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Share trading likes & dislikes!, What drives you to drinking???
post Posted: Sep 20 2005, 03:45 AM
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In reply to: davesss on Monday 19/09/05 10:35pm

Two months ago, some scientists headlined the idea that emotions can get in the way of optimal trading performance .

Later on this was headlined in a way that suggested brain damage can help trading .

It wasn't until the headline was about psychopaths being better traders that the story got featured on trader bulletin boards around the world.

The original research was not about psychopaths. It wasn't until the media twisted researcher comments and started using head kicking and social leper headlines that traders started paying attention. Most responded emotionally to the story, weren't aware it was rehashed and didn't do any background (fundamental) checks.

Have "dot com", will travel, so to speak.

post Posted: Sep 19 2005, 10:35 PM
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I'm obviously not crazy enough....

Best traders 'psychopaths'
From: Reuters From correspondents in London
September 19, 2005

"Wanted: psychopaths to make a killing in the markets".

Such an advert will not be appearing in the world's newspapers any time soon, but it may have a ring of truth after research revealed the best wheeler-dealers could well be "functional psychopaths".
A team of US scientists has found the emotionally impaired are more willing to gamble for high stakes and that people with brain damage may make good financial decisions, the Times newspaper reported today.

In a study of investors' behaviour 41 people with normal IQs were asked to play a simple investment game. Fifteen of the group had suffered lesions on the areas of the brain that affect emotions.

The result was those with brain damage outperformed those without.

The scientists found emotions led some of the group to avoid risks even when the potential benefits far outweighed the losses, a phenomenon known as myopic loss aversion.

One of the researchers, Antione Bechara, an associate professor of neurology at the University of Iowa, said the best stock market investors might plausibly be called "functional psychopaths".
Fellow author, Baba Shiv of Stanford Graduate School of Business said many company chiefs and top lawyers may also show they share the same trait.

"Emotions serve an adaptive role in speeding up the decision-making process," said Shiv.

"However, there are circumstances in which a naturally occurring emotional response must be inhibited, so that a deliberate and potentially wiser decision can be made."

The study, published in June in the journal Psychological Science, was conducted by a team of researchers from Stanford University, Carnegie Mellon University,

john constantine
post Posted: Aug 7 2005, 08:27 PM
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there is an old trick i hate--i had a lot of shares in a company that had a capital raising equal to 50% of the existing capital- issueing part paid shares with the balance to be paid in 6 months. not a lot of take-up, except for directors. once the issue was allocated, the terms were changed, so the balance of the part paid could be left as a non-recourse loan to the company , but the director holders could get the full dividend paid.............there was then a massive special dividend announced of 10 times the deposit on the part paid share-------nice work if you can get it.------------and one of the big winners from the stunt is no stranger to a board mr vizard was on either.

post Posted: Aug 6 2005, 10:50 PM
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I keep a list every day of insider trading and it is most interesting although asic will never do anything about it as Alan Kholer said.
At least it is in my diary so that if ever need be I have a comeback.
Last week I can name a list of u co's that went up at least 10% with no explanation except that insiders already knew the feds were taking over u mining in NT

post Posted: Aug 6 2005, 09:56 PM
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From the Age - August 6th 2005

