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View Diary: Nate Silver unskews Morning Joe (299 comments)

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  •  How do you invest? (5+ / 0-)

    Can I do it through my Schwab SIMPLE IRA plan.  How do you short?  I am an investor idiot.

    •  I don't think... (1+ / 0-)
      Recommended by:
      Amber6541

      ..you can do it through normal channels. You have to go to intrade.com and set up an account-this takes a little work as you have to send in some proof of residency etc.. Once you have sent in your account info you are free to trade in the election and other popular questions.

      "Good to be here, good to be anywhere." --Keith Richards

      by bradreiman on Thu Nov 01, 2012 at 11:12:03 AM PDT

      [ Parent ]

    •  Shorting - when it comes to stocks, is simple. (6+ / 0-)

      a great description from Investopedia.com :

      Here's the skinny: when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must "close" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money.
      The Short (short) Version:
      1. 'Borrow' some stock from your broker, when it is selling high, and sell those shares. Because you think the price is going to drop in the (hopefully near) future).

      2. Then, later on, when the price does drop, you buy that same stock (now, at a much lower price than you already sold those borrowed shares at) and return it to the broker who loaned it to you earlier.

      3. The difference between the original price you Sold at, and the lower price you Bought at, is your profit.

      See, not very complex at all.


      "I like paying taxes...with them, I buy Civilization" -- me

      by Angie in WA State on Thu Nov 01, 2012 at 11:31:28 AM PDT

      [ Parent ]

    •  Intrade is considered "gambling" and US banks (4+ / 0-)
      Recommended by:
      emobile, Dutch Doctor, StrayCat, SherriG

      cannot transfer funds to online gambling sites.  How this differs at all from the perfectly-legal stock market, I have no idea.  Well, actually I know exactly why--Wall Street paid good money to buy congress, and they don't want the competition.

      Anyway, you'd have to jump through a lot of hoops to get money to Intrade in order to participate.  It's probably not feasible to get it set up in time for this election.

      As for shorting, (and this is not advice, just information.  There's MUCH more to it than I'm mentioning.)

      Shorting is a way to sell a stock you never bothered to buy.  You borrow the shares from your brokerage and sell the borrowed shares.  You will have to eventually buy the shares back to return them to your broker.  People do this if they expect a stock to fall in price.  However, this is a risky move, since you're on the hook to buy the stock back no matter how high it goes.  The farthest a stock can fall is to $0.00, so that's the most you could possibly make.  The sky's the limit for how high a stock can go, so your potential loss is literally infinity.

      You can't do this in an IRA.  Your broker won't let you.  You can however do this in a regular brokerage account if you meet certain qualifications, but it's not something they'll let you do until they feel you're savvy enough and can afford to take a big loss.  It's really easy to get burned shorting something.

      •  Wire Money from bank to intrade and how it works: (4+ / 0-)

        A few days ago i looked into intrade.  In order to trade, money has to be in your account.  Direct bank transfers, paypal, credit cards will not work.  They either want an old fashion check sent thru snail mail (and the check will never clear by nov 6), or use the bank wire facility of your bank: usually an overnight process--at a cost!  Last time i looked my bank wanted something like $40 and that was years ago.

        Ok, so you have money in the account and you now want to take money away from some dumbass conservative who still believes R$ is going to win.  Obama to win is now at $6.61 a share.  Lets pretend to buy 100 shares for $661 (plus small fee) from Mr Dumbass.  On nov 7, each share you just bought will either be worth $10 if Obama wins, or $0 if they steal the election.  When Obama wins you just made $339 and you took it away from some dumbass maybe named Rush.  If they steal the election you are out the $661, but thats the risk in this game.  These bets are ongoing and undoubtedly we high information kosers could take a good chunk of money from the fox news watchers who place dumb bets on intrade. And we could do it consistently.  A second income anyone?

        Elizabeth Warren 2016!

        by windwardguy46 on Thu Nov 01, 2012 at 02:57:18 PM PDT

        [ Parent ]

        •  no get rich scheme available (0+ / 0-)

          Doesn't work that way, unfortunately.

          You need to have matched shares to buy.

          The volume is incredibly low.

          There are a small but very efficient group of sports bettors that scoop up almost all available positions that differ significantly from Pinnacle Sports (which is considered to be the most accurate source). They don't care in the slightest bit about the politics involved. (Or rather they are not going to let their own personal politics influence their wagering very much.) They know all about Nate Silver's work, because his work was very useful for baseball wagering. The money from these "sharps" outweighs the money from the random punter who is putting a few dollars to back the Faux News story they heard. The sharps who are rightwing nutters and who are allowing their heart to really get in the way of their head in terms of betting are arguing that the election is probably only 63-65% in favor of Obama (rather than the low 70s that seems to be the fair price assumption) . On sports betting forums, you'll see a fair amount wagers arranged with proxies to hold bets of any size if the parties don't know each other. Even the most rapid RW partisans are not wagering any significant amount of money at evens.

          The fact that the few shares that are available on Intrade are out of line with Pinnacle just highlights the barriers to entry (especially in terms of difficulty getting money on and off the site). If there were not barriers to entry, these "scalps" would disappear in minutes. It's a form of arbitrage.

          The fact that the few shares available on Intrade are mispriced might also reflect a fear of the money being seized. You require a larger edge to place money there because you have to factor in the chances that the friendly neighborhood DOJ seizes the site and all the money on it, LIKE IT ALREADY HAS for multiple other sites. The only other places you find stale lines like this are in places that have either questionable ability or questionable inclination to pay out. We call those "deposit only" sportsbooks.

