Thursday, November 20, 2008

New Lows, New Opportunities: Themes for Thursday

* Finding New Lows - Ten-year Treasury note yields broke below their 2003 levels today (top chart), as the S&P 500 Index (bottom chart) also broke the lows from the previous bear market. The last decade has resulted in a more than 33% drop in stock prices (November, 1998 to November, 2008), a crushing blow to those who have relied on buy-and-hold for their retirements. Add to that corporate bond prices that are priced for default and housing values that continue to fall and you begin to see the destruction of wealth that will affect the economy for years to come.

* Where There Is Opportunity - I was interested to see that retail traders opened a large number of accounts and increased their trading at E*Trade, even as customer assets dwindled. This pattern also manifested itself at Ameritrade and at Schwab. Indeed, according to one report, eight of the ten busiest days at Scottrade were during October, with the number of new accounts running three times the average level. It appears that volatility is bringing out the speculative sentiment among individual traders. Perhaps in response to the growing interest in trading, Scottrade has begun a program of free trader education at their branch offices. It's an interesting venture; over time we may see retail brokers developing their customers much like prop firms develop their traders.

* Figuring Out Bloggers' Personality Type - Thanks to a very helpful reader who found the Typealyzer app, which categorizes blogs by the personalities of their authors. Mercifully, the categories of "narcissist", "idiot", and "antisocial" are not part of the scheme.

* Thematic Trading - Here's an interesting idea that's held up well in the recent, difficult market from the MarketSci blog.

* When to Get Out - Worthwhile investigation of the performance of different exit strategies from the RipeTrade blog.

* Trading Sentiment - A followup on a promising trading system idea from the Buyside blog.