Seeking Alpha: Practical Application of Modern Portfolio Theory through Technical Analysis – Interactive Brokers

In his influential book, A Random Walk Down Wall Street, Burton Malkiel makes his case for efficient market theory and passive investing all while excoriating technical analysis through straw man argument. About Beta he writes, “Beta really looks suspiciously like a tool of technical analysis in academic drag – a bastard cousin of the technician’s charts”. We believe beta looks like technical analysis because it is technical analysis as is, by extension, alpha. To whit, alpha and beta estimates can be derived solely from historical price action of securities and indices. Moreover, alpha and beta are indicators that can be effectively analyzed by charts. Most important, it is apparent to us that alpha in particular has useful predictive properties for securities selection and portfolio construction.

Rotational Trading using the %b Oscillator

Academic finance is replete with studies supporting or denying the existence of serial correlation in securities prices1. In effect, such studies test the weak form efficient market hypothesis (EMH). Simply put, can investors use technical analysis to beat the market?

Interactive Brokers + Independent Advisor = Smart Investing

Watch this striking, scenic video! Remember, at Successful Portfolios, our credentialed, pros always have your back. As of July 2019, we managed over $92,000,000 in client assets at Interactive Brokers. Our viewpoint as an independent advisor ensures a fiduciary focus on your financial best interest.

What’s the Best Online Brokerage?

Online brokers are a proven smart way to invest. And they’re not just for do-it-yourself investors. In this article posted to Linkedin, I reveal how to select the best online broker.

What is the “Fear Index” and why should I care?

The VIX Index is a measure of market expectations for near-term stock price volatility derived from current market quotes on S&P 500 index options.  The VIX is also known as the “Fear Index”. Watching the VIX allows professional portfolio managers to monitor the cost of principal-protecting a stock portfolio. As you can see in the chart […]

Duke Energy and Progress Energy Merger

Duke Energy (DUK) and Progress Energy (PGN) have announced plans for a merger that would create the largest publicly traded utility company in the U.S.  Initial analyst reaction was unenthusiastic and both stocks traded modestly lower on the news.  However, the expected 5.5% dividend on the new company looks attractive in comparison to alternatives and […]

What the heck is a “Covered Call”? And why should I care?

Selling a covered call is a powerful yet simple technique that enables you to increase the cash flow from your stock.  Call options are available for trading on thousands of different stocks.  The best way to learn about covered calls is to look at a specific example: Buy 100 shares of Walmart Corp. (WMT) @ […]

IRA Required Minimum Distribution (RMD)

The Financial Rules Regulatory Authority (FINRA) provides a free, easy-to-use calculator for determining the annual Required Minimum Distribution (RMD) from your Individual Retirement Arrangement (IRA).  The calculator is based on life expectancy tables and Internal Revenue Service (IRS) regulations. FINRA, RMD, IRA, IRS, how is that for alphabet soup?             […]

How to Avoid Investment “DOGS”

In August 1999 near the peak of the stock market tech bubble, a long-time, normally conservative client asked me for a “low priced” stock pick in the then red-hot technology sector. I told him about several stocks that fit the bill. He settled on Corel Corporation, a Canadian based Software Company that was working on porting their Perfect Office Suite to the Linux operating system. Almost immediately upon his buying 1,000 shares at $4.75, Corel began climbing nearly doubling within a few weeks before pulling back. In November 1999, Corel stock soared higher. I called my client and recommended he sell his shares at $28. He sold, booking a 560% profit in just 3 months. The day after he sold, he called me back and asked excitedly “Where is Corel trading now?” “Forty-three dollars a share” I replied somewhat uncomfortably. “Buy it back!” my client exclaimed enthusiastically. Fortunately, I was able to dissuade him. Corel peaked that day at $44 and within months crashed back to earth as the stock market tech bubble burst. The chart below illustrates the gory details. Investors who bought and held Corel stock during its inexplicable moon shot of late 1999 and subsequent crash ended up owning a stock market DOG.