Don't fight the market, idiot!
Ending Bal: €307,558
Tuesday, March 17, 2009
Sunday, March 15, 2009
Profitable, No One Ever Doubts That
Last week's rally was fueled by a coordinated announcement from Citigroup, Bank of America and JP Morgan Chase telling us that their banks had been profitable for the first two months of the year. Well, who would ever doubt that their businesses are profitable?
The problem is their balance sheets, not their income statements. And until they or the US Government know how to deal with the inflated asset values, the rally will likely be short lived. Changing the rules may help but then again we must realize the potential long term consequences of changing the off-side rule in the middle of a ball game. The referee will easily end up playing the game all by himself.
Wednesday - UK unemployment. Short GBP?
Thursday - application of 1st phase of TALF fund closed. This works exactly like an increase in the spending limit of an already maxed out credit card. Should help in the short term.
Friday, March 13, 2009
Black Friday
That's it for me this week. The only regret was that I didn't fully maximize my gain. The BoA long was terrific. I held it over the weekend and for Monday night - caught the wave nicely but could have done a whole lot better if I had given it one more night.
It's black Friday and I'm very superstitious. No more trades today.
Ending Balance: €267,289
Thursday, March 12, 2009
Target
When set target is reached, follow thro. Don't bet against it. Repeating the same old mistake.
Current Bal: €247,229
Tuesday, March 10, 2009
Anymore To Sell
HSBC's position was closed as I placed at stop-loss at 330 which was breached early yesterday morning after the mass sell off in Hong Kong. BoA, however, seems so far a good long position. Have 36 pts in the pocket and should expect at least a mini-rally today as stock market is pointing to a positive opening.
A$/¥ cross is doing well. Long @ 62.57 with a target at 65.00. The hope that repatriation of ¥ for some window-dressing accounting as the 1st quarter comes to an end may not be enough to pop up the currency. There simple aren't much earnings to repatriate when they are making losses, huge losses. Australia is the only western country which hasn't officially gone into recession. Can be a good bet here.
Current Bal (excluding open P/L): €132,685
Monday, March 9, 2009
Almost Anticipating This
HSBC down 15% ahead of right issues. Position Closed.
Ending Balance: €108,774
Saturday, March 7, 2009
Friday, March 6, 2009
Short Into Any Rally
Easier said than done. With the market getting so cheap, the temptation to long something is hard to resist. Did just that and the entire day became almost unbearable. It would have been a disastrous day if not for the late rally (all within the last 5 minutes before closing). It saved my day.
Still holding BoA and HSBC long for the weekend - this is not good as I just broke my own rule not to roll over any stock holdings overnight. But a re-bound is long overdue - there isn't much left to sell. Let's pray.
Ending Balance: €127,600
QE
The hottest words on the planet at the moment - Quantitative Easing. For a novice like myself, it means printing money. For experts in our Government, it means re-capitalization of our failing banks in a less than direct way - the Central Bank (Bank of England or ECB or Fed depending on where you are living) will purchase gilts (government IOUs) and commercial papers (private IOUs) from the failing banks. The sellers can then use the extra fund to strengthen their balance sheets and therefore enable them to lend again. The Central Bank can generate the fund needed for the purchases either from foreign investors (called borrowing) or by pressing a button on the computer (called QE).
No one can be sure if QE will work to save an economy deep in recession as it is not anything new but had been tried many times in the past, most notably by Japan in the 90s and Zimbabwe since Mugabe.
The argument for QE is that it will inflate away the huge amount of debts we have accumulated. As we are unable to repay the debts, inflation becomes the only viable option to get rid of them. Furthermore, we are a lot smarter than Mugabe. We will constrain the inflation to 2% and won't allow it to run wild by increasing the interest rates once it gets any near to our 2% target.
Smarter or just fanciful, I'm not sure. By keeping the inflation to below 2% simply won't be enough to inflate away the debts. We will be carrying not only the same amount of old debts but also new additional debts created as a result of QE. We would need double digits inflation if we were to inflate away our debts. Obviously, if this is to happen, you can safely throw away your leather wallet and buy a few of these bags instead.
One analogy comes to mind is this:
We have maxed out our credit cards. The standard of living we are used to cannot be sustained through borrowing anymore.
Option 1: Work harder. Get 2 or 3 jobs if necessary. Forget the overseas holidays. Dine out in McDonald instead of the fancy Japanese restaurant. Forget the nightclubbing, watch TV at home with your kids. If we can do that, we will be gradually repaying our debts. It's not easy and it is extremely politically unpopular to the point that no politicians will have the gut or will to push through a policy like this. It calls for massive increase in productivity while at the same time administrating a substantial pay cut in order to regain our competitiveness globally. It will also mean higher taxes so that we have enough to maintain the essential public services.
Option 2: Apply for another credit card. In normal circumstances, the application will be turned down because our existing credit cards are already maxed out. But this is exceptional time and the Banks are under enormous pressure to lend, to issue another credit card to us. Without the new credit facilities, we won't be able to spend. And if we don't spend, the economy will go into a downward spiral.
In order to encourage the banks to issue another credit card to us, the Government has injected fresh capital into the banks in the form of bail-out money and lowered the cost of money through numerous interest rate cuts.
But the Government soon found out that these actions weren't enough to convince the banks. As a last resort, the Government turn to "inflation". Inflation is a powerful tool to vaporize money, whether it's debts or savings or pensions. The Government doesn't give a damn to you savers & pensioners out there. If you save your money in a bank and don't spend it, it's bad for the economy and therefore should be penalized. If you have debts, whether as a result of gambling or stupidity, you should be rewarded or at least saved.
DOW was making new lows today. Plenty of trading opportunities. I'm not trading as often as before. FTSE needs to go above 3,730 before it has a chance to recover.
Ending Balance: €103,000
Monday, March 2, 2009
More About Timing and the Market
- Think. The market won't fool you - just don't fool yourself;
- Patience. A good idea implemented at the wrong time is the worst possible experience a trader can get;
- Forget your conviction. It is most probably wrong if the market doesn't confirm it;
- Timing is critical. The market won't punish you for not making a trade but will kill you for making a trade at the wrong time;
- Do your homework. The decision making process cannot solely rely on indices nor can it be done online in real time.
And of course, we need luck! Good luck!
Friday, February 20, 2009
Not Again
The bear almost killed me. The trading account was nearly wiped out. Made one last bet in desperation pinning all my hope for a late rally as the week was drawing to a close and there had to be some unwinding to be done for all the shorts. Got lucky this time. I'm not sure if this game is right for me.
Ending Bal: €61,666
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