Trader’s Narrative

As a student of sentiment, I try to keep a sharp lookout for new, wacky ways of taking the mood of the crowd. There are the traditional methods. And then there are other more unorthodox ways of seeing sentiment.

Just recently I’ve been paying more attention to the keywords that people use to find my trading blog. Just a few days ago I started noticing something interesting. Quite a few people were googling: “I Hate Vonage!” and “We Hate Vonage”… which would take them to my post, Vonage: Please Don’t Leave Us!

Not only has Vonage had a very difficult time over the past year to make money and retain customers, recently insult was added to injury when a judge ruled that they had infringed on patents held by Verizon and ordered them to stop taking on new clients. Ironically, this might be just the thing Vonage needs since every new client brings with it much more expenses than concomitant income But the market was ruthless in punishing the stock as it gapped down to reach just below $3.

Tangentially, since I’ve promised to hold myself accountable in my previous opinions, I’ll take this opportunity to give myself an A+ for this call. The red arrow is when I made my first post about Vonage. The next day it gapped down and fell into the ~$9 area, consolidated and fell further. Never to see that level except when it came back a few months later to ‘kiss’ the resistance level.

Getting back to sentiment, when I see people actually typing in ‘I hate Vonage’, the contrarian in me feels an almost irresistable temptation to go long. I’m not sure though if these people are customers or shareholders (or both!). As Rothschild said, ‘Buy when there’s blood on the street!’. There isn’t any blood on the street perse, but definitely it is splattered all over the Vonage chart.

The MarketWatch’s individual stock sentiment measure is slightly negative (52% bears and 48% bulls) but the sample size is very small at slightly above 100 respondants. At the very least, I think that Vonage’s stock has reached a crescendo of negativity. So if you’re still short, I wouldn’t press it. And if you have no position, crazy as it might sound, it just might be smarter to go long than short.

By the way, we’re into the last days of my first trading blog contest. If you’re interested in sentiment, and you haven’t entered yet, hurry!

Kiva is a fascinating organization that uses the internet to bring capitalism and micro-finance to the most improverished areas of the world. The name is Swahili for “agreement” or “unity” and the concept is simple. You open an account and then begin to fund the business venture of a third world entrepreneur. Right now 100% of your loan goes to entrepreneur. This may change in the future after a critical mass has been reached.

The site uses Paypal and only requires a $25 minimum investment. You can build a portfolio of many different loans and the site helps you by keeping track of them. Also, the entrepreneurs file semi-regular updates on how their venture is going. So far, their repayment rate is 100% which might be shocking until you consider that all microfinance projects usually have repayment rates in the high 90%.

The only drawback is that your loan is interest free. All you can hope for is repayment. And the knowledge that you are helping someone you will probably never meet. If you are adamant about earning interest, give Prosper a look see. It is similar to Kiva but it is geared towards North Americans.

Many years ago Baron de Rothschild posed as a beggar for his friend, Ary Scheffer. While in the studio of the great painter in full costume with a tin cup and ragged clothes, a friend of the artist showed up running an errand. Seeing a beggar posing for Scheffer, he took a coin out of his pocket and dropped it in his cup. Rothschild said nothing and pocketed the coin.

Ten years later, Rothschild tracked down the good samaritan and had a note delivered to him along with a cheque for 10,000 Francs. In the note, Rothschild identified himself as the beggar and said that since receiving the coin, he had invested it and was now giving the principle back along with the accumulated interest and profits. He finished with “A good action always brings good fortune.”

I’m not sure if this is historically accurate but since the principle it teaches is timeless it doesn’t really matter, does it?