The inside news
August 6, 2005
Trading based on inside information is widespread and the ASX and ASIC seem unwilling or unable to do much about it, writes David Elias.
Inside information is being widely used to drive share prices and force shifts of millions of dollars in the market value of public companies.
An investigation by The Age in the wake of the Steve Vizard affair and heightened public perceptions that insider trading is widespread, has confirmed behaviour that is too common to be coincidental.
In the days before companies reveal takeover bids, profit downgrades, capital raisings and other price-sensitive events, the sharemarket community will too often take an unexpected interest.
The volume of trades will go through the roof and the price of shares will rise dramatically if it is going to be good news and tumble if it is going to be bad.
Business reporters have examined the volumes of trade, the movements of share prices and the activities of key players ahead of 50 price-sensitive announcements made to the ASX over the past 12 months.
In an extraordinarily high 15 instances, the movement in the share price should have been sufficient to ring alarm bells. However, all but three of these escaped scrutiny because it usually takes a 10 per cent one-day price jolt to galvanise the ASX into action.
The response to the ASX from each of the three was typical of most listed companies that receive please explain letters under the stock exchange listing rules.
They said they knew of no information that had not been disclosed to the market and they could offer no explanation.
Soon afterwards, however, two of the companies announced profit downgrades that could well have accounted for the fall in their share prices. The third company, which experienced a rise in its share price ahead of news it was involved in acquisition talks, said it must have been "positive broker sentiment".
"It is on the line if you get a private briefing . . . we have to be careful what we talk about.' FUND MANAGER
While many sharemarket players can profit from being inside the loop of information that flows in many instances from leaky boardrooms or loose-lipped senior managers, other less well-informed investors stand to lose money.
Dr aitken, who heads the Capital Markets Co-operative Research Centre, has carried out a study that showed the price and volume graphs moving in advance of official ASX announcements, but these were explained away as unofficial information releases.
"Most of the information leaked out as part of media activity, often from the key insiders themselves in order to attract other traders into the market as a way of hiding in a crowd.
"If others are also trading, it is possible to argue that the information was in the public domain before it was officially released to the ASX. If it is in the public domain, you have a defence."
Richard Heaney, an economics professor at RMIT University, has begun a five-year project looking at directors' trading behaviour. He said it had always been difficult for academics and regulators to differentiate between legal insider trades and illegal trades.
Directors are allowed to buy and sell shares in their companies but not during "blackout" periods in the run-up to profit announcements when they clearly hold price-sensitive information. They must notify the ASX of all their acquisitions and sales and Professor Heaney has found evidence of some profitable trading.
"They seem to buy at times that appear to be quite beneficial but as to whether they are illegal, that's very difficult to say. How do you actually prove that there was some intent to commit a crime?"
Merchant banker Goldman Sachs JB Were releases a summary of insider knowledge and the activities of directors as a market guide.
It suggests directors are able to buy and sell at advantageous times and manage to outperform the market by about 8 per cent.
Goldman Sachs analyst Chris Pidcock said these were legal trades by insiders.
Evidence before the HIH Royal Commission in 2002 showed that jailed former insurance chief Rodney Adler had breached FAI's code of conduct by buying 1 million FAI shares for $416,000 during a contract negotiation.
A fund manager has called for another look at the law and how it was enforced. "Either the regulator isn't pushing the current law hard enough or the law isn't sufficiently tight to enable the regulator to get better outcomes," he said.
But there is little the corporate watchdogs appear able to do about it because culprits are hard to pinpoint. Also, many instances of prices nudged by inside knowledge would either not fall within the insider trading laws or the technicalities of the Corporations Act would make prosecution difficult and expensive.
According to the Australian Securities and Investments Commission, 32 individuals have been charged with insider trading since 1985 and only nine have been convicted.
In the public's mind, the Vizard affair has tended to confirm suspicions that misconduct is rampant in corporate Australia, especially the use and misuse of inside information.
Vizard was popular and respected, and the discovery that he had used his position as a Telstra director in 2000 to trade shares in three public companies negotiating deals with Telstra shocked the community.
When it was then learned that the Commonwealth Director of Public Prosecutions had declined to charge the former TV star with the criminal offence of insider trading, which could have put him in jail, the public was outraged.
When the Federal Court last month banned him from managing a company for 10 years and imposed penalties and costs of $590,000, most thought he had got off lightly.
Company directors at corporate lunches have expressed their disgust at Vizard's betrayal. Stockmarket operators, most of whom are paid big money to seek information, analyse the numbers and anticipate the rises and falls, were equally affronted.
One such person, a prominent fund manager interviewed by The Age, complained that ASIC was armed with a tough law that was unenforceable.
The insider trading provisions occupy 10 pages in the Corporations Act. They are tough and cast a broad net but the enforcement hurdles are extremely high.
The fund manager said: "It gets my goat that ASIC's cost-benefit analysis suggested they shouldn't proceed because Vizard's lawyers were going to fight it all the way. That just says to me that ASIC backs down when anyone throws money against it.
"They have cast a huge net over the market to catch insider traders, but it's too huge and many get through it.
"It happens, there's too much of it, and the regulator has not been able to instil the level of fear necessary to stop it."
The man, who asked not to be identified, explained that it was his job to talk to companies about their prospects but there remained a fine line dividing inside information from public knowledge.
"The law is a bit vague but it is regarded as on the line if you get a private briefing from a company. So we have to be careful about what we talk about."
He said that in general, company management was much better than it used to be, but there were occasions when indiscretion got the better of people and they imparted knowledge that should have been kept under wraps.
"If, for example, you have a friend who is a research analyst and he tells you casually on the train what he is going to publish in the next few days, that is insider information.
"With a company, when that happens, I tell them I am displeased about having been brought over the wall. If I am in any doubt about whether the information I have has put me over the wall, I get a written opinion from my compliance people.
"If you believe that the information is price-sensitive and not generally available, then you must not deal in that stock."
However, there are many who do. The Age investigation has revealed a frontier mentality prevalent in Western Australia were 31 per cent of all public companies are registered. Most are resource minnows and day traders go looking for geologists and others who might hold useful nuggets of information.
Mining companies in WA, and to a lesser extent small biotech and technology start-ups elsewhere, have a never ending thirst for capital and company managers appear vulnerable when approached for information. "They are too frightened to tell people to bugger off," a market analyst said.
The companies most likely to have leaky boardrooms are those with the biggest needs. A broker explained: "Usually, these are companies of confidence where any investment is an act of faith. They are living day to day without income, so they do private placements for all their mates."
A fund manager described small companies as easy pickings, especially when they developed close relationships with brokers who were able to exploit opportunities.
Other fund managers The Age interviewed described a marketplace that worked on personal relationships between brokers and clients where information was money in the bank.
One described the frustration of seeing movement on shares that his investment company had put on its temporary blacklist because it had knowledge it dared not use ahead of an announcement.
"I know that only five people have the inside information and I see the price move and the rest of us are out of the market."
Dr Mike Aitken, an expert in market surveillance, said it was easy to spot incidents of insider trading and the equally evil stockmarket manipulation but it was almost impossible to prove in court.