          The plural of anecdote is not data.

          by Skipbidder on Thu Nov 01, 2012 at 07:12:23 PM PDT

          [ Parent ]

    •  IRAs? Not really (3+ / 0-)
      Recommended by:
      Lawrence, Says Who, Mathazar

      Intrade is kinda like Wall Street but it's not accessible  via brokers. You have to open an account at Intrade and fund it.  They are derivatives  that behave in some ways like stock options.

      Also , most , if not all , IRA plans don't allow shorting. I believe they are cash accounts. The best way of betting against a company is to go long on cash PUT options in a IRA. They are most useful for Insuring gains made on stocks. That means if your stock has gone up and you want to protect your profits but think it has more room to go, but see a short term correction, you can buy  Puts for a fraction of the cost of your stock investment.  One contract equals 100 shares.  That's also a good way to drive your average share price down. If the Put goes into the money and you cash it out right and buy more shares of the company you like, then your average cost goes way down depending on what kind of dollars you bet.

      The commentator above is doing what's called a leveraged bet that still has a limit on what he can lose. In other words if he shorted Romney at $3.50 and Romney Lies, ah drives his way to victory, he could lose $6.50 for each contract he bought as they only go to ten. He would also lose the $5.70 he bet on Obama.

      By the way, that's pretty much how Long Term Capital, a famous hedge fund from the 90s that used sophisticated algos to make highly leveraged bets on certain events using derivatives. They pretty much did a huge bet similar to the one made above and lost both ways . Since it was leveraged, the loss was magnified by 100x (I believe). That was when Greenspan stepped in and got the other TBTFs to cough up money to save the hedge fund.  There was some very stuffy PhDs who were running it who had developed rather large egos after a few years of 40+ percent returns. Like all those guys, they get punctured like a balloon.

      It's like insurance in that if the stock doesn't get buffeted by market currents or waves, you lose the premium like you do when you buy life insurance. Think about it. Your betting your gonna die and the Insurance is taking your bet that your not. Options work in similar fashion in that if a stock dies it pays off many many times the amount put in. If it doesn't you have to cough up more premium money when the "policy" expires.

      Selling covered calls is also a good way to grab some cash off of non dividend paying stocks without a crap load of risk, but you do have to know what your doing. .

      In 1987, one of the causes of the October Crash was called Portfolio insurance. For x amount of dollars one could either "short the box" or take out this insurance which is what exacerbated the selling. They don't offer that anymore. lol

       Most people lose in options. It can get addicting as the money that can be made in a short period of time is sometimes astounding. I bought 5 calls on Apple for about $200.00 in total and watched them go up to $1750.00 in less than two minutes on options expiration day.

      Those stories are similar to going to Las Vegas and seeing the occasional winner shout out from the slot machines, which causes a temporary frenzy of quarter feeding which results in the Casino guys smiling.

      Then there was the guy who bought 1.7 Million dollars worth of Puts on Bear Stearns and watched it turn into 270 Million over the week-end when it opened at $2.00 after JP Morgan agreed to buy them. (Note final price was $10.00 as shareholders realized that the building alone was worth $10.00 a share)

      . That's the kind of win that one can say "Ok, I'm done, cash my chips in".  

      Intrade is kinda cool because everything is done on a cash basis and there is a limit to how much you can win or lose. In the  Wall Street casinos,  if you short a option or a stock, it could wipe you out . Many people who shorted Apple found that out that hard way.

      •  On the other hand... (0+ / 0-)

        You could always just float bonds worth several billion dollars through a schlock lender like American Home Mortgage, then use that on Intrade to turn the billion dollars into 1.3 billion dollars.  Then pay off the lender and pocket the three hundred million dollars difference.

        Of course, you could lose, in which case you default on your bond and stick it to AHM and that would be so terribly sad.  ha ha ha.

        Naw.  That could never work.

        •  I think Intrade has account limits (0+ / 0-)

          I understand the cynicism and appreciate it, but I think Intrade limits accounts to $500.00 or so. It was devised more as a educational tool then a way to make money. It's turned into a place where people who like to bet on event outcomes can come, but no one is going to get rich or go broke there.

      •  Wow, thanks for the lesson! (0+ / 0-)

        You make investing sound exciting! (Too bad I have all my money tied up in IOUs.)

        Simple question, the commodities marketplace was supposedly begun to protect the farmers from natural disasters such as drought. Is today's industry remotely dedicated to that purpose or is it a lot of computers guessing what other computers are doing? I always laughed that fortunes were made and lost just getting a loaf of bread to the kitchen table.

        skipping over damaged area

        by Says Who on Thu Nov 01, 2012 at 04:35:48 PM PDT

        [ Parent ]

        •  The markets are still used for good (0+ / 0-)

          But for the most part you have people who place their money with companies like MK Global to firm up the prices they'll get for their crops and to hedge against disaster. Then MK Global bets it all on  European Debt improving with leverage , uses customer accounts to make Margin calls, then goes out of business with 1.2 Billion in customer funds going "poof".

          That's the problem with these markets and not enforcing the law.  The Futures market was mostly used for producers.  But then came the funds desperate for yield with  investment advisors like Goldman Sachs, who told them to speculate on Futures.

          There are Cash markets where you'll find legitimate users of Futures like Farmers and then there are the Margin accounts where you can get leverage that seems unreal . That's where the speculators live.

          The CFTC , who establishes position limits and is owned by Wall Street, still has papers out on suggestions for position limits for commodities. They are moving their mouths and they are shuffling paper, but there is too much money being made by forcing prices up as people sit on winning future's positions to make their fund returns look good.

          It's a maybe. Maybe it works and maybe it doesn't. These days, people with good motives are usually the ones that are cosmic shit magnets as those with bad intentions walk all over them.

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