Thursday, August 25, 2011

Surfing the Volatiles

The stock market is slowly heading down a bit today, tucking it in before the weekend. The fall of Tripoli ensures Libya's oil will once again supply Europe, and the oil stocks I'm following are down. That means cheaper gas, cheaper feedstocks, and a growing economy all may be here soon.

In audio, when you turn the volume up too high, the waveforms become clipped at the top and bottom, flattened out against the limits of the channel that conveys them. In volatile stocks as compared to blue chips, there may be a similar effect to making sound waves clip. Volatiles will rise until there's no enthusiasm to lift them further, then hold until the blue chips start to fall. On a blue chip (Dow) downward trend, volatiles will fall even faster, as the short sellers drive the adventurists out and shares are sold to meet margin calls. As the bottom nears, volatiles will fall only as fast as blue chips. They have lost their volatility, and reflect the general market.

There is not so much change at the bottom. Stock prices are nearer to book value. Changes are small and random - there is no signal - all one sees is noise.

Then an upward tick in the Dow is doubled in the volatiles. But a downward tick in the Dow is only equaled in the volatiles. The volatiles are edging upwards once again.

Wednesday, August 03, 2011

Proxy Power

This morning, I have been researching Saul Alinsky's idea about using proxy power to elect members to corporate boards of directors.

When a person holds shares in a company, as through an IRA or an ordinary brokerage account, they get to vote on candidates to the board of directors. An e-mail arrives with a voting code. If they just delete this, the board of directors elects the board of directors. But suppose they were to forward it. Suppose they were to assign their favorite organization as their proxy?

The greatest difficulty in using proxy power is in gathering the votes. These are widely distributed. But suppose that every time I get an email proxy from Scottrade - and at this time of year, for each stock in my IRA, they are arriving in the e-mail - suppose I could forward it to "AARProxy" or some such? That would be no trouble.

AARP Proxy needs only to sort incoming emails by company name, then to read the voting codes in the emails into a database. They would also need to examine candidates for the corporate boards they are interested in and to vote when the time comes.

That is to say, modern data processing and communications can easily conquer the mountain of trivial paperwork that would have been involved even ten or twenty years ago. Many, many retired people hold IRAs and have email. As their annual meeting notices come in, for them to forward instead of deleting the emails would not be a problem.

It would, in fact, give AARP a chance to send a "thank you" note to everyone who sends them a proxy, thereby building their base of support.

Even people who just plain hold stock could forward their proxies. Suppose even ordinary guys with brokerage accounts - I'm reminded of a cabbie who was investing in techno-bubble stocks in 2002 - suppose these guys were to forward their proxy emails to AARProxy without deleting them? Or to "ProgressiveProxies", "EarthProxies", "LGBTQ Proxies", "Rand Paul Proxies", "PreacherJesseProxies", "PowerlessAndPoorProxies", "ILoveNYProxies", "TaxiProxies", "HikerProxies", "BikerProxies", et al, ad infinitum?

Proxy collectors would be solicited by candidates for the boards.

The automatic turnover of unused voting rights to the currently elected boards would end.

Does this seem far-fetched?

Whoever writes a proxy-aggregater program that people can download for free will liberate the world.