Value of Perfect Information

TLB is at $2.70 in after hours trading after Sycamore Partners, which already owns nearly 10 percent of Talbots outstanding stock, said it would buy the remaining at $3 a share, a substantial premium to the $1.56 a share price at today’s closing bell. The stock is down a stunning 81 percent in 2011.

Back in July 2009, I purchased 24,000 shares of OMAG at prices of .1036 and .13 so about a dime a  share for a client. OMAG  was at $4.95  just 3 months ago; that is a 4,160% increase in a little over 2 years .   So that original $2,440 investment was worth  an amazing $104,000 and today it would be worth $42,000.  Based on today’s closing price of $2, that is still a 1,622% increase! Sure I could have invested $10,000 myself and purchased 100,000 shares that at the height in September would have been worth a cool $500,000. But I didn’t. Because as an investment adviser I took it one step further. I never had a personal trading account, because I never wanted to be accused of any improprieties, or front running any stock. I wanted to give Clients all that I could.  As you can see in the 2nd  blue box below, I also announced back then that I had no position in OMAG, but stated it was just my way of sharing with readers, traders, and investors. Furthermore, I was extremely generous, and in numerous financial blogs I boldly predicted that OMAG would be over a few dollars in a few years (see text in blue box below) and urged everyone to buy it!  Guess what?   I have now done my due diligence and have found the next stock that will explode higher and similar to OMAG in the next few years. Want to know what it is? Too bad! I’m retired as an investment adviser and don’t dispense any investment advise anymore!

Furthermore, I was extremely generous, and in numerous financial blogs I boldly predicted that OMAG would be over a few dollars in a few years (see text in blue box below) and urged everyone to buy it!

“Well OMAG partnered with CCC which is the largest contractor in the region to complete this mega project in Oman..CCC is a solid company that does all the work for Bechtel in the region; in a few years when the project is finished I hope to look back and be able to tell you that OMAG was the next CAR. Hey it is speculative, but as an investment advisor I can say with almost certainty that most readers here can afford to lose $60. Full Disclosure: No position, but providing this info as a courtesy here in the spirit of “Value of Perfect Information” which is the name of my website!”

Then I went on to state:

As I get ready to call it a night here on the East Coast and regarding my prior post on OMAG. Take the time to read the companies 10-Q report that they recently filed. The Warren Buffet of the Middle East, Mr. S.K. of CCC who is a billionaire is about to acquire any day now a one hundred million dollar stake in the company and 49.9% ownership. I assure you this private company did not become a top 15 worldwide international construction giant in terms of revenue by foolishly investing. Just thought I would pass this on. If anyone needs a copy of the 10-Q and can’t find it, let me know!  (Click on image below to read text clearly)

What becomes more dangerous when it is above 26, and less dangerous when it is below 26?

The answer is the Volatility Index (the VIX) which is often called the the Fear Index.

What some investors may not be aware of, is the importance of 26 on the VIX.   It so happens that many Institutional investors initiate what are often referred to as “program trades” when the VIX rises above 26.

What is a program trade?   It is a term that describes a situation where baskets of stocks are traded all at the same time, and the event is triggered by the execution of a computer program.   Sometimes, these are block trades with a total value of over a million dollars, that are executed on the New York Stock Exchange.

The impact can cause unusual swings in volatility which carries a higher than normal exposure to risk levels for smaller investors.

Since program trades typically increase after a value of 26 on the VIX, then below 26 would be a quieter, safer place to be when trading long positions.

Take a look at the two year chart below. where you can see the correlation between the S&P and the VIX when the VIX was above or below 26.  It is not a trader’s magical tool, but it can alert an investor when he is in a territory where volatility and whipsawing can be exceptionally high.

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Guess the closing price to two decimal places for the SPX (S&P 500) cash for next Friday December 9, 2011 close.  The closest to the actual close will win $100.  If you are signed up for our newsletter you will win $150, and if you are a member of our free trial subscription or a permanent member to MortiES you will win $200.  Learn about MortiES.  There must be at least 100 entrants for this to be a valid competition.  Deadline to send me your closing price will be 5 p.m. EST on Sunday December 4, 2011.  I will post everyone’s closing price in a spreadsheet by Sunday evening.  Please select a username when you send me an email and that is what I will post your name as.  I will be doing this competition on a weekly basis!

Send your closing price to bwm@bostonwealth.net or leave in the comments sections below.  Good luck

One indicator I look at intra-day to day trade is TRIN! Like stealing candy from a baby! .. especially with TRIN taking a nose dive with market rising .. a sure tell of the market rise to continue for a few minutes and up to ten minutes..