Trading Really need GFCII type of shocks!

Market gets what it hopes now:

1. EU could not give out a comprehensive solution on 23 October 2011
2. China is slowing down at 9.1% GDP

Things could be worse and much worse. If you don't believe it, you should read Chanos warns on China or EU bank failures will crash Wall Street — again.

It seems nothing could stabilize the world but GFCII. Very disappointed to notice that XAO just shed 88 points, 2% about only, not 3.81% as Hang Seng did. Just wonder how beautiful if XAO could be zero and all have to take spades rather than click the buttons for nothing!

What could cause GFCII? We need wars, revolutions, EU default, China tip off, and US crash. No these bad events, the world has no hopes again.

Hopeless life is terrible life!

***
Have you heard the words from Marx before?

"The worker becomes all the poorer the more wealth he produces, the more his production increases in power and range. The worker becomes an ever cheaper commodity the more commodities he creates. With the increasing value of the world of things proceeds in direct proportion to the devaluation of the world of men. Labour produces not only commodities; it produces itself and the worker as a commodity -- and does so in the proportion in which it produces commodities generally."

I just write the followings:

The retail market warrior becomes all the poorer the more money he puts into the market, the more his ambition to stop losses or buy and hold. He becomes every cheaper commodity when he trades quicker and bigger. With the increasing value of the world of things proceeds in direct proportion to the devaluation of the world of old share traders. Traders produces not only the money transactions; it produces themselves and the traders as items to be trade in...and does so in the proportion in which it produce the transactions generally!

***
For hopes, all of us need to go out to occupy some buildings where big shorters hide in. The news and markets make me very thirsty about the bloods! Don't be scared, Here bloods are just money, you burn on the fire or cannot make. This blood is much tasteful than that from the bodies!

Would you go out now for protection? Give me a second! I need to finish this transaction now, which I believe could give me a few baggers! You are really hopeless!

***
Feel sick when I go through the powertronics, control system, industrial process, firmware and software plus industrial networks and review what I have done for a old spade in case I would become absolute poor as the traders who have been traded in! Write for better English and relax!

Job is job and if you take one or you can get one, you should take it seriously for your responsibility and your bosses who take the risks to hire you!

 

Why has Mr Paulson lost so much this year?

John Paulson should be quite relieved since the prices of bank stocks and gold bounced back. At least for the time being, it help Paulson to stop some bleeding. The patience is virtue and could be critical condition for anyone to get some losses back.

***
It's been a tough year for Mr. Paulson. His flagship Advantage Plus fund was down 47% for the year. I could not kick him since I lost too and my portfolio has lost all of paper profit accumulated since October 2010.

I've learned that Mr market tends to smite the arrogant people. I've made my share of bad market playing over the years. Who could say he never makes mistakes. We all have made some silly mistakes.

The problem, as Paulson and me from our mistakes, is that it is quite hard, if not impossible, to recover from a loss of nearly 50%. In order to get back to break even we have to double our money. How much profit could we be sure to get per year? 100% profit is a tough task for everyone.

For long time, I just could not figure out why Warren Buffett said his first rules of investing are:
1. No losses.
2. Never take losses
3. Don't forget rules 1 and 2.

Paulson broke Mr. Buffett's rules. He has made an enormous bet on an inflationary boom and failed to ask what if I'm wrong? Before October 2010, since 2004 I never dared to forget ask this question but...

***
Paulson heavily allocated his money in banks and gold. It was not a problem. He certainly wasn't the only big boy to believe that American banks were undervalued at the beginning of this year. The problem was

1. He bet his huge parts of his entire portfolio on an inflationary boom.
2. The shares or bonds or funds in his portfolio were highly correlated to each other and highly dependent on the same macro forces.
3. He didn't buy anything that might do well if inflation rate was low, such as high-dividend stocks, utilities, pharmaceutical, etc.
4. It is worse that he did it with leverage.

It sounds crazy for a successful or famous market master as he has shown. What he did shows:
1. It was not sound portfolio management;
2. it's gambling.

It is not problem or wrong if we gamble with affordable capital and assets. All of us have to take some risks in some probability. Yes you could argue that all trading and investing is nothing more than gambling. To an extent that is true: stock market is a huge Casino. Risk is certainly part of the game even some believe they could play without any risks.

All of good market players as well good gamblers in the Casino need to practice risk control. The risk control can be done:

1. careful use of position sizing,
2. diversification,
3. keeping cash in reserve, or
4. lower the portfolio costs
5. buying in time average and for margin of safety!
6. disciplines to follow the rules, guidelines, and operation procedures, target direct and indirect goals, and tough budget and balance control.
7. Knowledge and skills to analyze the data, sort out all of possible scenarios, and invert between extremes for intelligence.
8. Always being self-reliant fiscally to get cash inflow for your life styles.

We all need to have processes in place that prevent an investing mistake from turning into a catastrophic loss they may never recover from.

If you want to avoid finding yourself in Mr. Paulson's and my predicament, remember Warren Buffett's rules and the basic means for risk control and management.

