The Online Investing AI Blog

This article on Yahoo Finance talks about how the housing market is continuing to decline. As with most government intervention, the effect of the first time buyer’s credit had a short term benefit and I think it will have a long term negative effect.

Besides that, it enticed the most naive and inexperienced buyers to buy at the worst time possible. The housing market is going down and there is nothing to slow it down. Unemployment is high and the economy is weak. It is quite easy to see that housing prices are not likely to rebound any time soon.

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Money, Success, US Economy business, buyers credit, entrepreneurship, foreclosure, government, housing, markets, unemployment, yahoo

After reading this article on Forbes.com, I feel like the writing is on the wall, and I have posted about it before. The government’s massive spending may not have been enough to turn the economy around. It was enough to delay the destruction, but in doing so only makes it worse.

Many people who bought houses in the last year thought that they could get a free $8,000 just by buying a house. Hate to break it to you, but it’s not that simple. The reason the government was giving away the money was in an attempt to prop up the housing market. The only problem is that it was unlikely to work.

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Investing, Money, Success, US Economy houses, housing, markets, Money, real estate, Success, tax credit, unemployment

After reading dozens of books about human trading and Automated Trading, I feel like one of the biggest shortcomings of trading books is that the strategies are not very well tested. Although each author seems to swear by their systems and indicators, they rarely present any real evidence that their systems work. They do present charts that are handpicked to show when their system worked, but they conveniently ignore any evidence when they don’t work. And, they rarely show a track record of trades so we have an idea of how often it might work in actual trading.

I agree with the authors of Empire of Debt, when they say that trading the markets is not a science, and not even an art. I wonder if it might just be voodoo, where nobody bothers to really find out how successful trading systems are. But that is a topic for another post.

Why am I starting this post about the problems with books about trading? Because The Little Book That Beats the Market is a pretty good exception. Not only does it avoid many of the tricks used by most trading books, the author even explains 7 common faults with trading systems, and how his system has avoided these faults. I found this a singular and refreshing explanation of the rigor of  the methodology used in trading books.

How does he do it?

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Automated Trading, Great Books, Internet, Investing, Money, Success, US Economy Investing, magic formula, markets, Money, stocks, Success, trading

After reading this post over at Monevator, I considered buying shares myself. I don’t really think the time is right for me, but there were several interesting points I got from the post.

The first point is that often when everyone else is selling, it might be a good time to buy. Just looking at the US markets after the massive selloff at the end of 2008 makes me wish I had bough stock then. Although there is no guarantee that the market will recover right away, there is a good chance that it will if the problem that caused the selloff is short lived.

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Investing, Money, Success, US Economy advisors, Investing, markets, retirement, Success

It has been theorized that the TV, computer, DVR and internet will converge into one unit. The question is, how will it all work out? This fascinating analysis about Hulu online video service shows how popular the service has become.

I guess that’s part of the interaction between capitalism and technology. Each company does its best to exploit technology, gain market share, develop new and revolutionary products, and ultimately maximize profit. It may not be a perfect system, but it is the best we have, and seems to work pretty well.

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Accelerating Technology, Business Strategy, Dreams Come True, Internet, Money accelerating capitalism, business, credit cards, DVR, hulu, Internet, markets, Money, tv

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When the internet first started to develop, some entrepreneurs decided that there should be a currency just for online transactions. It made sense. People didn’t trust conducting transactions on the web and, of course, cash wouldn’t work.

Internet currencies, like Flooz and Beenz, were introduced. And dot-bombed.

Despite good intention and good ideas, online currencies never were adopted.

So that’s the end of the story, right? Not according to an article from Wired.

New currencies are starting to bubble up again. One currency is based on wireless phone minutes. Technology is literally becoming a currency. With less faith in paper currencies and a lack of malleability and portability of other forms of currency (gold and precious metals), a new currency–or new currencies–are more possible. In tightly controlled economies (China), new currencies will find a ready market, too.

And, if technology can create a currency, it can create technology to trade this currency.

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Accelerating Technology, Business Strategy, Internet, Investing, Money, Online Investing AI Beenz, currencies, currency, Flooz, forex, markets, technology, trading

The current meme is that investment bubbles are unpredictable. These black swan events are random.

I agree that the exact timing of market crashes can’t be predicted, but there is nothing unnatural about a market crash, nor, as hard as this is to believe at our current point in economic history, is there anything unhealthy about a market crash.

The market crash seems to be hooked into psychological approaches to adoption and rejection of trends.

But a quick look at past bubble-bust tandems show a completely predictable pattern. They’re fads.

Look at the trajectory of Crocs–the ugly (at least to me) foam shoes.

At one time, they had a select following among boaters and water sport lovers. They were comfortable and tight-fitting. It was a following, kind of like those first few dotcom IPOs.

Then the shoes were kicked into mass consciousness. Everyone from Presidents to Rock Stars were wearing them. Just like everyone was investing in real estate a few years back.

Now, it appears that the Crocs company is declaring bankruptcy. Demand has plummeted and expenses have skyrocketed. Sound familiar?

The pattern of clothing fads follows almost exactly the trends of music fads, like boy bands. Cult following. Breakthrough album. World tour. Sophomore jinx album. And then, it’s onto the amusement park circuit.

As traders, we can draw a few lessons from this.

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Business Strategy, Investing, Money, Online Investing AI, US Economy bankruptcy, crocs, market crashes, markets, shoes

Everyone seems to running around complaining about the economy and unemployment and lamenting the fall in the stock or housing markets. Let’s stop running for a second and ask an important question.

How did we get into this situation?

The markets did not suddenly decide to go down by themselves. They are simply going down after going up for a long, long time. Markets go up and markets go down. It’s part of the grand scheme of things.

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Investing, Money, Success, US Economy housing, Investing, markets, Money, news, sheep, Success

As the stock markets have made a big rebound, some people think that we are out of the woods. Has Obama’s massive plan averted financial disaster?

I think that it is way too early to tell. The fact that the markets have come back to nearly previous high levels is a great sign. The problem is that nothing has changed fundamentally in the economy. Unemployment is still high, and there is no reason that it will come down in the near future. Domestic automakers are finished, but the American people are left holding the bag. Demand for goods and services is not rising, and businesses have little ability to grow in the near future. Housing prices are falling, and I don’t think Obama’s plan will be enough to keep them from continuing to fall.

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Accelerating Technology, Dreams Come True, Investing, Money, Success, US Economy depression, economy, finances, markets, Money, Success

The economy has taken a big hit in the last nine months, and where it goes from now is quite uncertain. It looks like the housing market will continue to drop, but the stock markets are a big question mark. What is an investor to do?

Many people say that you should buy stocks now because the market is down and is recovering. But what happens if it goes back down again? They say,

It’s OK. It will come back sooner or later.

That’s probably true. There is just one problem with this advice.

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Automated Trading, Business Strategy, Investing, Money, Success Automated Trading, economy, Investing, markets, Money, risk, selling short, Success