Friday, April 06, 2018

Unlocking Valuable Info: Moe Berg, Espionage, and Investing

Welcome, readers. This article on the life of ballplayer/CIA operative, Moe Berg and the role of information gathering in espionage and investing first appeared last month in the Finance Trends Newsletter.

Spring, when a young man's thoughts turn to baseball, young ladies, and... espionage?

Well, that last part may seem unusual, but allow me to explain.

I've been a baseball fan all my life. Even in recent years, when I have rarely felt the urge to watch professional sports, I often find myself reading about the great ballplayers of my youth or watching highlights of games from the past.

One of my great pleasures as a boy was reading about baseball's earlier eras and its great heroes (or tragic figures) and colorful characters.

Yes, in the pre-internet world we read tangible books. One of my early favorites was a book entitled, Baseball Anecdotes. If you have a baseball fan in your family I highly recommend it. Paperback copies are inexpensive and the book can be easily read 1 or 2 chapters at a time.

Here was my early introduction to a journeyman ballplayer of the 1920s and 1930s named Moe Berg.


Moe Berg Baseball Card 1933 Goudy


Berg was a journeyman in more ways than one. In addition to playing for six major league teams (including two separate runs with the Cleveland Indians) in his 15-year career, Moe was an avid traveler who spoke seven (or more) languages with great skill. He was also a spy.

Moe parlayed a 1934 trip to Japan into a clandestine sightseeing tour of Tokyo. With a newsreel film camera hidden in his kimono, Berg managed to sneak up to the roof of a tall hospital building and film the Tokyo skyline and its harbors! For years it was believed that his film footage, loaned to the U.S. government, was helpful in aiding WWII bombers in their air raids on Tokyo.



Moe Berg Japan Tokyo 1934 Film Camera Spy


What is certain is that Moe Berg was recruited into the war's new intelligence program, the OSS, an early forerunner to today's CIA.

In fact, while watching SportsCentury's episode on Moe Berg, I noticed that several of the interviewees were not old teammates and sportswriters, but OSS spies and CIA historians!


 

This aspect of Berg's life and work was expanded on in an episode of the Baseball Phd podcast.



The following is taken from CIA historian Linda McCarthy's portion of that podcast, as she describes Berg's value to the war's intelligence program: 

"Moe Berg had this tremendous intellect...like a chess master who can envision what his opponent's next move and next 20 moves will be..."

"The problem we have in today's intel field is we have so much information coming at us. The real skill comes in being able to sift it down into something that is a) accurate, b) readable, and c) has value."

"I've been told that his CIA field reports had some of the best writing that they [fellow officers] had ever seen. I tell new hires, if you want to know how to write a decent cable from the field, you need to study Moe Berg." - Linda McCarthy.

This ability to take in a great deal of information and hone in on the truly important items is crucial not only in espionage, but in the field of investing.

Not only was Moe Berg able to obtain crucial wartime intelligence data, he was uniquely skilled at conveying that valuable information in a highly readable way.

As traders and investors, we need to parse out the signal from the vast fields of noise. Whether we are taking in company fundamentals, technical price data, or industry news and opinions, it is imperative to focus on only the core data that is most useful to our particular strategy and needs.

When we go beyond that, and begin taking in less useful information and opinions, we subject ourselves to the problem of information overload.

As the "noise" increases, we lose the valuable signals within a sea of data, subjecting ourselves to the fear and emotions of outside "news" and opinion. We may also find ourselves subjected to "analysis paralysis", or the inability to take decisive action when we are bogged down with too many options.

Here is what legendary investor and American statesman, Bernard Baruch had to say about the problem of information overload back in the 1950s: 


"If anything, too much information may be available today. The problem has become less one of digging out information than to separate the irrelevant detail from the essential facts and to determine what those facts mean. More than ever before, what is needed is sound judgement." - Bernard Baruch, 1957

I hope you enjoyed this week's letter and will find time over the weekend to delve into the related podcast and video on a fascinating figure in American life, Moe Berg. You can read more about Moe Berg's life in baseball at the Baseball Hall of Fame website.