***
Don't forget to ask what if I am wrong! Why have I decided to pick up a spade? I have not asked this question between Oct 2010 - May 2011.

In the market, you cold be in hell just because you are ignorant or arrogant one time for one day and then your toes on the valley of death drag you into the hell even you struggle to get out. You just could not since you are human and under some conditions, you have to be in the hell!

Market doesn't care about what you have done or how famous or insignificant you are. If you are wrong you have to pay! If you are right, you would get the rewards. Hate to lose money? So ask this question again and again before you do any decision in the market!

Why do I want a spade? I failed to ask this basic question. It has proven that psychologically I am not mature enough to deal with the market as I assumed. I need to be sure my cash inflow and take a spade to let me never forget what mistakes I have made and what consequences could be!

I need to be away from the market a little bit far and then I could ponder what I have learned and let the lessons into my bloods and cells! It is not easy to admit your mistakes. We are trained to be competitive and then we tend to hide our mistakes(not harmful to others and our responsibility) and correct them silently even we are still quite honest and integration.

In the market you don't have any enemies but yourself. You have to let your enemies under the light and alert you the risk if you hide him somewhere! You need to beat yourself down before Mr market beat both you and yourself down!

***
Don't forget anything has its catches. In other fields of life, you have the time to put efforts to avoid the catches with much less or little greed and fear! When the catches work with the greed and fear, all of bad things would have wings to fly!

In the market, the things could be changed in seconds and the catches could push us into the hell before we could have time to response.

So extremely prudence is necessary. Market is a war place. You should crawl around your corners without forgetting you need the protection before you put your toes out!

Don't believe any genius and don't try to be genius. You are a fool and a fool need the protection since you are really fool! You could not play the fire with bare hands!

 

Are you sure the deal is real?

A piece of news could leverage XAO, DOW, FTSE... and any markets of this world down to hell or up to the heaven. Do wonder why the Bananas' price just stays at high for so long and even all of people worry about the sky!

Today a news said "France and Germany have agreed to boost a euro zone financial rescue fund to two trillion euros ($2.6 trillion) as part of a plan to resolve the bloc's debt crisis that should win support at Sunday's EU crisis summit." So that DOW up 180 points.

1. the euro zone will endorse a five-fold increase in the 440-billion-euro bailout fund to help troubled governments and banks withstand the impact in the event a troubled country defaults.
2. the plan would be approved at the summit was on the rise after Moody's warned it might put France's top AAA credit rating on review, citing the potential cost of bailing out troubled banks or other members of the euro zone.

But yesterday, the whole world seemed believe no deal to save EURO at all. Today people would worry again if the train leave away without me: "if true, "would be what the market's been looking for, and two trillion seems to be in the right neighborhood."

1. Markets have been on edge for fear European leaders would not agree on a comprehensive plan to address the crisis, which has already forced Greece, Ireland and Portugal to seek bailouts and has driven up borrowing costs in Italy and Spain.
2. European banks with heavy exposure to troubled sovereign debt have also found it harder to fund operations, sparking fear that governments may have to bail them out.

Believe or not it said:

"1. France and Germany agreed that Europe's banks should be recapitalized to meet the 9 percent ratio the European Bank Authority is demanding after having examined the exposure levels of between 60 and 70 "systemic" banks.
2. While French and German banks are said capable of meeting the new capital ratio on their own, other countries' banks may need help from the state or the expanded bailout fund, known as the European Financial Stability Fund.
3. Berlin and Paris are also said to be closer to agreement on increasing private sector involvement in a second 109-billion-euro rescue package for Greece. The voluntary "haircut" for bond holders was set at 21 per cent in July but worsening financial conditions have spurred Germany to push for private creditor losses of up to 50 per cent."

It seemed market don't know what the comprehensive plan or solution he wanted but read the news and feel what's going on. How about XAO today, it should feel better! God, XAO now is a huge Casino and most of people in it now are gamblers!

Another news said the above saying was not true and no deal until Friday. It seemed good time to guess and issued a news based on the guess and images. It seemed any words could throw over the world into GFCII. It seemed you don't need any analysis and judgment but guess and run!

Yo-yo and yo-yo until you could not follow the words to yo-yo! Is you system telling you to yo-yo!

 

Booming of Fixed income investment

In the wake of sharemarket volatility, market players desperately chase after the fixed income investments for cash inflow and safety. Money always looks for better return. Sharemarket looks just destroying the capital so that any yielding or capital safety become the hot points:

1. More stable investment products than shares.
2. Higher-yielding instruments, including corporate bonds and hybrid securities, as they roll out of term deposits.
3. This crowd activity would dramatically increase the demand of the fixed income investments and push the price goes up and then yield drop down.
4. It takes time to see the over-prices of fixed income investments and need to monitor to sense the crowd sentiment.
5. Generally saying before yielding of bond drops down to lower than yielding of stock, more and more people would jump into the fixed investment since fixed income investment could give the sense of safety and some cash inflow.

