Its Sunday, and unlike last week I made it to Church today. The readings were from Timothy and Luke. The first being the passage about the love of money being the root of all evil and the second was about Lazarus lying at the foot of a rich man's door with dogs licking his open sores...yes, there wasn't just one Lazarus in the Bible. Lazarus goes to heaven and the rich man is sent to Hades, crying out to the God of Abraham but he gets no consolation, he had the good life when he was alive.
Hardly the backdrop for a blog about the stock market, where most (and probably all, myself included) invest and trade with the goal of getting rich, or richer as the case may be.
Our Pastor's sermon was about doing good, its not money that is evil but the love of money. The rich man who left poor Lazarus outside his door to feed off the crumbs of his table, he could have shown him some kindness, invited him in...and now that the rich man is dead its too late. The message was ''do good'' don't wait, don't make an excuse.
Ahhh to be rich, to have the money at one's disposal for whatever one wishes. The markets almost worship wealth, and some investors will choose to put money into a stock because they're following a billionaire. If social media is any indication many ZIOP investors stormed into that equity based on the involvement of billionaire R.J. Kirk, I myself took a flyer on another biotech based on Mr. Kirk's involvement, TBIO.
Sometimes following a billionaire doesn't work out. Investors who based the decision to buy Sandridge Energy based on the activist position of Leon Cooperman know that all too well, myself included among them. Resverlogix, a stock I've written about here several times has the backing of billionaire Kenneth Dart, as does another biotech PPHM.
It would seem that having a big player as a backer is no assurance of success, even billionaires get it wrong from time to time. So should we perhaps not include deep pocketed players in our definition of ''smart money''? I will suggest that no....we should not. ''Smart Money'' players don't have to be billionaires or even millionaires by my definition.
So what is my definition then of a ''Smart Money'' player?
I will offer up what I consider a prime example, and although it is fictitious and from a movie I do believe instances like this occur.
Younger readers might not be familiar with the movie 'Trading Places' starting Eddie Murphy and Dan Ackroyd which was made in 1983. I won't bore you with a plot summary, rather I will include a scene available on YouTube.
In this scene two old gentlemen, the Duke brothers, believe they have in their possession an early copy of a report on the orange harvest. Their report tells them that the orange crop has been severely damaged by a harsh winter. Looking to capitalize on this information they instruct their trader to start buying right at the opening bell and to keep on buying. ''Don't worry if the prices starts climbing, just keep buying''.
What the Dukes don't know is that their copy of the report is doctored, and that the harsh winter didn't damage the orange crop. Billy Rae and Lewis (Murphy and Ackroyd) are the reason the Dukes have a doctored report and instead of the Dukes getting rich they are financially destroyed.
So what's the point? The manner in which the Dukes act is the way I think ''smart money'' acts, with bold confidence. And just like the two traders who see the Dukes open their window on the trading floor and watch them eyeing their trader in the OJC trading pit....I think it can be possible to discern this ''smart money'' buying activity. Not from the trading floor, (which has now been replaced by automated trading) but rather from the chart.
Take note however, the Dukes didn't issue a PR announcing to the world they were going to boldly buy up OJC futures, that would not be smart. In today's world, if you were 100% confident that you had the inside track would you announce it to the world, spreading messages all over the internet and sending out emails? No....I don't think so either. If you did everyone would be buying with hardly any selling and your chances at profits would disappear.
I know in the movie the crop report the Dukes have is wrong....but that's Hollywood. The guy they paid for it had it stolen and was then dressed up as a gorilla. As the Dukes are going bankrupt their spy is being sent to Africa to be introduced into the wild gorilla population.
I've belabored this point long enough. The smart money (no matter whether they're uber wealthy or not) buys with extreme confidence, and that confidence shows up in price and volume movements in a chart. But note that if those price volume movements come in tandem with lots of Promotion, News and Hype....well then its almost certainly not smart money players but the dumb herd moving in.
Now to tie this in with my Pastor's sermon today....If you make some money in the markets, pay it forward, do some good, we're only here for a short time. Money is not the root of all evil, the love of money is. Money can do a lot to ease pain and suffering that exist in our own back yards.
Disclosure, I have long positions in TBIO, RVX and PPHM. With ZIOP I have placed my bet on the short side.
Good luck
