I mentioned before that I love StockTwits. But has it helped me this year?
Sadly, the short term monetary answer is “not yet”.
However, the long term answer from an educational perspective is “yes”. Because as obvious as it sounds, while StockTwits is great for idea generation, ideas are $0.008333333 each, and ideas are no substitute for doing your homework.
Case in point: I buy the premise of most of the folks I follow on StockTwits that commercial real estate is hosed in 2009. And the ticker that is most mentioned when determining how to play the plunge in commercial real estate next year is $SRS. Makes sense. Go UltraShort Real Estate if you want to dial in profits, right? All the cool kids are doing it.
Wrong. $SRS is one of the inverse ETFs that is only really useful to hedge for a day, and it exhibits the fundamentally broken tomfoolery that TraderMark highlights, with the added negative of being susceptible to the sawtooth effect for eroding gains over any period of time that that Fortune8 demonstrates.
The short version: these are horrible vehicles to hold for any kind of intraday trade, let alone as part of any kind of buy and hold hedging strategy. Go read those posts before investing in any double or triple ETF, or in any inverse ETF. As TraderMark puts it bluntly:
I am beginning to wonder if due to the structure if all these ETFs are destined for a near $0 price in the “long term”.
But is my use of StockTwits to blame here? Absolutely not. I plunged into $SRS trusting a premise and voices I agreed with, and even had one good short term trade on $SRS. I was the one who didn’t fully understand what I was investing in before jumping in. I was the one who didn’t read the prospectus. I’ve learned my lesson (and I’m stubbornly still long $SRS at cost basis of $97 and change). But here’s the happy ending. The very insightful blog posts above (TraderMark’s and Fortune8’s) came to me through StockTwits participants including Fortune8 and TradeFast. So I wouldn’t have learned my lesson without getting references to their more detailed analysis that explained what was going on.
My only regret is that they didn’t tweet that stuff in the beginning of December rather than at the end. The good news is that I’m up enough from my $AAPL and $AMZN trades this year that I can tolerate this $SRS pain as I look for an exit (take it now and treat it as tuition? Or hold it and hope for more irrational exuberance to take hold?) and look for a more suitable proxy for a commercial real estate collapse.
So in the end, I paid for a couple of lessons this year. In this one, I not only got reinforcement on doing homework, I also traded up voices I’ll listen to: Fortune8, TradeFast and possibly TraderMark (if this silent twitterer is the same TraderMark from the blog.)
My observation over the course of December is that StockTwits currently holds much more value for the daytrader than it does for the buy-and-hold investor, or for the casual intra-day trader. In fact, I’d say 95% of the value of StockTwits accrues to day traders. There was money to be made in $SRS this week by through the use of StockTwits, but to make that money required a day trader’s level of attention. One of my goals for 2009 (which I’ll detail later this week in a kick-ass post for the ages) is to learn how to exploit StockTwits in 2009 as a tool for someone who isn’t a day trader, someone with periodic, limited attention span. In short, A StockTwits User Guide for the Idiot Retail Investor.
Stay tuned.
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