Long time ago, I have read some books about bond investment but never put them with the market realities. The above is my first trying to see bond in market realities.

***
Since coming into the market, I mainly have concerned is 'when do I get out of cash and into equities; and out of equities into cash?' But theoretically there are investments in the middle of that risk spectrum that could satisfy our cash reserve and cash inflow goals after the stockmarket gets into bear road from anxiety, in denial, fear, desperation, panic, despondency, depression, and relief and hope.

If you have the debt and an offset account, it is better than any actions to put your money back to the offset account before the bear roars and everyone rushes into stampede. If you don't have the debt, the fixed income investment, such as treasury or government bonds could give you a safe place for capital and cash income.

Fixed income has long been seen as a defensive asset. The asset class includes term deposits, government bonds, semi-government bonds, corporate bonds, hybrid securities and international bonds. But during the GFC many investors were shocked by big losses in fixed-income funds due to the assets of the funds are not safe, such corporate bonds and high gearing.

It should be remember if you feel the financial system and stock market in stake, the safety of the asset is the first issue you could not ignore. You need defensive line in worst cases. You could not buy the junk bonds but quality is first. Otherwise you would be shocked as in the GFC when junk bond investments going down at the same time (as equities). So what kind of bonds you choose is very important. All you need question how could you get the high enough yielding with the maximum safety!

1. Term deposits had been the best risk/return investments with strong rates backed by the government guarantee. But that is over and with many term deposits rolling off to lower rates, investors are now looking more and more at direct holdings.

When term deposits tend to give you the highest yielding? It usually is the time when interest rate is high and stock market is hot!

2. Managed funds of bonds and equities are just on the nose really and clients got a bit despondent by it all. They tend to drop down with the stock market.
3. The demand for term deposits, the most simple way of playing this (fixed income) game, has been partly a result of distrust of managed funds.
4. We should know we don't have a sufficient understanding of bond instruments and a lot of people still shifted away from managed funds since the yielding is terrible plus huge capital losses.

***
I have debt and don't need to use fixed investment before I can pay it off or have the gut to refuse the market sentiment synchronization to pay it off.

But asset allocation and risk management need the understanding of fixed income investment and the target of fixed income investment is the yielding and safety and the safety is the most important matter!

Bonds are the basic elements for main street operation. All of true value investors and traders on economical fundamental know bonds and use them as the way to manage the risks. It is the time for me to learn it and use it in the market playing!

Very interested to read the words below:

"While no financial economist or practitioner in the industry would claim they have found a reliable model for the valuation of stocks, we indeed have reached a fairly high level of understanding on how, why and when to invest in bonds."

Is it true? It sounds too good to be true! How? Why? When? If we know answers for other questions such What? Whom? Where? and Who?, we would get more chances to win!

 

GFCI: Too many sold in a panic when stocks were at their lows. Too many were surprised when they saw their fund managers proved just as capable of losing the nest egg as they were. Too many lost their life saving...

Could you get enough lessons from GFCI and don't repeat the mistakes you made in GFCI again or worse did sell all on the fire? Do you know more about the importance of diversification, time average, safe havens and avoiding overconfidence?

It is hard to get lessons and check you really have got your lessons. Now is a good time, when markets sways again amid uncertainty about global economic growth, to ask yourself how well you learned your lessons from 2008.

Diversification isn’t a cure-all even works in most of time

All of stock markets lost money in 2008; All of bond benchmarks lost money too; All of assets, that were considered less risky than others, lose not less. It was not a new era for resource shares but a confirmation of the failure of decoupling themes which supported resource shares then.

Would diversifying an investment portfolio protect you in a down market. In most of time it does but not in extreme or worst time. One lesson for investors is that when pessimism is greatest, many investments that ordinarily go their own way are likely to tumble together. A market in free-fall crushes anything in its path, just as positive momentum tends to lift all boats.

However over longer periods with time average, you could use diversification to lower your cost if you have big enough cash reserves after the market touched the rock bottom.

True diversification requires spreading a portfolio widely — across stocks, bonds, gold and other precious metals, real estate, commodities and the like — even if this means giving up some gains in bull markets. Seriously saying most of market players could not do or afford to do so!

Take flight to the Safe havens before all else want!

In Oct 2008, XAO had been the top-performer for five years. No one thought about government bonds. Yet once stocks went into a precipitous slide, Government debt played its traditional protective role; Treasury bonds were the best place to make money in 2008. Please note when yield of bonds drops down their price increased.




Treasurys have outperformed most other investments so far this year, even rallying since the GFCII worries in early August. Prospects for slow economic growth have investors fleeing to the relative safety of federal and municipal bonds, pushing yields down and prices up.