post Posted: May 31 2005, 07:55 AM
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now what would have happened had they taken this short position, phoned clients to sell Promina and then covered after the sell off?
Crooked brokers? Makes you wonder why we use brokers at all.


post Posted: May 31 2005, 07:23 AM
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ASX fines Merrill
By Robert Clow

THE Australian Stock Exchange yesterday fined Merrill Lynch $125,000 for trading Promina stocks for its own account in 2003 in a way that suggested market manipulation.

Merrill agreed to the fine without admitting anything. It also agreed to undertake an education and compliance program.

"We engaged in a series of high-volume trades over the course of a few hours which the ASX disciplinary tribunal took the view had the potential to be viewed by an observer of the market as involving inappropriate trading," said Merrill chief administrative officer Terry Winder.

"We co-operated fully with the ASX review into the matter and without admission did not contest the contravention before the tribunal."

Merrill established a $61 million short position in Promina stock at $1.90 on May 12, 2003, anticipating a number of client sell orders.

But those orders never materialised and Promina's share price started to rise - endangering the short position. Merrill started to buy Promina stock back to cover its short position - eventually closing out the position by buying Promina stock at prices between $1.91 and $1.98.

But at the same time Merrill listed six substantial selling orders on its trading screen - totalling 42.5 million shares between them. Five of the six selling orders never traded, according to the ASX.

