AssetPreserver News

If you have ever watched level II quotes, you will see bids for $0.01 or ask $100,000 for a stock. These are stub quotes.

According to Investopedia: stub quote is an order placed well off a stock’s market price. Stub quotes are used by trading firms when the firm doesn’t want to trade at certain prices and wants to pull away to ensure no trades occur. In order to make this happen, the firm will offer quotes that are out of bounds. A stub quote also serves as a safety net in that if a market maker doesn’t have enough liquidity available to trade a stock near its recent price range, then a stub quote is entered so that the market maker complies with its requirements without extending its quotes beyond its available liquidity.

The SEC found that stub quotes represented a significant proportion of the trades that executed at “extreme prices” on May 6, the day of the Flash Crash. When market makers briefly stopped trading, the only quotes left were stub quotes (which were executed) causing the S&P 500 to drop 6% in a matter of minutes.

New rules that took effect this Monday (Dec 6, 2010) tighten the band to within 20% to 30% of the national best bid and offer. The 20% trigger occurs near the open and close (before 9:45 or after 3:35) and 30% for other times during market hours. The range can tighten to 8% for stocks participating in the new circuit breaker program.

Hopefully, this will add some order to the market.

Do you have an exit strategy for each of your investments?

Knowing when to get out of an investment is much more important than knowing when to get in.

Here is an article discussing why having an exit strategy is pertinent to your portfolio.

Vanguard has joined the no fee zone. Their lineup of 46 ETFs are available for no commission trading. Also, their commissions on equity trades have been lowered; the amount depending on your total assets with them.

I am a big proponent of Vanguard because of its philosophy of low costs for financial products.

Visit Vanguard for the details.

One of the big costs of trend following and ETF investing at regular intervals is commissions. That may be going away.

Fidelity has offered commission-free trading on certain iShares ETFs. This is great because now you can invest in ETFs at regular intervals like mutual funds but without incurring commissions. Since ETFs generally have lower expense ratios this is a big plus for investors. Schwab has a similar offering for eight Schwab ETFs.

Want your own asset allocation? Instead of a 60% stock/ 40% bond balanced mutual fund at 0.60% expense ratio, do 60% IVV (S&P 500), 40% AGG (U.S. bonds) at a combined 0.15% expense ratio, a savings of 0.45% per year.

Finally, something good for investors.

AssetPreserver.com recently attended the International Traders Expo in Las Vegas. The impetus behind the show was not long-term investing; it was trading commodities, futures, options, day trading, and forex – not for the faint-hearted. Not being a trader myself, I thought it would be interesting to see how the companies would sell us on their products. My gut feeling was since gold is near an all-time high I would see a focus on precious metals…I was right.

I was surprised at how many people showed up. The seminars I attended and peeked in were nearly full. The one seminar we finally attended was futures trading. A few secrets were thrown out to the audience so they would come back tomorrow at 6 AM when the Europe markets were winding down and the North American ones starting up and a few real trades would be made. The presenter indicated this was a 24 hour a day, 5 1/2 days a week endeavor.  What surprised me was the attendance: the room was full (150 people or so) and most attendees were already trading at this level. I was tempted to ask how many made money over the long term, but refrained.

Most of the exhibits were on trading methods and showing off the latest software. There were several aside presentations on techniques which work best with their tools. Dona asked some poignant questions on how does this help the average person.

One interesting idea had nothing to do with split second trading. It was a private mortgage REIT which relied on farm production for income. It guarantees 7% interest every year for four years after which you can buy in for another four years. The REIT holds mortgages to farms in the Midwest and does not make money until the 7% is paid out to its owners. The prospectus was not available so I have to wait until it arrives in the mail. I will analyze it on AssetPreserver.com.

One booth I visited showed me the gamut of software in which I could trade just about anything. Almost under his breath, the salesman mentioned that after 18 months of trading you should get good enough to start making money.

The whole experience reminded me of the 1850′s gold rush. The ones who made the money were the ones who supplied the tools to the prospectors.