demand surfacing...?

OK Here is some of that background I consider useful in framing My approach to Investing..

And giving some context to My posts...

This fellows work is of interest His Name is Charles Lee...And He calls his approach

Fusion Investing....( Value + Behavioral tools )

OK First the Problem of taking price as value and as signal...

If we assumed EMH was correct.... (We would find )

Too much trading Volume

Too much Volatility

Too many cyclical patterns in returns

Price series too noisy ....Success of value strategies in outperforming.....



OK So what is reality then ?

Twofold ( AT THE VERY LEAST ! ) ...Not a monoculture...

There are information traders .. Smart Money

Who at a certain price will ( as a group ) buy all available stock...

And at another price will Buy not even one more share.....

Then there are Noise traders ( Wyckoff's Public ? ) defined By having limited time ( unrealistic ? )

Horizons and frames.... And are bandwagon driven ...

What Is the Problem then ?

Prices in equity markets are much noisier

than many people expected

Black (1986):

"All estimates of value are noisy, so we can never
know how far away price is from value. However,
we might define an efficient market as one in which
price is within a factor of 2 of value, i.e., the price is
more than half of value and less than twice value…
By this definition, I think almost all markets are
efficient almost all the time. 'Almost all' means at
east 90%."

Prices are indeed set by the interplay between noise
traders and rational arbitrageurs.
Gemmill & Thomas (JF, Dec. 2002):



This can take us somewhere.... price might be a good buy... But noise if desperate to sell

will make the oversold even more so ! Hence what would be good buying at a certain price might not arise when expected.......( more noise generated more bandwagon ) ( Yes should be everyone buying BUT not if there are some who will sell for even less )



OK What drives Noise ? ....Sentiment !..... But What then Gives Rise to Investor Sentiment?



• Sentiment involves systematic deviations of price from intrinsic value

• The mistakes must be correlated across noise traders

• More like mass psychology than animal spirits

( social proof ...herding )

• What gives rise to a common sentiment?

• "Pseudo-signals" signals that contain no real information, yet are persuasive ( This could be a long list ! )

• Sub-optimal use of actual signals

Under-reaction to value-relevant information earnings
surprises, quality-of-earnings indicators ( relevance of real news )

• OK What variables might help predict the participation of noise traders over shorter horizons?

In Lee and Swaminathan (JF, 2000): Price Momentum and Trading Volume....

• Recent trading volume (shares traded scaled by
shares outstanding) was found to be a good indicator of investor sentiment about a stock....



In a nutshell.......He finds that



• High (low) volume stocks exhibit glamour (value)
characteristics and earn lower (higher) subsequent
returns.

• Integrating volume into the analysis greatly
enhances predictive power ....

OK Richard D .Wyckoff once said the public always buys bulges and sells on declines without ever considering who they sell to and who they buy from ( Or maybe even why ? ) His definition of Overbought and Oversold also hinged here....

If stocks with EPS and DPS and NTA are so wild in their behavior

How foolish to take anyone price in something like GCN as signal...

Look at Volume action esp in declines.... Volume off the bottom is where maybe signal can be discerned..

The price where the smart money says "yes and more" ... Here is what oversold is as fact ( not as RSI or any indicator ...) where stock sought by demand exceeds quantity offered by supply...



GCN for me just flashed green.... yesterday and following on today....

And If these green flags are seen to waving at higher price ranges than in the past...Good

Rallies and reactions occur as a given of mkt dynamics built on the many fold nature of participants..

It is the engine that can make us profits ....

OK was GCN over or undervalued at .20 ?
Is GCN overvalued or undervalued at .115 ?

How much noise How much signal... ??

Do your research.... To Me GCN is a stock with amazing potential.. Lets see
But SSI is soon to be ( post merger ) A very large parent....With what future envisioned for It's child ??

I see a GCN director as been buying.... Seems some new in the Top twenty .....report mailed out...
Reads well to Me .........For those interested The above is formulated from

Professor Charles M.C. Lee
Johnson Graduate School of Finance Cornell University
Recorded on 14 July 2003
A Presentation of AIMR Direct

Fusion Investing: Integrating Behavioral Finance and Fundamental Analysis

And His research paper

Lee and Swaminathan (2000): Price Momentum and Trading Volume....

Things to look for Volume off the bottom and into the rally....Then How high does the next rally take the stock
Compare rally to rally and then to reaction ...

see what the Volume does to price.....

At .20 GCN got a bit of glamor....Now at these levels are the buyers keen ?.....The challenge as an investor is sometimes just to get enough stock... So let's see what the substance is....

GCN as a small micro cap growth stock...
Will whip around quite a bit... OK nothing certain

Much much safer to wait and see what happens ...
But price paid determines returns,,, And We only can buy what is offered....

When the tide of Volume dries up what is the price range
and how stable ? When Volume tide flows again.. Where does it take price ? What is the lenght of thrust and stride ??

Fundamentaly ( revealed in the fullness ot time ) GCN is and will be.....But today right now Mr Mkt let's you buy sell or hold at a price determined by noise and signal...

Now is this Volume a chance to buy or sell ??

That is the investing question......

I have mentioned EMI before

Here is one very early on in the cycle
Lot's of potential ( I think ) But must have losted the glamor... One I am Holding and on the buying list.. CLV

GCN chart looks ok given the above ( and lot's more ) context.... We saw it go from .08 to .20 And not all noise.... back to .11 ... Now does that bring out the smart money ?? We will see!!


Motorway