"None of the six Asks traded immediately and all were either amended away from priority and/or subsequently cancelled," according to the ASX disciplinary circular. An observer could reasonably conclude that it had entered the six sales with a view to depressing Promina's share price while closing out its long position, the ASX said, and concluded that Merrill's actions were "prejudicial to the interest of the exchange".


post Posted: Mar 12 2005, 10:22 AM
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Cunning predators hide behind swaps

March 11, 2005

EQUITY swaps are a firmly established part of market practice. Many hedge funds, for example, deal only in cash-settled swaps, betting on a rise or fall in the price of a stock rather than dealing in the underlying securities.

But there's growing unease that there's no disclosure requirement in relation to the holders of swaps, and some other derivatives, particularly in takeovers.

Cleveland-Cliffs of the US believes US hedge fund Seneca has secretly built a 9 per cent stake in its takeover target Portman Mining through CSFB – enough to block compulsory acquisition – while BHP Billiton raised eyebrows by admitting it has cash-settled swaps with Deutsche Bank over 4.3 per cent of its takeover target, WMC Resources.

And the appearance of investment banks, which are active in the swaps market, on the registers of Lend Lease and takeover target Foodland Associated, has created speculation that a party may be seeking a strategic stake in those companies. But it's all guesswork. Equally, the stock may be held for the fund management arms of the investment banks.

With an equity swap, a party (the holder) enters into an agreement with an investment bank (the counter-party). If it's a long swap, the holder benefits if the price rises, and the bank benefits if it falls. It's the reverse with a short swap – holder benefits from falls, the bank from a rise.

The counter-party bank will normally hedge the swap by buying or selling short, depending on whether it's a long or short swap and the number of shares involved.

The Corporations Act's disclosure requirements are concerned with ownership and control, rather than economic interest. In fact, section 609 (6) specifically provides that a party doesn't have a relevant interest in securities merely because of "a right to acquire the securities given by a derivative". Section 761D suggests that's the case whether the derivative is settled in cash or in the physical securities. If a swap exceeds 5 per cent and the bank hedges by acquiring that amount of shares, the bank, as the beneficial owner, must lodge a substantial shareholding notice, but the swap holder, who has an economic interest, is not required to make any disclosure.

On the face of it, there is legally nothing to prevent a party getting its foot on a substantial stake in a company through swaps, possibly exceeding the 20 per cent bid threshold, with no disclosure because it wouldn't trigger a relevant interest.

Most of the investment banks are foreign owned and wouldn't be able to enter into share swaps covering more than 15 per cent of a company's capital without requiring foreign investment approval. But what's to stop a potential bidder from using two or more investment banks?

The use of derivatives in takeovers is under scrutiny in Britain. As in Australia, the holder of the swap doesn't have a legal interest in the underlying shares. The British Takeovers & Mergers Panel does have a policy on the use of derivatives and options in takeovers, which essentially boils down to disclosure. But the panel thinks it doesn't go far enough and recently issued a consultation paper seeking submissions on its proposals for greater disclosure requirements.

The British panel believes the holder of a swap can exercise a "significant degree" of de-facto control over the underlying shares held by the bank counter-party. The holder often expects the bank to vote the underlying shares in accordance with its wishes and to sell the shares to it when the swap is closed out, and in practice the banks often oblige. To protect its hedge, the bank is unlikely to sell the underlying shares while the swap is in place; that effectively quarantines the shares and makes them unavailable to a bidder.

The British panel argues that since a lot of market activity has moved from the cash market to derivatives, the disclosure regime should "move accordingly".

Disclosure of dealings in derivatives would enable shareholders to better understand the forces at work in the market, and why the share price of a bidder or target is moving in a particular direction. The panel wants the holder of the swap to be required to make disclosure.

