What Value-Creating Winners Do All Day

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Howard Lindzon, Ivanhoff, and How to Find the Next Apple

How To Find Stocks That Could Go Up 1000% is a line often used by penny-stock peddlers. It is also the title of Howard Lindzon and Ivanhoff’s new book.

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I bought this book because I’ve always wanted to subscribe to Lindzon and Ivanhoff’s SocialLeverage50 service. But I always wanted to keep the $79.99 in my pocket every month a little bit more.

Anyway, the Next Apple. What is Apple? In its 35 years as a public company, it has been a growth, value, momentum, and penny stock. This book is about finding Apple-the-momentum-stock.

How to find the Next Apple

1. Identify a trend.

Find something you love, whether it’s Shake Shack (SHAK) or Virtu (VIRT) or Comcast (CMCSA). Chances are that other people out there like it too. If you don’t love anything, look at what Chris Dixon is tweeting about.

It is important to understand the catalysts behind a trend so you don’t freak out on price pullbacks.

2. Find an entry point.

The synonym for early is wrong. It doesn’t help to buy a future breakout stock only to have it hide in oblivion for years.

The first stocks to make new 52-week highs after a six- to 12-week correction are usually the ones that will outperform significantly over the next two to six months.

The vast majority of big long-term trends start with a breakout to new 52-week highs from a proper base.

3. Don’t overstay your welcome.

If price gets you in a trade or investment, price should take you out. If you don’t know why you bought, you won’t know when to sell.

Start taking profits in overbought conditions, like when Weekly RSI goes above 80.

For exit points, look for sudden high-volume, large moves against the established trend. These include: New 50-day lows, closes below the most recent time consolidation, closes below 100-day or 50-week moving averages.

4. Profit

Lindzon also happens to be an investor in Robinhood, an iPhone-only brokerage for millennials. Much like Robinhood encourages millennials to take an interest in financial markets, this book encourages the uninitiated to take an interest in stock picking. Whether or not retail investors should be picking stocks is another matter. But it never hurts to be interested!

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The examples in this book may suffer from survivorship bias, and you should probably talk to your financial adviser before trying the strategies described above.

The book doesn’t spend much time on charting tools or technical analysis. I like StockCharts for charting, FinViz for screening, and StockCharts’ ChartSchool for learning about technicals. I think a shortcut would be to subscribe to SocialLeverage50.

The SEC is Massively Underfunded

The SEC uses Blackberrys
The SEC uses Blackberrys because they can’t afford iPhones
Now I’m reading SEC Financial Reports because I still have too much free time. Interesting fact: The SEC had a budget of $1.35B in 2014. Not only does this have to pay for protecting investors and maintaining fair, orderly, and efficient markets*, this is also what they have to work with when they bring charges against big banks.

In fact, only $445M of the SEC budged went to enforcement last year. That’s nothing when you consider that Bank of America spent $16.4B on litigation in 2014! JP Morgan Chase spent $2.9B on litigation, but it had another $23B to dip into, on reserve.

Maybe it’s not an apt comparison. I don’t know how much the banks are fighting government agencies versus fighting each other. I do know that government agencies are no match against Wall Street banks.

Matt Taibbi explains how law works on Wall Street [1].

The bank walks into the room with the sordid activity, and the law firm’s partners huddle up and whip their associates – for hundreds and hundreds of billable hours straight, if necessary – until a way is found to call stealing or tax evasion or accounting fraud or whatever legal.

Matt Taibbi proposes the following solution:

That’s the way it should work on the prosecutorial side, too. You should start with a simple moral premise – this group of crooks ripped off X group of victims for fifty million dollars – and then you should bury yourself in law books until you find a way to put them all in jail.

I’d really rather they not do that. Just let me keep my tax dollars, okay. Goldman Sachs didn’t rip me off, nor did they rip off my self-directed retirement accounts, and if IKB bank wants to make a case out of this they can do it on their own time**.

I know, I know, there’s evidence that some public agencies are exposed to bank shit through convoluted investment vehicles but I hope those public agencies at least tried to follow David Swensen’s asset allocation strategy [2] with maybe 0% directed towards toxic securities.

If not, then maybe my tax dollars should go straight to helping these public agencies rather than law enforcement salaries.

*Also, write new regulation for the JOBS Act!

**Although I hope they don’t, because I am a GS shareholder. That’s a disclosure.

References:
1. Goldman Non-Prosecution: AG Eric Holder Has No Balls –RollingStone
2. Swensen, David. Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, Fully Revised and Updated
3. SEC Annual Reports –sec.gov

See Also:
1. When Regulators Think They’re Prosecutors –wsj
2. Main St. paid for Wall St. maneuvers –LA Times

The Women in Bitcoin Problem

How do we get more women interested in X is an age-old question that has been applied to science, technology, engineering, politics, econ, finance, sports, Asian men–

And now Bitcoin.

Felix Salmon recently made the case that the lack of females in Bitcoin is a fundamental weakness of the currency. Bitcoin is a technology perfectly suited for socioeconomic problems in developing countries, he says — but held back by poor design.

That’s a product design job, and frankly, it’s a product design job well-suited for women who aren’t approaching the problem while grinding an ideological axe.

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Bitcoin’s prime use case is in the most corrupt societies in the world. It needs women, with their sensitive emotional natures, to step in and design a delightful product experience to empower the underserved and unbanked.

I am a woman in Bitcoin. I identify with sub-Saharan African girls about as well as I identify with sub-Saharan African men.

Bitcoin is a first-world solution for third-world problems. It is likely to be well-suited for international remittances in developing nations. But convincing third-world oppressed populations to be early adopters is difficult with any technology, and not simply solved by throwing women at the problem.

The issue isn’t that Bitcoin needs women to step in and solve third-world problems, it’s that it needs people who can solve third-world problems.

And these are problems that everyone can think about, including Felix Salmon.

This is a subreddit where girls take off their clothes for bitcoin. So, that's one way to get women involved in Bitcoin.
This is a subreddit where girls take off their clothes for bitcoin. So, that’s one way to get women involved in Bitcoin.

References:
Why Bitcoin’s male domination will be its downfall –Fusion