottom of the page.

bad retail data

barry ritholtz reports that the actual sales numbers from black friday weekend are coming in, and they aren’t quite the ~+20% y.o.y. survey numbers that the NRF was pushing. from the wall street journal post:

It’s easy to get caught up in the hustle and bustle of Black Friday, but let’s go to the scoreboard and see what really happened.

Chain-store sales slipped 0.4% in the week ending Saturday from the prior week, the International Council of Shopping Centers reported Tuesday. Not too impressive given all the reports of jam-packed malls over the holiday weekend. However, when you compare last week’s performance with the same week a year earlier, chain-store sales increased 2.6%.

Redbook puts out a similar survey but got slightly different results. Chain-store sales rose 0.1% in the first four weeks of November from October, and 3.2% from November 2005, according to Redbook’s gauge.

senate subcommittee report on oil price manipulation

“Ironically, hedge funds trading oil are not doing anything very different than the large investment banks such as Goldman Sachs, Bank of America, or Morgan Stanley already do.  The proprietary trading desks of these and other large investment banks are actually ‘hedge funds in drag,’ just as Enron was.” –Peter C. Fusaro and Gary M. Vasey, Hedge Funds Change Energy Trading

bill cara did a write-up of the senate subcommittee report THE ROLE OF MARKET SPECULATION IN RISING OIL AND GAS PRICES: A NEED TO PUT THE COP BACK ON THE BEAT (PDF). phil davis did an analysis as well.  for an alternative view, read the EIA report on why oil prices are so high. you should read the report and those analyses if you are interested in what may prove to be the next enron-style scandal, only much bigger. player of note: t boone pickens, who among other things donated $3MIL to the swift boat veterans for truth, and who has been pulling down billions in the last several years while pounding the table on peak oil.

i sold penn west (NYSE: PWE)  this morning, not on the basis of this alone (EIA weekly inventory was up this morning, and GDP surprised downwards, adding more data to the argument for a slowdown).  weighing in favor of holding was the iran deadline tomorrow, but the risk of the bottom falling out of oil has been bothering me more lately.

demand is going up, supply is going up. if the economy keeps slowing down,  and i consider that the more likely case, then demand acceleration is going to slow as well. more to think about.
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more about stocks

a friend IMed me the other day asking why i feel compelled to publish information about what i am buying and selling. she is a finance professional, so i took her concerns seriously. that conversation was the impetus behind putting the disclaimer up there in the tabs.

there are a couple of compelling reasons behind publishing my trades and talking about stocks. for one thing, it makes me a bit more accountable to my own behavior. whenever i write about something critically, i force myself to look more carefully, to more thoroughly run through arguments in favor or against. or at least that’s the way it’s supposed to happen. writing here forces me to be more honest with myself usually.

and in all honesty, i am still very much learning about markets. i believe i will always have that feeling, because it’s an observational knowledge and the behavior of the markets is perpetually changing. this is another compelling reason to share. i get a deeper understanding, more rapidly,  when i attempt to explain things i have learned, especially in the context of blogging and other intarweb knowledge sharing  activities. i believe there is a large amount of disinformation or lack of critical thinking in mainstream financial press, and reading and becoming part of the dialog on a large number of blogs has helped me get a clearer sense of these systemic biases.

i can see some potential dangers. i tend to favor contrarian strategies, and occasionally spend a lot of time in conversation defending my positions or economic opinions. in a way this a good thing, in that i have to do more research and strive for a better understanding than i might have if i were always siding with conventional wisdom. the pitfall is investing so much time in defending my own reasoning that i fail to recognize when a situation has changed. flexibility of thinking is the best way to make money in markets, not winning arguments.

another danger i addressed in the disclaimer. writing about a stock i buy doesn’t mean that i think everyone else should run out and buy it as well (ok that’s not true, because i DO want everyone to buy them and push the prices up 😉 ). a good example is that i manage an account for my mom, and there are things i do with my own money i would not do with hers. she has done really well, but i stress out a bit more about her account than my own, even though it’s a lot smaller and less volatile. things i do, i cannot necessarily recommend for anyone else.

i am trying to think of the best way to keep my trading info updated here. for now, i think i will point anyone who cares to my stocktickr page. i just updated the list, with correct buy prices, and will attempt to keep it current. perhaps a project for the future is a plugin to keep the information in the sidebar here on the blog. there is also an rss feed for that page. (i just noticed that if you don’t have a registered account, the information on the page is TWO days old. that’s not very useful. ok back to the drawing board. the rss feed is up to date though).

oil safari

here’s an interesting project  by paul salopek, a pulitzer prize winning reporter who traces a gallon of gasoline in a chicago suburb to its origins in the oil wells of the world.  (via bill cara).  no commentary here other than i did take some profit on PWE (NYSE: PWE) a few days ago, as i am starting to wonder about the price of oil in a slowing or recessing economy. this post gives me a chance to test out the wordpress stock plugin i installed.  i have been remiss in keeping up with my last couple of trades, but it is late so i will save that for another post. i sold the last of my apple  last week. (Nasdaq: AAPL).