Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Why Day Traders Fail

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Day trading is when an investor buys and sells the same stock on the same day, which can occur in any marketplace (but is particularly common in the foreign exchange and stock market). Over 97 percent of daily trading activity derives from individual investor accounts. Moreover, performance measured over six months found that eight out of ten-day traders loses money. While those numbers can be discouraging, it should serve as a measure of caution for new traders lured into this activity from marketers advertising “fool-proof strategies” and “surefire signals.”

In a 2011 research study titled “The Behavior of Individual Investors,” UC Berkeley Professors Brad M. Barner and Terrance Odean found that individual investors who trade both actively and speculatively without a diversified portfolio lost money over time.

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The Tesla Tank

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One thing that has been driving Tesla stock recently is the expectation that it would be added to the S&P 500. However, that didn’t happen, and investors started unloading the shares as a result. The S&P 500 Index Committee added Catalent, Etsy and Teradyne to the index on Friday, but it excluded Tesla stock.

Tesla excluded from the S&P 500

Many investors had been banking on Tesla stock being added to the S&P 500 after the company posted its fourth straight quarter of profits. However, when it was revealed that the EV maker wasn’t added to the index, its shares plunged by more than 7% after Friday’s closing bell and were down as much as 15% before opening bell this morning.

Tesla stock has skyrocketed this year, climbing about 400% and making the company more valuable than some of the biggest automakers in the world, including Volkswagen and Toyota. It’s unclear why the S&P 500 committee snubbed Tesla stock, but one popular hedge fund manager had an idea.

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The Capital Rule and FNMA

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Fannie Mae and Freddie Mac have now officially said that they oppose the capital rule proposed by the Federal Housing Finance Agency. The government-sponsored enterprises agreed with critics of the rule who said the capital rule would increase costs for borrowers.

In a note over the weekend, analyst Dick Bove of Odeon Capital pointed out that Fannie Mae Chief Financial Officer Celeste Brown said recently that she had reservations about the FHFA’s capital rule as it was proposed. He also argued two more points, although his views are controversial.

Bove argued that FHFA Director Mark Calabria “is a highly intellectual, honest, and committed Libertarian who is adamant that the GSEs are not good for the government or the economy.” However, others like Tim Pagliara of CapWealth Advisors believe Calabria supports Fannie and Freddie, based on his actions and comments.

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Anne Scheiber’s $22 Million

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​Anne Scheiber worked as an auditor for the IRS. She retired at the age of 51 in 1944, and focused on managing her portfolio for the next 51 years of her life.

I wanted to share with you the story of Anne Scheiber, who died at the age of 101 with a portfolio of dividend stocks worth over $22 million. That portfolio was generating over $750,000 in annual dividend income at the time of her death. Anne Scheiber is one of the most successful dividend investors of all time.

I believe that this story can be inspirational to many. After reviewing it, I can tell you that I understand the blueprint for financial success. One can easily see the steps taken to achieve financial independence, so that they can mold their lifestyle in a way, shape or form that they desire.

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Market Efficiency?

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With the stock prices rising so dramatically for many companies on apparently so little news, we academics take a lot of kidding about the efficient market hypothesis which says that the market price of a stock fairly reflects fundamental information about the company.  Just what fundamental information is the market reflecting?  In our defense, it is important to draw a distinction between informational market efficiency and fundamental market efficiency. As described in our book, The Conceptual Foundations of Investing, a market is said to be informationally efficient if it responds quickly to new information.

Tesla is a poster child for informational efficiency. The stock responds almost instantaneously to slightest hint of news. A tweet by Elon Musk can set the stock moving the instant after he hits the return key. But fast response to information is not the same thing as a fundamentally correct response to information. A market is said to be fundamentally efficient if stock prices fairly reflect fundamental value. That means when the stock price moves in response to information, it moves the right amount.

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