Moe Berg Baseball Chicago Photo Spy Espionage

Perhaps you'll also draw some useful parallels on good intelligence gathering and active investing! I hope they will serve you well in the future.

Related posts:

1. Maximize Your Trading Gains, Not Wins: William Eckhartd Interview.

2. William O'Neil Interview: How to Buy Winning Stocks.

3. Babe Ruth on Persistence: Keep Swinging Your Bat.

Tuesday, April 03, 2018

Abnormal Returns Interview: Finance Blogger Wisdom

Head on over to Abnormal Returns for this week's Finance Blogger Wisdom interview series. 

You'll find a daily Q&A session on investing with some of the top financial bloggers, and a new topic of discussion is offered up each day. Topics this week include: the future of pension fund returns, lessons of the post-financial crisis decade, investing in new ETFs, the IPO market for new companies, and some shout outs to our favorite under-the-radar bloggers and investing writers (look for that on Friday).

Abnormal Returns logo finance blog links investing

Once again, AR has been kind enough to include Finance Trends in their ongoing interview series. Thanks to Tadas Viskantas at Abnormal Returns for hosting us and giving us all a platform to speak on the financial topics of the day.

Subscribe to the Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter. 

Thursday, February 08, 2018

Earnings Season Stars: Twitter and Snap Spike Higher

Welcome, readers. This post was sent out to Finance Trends Newsletter subscribers earlier today. Subscribe now to get all our email updates as soon as they are published.

You may have heard of Snapchat (certainly your kids or your younger nieces and nephews have) and its parent company, Snap Inc (SNAP).

The youth-targeted social messaging and live-streaming app IPO'd in 2017, but quickly disappointed investors with a slow decline from its early highs near $28 into the mid-teens (how appropriate, given their demographic).


Well, after a nearly year-long decline, SNAP shares are roaring back in a big way. The stock surged higher this week on its first earnings beat (the company still reported a loss of -13 cents per share) and increased revenue Y-O-Y.

 

Here is the SNAP chart I shared yesterday on Twitter, with the following note: "There's the high volume, gap up move after earnings. Buyers, Wall St. proving their interest. Powering out of last year's downtrend."
 
SNAP Snapchat stock price chart earnings spike gap

 As noted earlier this year on Twitter, I could see a potential new uptrend shaping up in SNAP but my entry into the stock, on the initial trendline break, was just too early. That quick burst of strength faded and I was soon stopped out for a loss.
 

You know the old saying on Wall Street - "too early is just another way of saying wrong.". Now the stock is providing us with a message, "something has changed!", and the buying interest to go along with it.
 

If SNAP can hold on to some of its newfound momentum and continue moving higher in the coming weeks, then we may see a real turnaround taking shape. As it stands, the stock is now trading at 6-month highs on strong volume, an encouraging sign.
 

Now let's take a quick look at today's earnings season standout, Twitter (TWTR).
 

The company reported its first-ever quarterly profit (finally!) and the stock jumped 25% higher in early morning trading. As of this writing, midday New York time, TWTR is up 17% on the day. If the stock can close above $30, it will mark Twitter's highest closing price since late 2015.

This new uptrend in TWTR is gaining momentum. Here is an updated chart that shows the stock's recent upward progress and its slow climb out of a 2-year downtrend. Note the green uptrend arrows signaling a series of higher highs and higher lows, plus the recent 2-year high.

 
TWTR Twitter stock chart price earnings gap high

We don't know which company will ultimately "win" the social media landscape, but we can plainly see by the charts that SNAP and TWTR are signaling that they are back in the game. Only time, and price, will tell if these stocks (not to be confused with their underlying companies) are strong enough to hold their recent gains and continue higher.
 

Longtime Finance Trends readers have heard me say this about TWTR in prior years:
 
"...While I have been an avid user of Twitter since 2009, I have never owned the stock. I have owned Facebook shares in the past, despite never having used the service (in fact, I can't stand Facebook).

