"Inside" Information nearly always useless

[Unknown]

In the market everyone is trying to get an edge. A common myth is that of insider information, it's a myth because 99.9% of the time if the tip is valid it has already been heard by so many people the priveleged information has been priced into the stock's current price. Most of the time "inside" information is a ruse to get the stock trading long or short by those with existing positions looking to take quick profits. The myth persists because 50% of the time an up/down prediction will be correct.

Actionable inside information seldom filters down to the ordinary Joe's. Those with valuable inside knowledge tend to be executives, and those guys save the spoils for their peers quid pro quo.

How to profit from the mythical inside information? Move with the sheeple but get out before they do.

[JBB]

Interesting point which I generally agree with.  However, there may be ways to get the "inside" skivvy on the stock indirectly.  My thoughts on this are based on a seminar I attended a couple of months ago where I saw an investment tool demonstrated.

This tool did things like track what trades the people at the top of the company are making with company stock.  For instance, if the top execs are sellling their stock in the company, it's probably a pretty good indication that you shouldn't hang around in the stock.  This tool tracks that info and graphs the trading behaviour of those individuals.

It does the same thing for institutional trades in a given stock.  Institutions tend to be the largest shareholders in most stocks.  I don't have a specific example, but generally an insitution such as a mutual fund company will own a major block of the company's shares, or several will.  Seeing how their performing in the market is a good indicator of what may be going on.  But usually, from what I understand, institutional investors are more reactionary and you might be in a position to trade against their investment performance.  Sell high when you know their buying.  Buy low when you know they're selling, etc.

Anyhow, this tool really impressed me.  But three things stopped me from from investigating it further and pursuing it further.

First and foremost, I'm not a day trader and only have general knowledge of buying and selling, as well as options and futures trading.  This is something I'm sure I could learn and in fact, the tool took much of the guesswork out of the process and made it much easier to do things.

Second is that if the tool was such a great way to invest and make a fortune day trading, then why isn't everyone using it?  If everyone were using it, we would be stuck in the mud and the tool would be worthless.  There is no panacea, no easy way to get rich and make a fortune.

Third was the cost.  The tool has a high barrier to entry.  I believe to use it you have to become a member of the organization that owns and markets it for something like $1000/year.  Next, you have to pay to get trained on the tool which I've heard costs upward of $25,000 when all is said and done.  They didn't mention this at the seminar, it was hearsay from someone who was there and was in the process of training on it.

Anyhow, I've gone far afield from the original topic of this thread; however, I would said there are probably ways of getting around the lack of specific "inside" information by understanding how to analyze a stock and having the tools to trade competently.  There is no magic bullet but someone is still making money at trading stocks, so it must be doable.

[Unknown]

Usually people with that tool info are sharing the data online and you can usually check the SEC filings yourself to assign credibility to the individual for future datapoints.

Useless Bio tips were the classic example of which m3 speaks, friend says his wifes friends mother works at SuperBioCorp and the trial has been approved or will be approved. This is the kind of tip that you can be sure 'you are the last one to hear it - not the 1st'.

The clearstation member that told me about Sonic Foundry taking off in the short term was dead on. It went from 12 to 120 but I had gotten nervous and got out.

I see 2 things about CKCM which are purely sports to me.

1) Will the earnings be boffo on monday or will they fail to impress and the stocks recent runup collapse ?

2) Will the character claiming inside info ( the best kind as in 'earnings data' ) be proven an idiot as he misses on his 3rd quarter or will he be correct for the 3rd time in a row.  This must be a bit like chicks watching soap operas but for me it sure beats television.

 

This graph only shows it going from 12 to 70, perhaps it was splitting, or I have the wrong sonic foundry.

clearstation.etrade.com/c...e&x=93&y=5

[Unknown]

JBB, think about it, if the tool worked why would they be sharing the secret?

One of the easier ways to make money is to sell snake oil.

[JBB]

Good point, but on the other hand, they aren't exactly giving it away.  You're tied to them financially as long as you're using it, even after you've ponied up the training dollars.