1. For fixed-income assets, stick only with Treasurys, bonds of government agencies and the highest-rated municipal bonds.
2. Anything else, such as high-yield junk bonds, convertible bonds, emerging-market bonds and preferred stocks can have the risks show up at the wrong time as stocks.
3. Treasurys are one of the rare investments that are likely to do well in short-term crises when stocks and other assets tumble.
4. Conversely, they could be among the worst performers the next time economy and stock market take off.
5. No any assets else can’t save you in bear markets

This time since April 2011, XAO and DOW lost a lot and Government bonds become brilliant again. How about now? It seems stock drops down too much and Bonds goes too high! Time to switch? Don't know since I never try to use bond before. My debt could work as my bond. I should start to put more money back to my debt and get money back to stock when bond get too high! Why market players hold low yield bonds since they are extremely fearful. Once any place could give more yield and acceptable risks they would jump out of the bonds. Where could they go? No too many place!

We are human and we could be greed or fear

This time is never different. If you hear too many people tell you it is different this time. You should alert you that it is smacks of overconfidence, which leads us to forget history and repeat our stupidity. Do remember chasing higher yielding, having unrealistic expectations, timing the market and other wealth-destroying behavior all stem from overconfidence.

Confidence was high in the first half of XAO. The credit crunch in US was considered a troublesome spot but not a cancer. XAO also took comfort thinking that a once-in-a-generation mega-bear market had already occurred. It was in 2000-02, the IT bust. We had China and old economies. Crisis was a matter to US if it would come in. So bear in XAO should be in hibernation for decades. So when a second tsunami hit the financial system down to the ground, all of XAO stunned.

This year, XAO looked more cautious and led the way to GFCII. It even run much quicker than anyone else. It was lack confidence in stocks, maybe too much this time. All of Aussie market players just was fearful to run not quick enough. Most if not all cry loudly for the sky and expect all would crash down onto ground.

With GFCII in their sights, many are selling before asking questions. The market has reacted as quickly as it did because it wasn’t going to be fooled again. But was XAO really not fool or stupid?

Individuals can take the big picture into account. How much return do you expect annually? Over how many years? Are you taking too much risk or too little? Are you trimming winners and adding to losers? Do you have enough cash that you won’t be compelled, or forced, to sell in panic?

Build a solid, well-diversified core of your portfolio that can thrive in a variety of environments. Run your market playing as a true businesspeople. We need to stay vigilant, and make adjustments around the edges. Don't waste the lessons and your mistakes.

Don't hand your money out to Funds at euphoria time

In normal time, most of big boys fail to beat their stock portfolios’ benchmarks. When times get tough, it is wrong belief that the pros deftly move into cash and other defensive areas, sidestepping the market’s worst blows.

In 2008, actively managed stock mutual funds lost 35-50% gloabally that year on average. They performed worse than XAO and DOW.

Actively managed funds are often doing very bad in down markets. They are committed to a particular style, strategy or sector, staying fully invested rather than “going to cash” or taking other defensive positions. Asset allocation or market timing falls to you and not the fund manager, who instead sticks to the portfolio’s mandate.

Cash is king

To be a loyal subject and keep it where you can easily get it.

That doesn’t mean to stuff the mattress, but do keep a stash at home. If you were building an earthquake survival kit, you would have cash on hand because bank machines could be out of order for many days following a disaster.

Preparing for Black Swan events also requires more liquidity than you might realize. A Black Swan could disrupt your job or source of income; three-to-six months’ worth of expenses may not be enough.

Plus, having ready cash gives you flexibility to take advantage of lower stock valuations.

Rebalance to lock the profit and get rid off the losers!

 

GDP 9.1% vs Bad Stopmarket

The market players wonder:
1. GDP 9.1% is not to bad performance and at much better than 1% around of the advanced economies
2. but why Chinese stockmarket performs so bad at present!
3. Its stockmarket has shed about a sixth of its value this year
4. DOW are barely lower despite US economy may slip back into recession.

Why?
1. In bad time, it typically sets its market for volatility since China has not Casino and too many gamblers, big or small, who are driven by crowd sentiment and push the market into bipolar disorder.
2. Government has exerted efforts to curb excessive growth stoked by over-easy credit from state-run banks and unregulated lending between businesses and individuals.
3. So market sentiment and government policies both work together to get the bubbles out of the economies and market.

What analysts said?

1. It was said the Chinese bank's domestic credit is equal to about 145 per cent of the nation's nearly $US6 trillion annual GDP, with the ratio swelling to 170 per cent when so-called off-balance lending is included.
2. By comparison, domestic credit in US institutions totalled just over 100 per cent of GDP in 2010.

So, the credit bubble would sooner rather than later tip off Chinese economies if EU and US don't buy anything from China.

What if China tips off(a question all think about in China and the world) and analysts are perfectly right?

Australia would have no tomorrow if China tips off?

Australians are with the most at stake, if soaring bad debts should prompt Chinese banks to hit the lending brakes.

1. China accounts for about a quarter of Australia's exports, nearing $65 billion in the year to June
2. Its growth has helped fuel demand in many of Australia's other main export markets in Asia.

So China's problems would spread to the whole Asia and Australia. If Chinese gamblers in the stockmarket become desperate and depressed, Aussie gamblers(it said nearly all of wise retail market players in XAO are in sideline) would lose shirts again. Without matter there were GFCII or not XAO would be the ghost land.