Why? Because I am a trader who prefers to buy stocks in uptrends. That means I want a stock that will continue to move higher. I want to own stocks that are being bought by professional investors and are increasingly being discovered by the wider investing public..."

 
TWTR and SNAP are showing us that things have recently changed for the better. Wall Street is starting to bet on these two social media stocks again. That means Facebook (FB) is not the only game in town anymore, so we have to change our minds and act accordingly.
 

For me, that means I have to be willing to step in and buy SNAP again. Maybe not today or tomorrow morning, but soon, given the proper risk vs. reward setup and a stop loss in place. It means I also have to look at TWTR as a stock to buy instead of a perennial loser. I can manage my risk and get over my hesitation with small initial long positions.

More on that (how to pull the trigger and buy or sell) in a future newsletter!

Tuesday, October 24, 2017

Dow Jones Soaring to New Highs: The Dow 30 in Charts

The Dow Jones Industrial Average (DJIA) climbed to a new high above 23,450 today.

Dow Jones Industrial Average (DJIA) at New Highs Dow 30 Chart


If the Dow Jones 30 can close the week positive, it will mark the seventh straight week of gains in this highly-followed US stock index. The Dow 30 has climbed over 5,000 points since last October, a 29% gain in one year.

Dow Jones Industrial Average (DJIA) New Highs - Weekly Chart


Supporting the DJIA this week are major components like Caterpillar (CAT) and 3M (MMM), both continuing their climbs on strong 3Q earnings. 

With big cap industrial movers like CAT and MMM, plus US banking leader JPMorgan Chase (JPM) making new highs, the Dow's uptrend is intact and has been propelled higher (despite the persistent "crash" callers).  



The Dow is also helped by the recent strength in chip bellwether Intel (INTC), which has just climbed to a 16-year high, and Microsoft (MSFT), which is trading at new all-time highs.

Intel (INTC) Monthly Stock Price Chart 1999 2017

Microsoft (MSFT) Monthly Stock Chart Price 1999 2017 High


So while the naysayers neigh, the US stock market continues its upward climb. We are in the midst of a powerful, multi-year bull market; it's time to respect the message of the market and position ourselves accordingly. 

Stay tuned...

Related Posts

1. Chip Stock Rally Broadens: NVDA, AMD, BRKS, SMH Charts

2. McDonald's (MCD) Near All-Time Highs, Market Outperformer

3. Nasdaq 6,000: Tech Leaders at New Highs

Subscribe to the Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter.

Sunday, October 15, 2017

Market Wizard, Steve Clark on Trading: Grow Your Equity Curve

Trading wisdom recap: Steve Clark, founder of Omni Partners, was featured in Jack Schwager's 2012 book, Hedge Fund Market Wizards

Clark's interview with Schwager provided us with some valuable trading insights; "Lessons from Hedge Fund Market Wizards: Steve Clark" was one of our most popular posts ever.

If I had to pick my favorite sections from Clark's chapter, it would be boiled down to these two concepts: "Do more of what works (and less of what doesn't work)" and "Manage your equity curve".

Here's his full quote on the supreme importance of growing your equity curve

"Your job as a trader is to make the line of your equity curve go from bottom left to top right. That's it. Don't get hung up on other supposed "mandates". Protect your capital and the direction of that equity line."  

I will leave you with one last series of quotes from Steve Clark's interview with Jack Schwager. When asked about the characteristics of traders who succeed, Clark replied:

"They all work hard... Nearly all the successful traders I have known are one-trick ponies. They do one thing and they do it very well. When they stray from that single focus, it often ends in disaster."

"Really good traders are also capable of changing their minds in an instant. They can be dogmatic in their opinion and then immediately change it. If you can't do that, you will be caught in a position and be wiped out."

If you'd like to read more, just click on the Amazon links in our Hedge Fund Market Wizards post series and buy the book!

Related posts:

1. Your Job as a Trader: Manage Your Equity Curve

2. Maximize Your Trading Gains, Not Wins: William Eckhardt Interview 

Subscribe to the Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter.