Why is the Euro likely to Rise? Who cares.

The Euro's rally eased recently but it appears that it might be gearing up for another run to new short term highs.  Is it QE2?  Maybe.  Is it just the natural forces of the "risk trade" being back on that puts pressure on currencies with low rates (the dollar) as traders sell dollars as a funding currency?  Probably.  Here's the chart:

Does the "why" really matter?  Absolutely not.  Too many people get wrapped up with the "why" in the market and lose track of the goal..which is to make money.  Talking about the Fed and politicians is fun and can be profitable, as long as you keep the important questions in mind..which are "how will this affect my trading?" and "how can I make money on this idea?" 

The proper time to ask and use "why" in your analysis is when you are determining a catalyst and you are actually basing trading decisions off of various things happening or not happening in the future.  The time to determine these things is before the trade and they should be incorporated in the trade plan.  These questions and determinations should not be impromptu decisions that are made while your trade is on. As always, there are exceptions to this and there are traders that can make these determinations while trading and you know if you are one of them or not.  For the most part, traders can't do this and it is probably reflected in your P&L. 

A little bit of rant?  Yes.  Probably just pent up frustrations from dealing/working with individuals that think they know how to make money in the market.  Most don't and it is obvious from looking at their accounts.  The individuals that are the worst are the ones that know a little..they know just enough to be dangerous?  We are all at the "know enough to be dangerous" stage at some point in our trading/investing careers.  What separates the profitable from the unprofitable are the ones that either push through this stage by much work and effort and open mindedness or they turn over their investments to someone (adviser/fund manager) or some strategy (mutual funds/index funds) that performs better than their own active strategies.  The habitually unprofitable traders continue to look for the next magic formula or holy grail and they always know that they're on the verge of discovering it.  It's always worthwhile to spend a few minutes thinking about where you are in your trading/investing career. 

Happy Halloween!

TLT

Biggs says there's another 10% of upside

Here's a link to a great interview with Barton Biggs..check it out.

TLT

Wisdom Quote

"It would be a serious mistake to think that all the facts that describe a particular investment are or could be known.  Not only may questions remain unanswered; all the right questions may not even have been asked."

--Seth Klarman

Margin of Safety

Show Me the Value

Here are four stocks that turned up this week on my "Ben Graham" style value screen.  I run a handful of screens every couple of weeks to look for ideas and there seems to be some potential in a couple of these names.  The screen that I run is pretty basic and I use FINVIZ to run it.  This is an excellent website that offers up so many free tools that I can literally spend hours on it just playing around.  Check out the site if you haven't already..fyi, I have no affiliation with FINVIZ, I'm just an enthusiastic user of the site.


On to the good stuff.  Below, are some pictures and charts that give a brief rundown of the 4 stocks that are currently coming up on the screen.  Then at the bottom of this post is a screen shot of the settings that I use to run the screen.  If you're interested in this type of screen, just plug in the same values and then begin tweaking the values and filters.  Let me know if you find an interesting take on this screen.  Here are the current value candidates:

 My favorite on this screen is CRWS.  CRWS just broke out of a range and is exhibiting major strength.  A pullback to the 50 day moving average around $4.50 could provide a great long entry with a favorable risk/reward outlook.  ELNK is also worth keeping an eye on..it could be a good trade as well, it just needs to find some support after its recent sell off. 

As for the Value Screen itself.  It is a Graham style screen because it uses similar criteria and concepts that Graham endorsed.  These stocks have a relatively low Price/Book ratio and a low P/E.  They also have low Debt/Equity and positive earnings growth.  Furthermore, these stocks have a current ratio of at least 1.5.  The idea behind this type of screen is to find stocks that are cheap using the Price/Book and P/E but then qualifying the cheap stocks by making sure they have low debt and plenty of cash to meet their near term obligations.  Some stocks have a low P/E for a reason, and their P/Es continue to get lower and lower as the business gets closer and closer to having to shut down forever.  This is why Graham preached about the importance of the examining the "debt" side of the equation.

Here are the parameters that I use for the screen:

I hope everyone is having a great weekend!


TLT