Ichimoku-who?

A couple of days ago I ran across a list of technical indicators. I figured that, after 15 years and numerous tutorials, I knew 'em all: Bollinger, Aroon, ADX, Williams %R ... In fact, I hardly recognized any on that list. The most intriguing name was the Ichimoku cloud. I recall, when playing with candlesticks, running across dojis and haramis (and even the shaven bottom). But Ichimoku cloud? Then I asked some charting software to show me that cloud: Mamma mia! I reckon I gotta play with that guy ... P.S. I understand that the "trend" is UP when the stock prices are above the cloud. I stare at the above chart and feel warm all over. Who knows? I might make $$ next week, eh? ------------------------------------------- I'm struggling with that $^#@!* spreadsheet. So far, so good ... I think Click to enlarge.   Wanna try it? Click!

 

Brothers, revisited

I mentioned them thar brothers: stocks (actually ETFs) that moved in opposite directions, each day. There's a gaggle of 'em, here: http://www.hbpetfs.com/pub/en/Etfs.aspx. They got Bull & matching Bear ETFs, ending in U and D (for Up and Down, I reckon). One might think that Bull and Bear ETFs would behave like mirror images. For example, them that's tied to the Gold Index Well, close but no cigar ... but they do get a cigar each day: HGU was UP 4.8% yesterday and HGD was DOWN 4.6%. Good, eh? However, it's quite possible that both the Bull & Bear ETFs have negative (or positive) annual returns (as opposed to opposite daily returns). For example, these guys (tied to crude oil futures) both ended up with a negative annual return: Yet, on a daily basis they look like ... uh, twins, eh? (Or is it brothers? What's a good name for these guys?) Is it the accumulation of tiny differences over a year? Surprisingly, the answer is NO! If they are closely tied to some underlying Index or Future, they can both lose over just 2 days. For example, suppose the "underlying" goes UP 10% on Monday and DOWN 9.1% on Tuesday. The net result is (1.10)*(.909) = 1.00, so the underlying Index is back where it started. Yet the two cousins (what are we calling them?) both lose over these 2 days. The Bull has returns of 20% and -18.2%. (Them's 2x the underlying Index returns, eh?) The Bear has returns of -20% and +18.2% (That's -2x the underlying Index, eh?) Check it out: they both end up with a negative 2-day return. (About -2% and -5%.) Now that deserves a Mamma mia! These Gemini ETFs (what are we calling them?) are fascinating and I really need to find a way to make a $killing.

 

Test tube babies

We watched a movie last night. A lesbian couple had a baby with one gal donating an egg and the sperm created (artificially) from stem cells. Fiction ... we thought. So (as is my wont), this morning I google. Mamma mia! Eggs and sperm created in a test tube ... from stem cells.

 

Magic events

Remember when we talked about Darvas boxes? It was a scheme that relied upon the occurrence of some event or situation. When it happened, you made your move and X% of the time (historically speaking), you'd make money. If X% were in the neighbourhood of 50%, it ain't a good scheme. (Half the time you lose, eh?) However, if x% > 60% then (eventually!) you'd make money ... or so the theory goes. Anyway, there seem to be lots of such magic events lying around. We talked about them what-are-they-called stocks, It was pretty easy to find a pair of stocks, A and B such that: On days when A opened DOWN, B would go UP that day --- most of the time. That suggests a trading strategy for certain magic pairs:: Buy B at the Open and sell at the Close ... whenever A opened DOWN. Click to enlarge.. Wanna see what would have happened the year before? Click! Here's another, simpler scheme based upon the fact that (historically speaking), certain magic stocks (much of the time) increase from Open to Close, even when they open DOWN. That was true of several DOW stocks, over the past year. For example, the IBM opened DOWN 150 times (over the past year). In 87 of those times, it nevertheless increased from Open to Close. That's almost 60%, right? So here's the strategy (for that magic stock): Buy at the Open and sell at the Close ... whenever the stock opened DOWN. Alas, that 60% was just 46% the year before.

