Will: ‘The water resources bill passed in the House and Senate overwhelmingly at the end of last week. After an agreement on the final bill is reached in conference, both houses of congress will vote again and it will be sent to the President. Apparently, this is a high priority bill that authorizes more than $12 billion in water resource development spending. I’m guessing this could account for some of the recent volume.’
☞ Every $12 billion helps.
Nathan Johansen: ‘That original link to the WheelTug video breaks down near the end. It’s since been fixed and reposted with this link.’
Jim Batterson: ‘It seems like Borealis is so thinly traded that anyone buying or selling a hundred shares can shift the ‘last sale’ price of the stock by a dollar or so. Obviously it is a mistake to buy or sell shares ‘at market’ for a stock like this. So, two questions: (1) Is there a ‘right’ strategy for buying or selling a stock like this? If the ‘last trade’ is $8.20, can I put in a buy order for, say, $7.50 and just be patient? Can I put in a sell order for $9 and hope someone wants to buy some? Patience seems very important here. (2) Doesn’t this create an opportunity for someone to ‘make a market’ in the stuff and do the arbitrage thing, putting in buy orders for $7.50 and sell orders for $9.00 and make money both ways following the meanderings of a thinly-traded stock like this?’
☞ The first thing to say is that, ordinarily, ‘spreads’ and other transaction costs kill you in the stock market, which is why, over time, a monkey throwing darts beats most mutual fund managers.
The second thing to say is that BOREF is not ordinary. Either it will eventually be zero, in which case you will lose 100% of your money whether you paid $8 or $9, or – however slim the chance – it will be worth much, much more than $9. (I will admit to having become increasingly hopeful, or perhaps simply increasingly deluded.)
So, yes, you should never enter a ‘market’ order for a stock like this. But I don’t think it’s crazy to offer to buy it, with money you can truly afford to lose, at the ‘ask’ price, even though you’d lose 10% or 15% if you turned around immediately and sold it. (With a house, you’d also lose close to 10%, between commissions and closing costs, if you sold the day after you bought.)
As to your second question, the market makers in BOREF make the spread between bid and asked, not retail investors like you and me. We pay the spread. You can’t just put up a shingle and become a market maker.
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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