How To Turn Uncommon Knowledge Into Power And Profit
Thursday, July 30, 2009
by Marc Lichtenfeld, Senior Analyst, Smart Profits Report
So what’s a “flash order” anyway?
It’s a stock trade that is routed through private liquidity pools before they’re sent to the general market. While the orders are only seen for fractions of a second before they hit the market, it’s still enough time for advanced computerized trading systems to respond and act on them before the public has the opportunity to do the same.
Sounds a bit shady, doesn’t it?
Senator Charles Schumer (D-NY) agrees. He wants to ban these flash orders, which give an unfair advantage to professional traders using high-tech trading systems.
Senator Schumer is doing the right thing. It shouldn’t matter if you’re a $50 million-a-year trader at Goldman Sachs (NYSE: GS) or a grandmother from Dubuque, Iowa; everyone should have the same opportunity to make money in the market.
Unfortunately, the reality is that even with good legislation like this, the playing field will never be level. But don’t despair… there is something you can do about it…
It’s Not What You Know… It’s Who
I’m writing to you today from the downtown San Francisco office of a small hedge fund, which is run by a good friend of mine.
As I took the ferry ride over here from Tiburon (one of the most beautiful places in the country, in my opinion), I reviewed the notes that I’d taken during a conversation with another friend, an investment banker.
We’d discussed some small-cap healthcare names that she thought I should take a look at. In particular, one is starting to attract institutional interest - interest that she believes will continue. I’m doing my due diligence on the company and it may appear as a recommendation in the Xcelerated Profits Report or in my small-cap healthcare service, Access).
As I write, my hedge fund friend and I are talking about various stocks, many of which are flashing away on the bank of five screens on his desk. When I ask him for information about a company, he usually has it in a few keystrokes. And if he can’t find the data, it usually comes to him in minutes, after talking to one of his associates on the phone or by instant messenger.
Having contacts like these gives me an advantage that most people don’t have. This is the way Wall Street operates.
However, I’m not getting any inside information here. No one is calling to tell me that “Blue Horseshoe loves Anacott Steel,” like in the movie “Wall Street.”
The conversations I have entail information like I mentioned above. That someone’s institutional clients are poking around the company. Or a hedge fund manager shares the data from his survey of physicians, indicating that Wall Street is underestimating a company’s market share.
So how can you get a leg up on the competition?
Know Your Sources
Individual investors can do just fine without this kind of information.
That’s if by “fine,” you mean “average.”
And while there’s nothing wrong with average (over the long haul, you’ll make money if your performance is average), if you want to jump into the “above average” category with your stock market returns, you need access to certain little-known information.
For example, Maria Bartiromo knows a lot of people. But when those people tell her things, it’s because they want that information out to the masses. Same thing with any other mainstream media outlet. By then, it’s usually too late to gain any advantage.
In other words, you need to be in stocks early - before the information is in the Wall Street Journal or on CNBC.
So where do you get that kind of information?
Right here!
If you don’t have a son-in-law in the investment business, allow me to fill that role.
Need an uncle who is savvy in the market? You’ve got one in Karim Rahemtulla. Uncle Karim is better at making money in any kind of market than anyone I know.
How about a nephew who knows the inner workings of the trading floor? Lee Lowell is a former floor trader who’s got his finger on the pulse of the options markets.
Whether you rely on our expertise here at the Smart Profits Report or follow our stock and options recommendations in the Xcelerated Profits Report, you can be sure that you’re getting information that is as close to the source and as timely as possible.
Senator Schumer will likely succeed in banning flash orders. But it will be impossible to stop the flow of information and ideas. Knowledgeable people will always have that advantage. Will you be one of them?
Hoping your longs go up and your shorts go down.
Marc Lichtenfeld
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