 

Earthquake in Ontario?

Okay, so the building shook a mite this afternoon. Heidi was on the couch, watching soccer. She thought I was pushing the couch. Then, an e-mail from our daughter, in Texas. "Did you have an earthquake?" Huh? In Ontari-ari-ari-O? Impossible! Now I discover there are (gasp!) fault lines running through the Province. So I check out the location of earthquakes, worldwide. Mamma mia! They is here, too! I larn something every day ...

 

Brothers?

Some time ago I played with so-called sister stocks. Such pairs tend to move in the same direction ... either UP or DOWN. What about pairs that move in the opposite direction? How about this pair? Interesting, eh? It raises some very important questions: [1] Where do we find such pairs? [2] Can we use them to make a $killing? ... and most importantly: [3] What should we call 'em?

 

Heidi's recipes

Some time ago I happened upon a site that told me what things (on gummy-stuff.org) were most popular. I always assumed they'd be "financial" things. What surprised me were Heidi's recipes. They were way up on the list! I even found this: I have no idea what it says ... 'cept it's got the proper URL.

 

Soccer: Offside ^#$@!(?

We've been watching World Cup soccer. We never watch soccer, but this is special, right? Alas, that %#&@!? offside rule is confusing. I think I got it right, now ... maybe: >> I kick the ball toward the goal >>A teammate is the closest person to the goal     (other than the opposing goalie) >>My team mate is offside.     (If he scores, it won't count.) On the other hand >> If the closest team mate receives the ball ONSIDE     he can then move to the goal (with the ball) and score. So why is soccer the most popular spectator sport on the planet? It usually ends up with a total score of, roughly, 1.23. (That's some kind of average, I think.) Hmmm ... maybe because (unlike basketball) getting a goal is a world-shaking event. Maybe because (unlike baseball), kids can play with just a ... uh ... ball. It sorta reminds me of the days when Heidi and I went mushroom hunting. If we wandered through the woods for hours and found a bushel of these, that was nice: Aah, but if we spent hours and found just one of these: MAMMA MIA!

 

a Horse, eh?

I mentioned that we'd be at a cottage next month with a gaggle of grandkids. For Ty I'm working on that spreadsheet. I'll be painting this for Heidi: This Heidi is my granddaughter, not my wife. I reckon I'll be busy. I may even get in some fishin', eh? I reckon Heidi will be busy cookin'. That Heidi is my wife, not my granddaughter.

 

Mortgages

I got e-mail commenting (complaining?) that the XIRR function in Excel ignores leap years. True, but I reckon that the "error" of 1 day in 4 years ain't significant enough to modify any decisions you make which depend upon the value of XIRR. The fella who wrote is in real estate, so I thought I'd consider similar "errors" that are introduced in the name of simplicity. For example, in the U.S., an advertised annual mortgage rate of 6% is taken to mean AnnualRate / 12 per month. That's 6 / 12 = 0.50% per month. Amortized over 30 years, the monthly payments for a $100K mortgage would be $599.55. I think it's the same in France, but not in the U.K. In Canada, for an advertised annual mortgage rate of 12%, the monthly rate would be (1+0.12/2)1/6 - 1 or 0.487% per month. Amortized over 30 years, the monthly payments for a $100K mortgage would be $594.82. See mortgage calculator. Is that the "error" I'm thinking of? No, I'm thinking that monthly payments imply that a year contains 12 months of equal length. Remember? Thirty days hath September ... Okay, suppose we take into consideration the different periods between payments. You take out a $100K mortgage at the beginning of the year. The first payment is made after 31 days, the next after 28 days, etc. If (daily) interest, say r, is charged on the balance, then you'd owe at the end of January (31 days): 100,000 (1+r)31 Then you'd make your payment of $P and the balance would be: 100,000 (1+r)31 - P Another 28 days go by, interest at the daily rate r is applied to this balance, then you'd make your next $P payment and the end-of-February balance would be: 100,000 (1+r)31+28 - P(1+r)28 - P etc.etc. 30 years go by and your final balance is $0. If the "advertised" annual rate is 6%, you'd expect the daily rate to be: r = (1 + 0.06)1/365 - 1   or   0.01597% If you know r, the daily rate, then you can calculate $P your monthly payments, right? Guess what it is? P.S. At the (constant) daily rate r (above), a $100K balance would become: $100,448 after 28 days $100,480 after 30 days $100,496 after 31 days. Did somebuddy say: leap year?

