MartinKronicle

The Master Class with Victor Sperandeo on Friday, February 4 in New York City is almost full.

Victor is going to teach you the proprietary rules he uses himself to this day. These rules are not in any of his books. Click on the link to see the full agenda.

Register for the Master Class and change your life.

I thought I’d have a little fun with a morning ritual The Business Insider runs each morning, with the same title as this blog piece. Here’s my take on what they’re saying:

“We’re in it for the long haul.”
“You can’t time the market.”
“We have to buy and hold.”

The tickers may change, but the banal story is the same. Not their fault entirely. They are poorly trained. And what would they do if they couldn’t get CNBC all day to kill the time? They are not money managers by a long shot.

You can see a 10% selloff in GLD btw, if it trades below $129.50 on size.

There is nothing on neither the Series 3 nor the Series 7 that will make you a better trader. These exams are for those of you who want to become marketers for member firms. Do yourself a favor and drop any plans you have for taking these exams.

Any time an employee of a member firm speaks to someone in the investing public about an investment, they need to be registered. “Speaking to someone in the investing public about an investment” is marketing, not trading. You don’t need the Series 3 to trade.

It is not going to make you more employable. It WILL confuse the hell out of the folks looking at your resume. Here’s what they’ll be saying:

“Why the hell does he have the Series 3 if he wants to trade?”
“Why did he set up his CTA if he wants to trade for us? We don’t hire CTAs.”

Set up your CTA if you want to be self-employed and you have a substantial marketing team. Everyone wants to shoot the gun, but no one wants to get the bullets.

Do not get a Series 7 so you can work at an equities prop trading firm. In other words, don’t work or seek employment from a firm that mandates you need to take the Series 7.

The licenses for the General Securities Representative (Series 7) and the NFA Associate Person (Series 3) will not help you manage risk or trade better. Pass on them.

Dynamic Hedge has missed the whole point about StockTwits in the author’s recent blog post Cost of Free in the Financial Web.

The “population of novice observers and would-be pundits” along with the pros et al. create a valuable community where everyone is an equal. That to me is what seems to be the biggest asset of StockTwits – more than the Tweets themselves. It’s the idea of sharing and being part of something bigger than the individual.

There’s no room for ego or “I’m a pro and StockTwits is beneath me because they let amateurs contribute.” Ed Seykota said “pride is a great banana peel.” We want newcomers to air out their thoughts among professional traders. That’s how they’ll grow and become great, not become a Massengill like Brian Hunter from Amaranth or Bernie Madoff.

Some of the most insightful things I’ve learned have come from students who didn’t know their backsides from a hole in the ground, but had the guts to ask questions that were way outside the box. And those questions got me thinking. As a teacher I’m better for those questions b/c frankly, I wouldn’t have come up with them on my own. I’ve been around too long to sometimes see the simplicity in things…to my own detriment. This goes for my trading also.

Traders and traders-in-the-making are very idiosyncratic and highly independent people. It’s more valuable than not to have some type of tribe to belong to. Trading is 80% or more self-awareness and 20% “how to,” so there isn’t any “best ideas” anyway. Saying otherwise is disingenuous.

Like Dynamic Hedge, I could not care less who nailed a big trade or who made 8 great calls in a row. That’s not the point. What is the point is if one of my buddies I’ve connected with via StockTwits has gotten ripped off by an HFT and he’s frustrated, he can reach out to me for support. StockTwits provides the platform for us to connect maybe long before we actually need to.

Unlike Dynamic Hedge, I will always share my best material for free. It’s very hard to develop trust with a readership otherwise. Plus, most new traders cannot afford to pay me what I’m worth, so I figure karma-wise it will come back to me in spades from other sources – not necessarily from the students who benefit from my writing.

I can call most of the Market Wizards from the first book on a cell phone at a moments notice for advice if I need to. I reciprocate that by paying it forward on my blog with some of my best material as frequently as I possibly can. I am by far the luckiest blogger/trader out there and I know it.

I’m willing to sift through some of the grizzle in the blogosphere to find the 3 guys who can help me. That’s the cost of having StockTwits.

F*ck intellectual greed.

It’s not Billy Crystal’s coffee grinder that’s spooking the cattle.

CME Live Cattle

(click for larger image)

Barry Ritholtz had an interesting post on Cattle prices. Yes, beef is going to cost more, because protein is going to cost more. But not the protein you think, but yes, that protein will go up in price too. Get it? Read more…

Cattle need to be fed protein so they can be fattened up so they can, of course, be slaughtered. That protein comes from corn, wheat, or soybean meal for the most part. That’s the first “protein” above. All of these commodities trade at the CME and CBOT. You can follow the CME Group on Twitter with the @CMEGroup handle.

Each of these commodities has a percent protein by weight. The feedlotter needs to be aware of the costs of the cattle feed protein. If the grains and oilseeds have bearish supply numbers, then higher cattle prices are going to follow. That’s the case today.

If you look at prices for live cattle, soybean meal, corn, and wheat, you’ll see (in the charts below) that they’ve risen quite dramatically compared to cattle prices themselves. Since June 1, 2010 prices have risen accordingly:

Live Cattle – 15.36%
Soybean meal – 52.63%
Corn – 68.06%
Wheat – 52.11%

Corn looks to have appreciated the most, so entities that need protein will look to find a cheaper cost of protein by weight that what their afforded via corn. Remember corn and wheat trade in bushels, which is volume, not weight. Soybean meal trades in metric tons and cattle in pounds.

Some sharp pencil will figure out a model to take advantage of this, as well as how much the increase in protein from grains and oilseeds will result in an increase in live cattle or feeder cattle.

The second protein is from fish, chicken, or pork. If cattle prices rise, the substitutes might rise from all the new buying that otherwise would have purchased beef because the substitute is cheaper – pound for pound.

If feedlot protein costs rise, or are expected to rise, feedlotters can buy grains and oilseed futures to hedge their costs. If the price of their cattle rise, they may decide to hold off selling cattle futures today, in order to take advantage of higher prices in the deferred months. That can lead to a one-sided market if there are only long speculators and no commercial selling hedgers.

CBOT Soybean Meal