All are fearful. US has the bad economies. Australia has a hopeless economies. So it is very rational XAO should lead the global market into GFCII.

Even Aussie government and RBA started to worry about! Why did RBA say it could lower the interest rate? Why did Swan say it was hard to get budget back to balance in 2014?

That is a real reflexive process for self-destruction. Bad signs of economies scared people; People prepared for worse case; Worst case was confirmed in economies; and then all for worst case...

EU should be default. US could not get better. China would be in tipping off since it is so obvious that the debt would crash all down along the way. China could not be a exceptional. Australia has no debt problem now but it will and should be.

What's real in future? Who knows and who care about?

“The rising risks of banking sector bad debts together with significant tightening of monetary policy over the last twelve months have heightened concerns about increasing risks and vulnerabilities to the Chinese growth outlook.”

That in turn has “weighed on domestic equity market sentiment, particularly for the banking sector, pushing Chinese stock markets significantly lower this year”. In other words, Australians can't take for granted that China will shield it from Europe's protracted debt wrangling and stagnating growth. Although China's growth is strong by global standards, there's also mounting discussion about its credit problems.

Investors are now familiar with the risks resulting from dubious financial products in the lead-up to the global financial crisis in 2007-08. While China's risks are not yet on a par with the sub-prime morass that engulfed the North Atlantic economies.

“We have to be concerned. We have to be a little bit worried...'Watch this space!' Do you believe these guys were the same ones who cheered for decoupling at the peak of GFC? You were beaten heavily before and you could not act without fears.

But how much truth in these words? Oversimplification of the economies and guess work. In fears, could we say the gamblers would run away in stampede and everything is possible to sell on fire? Could we trust the prediction all of taxi drivers now brace tightly globally?

Nothing 'pre-ordained'

"China's growth is not “pre-ordained” was popular warning but seem too late.

1. China was reporting its third-quarter GDP growth rate had slowed to a two-year low. 2. The 9.1 per cent growth, down from 9.5 per cent, is still world-beating for any sizeable economy but observers have long noted that such numbers are estimates at best.
3. China's annual GDP figure has in the past been released before the year is out, and major numbers are typically not revised until years afterwards.
4. Prices for commodities such as iron ore and copper gyrate on reports of shifting stockpiles at steel mills, smelters and ports. Lately, though, the direction has been downward.

But what more could you expect? After GFCI you have to work hard to save the sky and now you have to clean up the mess. China's data is not clean or very muddy for thousands of years and the last decade was the best time in its history!

The problem is suddenly all of the world become so conscious that all of dirty matters are under the microscopes and blight scenes have to be ignored since humans have to focus on something, good or bad!

I tell you now but why didn't say so before?

Why does China still import bulk ores hugely? Nothing is the demand for this slowing economies but it is just the outcome of Beijing's massive efforts to stimulate growth since the GFC. Do you think it is all for China to be so fearful and powerful?

Let's know something about the growth in the “shadow” credit expansion through non-bank channels amplifies the risks for China overall:

1. The Chinese economy could get rapid economic growth since GFC, is because substantial fiscal stimulus and a 50 per cent expansion in bank credit over 2009-10.
2. The 2008 stimulus was worth 4 trillion yuan, or about $575 billion in Australian dollars today.
3. It was huge number absolutely but how about 1.4 billion people as the denomination for this huge number? What's the impact of 3000 billion of foreign exchange reserves?
4. Why does the policy maker want to tight the credit and what the landing would be?

Is Chinese economies just about these few numbers?

Why didn't you say so just after GFCI? See the rear mirror recently and then all of the words are guesses. Guess is virtue this time? Is it different now and you could predict darker days in the pitch darkness?

Don't invert from worst case!

1. “This (boom in lending) has increased concerns about the vulnerability of the Chinese financial system to rising bad debts over the next two to three years.”
2. non-performing loans in China would likely rise to between 8 and 12 per cent of total debt in the next few years, up from their earlier estimate of 4.5-5 per cent, as real-estate companies and local governments fail to pay debts.

All in all China could tip off terribly and Aussies could not be hopeful and its house market would be on the ground too.

Sell all of your assets for the tip off of China! But where could you hold your cash? Put all into US bank account if it could not be default! Is it the reason that GFCI hub becomes the safety heaven?

What are the features of XAO mass behavior at present? If all of other markets up, it up and if all of other markets down, it drops down and down more than anyone else. Is it normal in abnormal craziness? Yes! What if China doesn't need any resources from Australia? Once you think about China, EU and US are not problems anymore. Decoupling or tight coupling? It depends on the mood. Aussies have very bad mood, lost their own capabilities to analyze, judge, and very focus on the worst case, the sky falls down!

Mood and all about the mood!

All of sensational headlines in the newspaper try to give some so called fundamental reasons why XAO could move fast ahead to the GFCII than anyone else in this world.

Is it matter about China or external events for XAO so depressed? Seems not! It has lost its brain or needed shocks to get out bipolar disorders: decoupling from crises in advanced economies or tightly coupling with all of bad things which could happen anywhere in this anyone could decide to occupy some offices in the Streets.