I would expect threat of a class-action fraud lawsuit would be a major issue if they didn't have something worth the money.

[The Gorn]

Geez. It'll never happen.

How do you prove something like that? EVERY investment related product (the investment itself, books, newsletters, etc) states plainly "results depend upon the market" and "past results should not be used to predict future results."

Investment information providers have known about sleazy EULAs long before Microsoft got interested.

[pm4hire]

[Unknown]

This guy is a bit of cheerleader for the stock, he owns a lot and was really optimistic right before the earnings where the stock tanked. I'm glad I rode it out.  I have gotten out now and wonder if it was such a good idea.  The stock just picked up institutional coverage and another institution just took a 5% position. Assuming these boys did their due-dili, then its a strong long term stock.  Attempting to predict such a volatile stock could leave me on the sidelines when it runs, I dont like to chase em.

MG says:

Last week can be characterized as a week of profit taking. There was a lot of profit taking pressure ever since the stock broke $29 on Monday morning, and the pressure persisted all week long. Some profit taking was almost unavoidable which would happen either before or after the earning report. From the message board discussions, we can see that many longs have chosen to lock in their profits before the earning report this time. The good thing is that, after a week of selling (except for a pause on Thursday), most people who want to take their profits have already done so.

Another observation is that, the profit taking was mostly from retail investors. Only 1% institutional volume was tracked by I-Watch last week, while nearly 10% institutional volumes have been observed in earlier weeks when CKCM was in the accumulation mode or advance mode. Noticeably, while some retail investors were taking their profits last week, one institution just filed as a 5% holder.

After a week of profit taking, the stock now maintains a low profile into the earning. Current price suggest that many people want to play safe and are cautiously pricing in an earning of slightly under $0.30.

Let the earning speak.

New investors please read my earlier posts if you are interested. Please do your own research. The more research you do, the more you may like CKCM.

1. $30 is only a New Start, Jul. 31, 2005, Post 74459.
2. Shorts to be on Focus, Jul. 24, 2005, Post 73614.
3. Calm Before the Storm, Jul. 17, 2005, Post 72159.
4. "CKCM Determines to March Forward (1, 2)", Jul. 10, 2005, Post 70545, 70546.
5. "Weeks Ahead: CKCM to Position for Q2", Jul. 4, 2005, Post 69513.
6. "CKCM to Explode to the Upside", Jun. 26, 2005, Post 68069.
7. "Institution to Play Increasing Role (1, 2)", Jun. 19, 2005, Post 65971, 65972.
8. "CKCM & TZOO: A Revaluation Process (1, 2)", Jun. 5, 2005, Post 62789, 62790.
9. "Accumulate on any Pullback", Jun. 1, 2005, Post 62220.
10. "CKCM: Building a Profit Powerhouse", May 30, 2005, Post 61434.
11. "CKCM in Process of Rapid Revaluation (1,2)", May 22, 2005, Post 59130, 59131.
12. "CKCM to Fly on Constant Short Squeeze", May 18, 2005, Post 58296.
13. "CKCM: Storing Energy for Breaking $20", May 17, 2005, Post 57831.
14. "To New Investors on Board", May 14, 2005, Post 56920.
15. "CKCM: Another BOOM", May 9, 2005, Post 55171.
16. "Earning and Growth Rule, not Nasdaq (1,2)", Apr. 17, 2005, Post 49366, 49367.
17. "Dont Repeat My Mistake on CMTL", Apr. 14, 2005, Post 49034.
18. "To investors who like CKCM's earnings", Oct. 29, 2004, Post 6407.
19. "Re: My experience with CADA and CKCM", Oct. 11, 2004, Post 6065.
20. "My experience with CADA and CKCM", Oct. 6, 2004, Post 6040.

[John Masterson]

Sounds like CKCM is no secret any longer. Enough investors are aware of it, such that the current price accurately reflects the potential of the stock and it's risk/reward ratio.

