Diogenes Decisions

Various stocks that have caught my attention:

MKL
IW
ULGX

Neat website with a lot of neat info:

http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

Sue

Below is a link to a somewhat outdated study on S.U.E. (standardized unexpected earnings). Essentially, it seems that stocks that have “good news” on the way have a tendency to drift upwards prior to the actual release of the news and continue drifting up after the announced “good news.” Also, the converse appears to hold for stocks with “bad news.”

http://www.westga.edu/~bquest/2004/surprises.htm

Edit:
From http://faculty.fuqua.duke.edu/~mbran...orking/ear.pdf

A trading strategy taking long positions in good-news stocks and
short positions in bad-news stocks produces an annual abnormal return of 6.3%.

N.B. This is a working paper and I have not read the entire paper, yet.

It looks like Tharp has a new edition of “Trade your way to financial freedom” on the way. I think that it might be of interest.
Anyway VIX is a bit interesting at the moment.

http://www.iitm.com/Trade-Your-Way-to-Financial-Freedom.htm

Looks to have some interesting data, but I have not checked into it yet:

http://www.nowandfutures.com/index.html

This week:
Tkr: Vol:
IFS 0.339
OTEX 0.279
AW 0.379
TSG 0.125
MENT 0.257
HAS 0.179

Interesting paper, oddly enough free:


Commonality in the Determinants of Expected Stock Returns

-- Abstract --

"Evidence is presented that the determinants of the cross-section of expected stock returns are stable in their identity and influence from period to period and from country to country. The determinants are related to risk, liquidity, price-level, growth potential, and stock price history. Out-of-sample predictions of expected return, using moving average values for the payoffs to these firm characteristics, are strongly and consistently accurate. Two findings, however, distinguish this paper from others in the contemporary literature. First, the stocks with higher expected and realized rates of return are unambiguously of lower risk than the stocks with lower returns. Second, we find that the important determinants of expected stock returns are strikingly common to the major equity markets of the world. Given the nature of the tests, it is highly unlikely that these results may be attributed to bias or data snooping. Consequently, the results seem to reveal a major failure in the Efficient Markets Hypothesis."

http://www.quantitativeinvestment.com/research/common/commonal.html

N.B.
this is my addition.

This week:

HAS 0.215
AVT 0.476
AL 0.347

For a month:

KBALB 0.266
HAS 0.311
CP 0.243
TWX 0.107
AL 0.317
SQA-A 0.235

Just a thought:
FX markets appear to behave, in the short term, in vary narrow ways.

Mean-reverting seems to be the case here.

List- Short Term:

Ticker-Implied Volatility [over 10 days]
KBALB-.21
CP-.24
BW-.32
SMP-.25
TWX-.088


Def: Implied Volatility at http://www.investopedia.com/terms/i/iv.asp

Edit: Correlation for the above tickers with DIA over 1 year:

0.8365
0.6961
0.8670
0.5815
0.3310

See the below link for more info:

http://en.wikipedia.org/wiki/Correlation

For this week:

TWX
AEP
CP
SR

For a few weeks:

IFS
NEWP
AEP
AVT
MS

Short term:

NEWP
OMG
TNB
BW

And for a bit more time:

OMG
OTEX
TNB.

Just a thought:
FX markets appear to behave, in the short term, in vary narrow ways.
So far, with a play account, it has been interesting.

Here is a website with some nice fx data:

http://fxtrade.oanda.com/resources/

[IIC]

OTEX trin' to fill the gap

OTEX's 3-year chart is replete with big gaps (I can see 10 by barely looking; only 2 of the 10 are gaps up). Very volatile stock on an intermediate basis.

[IIC]

Not what I wanted to read, but I am sure you will make it up.

Win some...Lose some...That's the way it goes...As long as I make more on the winners than I lose on the losers...I'm OK...Best, Doug

A few picks for this week (actually more than expected) :

CY
GLYT
SR
TWX
RFMD

for a month:

TWB, CY,OTEX

From don's funds newsletter (free):

For more "Wall of Worry", I have included John Mauldin's latest newsletter "The Inflation of Expectations". We all know that the markets current rally is caused to some degree by the perception that the next move by the Fed will be to cut rates. John has something to say about that below:

" So why do we care about all the Fed speeches mentioned at the top of the letter? Because they are telling us that they will not cut rates if inflation does not come back into their comfort zone, EVEN IF UNEMPLOYMENT RISES".

"Those market participants looking for the Fed to come to the rescue in January or March are likely to be disappointed. Unless inflation slows more and faster than it looks like it will today, the Fed is on hold for some time, even as unemployment looks set to rise. Interestingly, because of the upward revisions, the unemployment rate dropped to 4.6%, the lowest rate".

"This just doesn't have the feel of Goldilocks to me".

For the complete 10/06/06 newsletter by John Mauldin's Frontline Thoughts:

http://www.donsfunds.com/files/Mauldin_Inflation_of_Expectations100606.pdf

From Jason Kelly's website (http://www.jasonkelly.com/) weekly update:

The September employment report left the labor market looking fine and the odds of another interest rate hike low. However, strength in wages and salaries means that the odds of a rate cut are also low.

Econoday reported that "economic growth appears to be on a moderately healthy trend but it likely is going to be the middle to latter part of 2007 before interest rates might come down."

Jason Kelly is the author of “The Neatest Little Guide to Stock Market Investing,” which is a nice introduction to Fundamental Investing.
It should also be noted that he has a pdf sheet on his website for download that is a nice way to organize various stock picks.