In BHP Billiton's case, it entered into swaps between November and January. That suggests it was considering a bid and trying to offset the cost by locking in a stake at a lower price than the likely bid. The average of the swap price is probably $7-7.20. Its bid price is $7.85 a share.

Legally, BHP could enter into swaps over 10 per cent, or even 15 per cent of WMC without the market being any the wiser. That would have avoided the need for the abortive 11th hour attempt to obtain a 10.1 per cent stake in the physical securities. And it would have got such a stake at a much lower average price than if required to make disclosure once it reached 5 per cent. But such tactics would have been criticised, which may explain why BHP Billiton limited the swaps to below 5 per cent disclosure level for the underlying shares.

WMC tried hard to find out whether there was a strategic party behind Deutsche Bank's buying. It issued section 672 disclosure notices but the bank responded that it was the sole beneficial owner (which was legally correct). WMC complained to the Australian Securities and Investments Commission, which queried Deutsche Bank but it stuck by its stance that it was the sole beneficial owner.

ASIC has long been concerned about equity swaps. It's only a matter of time before the Takeovers Panel is asked to rule.

Footnote: In yesterday's column it was stated WMC believed the $92 million – or 8c a share – break fee agreed with BHP Billiton would be a deterrent to a rival bid. That should have read would not be.


post Posted: Jan 19 2005, 06:34 AM
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Bourse bollocking bad for broker

January 19, 2005

THE Australian Stock Exchange's public criticism of Goldman Sachs JB Were's role in last year's float of the jeans-maker Just Group is bad enough for the investment banker, but the timing makes it even worse.

That's because expressions of interest close tomorrow for parties interested in being appointed to conduct a scoping study and advise the federal Government on the $33 billion sale of its remaining 51 per cent interest in Telstra.

The Government no doubt would be concerned about anything that smacked of questionable or sharp practice. If GSJBW is among those who have thrown their hat into the ring, the ASX's public airing of its concerns would be unlikely to help its chances.

The Just float last April involved a public propectus offering followed by an institutional bookbuild which set the issue price. The float was a disappointment and the vendor, Catalyst Investment Management, was forced to cut the issue price to $2.10, well below the indicative bookbuild price range of $2.25 to $2.70 and the $2.60 at which the public subscribed.

Not surprisingly therefore, Just shares debuted at $1.97 -- 13c, or more than 6 per cent, below the issue price.

But it turns out that was only achieved after GSJBW paid a fee of 15c a share to selected clients to take up the shares, which amounted to 7.3 per cent of the capital, effectively enabling them to take up the shares at a subsidised cost of $1.95. GSJBW bore that cost, not Just. GSJBW made no disclosure of this arrangement, either to the market, or to Just itself. Arguably, had Just been told it may have been required to make disclosure and perhaps to further lower the issue price.

In fact, it appears that GSJBW offered the fee to selected clients in order to avoid disclosure. Had it not offloaded the shares at a subsidised cost it would have been required to lodge a substantial shareholding notice.

That would have alerted the market to the fact that demand was weaker than it had been led to believe, and that there was a potential overhang that might bear down even further upon the market price.

It may have been even more draconian. Had the institutions bidding into the bookbuild known there was insufficient demand to get the issue off at $2.10, it may well have triggered a stampede of withdrawals, which would have forced the issue to be called off. That would have meant GSJBW would not have received any fees.

The Just affair highlights a lack of transparency and has the potential to undermine market confidence in the bookbuild process. The ASX has been investigating the matter for eight months and the fact that it has gone public demonstrates its concern.

A major concern to the ASX is that its inquiry had highlighted the fact there were no clear guidelines in relation the bookbuild process. It wants to consult with market participants to produce a guidance note which sets out best practices. One obvious conclusion is that there needs to be more "sunlight", a requirement for transparency and for disclosure that would avoid a repeat of the Just affair.

The bookbuild process is designed to find the lowest price at which all of the shares offered in a float can be sold. That's plainly not what happened in the Just float. The float involved 203 million shares, but at $2.10, the bookbuild was 11 million shares short and the joint lead managers, GSJBW and Citigroup each bid for 5.5 million shares.