If it to rise dramatically, lots of people would have to have been wrong...i.e. the people who are not currently buying into the rosy forecast for this stock. My assumption is that as a whole these people have studied all factors and are probably correct in their collective wisdom.

That's how it looks to me, based upon my understanding of how the market works.

--- JM

[Unknown]

Quote:New Post  Re: Magic Discovery Sounds like CKCM is no secret any longer. Enough investors are aware of it, such that the current price accurately reflects the potential of the stock and it's risk/reward ratio.

So the value will rise if revenue rises or more key aquisitions occur.  Last quarter they tripled earnings.  If they do that again it will zoom.  OTOH if they fail to do that it could cause a lot of momentum traders to head for the exits. Everyone was surpised ( except of course MD ) last quarter when we thought something was leaking under the hood and they tripled. It does seem that the SEC has people keeping a better lid on the financial performance of publicy traded companies.

[Unknown]

JM, it really depends on the volume. My guess is that a stock like CKCM has a trading volume wildly out of proportion to its capitalization. When large amounts of capital are flowing back and forth its difficult to attribute rationality to price swings (although it doesn't stop people trying), what you have is a group of gamblers betting on which way the wind will blow. They may justify their trades with pseudo technical & fundamental analysis (mainly technical), but most of these guys are playing roulette, and the majority will get fleeced in the long run.

[Unknown]

Agree with all but the fleecing. If it is a true growth stock ( RFID over barcode ) then its surely going to grow either by continued aquisition or by growing revenue stream.

As long as the majority is 'buying and holding' then they will have nice exit points regardless of what year they exit.

I think the 5 year growth horizon from the CEO is accurate but the stock price growth which is ALWAYS looking forward will peak about 2 years from now.  At that time I am definately out and looking for the next 'Magic Discovery Growth Stock'.

Do you know of any ?

 

[Unknown]

BJE, I worked at Charles Schwab Institutional as a project manager. The software we wrote supported individual investment managers, circa 1995 we had about 300 Billion in assets under management. I didn't take the series 7 exams (broker exams) but I know enough to support brokers, execute trades, manage accounts etc. After leaving Schwab I wrote software for one of the leading financial data providers. One application archived every NYSE, AMEX & NASDAQ tick in real-time from a sat feed.

One thing I learned from seeing the inside transactions is that trading moves markets and the big players control trading volume. If you trade S&P futures, there are people on Wall St that can press a button and wipe your position out. The same applies to stocks. There are 101 different types of information that the big players have access to that you don't. While it's obviously not impossible to make money (btw congrats, you've done very well), it's hard to do it consistently, especially with frequent trades.

Wall St is like Vegas- the House has the edge, and over time the house will win unless you're smarter than the average trader. Of course every trader thinks they're smarter than the next guy.

Tips for picking good stocks? There's no magic recipe. I would advise that you understand fundamental analysis cold and only trade stocks that look good on paper. In other words, only trade stocks with good earnings and a reasonable P/E. Position yourself with a portfolio of quality stocks with a distribution of beta that corresponds to a risk you can handle. If you don't know what I'm talking about buy a good book on fundamental analysis. Don't listen to anyone pimping technical analysis, it's a crock.

You need to be able to read an annual report and quickly compute the fundamentals for a company. Don't be like the other sheeple trading on Internet rumors, you will eventually get wiped out.

[Unknown]

I made a lot on IPO's as soon as I figured out the research was meaningless, just had to figure out what the herd was going to do. Regular stock investing is much harder.  I dont have time to research anything but RFID, which is why I let my 401k's run and this stock is the only one I trade personally.  TA is interesting but nothing moves a stock like news.

We have Market Wise nearby and they use pretend money and pretend market systems to school people on trading.  Costs a lot of money.  I seem to recall a place like this out east where the guy lost everything after the training and came in and shot everyone. More snakeoil.

[The Gorn]

MMM, what's the difference between the two? Where in particular does technical analysis go astray?