I just could not agree the rationality of the bipolar behaviors XAO and all of the stockmarkets have taken, one day they lost 2-5% and another day they got 2-5% gains, for XAO it is a mater for 28 months and for DOW it is a matter for 11 weeks, for China it is a mater for 28 months too.

No brains and bad mood are the explanation to the volatiles. It seems every home of XAO market players have fire alarms which have being triggered not by the fire but the words who cry for the fire or rumors about the fire. Anyone could say something about the fire so the guys in XAO jump in or out the houses in case the fire on and anyone is in the house!

Stupid as me just could wonder!

All of genius fell to the hell in IT bust and GFCI. XAO has nothing but bolts struggling hopelessly! No crying around the trading forum any more. All of things deserted by the genius. Now I really feel it would be better if these genius could be here to cry! Silence if too long makes us feel we are in the hell! If you could not get reborn in silence you have to move out of the valley of death in the war!

God blesses Aussies and XAO?

What're the world and Australia? I wonder what happened in WWI and WWII or the red revolutions of communism beaten the stockmarkets in the advanced economies or capitalism system decades ago. I wonder how the people in XAO could have survived when the smoking of the wars could be seen everywhere. I wonder if the beef and bread would make all of Aussies in XAO lose the basic capability to find hopes and survive.

I wonder and don't dare to miss any episodes in case I would do something to fight against these crazy and bipolar disordered Aussies next time. Please don't mistaken me. Aussies are very clever. Crowd could be right. If fire on and you are in houses, you risk your life! In case and just in case if you don't know anything and have to stay in your house, don't be reluctant to jump into the open place at anytime you hear a alarm days and nights.

But I do wonder why don't you choose to leave away from XAO and forget it? I guess most of crowd have got out but the silly bargain hunters who are both greedy and fearful. No fire, someone could take their places. Having fire, they could be burnt to die. To me, damage have been done. I just read, ponder, think about the spades, and sleep in my own house while leaving the damaged assets in a tiny house of XAO with the hope it could be not dragged down by the crowd.

What can I do?

I just hope next time I could get all of assets out of my house in XAO when all of XAO get bad mood. You can not win when the crowd is crazy.

Just a few minutes ago, one of my friends call me and said "I have sold all today since I really could not sustain the pressure to see all of the screen were red!" Yes, it could be a very wise reaction since you have to think what if China tips off. EU defaults, and US has another credit crisis. Who can say they are impossible.

I turned dumb and tried to joke away the topic. That is what I could do. I have made a series of mistakes as any stupid warriors. Give a advice to hold. I don't trust me now. Cheer for the selling. I don't agree the desperation and depression could give better options. We can say bad mood is abnormal for normal life but in a abnormal world normal mind is risky! For safety, I just could choose dumb and hope... No revolution and war again in my life.

I hate the wars and revolutions, even at my 15, I loved all, the bloods and death for the The Internationale which I just could not really understand until I worked in a remote village as so called Educated Youth! I rather take a spade than take a gun.

In China all of people who have the power now have some similar experiences in their young time. They know a nation must make things while it tries to get the fairness and justice in life, which is a process rather than a impulsive actions. Most of them have studied "The wealth of Nations" in 1980s as I did. No belief on communism; No religion survives and revives; China if you could see into it, is a very fundamental capitalism nation. There are still a lot of people could not get the bread and beef for their mouths. The statistics needs long time to be transparent, which everyone loves but could not ready in one day!

China in my view still have a long way to go. Good thing is it has got the momentum to go in the right direction with huge problems. A huge train once starts, would generate huge inertia to go forward even it could stop or derail. It should not be a thing just in weeks, months, or even years.

Completely hopeless!

The problem is there are black swans, good or bad, we don't know. I don't know I should shut up! In this sense, I should speed up to get a spade but I just could not put me in completely! I just could not do as I did before to turn finding a job as my job! It is a very fundamental problem and maybe I need to lose all in the stockmarket and then I could put me all into the spade searching!

If all in Australia act as me, it is hopeless! You know I even dream if XAO was back to 5000 between January - March 2012 and then my portfolio would get all of lost paper profit back and I could not need a spade and keep to be a full-time students for "Intelligent Investor," "Security Analysis." "Corporate Finance and Financial Statement," and "Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies" for two years.

You can see my problems. It is a hopeless old soul to have the hopeless dream since China could tip off any second! I even dream BKP could get huge shale oil but deny the fact that China doesn't need it and Australia doesn't care about it.

Really hopeless while your head is just buried by the sand!

 

Australia Default!

Default fear in Australia!

It was said that "a sharp jump in the cost of insuring against an Australian bank default has raised eyebrows recently and appears at odds with both funding markets and a relatively upbeat performance for bank-sector shares."

