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.

My Brush with Greatness

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I'd like to share with you the story of how I met one of Silicon Valley's greatest entrepreneurs (and a multi-billionaire) who funded my company back in 1992. This isn't just a story about the funding, but is more about the kind of person whom I admire in this technological center of the world.

This story is from back in early 1992, when I was working at a little financial data firm in Los Altos, California. A person came into our office to buy some data, which was unusual in itself, since almost all our sales took place on the telephone. Stranger still, he said he wanted to buy everything we sold, which was something like a $4,000 sale. For a company accustomed to selling data in chunks of about $50, it was pretty cool to have someone come in and just buy everything all at once.

I was curious who this mystery shopper was, and after a little exploration, I came to learn that he worked for a man whom I had never heard of – Andreas von Bechtolsheim or, simply, Andy. Andy was one of the four co-founders of a company I definitely had heard of, Sun Microsystems, which at the time was one of the biggest forces in the Silicon Valley. I tend to be fairly proud of my knowledge of Silicon Valley history and its figures, but Andy (being pretty much the opposite of Donald Trump with respect to self-promotion) was new to me.

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Trading as Character’s X-Ray

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I've pondered in the past how much we really know ourselves, or each other. Real-life heroes, for instance, seem to me to be born that way, and fate provided an opportunity for them to do something extraordinary that most people wouldn't do. The person who leaps between the subway tracks and puts his body over a child who fell down there wasn't necessarily trained to do such a thing. I don't think there's anything specific to their gender, ethnicity, racial background, or anything else that drives them to behave heroically. In that split-second, where most people's desire for self-preservation would have held them back, some individuals choose to do something with what we might describe as a very bad risk to reward ratio.

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Hedge Funds and Mayhem

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PREFACE FROM TIM: The world is divided neatly into two types of people. Complete Dorks, and SocialTraders. I met the gent below, House of Cards, by way of SocialTrade, and when he saw how much I liked the stuff he was stacking, he wrote and asked if he could write an article for Slope. I told him I'd be delighted for him to do so. It is below, and it's outstanding:

It seems that hedge funds and banks are buying up foreclosed single family homes with the intention of bundling them and securitizing to resell. I think this is a dangerous idea.

Let me start by saying I have always loved real estate and I think owning rental properties is a terrific idea for individual investors in today’s low-yield world.  You can make money four ways:  It provides a steady income stream from rents.  Tenants pay down your mortgage, meaning you can profit further when you sell down the road.  You can use the tax advantages of depreciation and long term capital gains rates.  And it is a great shield against inflation.  I believe you can triple your investment (including after tax and adjusting for inflation) in just ten years (if leveraged: all cash doesn’t work out as well.)  Here’s a real world example from the Pacific Northwest:  A 25 unit, nearly new complex sells for $2,000,000.  Net operating income is $137,000 a year.  With 20% down, a mortgage (10 year term/ 30 year amortization) at 4.5% costs $97,000 a year, leaving an income stream of $40,000/year, tax free due to depreciation write-off.  In 10 years, mortgage will have been paid down $320,000.  If rents follow inflation as they have historically, both income stream and sales price increase, as well.  Show me any other investment that pays the patient investor so well.  A dividend stock paying 3%, on which you have to pay taxes? 

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Trading In The Matrix (by Market Sniper)

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Most are familiar with the movie series The Matrix in which reality was totally divorced from perception. I believe we are faced with the same situation when we, as traders, engage the markets now.

Formerly  relatively free markets have been replaced by The Matrix. Markets that, over a long period of time, reacted to fundamentals and over shorter periods of time reacted to supply and demand factors no longer exist. All of that has been replaced by The Matrix leading some to even question the validity of technical analysis.

Does it not seem that what used to work fairly well no longer does? Or works so sporadically as to call the usefulness of what we used to do into question? Does volume matter with the advent of dark pool trading and high frequency trading  (HFT) machines? Does it seem that things no longer trend well at all? When you do identify a trend, it tends to end abruptly? Seeing a lot of chart patterns that used to work well fail more consistently than leading to the next technical  expectation as to direction?

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I Choose the Risk

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We all face risk as traders. No one knows what a day is going to bring (unless you are one of the big banks, in which case your profits are assured by government fiat). But for us little guys, we have to do the best we can with the tools and skills available to us.

The week ahead brings more risk than most weeks. I won't even go over what the risk events are; you've heard them all countless times. Suffice it to say that it's going to be wild, dangerous, and – at times – scary.

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