But GSJBW also took an $85 million broker firm allocation in the public retail float (equal to 40.47 million shares at the $2.10 issue price), only to end up with a shortfall of 13.47 million. When that was added to shares allocated under the bookbuild it had 18.8 million shares, or 7.3 per cent of the capital.

So it offered the 15c a share fee to selected clients and managed to offload 15.8 million shares, which removed the need to make disclosure via a substantial shareholding notice.

GSJBW offered the fee the morning after the institutional bookbuild had closed. It maintains that the fee was in the nature of a "sub-underwriting agreement". There are a number of points to be made about that. The first is the prospectus stated the offer was not underwritten.

More importantly, the "sub-underwriting" was arranged post facto, that is after the issue had closed, not before. It's difficult to see how that, in any sense, could be described as sub-underwriting. In addition, significantly, the 15c fee was not a market rate. It amounted to 7.5 per cent of the $2.10 issue price, whereas sub-underwriting fees normally range between 0.5 per cent to 1.5 per cent.

A key concern of the ASX is that the sub-underwriting fee was offered to a select group of GSJBW clients. Thus, even at the debut price of $1.97, they were showing a small profit, while all other subscribers had to pay $2.10.

The ASX's view is that the sub-underwriting was to give the impression to the market that the true level of investor interest in the bookbuild was at the issue price of $2.10 when it was not. Had demand at $2.10 been sufficient there would have been no need to offer the 15c a share sub-underwriting fee. Because the fee wasn't disclosed it created an "incorrect appearance" about investor demand for Just shares -- that is, it created an uninformed market.

While ASX does not assert that GSJBW breached the operating rules or the Corporations Act, it must be wondered how giving preferential treatment to some clients fits with its obligation as a licence holder to act "efficiently, honestly and fairly".

This is not the first occasion that there has been disquiet about the level of disclosure in relation to a bookbuild. In late 2003, controversy erupted about the float of the Foster's spin-off Australian Leisure & Hospitality (recently acquired by Woolworths).

That also involved a retail offering and an institutional bookbuild, managed by Macquarie Bank. Demand was said to be strong and issue price was set at $2.50 a share, at the top of the indicative bookbuild price range.

After the float, it was learnt that 33 per cent of the shares had gone to a small group of institutions at $2 a share under an "institutional firm offer". The institutions had committed prior to the issue of the prospectus -- in effect they had underwritten one-third of the offering. The fact of the institutional raising and the significant discount price they paid was not prominently displayed in the prospectus and the quantum -- one-third -- was not mentioned at all. Not surprisingly ALH shares debuted well below the issue price and took several months to reach that level.


post Posted: Dec 15 2004, 07:37 PM
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In reply to: LookingConfident on Wednesday 15/12/04 06:01pm

Hi LC--thanks for that.Ovade's was a great read , for sure...good to see kindred spirits who can think outside the box..... I asked an asx rep once at a share expo in Perth in front of a large audience,he'd just finished dazzling with his wisdom on the intricacies of investing , virtually the same question as u quoted from me.......I got no response except an embarressed attempt to pass me off and move as quickly as possible to another hand raised in the audience..for , hopefully, a 'safer' question from the newbies with $ signs in their eyes, generating the powerful vibe of 'spare me the details, just how do i make this money quick!' during that market peak time of dotcom.
unfortunately many newbies today are just like those unfortunates born into slavery, not knowing anything better... so what IS , MUST be valid.. accepts it...why should i question anything?(anyway i am too concerned about stock ..a, b, c worry about this intangible stuff!).... and so the trader sheep line up dutifully time and time and time again..etc to give their money away ........until an unholy scepticism develops as a result...and absolutely everything is questioned, especially the system/workplace we use daily... and trading results slowly improve...
my experience anyway.. and other traders i have known..


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