1. Credit default swap premiums for Australian lenders haven’t climbed as sharply as for some French banks,
2. Since August they have risen to levels above that of some U.S., German and Canadian banks
3. Australia isn’t immune from concerns about funding-market stresses, and the recent hike in Australian bank CDS premiums likely reflects generalized concerns about the global banking system.
4. Since August, concerns have risen that Europe will fail to contain its sovereign-debt problems, leading to another near-meltdown of the global financial system.
5. However, Australia’s total sovereign debt outstanding is low compared to other countries, its domestic banks have little direct exposure to Europe, and the banking system is tightly regulated.

Why?
1. Technicalities could be behind the rise in CDS premiums for Australian banks, as the market is generally low-volume in Australia.
2. Potentially it allows traders a cheap way relative to a debt security to take a position either on the entity in question or as a proxy for a broader position.
3. (Wdongli: )Fundamentally if global financial system crashes, Aussie deposits would run in stampede to the banks and they would get all money out. Bank would run and not XAO run only!
4. Very scared if you could image the stamped at the doorsteps of big four banks! If you could not see it, it is advised to try again and again!
5. All of potato could be got by gold coins since nothing could be trusted. Who said gold is no value?

Any good news or bullish views? They are not important to anyone in the market at present. Technically all of Aussies are preparing for GFCII! Is it bad? Very bad since all of Aussies know how bad we could get in future and resource could be left at ports without ships come in to anywhere. It is a theme that all of taxi drivers know!

23 October 2011 is a line: GFCII or not this time. Before that you have chance to burn your money. After that China could tip off. After China tips off, all of us would tip off. That is the road map for XAO and this world. You would have no chance to burn your money.

What could you do if GFCII on 23 October? Hold your spade and get a spade as quick as you can! We need organized, visionary, analytical, and self-reliant for GFCII. LOL.

 

Game is over!

The mood is low not among the retail warriors but professional ones too. Actually the big boys hold more cash or bonds than any time since GFCI based on my reading of the news and surveys. As you know it is not caused by greed but fear. What are they fearful now? Four big bad wolfs: Greece, Spain, China, and EU as a whole. Any one of these four wolf could eat out all of these big boys. You could see the reasons why they are so fearful.

It was said that banking sectors globally have been throw away in very high percentage. Even in Australia bank credit default swap have been priced as that in German and France much higher than July! It can say banks are by far the most “unloved” sector in the stock market in Australia, EU, and US. I guess in China it should be true too. It attracts some brave gamblers(depending on your angles) are turned to be greedy to jump in. It is not a news if you hear anyone averts bank shares.

Now all of people nearly are afraid of the stock markets overall. People starts to look for fixed income investment and investment banks are busy to introduce small package of junk bonds for the investment public. A lot of public don't have idea how to classify the bonds, which let me feel fearful too. Bonds have a lot of types and some of them could be much riskier than shares.

Even oil is priced more than $80 and no sign of demand crash in commodities, fewer people like to put money into resource shares. Some said it is the first time the market as a whole avert the resources. All of people now dislike most Europe. It is OK you are default but don't spread the fear around the world.

However if you have minds of contraians, you could be abnormal to think all of the above are bullish signals.

However more and more are waken up. It is a wonder of wonders in this wolf crying time. Slowly but definitely all of the market start to realize the biggest "tail" risk is out there. It is not that Greece will default, which is not problem anymore, but the wheels of the global economic cars could be in the biggest risk now. What if all of Chinese new houses become ghost haunting places? 9.1% GDP are full of water and its future is more bearish than at any time since the GFC crash, and fears are rising that the Chinese real-estate bubble could burst. All we know how bad consequences we got from US house bubble burst. Logically no one could say Chinese houses and Australia houses are bubble free let alone you could get YouTube to see the real scenes taken somewhere in China or Australia.

Greece would be in default. Most of people guess it would happen in six months. And no wonder if China and Australia tip off. This futzing around the world could not fool anybody now. Even taxi drivers could tell the causes, the history, and future about the world.

The game’s over.

I tell you now. Don't wait for all of your money gone and blame me I don't tell you the risks before that. How about you? I have been beaten down onto the ground and don't mind someone would kick me a few more. I just scare to run in pitch darkness. Stupid? Of course!

 

Take a look at the 3rd chart. It shows things to be way better than what they could be!

The Dow, 2008 vs. 1987 vs. 1929 (as of 12 Aug. 2010) on Physics Forums Blogs





Johny.

 

Johny, as the charts shown, the situation after GFCI was much better than that after 1929 Great Depression. Then EU was not in the debt crises but was in wars and in US there were much much higher unemployment.

Now the game for most of traders who started in IT boom is over but the new game for some of them just starts. These people with experiences of IT boom and bust, and resource boom and GFC crash, have to choose to finish them game or change themselves.

I choose to change myself. We don't have a lot of options to change. I like what Charley Monger said: we have to invert, invert, and invert; we have to read and ponder about market, economy, useful knowledge and skills, and ourselves, by which we could set up our mental latices for a right mental network.

