Me: What time will you come home?
The Wife: Bill has a conference call.
Me: (Pause)
The Wife: Bill is driving back to Beijing.
Me: OK, but what time will you come home?
The Wife: We’re having lunch here.
Me: (Pause)
The Wife: We should be finished with lunch around 1:30.
Me: OK, but what time will you come home?
The Wife: We will leave here after lunch.
Me: (Pause)
The Wife: (Pause)
Me: OK, but what time will you arrive home?
The Wife: Maybe by 3:00?
Me: OK, I’ll see you at 3:00.
The Wife: Yes, maybe.

15 happy years together and counting. :-)

The box came up with two ideas, one short and one long, for Monday, December 24. It’s a pre-holiday trading session so we’ll see if either one of these trigger and fill during the shortened trading day.

Please email me to join the list if you’re interested in getting these daily ideas.

A couple interesting things from Arjun Divecha in this week’s Barron’s. First, on the Chindia “misperception” –

“India has benefited hugely from this misperception of “Chindia.” By linking China and India together, people think that India is in the same league as China when, in fact, it is not. Let me give you a few numbers: In global zinc consumption, China consumed 29%, India consumed 3.8%; aluminum, China consumed 25%, India consumed 2.6%; oil, China consumed 9% of global oil, and India consumed 3% of global oil. These countries are not compatible. They are not even in the same league. India has got a whole lot of capital that it would not have gotten if people had thought of it separately. India is where China was 15 years ago in terms of per capita consumption. It is a great growth story, but equating it with China has meant a lot of global liquidity has flowed to it and helped India’s performance. It has made Indian stocks quite expensive, and that’s why it is our least favorite country. The economic story is terrific, the valuation story is not.”

Second, on the possibility (ha! why hedge?) of a bubble in China:

“China we don’t like, either. Although, I want to caution you on China because China could be in the beginning stages of a fairly large bubble. I’m not predicting it. I’m just saying it’s a possibility. There is a huge flood of money coming into the country as exports lead to massive amounts of capital inflows…so large the central government has not been able to sterilize them … The money supply has been growing at the 15% to 17%, about in line with GDP growth. But now it has suddenly stepped up to 25% or 30%, and in the last few months inflation has gone up to 6.9% in China.

That in and of itself could be a problem, but that is not what I’m focused on. I am focused on short-term interest rates at 3½%. If you are a saver in China, you are getting 3½% from the bank while inflation is at 6.9%. You can’t take money out of the country. So what are your options? Real estate and the stock market. That is why the stock market has gone up so much this year. This trend isn’t changing any time in a hurry.”

Related: Losing Less Money on Chinese Bank Deposits — Yippee!

(This is my last issue of Barron’s since I’ve canceled both it and wsj.com anticipating Rupert’s making them both free soon.)

Just thought I’d point out the disaster area known as Consumer Discretionary. Boy is that an ugly relative performance chart. (It’s always good to review the component stocks that make up a sector.)

China Raises Rates to Nine-Year High on Inflation

“The one-year deposit rate will rise by 0.27 percentage point to 4.14 percent. Consumer prices rose 6.9 percent in November … House prices in 70 major cities jumped 10.5 percent in November from a year earlier. The CSI 300 Index has climbed 147 percent this year.”

Gotta love it when the negative real returns on bank deposits narrow a tad. And thank god that our apartment, which I conservatively estimate is worth around $200,000, is priced at nearly three quarters of a million dollars. Don’t even get me started on the stock market here, lol.

Akamai, Wednesday’s long idea, closed higher again on Thursday, and has traded beyond the critical 1x initial risk level. Once a trade moves in my favor by one time (times? grammar alert!) the initial risk, I usually start thinking hard about how to manage (raise) the stop. Going to breakeven provides the greatest comfort, that’s what I experienced as a day trader, but swing trading may be different, I don’t know.

Click to enlarge (AKAM, 10-minute chart)

I do know that people who say you should use a volatility-based stop, or move to a larger time frame, or reduce your position size are often barking up the wrong tree. Trading is maybe 10% mechanical (technique) and around 80 to 90% mental (maintaining a good psychological state). Using chart-based stops and making sure your initial risk is as small as possible is the way to go, in my humble opinion. People who say otherwise are either automatons or don’t know what they’re talking about (usually the latter).

Anyway, here’s Friday’s idea, already emailed to the several hundred people on the list. If you’d like to join, just drop me a line. Sorry about the annotation error: 1x initial risk will be covered at 40.99, not 39.77 obviously (the trouble with copy and paste). You can’t beat facing 61 cents of initial risk on a $40 stock (~1.5%) off of the daily chart.

Click to enlarge (Friday’s idea, available to list members only)

Rating Subprime Investment Grade Made `Joke’ of Credit Experts, by Kathleen M. Howley

“Investment banks sold $1.2 trillion of securities backed by high-interest subprime mortgages in 2005 and 2006. None of this could have happened without the participation of the three biggest arbiters of credit — Moody’s Investors Service, S&P and Fitch Ratings [ed. Oligopoly, anyone?].

About 80 percent of the securities carried AAA ratings, the same designation given to U.S. Treasury bonds … ‘Issuers got guidance from rating companies on how to shape their subprime securities to win the ratings.’

‘Our attitude used to be: We’re not here to be your friend. We’re here to look at credit quality. But that began to change.’”

Echoes of Andersen and Enron, except this is a much bigger disaster. We know what happens when auditors, and now credit rating agencies, get cozy with clients.

I believe the recent spate of mass murders (Omaha, Colorado Springs, etc.) can be directly blamed on the canned holiday music now being piped into elevators, shopping malls, and other public spaces. Even here in Beijing, on the short elevator ride up to my office, I’m assaulted by “Jingle Bells,” “Silent Night,” and “O Little Town of Bethlehem,” which fill me — a normally cheerful, friendly, and optimistic guy — with violent rage.

Here’s an intraday chart of AKAM, which was the long tech stock idea for Wednesday. A lot of people are writing me to say that they’re using tighter stops than the one I suggest, kind of combining day trading techniques with the swing trading ideas.

I guess it’s OK as long as you understand that the tighter your stops — the less “breathing room” you give the trade — the more stop-outs you’ll suffer. If you’d like to share how you improve the execution and risk management of these trading ideas, please leave a comment. I’m all ears!

Click to enlarge (AKAM, 10-minute chart)