 

Math problems, eh?

In a few weeks we're renting a cottage and some of our grandkids are joining us. We're given the job of providing some grade 4 math problems for Ty. Heidi buys a math problem book. I make up a spreadsheet : Anybuddy got any wee grandkids? Click!

 

IRR and MIRR revisited

As a consequence of senility, I feel I may not understand IRR and MIRR. Anway, I wrote up something here and here. The latter has a spreadsheet which compares IRR and MIRR. Click to enlarge. -------------------------------- One thing that really bugs me is the ongoing debate about reinvesting withdrawals. The argument (by some) is that IRR assumes that withdrawals from an investment portfolio are reinvested at the same IRR-rate. I never understood the argument ... so I wrote up my thoughts here. I could be wrong ... but those that say there's an implicit reinvestment assumption (when using IRR) never seem to justify that claim. Indeed, I reckon that somebody said it (long, long ago) and everybody now parrots the claim.

Obama: the God

Why does everybuddy think he's God?

 

 

 

MFI

I got e-mail from Ron McEwan that mentioned a scheme that involved volume-weighted stock prices and a momentum indicator ... and it rang a bell. I don't get too many ringing bells, these days. Since I usually forget everything that's on gummy-stuff, I did a search and found Money Flow Index. It does involve volume-weighting of stock prices. Instead of P you use P*V. It's also (somehow?) associated with "momentum". I forget how ... ** Anyway, to make a long story short, I modified the spreadsheet to calculate the MFI for the DOW stocks and got this: Click to enlarge. ** Now I remember: MFI measures how often the daily "Money Flow" (as measured by P*V) is associated with increases in price. Over the past year, it's 56% of the time, for JPM (according to the chart). If'n we use weekly prices over 5 years, we get this chart: Click to enlarge. See? MFI = 77% for DIS and GE has moved up from last place.

 

MIRR, eh?

I got e-mail asking about MIRR, the Modified Internal Rate of Return. As usual, I ain't never heard of it. So I googled and found something like this: You borrow $A to start some company (or some project). The Financing rate is F%. (F% is the interest charged on the loan.) Profits from the company are Invested at a rate I%. Expected profits are $B after 1 year and $C after 2 years. (These you intend to invest at that annual rate of I%.) Then comes the BIG question: Is $A too much to pay for the company? The profits will be worth (at the end of n years): P = B (1+I)n-1 + C (1+I)n-2. Suppose the company is worth $K, at the end of n years. The total value of profits + company will then be their sum, P + K. So what "return" are you getting on your enterprise? There's some magic rate of return (which we'll call MIRR). Our A would be worth A (1+MIRR)n (after n years at this magic return). Setting that equal to P + K we'd get the equation: A (1+MIRR)n = B (1+I)n-1 + C (1+I)n-2 + K. Now all we have to do is solve for MIRR, eh? To buy that pizzeria, suppose we get MIRR = 8%. For the burger stand we get MIRR = 7%. Then we buy the pizzeria. ------------------------------ Note: If A is the only loan, then MIRR ain't got nothin' to do with the Finance rate F. However, if there are other loans, we gotta calculate their present value (at the Finance rate F%) and add all these present values to A. If that give A', then we'd solve for MIRR from: A' (1+MIRR)n = B (1+I)n-1 + C (1+I)n-2 + K. 'course, there may be other profits as well as B and C, so ... uh ... I reckon y'all can take it from here. If an initial loan of A0 is followed by subsequent loans (after 1, 2, ... years) of A1, A2 ... and the Financing rate is F ... and annual profits (after 1, 2, ... years) are B1, B2 ... which are invested at an Investment rate I ... then define: PV = A0 + A1/(1+F)1 + A2/(1+F)2 + ... That's a Present Value FV = B1(1+I)n-1 + B2(1+I)n-2 + ... That's a Future Value then MIRR is defined so that: PV (1+MIRR)n = FV So the PV gives FV after n years with annual return MIRR. Solving: MIRR = [ FV / PV ] 1/n - 1 I forgot to mention that one (often) takes the PV as a series of negative cash flows, so - PV is (often) used in the formula for MIRR ... just so you get a positive ratio: -FV/PV. Further, if I = F = IRR, then MIRR ain't no different than IRR. I might also mention that there's FMRR. In the above analysis, all cash flows are discounted to Present Value at the same rate. With FMRR, there are a couple of rates for this ritual ... and the discounting is not (necessarily) to the "present" value.

