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American Capital Agency Corp. Message Board

  • mrwizard9090 mrwizard9090 Apr 30, 2013 2:48 PM Flag

    what the glad model is doing(cont)

    the message board sucks. I think there are some replies/posts I can't see.

    a couple more observations.

    most of the stocks doc has included in his best performers, don't do SPO's very often, and when they do, it is near the ex date, when the model has you out. the rules say to buy all the SPO's and that is fine, but to answer somebody else, I think it would be best to set a share purchase target that you can sustain. IOW, don't blow your stake on 10K shares just because it is an SPO. you might get another buy signal, which the model suggests. by definition that will be an average DOWN.

    another thing with the stops, exits, and such. don't get too greedy. more people than I can count have gotten whacked by trying for that one penny more(myself included). as far as I am concerned, once your trade costs are covered, you are golden, because you have no net loss. while black swans are rare, the market fairies are going to catch on sooner or later, and will set you up for a fall.

    I strongly urge everybody to back check the model, and even more strongly urge anyone I have sent the sheet to, to check my formulas and math. sometimes my nickname should be "often-wrong", especially when it comes to nested IF's and AND's in a spreadsheet.

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    • Hey MW,

      ""the rules say to buy all the SPO's and that is fine, but to answer somebody else, I think it would be best to set a share purchase target that you can sustain""

      Clarification. Page two of the Rules state to NOT buy any SPOs within X-6 of the next EX date. Not enough time to recover. I have spoken about money management at length. Hold out enough in cash or margin to buy three times your initial entry with each of the Varsity. Not so with the Red Shirts as they rarely have 1.5% entries...so hold out 2x for them.

      Cheers,

      DocReits

    • Maybe you should have titled your thread - "What the glad isn't doing" ??
      One needs to have plenty of dry powder for the host of non-glad opportunities that are presenting themselves.

    • The occurrence of black swans has inspired the mathematical types to take a new look at stock market probability distributions. Most probability distributions are Gaussian however the Gaussian distribution predicts too sharp of a roll off of the occurrence of events to able to accurately predict the outcomes in a world where black swans do occur, and they do. They are thinking about using a new probability distribution that has tails that do not roll off as fast as Gaussian however I know of no mathematical derivation that shows the validity of such a model.

      After all, the assumption that stock market events were Gaussian distributions was just that, an assumption. Now they are starting to believe otherwise. It will be interesting to see if someone in the future comes up with a solution to this problem that can be accurately quantified based on some set of assumptions that everyone can agree on because they make sense. But until then I think we only know that black swans do occur and we don’t understand how likely it is that they will occur.

      You would think that most problems of this nature would be solved by now being that it is pretty fundamental to be able to predict risk of random occurrences of real life activities of which we have massive amounts of data. Yet the solution eludes us still. And maybe they will come to the conclusion that it can never be solved precisely because of the human factor. That would be scary.

      How do you predict with probability a complete market collapse when these collapses tend to feed on themselves. In other words the fact the collapse is occurring causes people to behave differently which tends to cause events to spiral out of control. The Gaussian distribution doesn’t account for this kind of interaction. That I believe would be its weakness as it assumes that events are independent which clearly they are not when a market is in the state of collapse.

 
AGNC
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