 

Hi Tech plasma

We were thinking about a nice, big 50" plasma TV. On the weekend, we bought this guy: Then I read the manual. Mamma mia! That thing has some neat cerebral facility. I had forgotten everything I knew (or didn't) about HDTVs: DVI? HDMI? DLNA? DTCP? It'll even play photos, music and/or movies stored on one of these: Soon, I'll get it talking to my PC via an ethernet port. But that requires an "ethernet bridge". Huh? Hmmm ... gotta google ethernet ...

 

Great Idea!

 

plasma TV

Years (and years) ago, I was a graduate student at the University of Illinois. Although Heidi was a nurse and generated most of our income (so she got a PhT: Putting Hubby Through), I got a research assistantship. It meant working, part time, at the Coordinated Science Labs (CSL). While there, I met Don Bitzer and Gene Slottow. Gene told me about a hair-brained scheme for displaying images on a screen. It involved making ionized gases glow, using electrical impulses. Yeah ... sure. Gene was a nice guy, but that scheme would never fly. Last night, Heidi & I decided to buy a 50" 1080p, 600 Hz TV. I had to look up the significance of "600 Hz". ** While browsing, I also checked on how plasma TVs worked. I had already studied HDTVs a while back. (That's when we decided to buy our current 42" 1080i TV.) Wait! Plasma TVs? Was that Gene's hair-brained scheme? So I looked up Who Invented Plasma TV?. Sure enough: Slottow & Bitzer!! Mamma mia! ------------------------------------------- ** The moving images on a TV screen are made up of a sequence of still images, displayed 60 times each second. (That's 60 Hz, eh?) However, the glowing pixels fade a mite before the next still image is displayed. To overcome this, each pixel is "flashed" 10 times for each still image. That makes a 60 x 10 = 600 Hz refresh rate for each pixel. ------------------------------------------- P.S. While looking at stuff on good ol' Gene Slottow, I discovered a paper he wrote in 1964 in which he says: Special thanks go to Dr. Peter Ponzo for programming assistance and for a series of valuable discussions on the mathematics of electron dynamics. Though Heidi & I weren't sure whether we should go with another plasma or switch to LCD, now I realize that we gotta go plasma! Why, I practically invented plasma TV myself!! ------------------------------------------- I understand that some U.S. companies became interested in the Bitzer-Slottow plasma display, but soon gave it up. However, some Japanese engineers became regular visitors to their lab. Guess who makes plasma TVs today?

 

lousy investor

Because I got me a web site that deals (mostly) with financial stuff, I get lots of e-mail asking advice on when and what to buy. Fortunately, I got lots of evidence that I'm a lousy investor ... like my take on lithium: I also provide this evidence, where (in an Internet contest) I come in LAST!. However, undeterred, I still have faith in my Lithium stock. Heidi, on the other hand, keeps reminding me of my lousy choice of investment. "One of these days," I say, "... you'll see".