Seriously I don't believe the sky would fall down, EU would be default, China tips off, and US lays down flatly. However I do realize that market can be worse than our assumption. I was born as a risk taker and tend to be over-optimism when my paper profit turns to be very big:

1. Market is a war place
2. We could make human errors
3. There are gaps between reality and images in our minds
4. Everyone and everything could be wrong but we should not make any mistakes to lose
5. We are fools but we could know KNOWN and UNKNOWN and we should be prudent and never be synchronized with the crowd.
6. We could lose all even no GFCI and GFCII since market don't tolerate any mistakes we make.
7. We need to set up our direct goals within allowed limitation set by ourselves and environment.

We know the game is over to most of veteran traders(having stayed in the market for a decade). We should not be one of them and if we are prudent and run around our corners with great protection, we could play the game with reasonable profit rather than stop-loss every day.

Could we win over the only enemies, ourselves? All what I try are to beaten down the biased and preoccupied myself, who is ignorant, arrogant, no idea what market is, no enough knowledge in finance, micro- and macro-economies, and good behaviors in the market. All of my biases and preoccupation result in self-synchronization to the crowd sentiment in euphoria.

My extreme caution and prudence between 2006-2008 let me go through the GFC acid test. My ignorance and arrogance let me lose all of my paper profit and too much capital just in a few months. I beaten myself down. I have full responsibility for all of disastrous consequences to my portfolio.

I known and believe I am a fool! The game is over if I am a fool but don't try to open my eyes to see what fool can do and what fool cannot do!

Invert, invert, and invert to make me a intelligent and wise fool who never synchronize himself with the crowd sentiment again!

 

BHP: Stronger for long stance!

Any great things need vision, gut, plan, and prudent operations.

In hindsight, RIO got the vision, plan, and not prudent operations before GFC. It tookover some assets at too high price and then GFCI put it in a very bad but not fatal situation. Why? It didn't act decisively before the market sentiment was too hot but just when the whole of XAO believed the decoupling theory! Just a tiny mistakes to get into the deal and it made quite hard time for itself.

BHP did very well before GFC and any of its aggressive attacks with little timing errors corresponding market sentiment. Now just when all of the market worry about China tipping off, BHP wants to get ''stronger for longer stance'' towards the resources boom with its belief: the world is in the midst of a ''dramatic'' economic structural shift that will support global growth for at least the next 20 years.

What's a different images: bright future of resource sectors vs pitch dark market realities! Don't forget all of trade forums are becoming ghost towns which is much worse than Chinese real-estate markets, EU and US economies! How dare can BHP do so? You are throwing the good money after the bad one! What the pitch darkness turns to be hell? The genius would question so. They are too clever!

BHP believed "while the short-term worldwide financial volatility was obviously a major cause for concern - in particular the debt crisis in the euro zone - BHP remained confident the western economies would, in time, experience a protracted recovery." I believe it too. If sky is there, life should be going on and we have to climb up over the wall of worries. Human is fool but intelligent enough to turn around rather than hitting his mind against the wall forever!

"Nevertheless, the high levels of sovereign debt in Europe and to a lesser extent in the US would continue to create uncertainty" ''In most of the developed world, economic disruption has seen companies and consumers reduce their debt levels and growth slow. Unexpected events such as the Japanese tsunami have disrupted trade, and austerity measures proposed by governments have yet to restore confidence, particularly in Europe.''

However, BHP believes, long-term growth and BHP's future prospects were very much tied to the developing world, with the record over the past 30 years showing that the relative contribution of developed economies to global expansion has consistently declined.

The developing economies were expected to account for 75 per cent of worldwide economic expansion by 2015. BHP also dismissed concerns that the ongoing growth in China was akin to the gold rush in the 1800s, which subsequently petered out as sources of the metal were exhausted.

The situation in China - which is providing a buffer for the Australian economy against the troubles in the US and Europe - was a ''structural shift'' in demand.

This was best underlined by the increase in the number of people now living in new Chinese cities - a rise of 350 million in just 20 years since 1990. In India, that number had risen by 135 million people.

''Over the next 20 years, cities in China and India will grow by [about] 500 million people.'' So in BHP's view, the world is in the midst of a dramatic structural shift. This shift is unprecedented in its scale and potential long-term impact … ''

This, in turn, had driven strong and consistent commodities-intensive growth which, unlike the gold rush, would not suddenly disappear. ''Rather, it will continue to drive long-term demand for minerals and energy: our(BHP) products.''

"BHP is in talks to buy the Brazilian iron-ore producer Ferrous Resources, according to sources close to the negotiations. No final decision has been made on a transaction, which could fetch about $US3.1 billion. Discussions have taken place in the past few weeks in Melbourne after negotiations with a Chinese suitor broke down."

All are about price not confidence about future. BHP has tried to extend its resource base every time when pessimism take over the driving seat. BHP has vision, gut, plan, and prudent operations. What if the sky falls down? What if China tips off? What if all of houses in China become the home of ghost? BHP doesn't care about! How about me? I don't care about it too. I do care about whether I could lock my profit before next euphoria turns to depression.

I, as RIO, have vision, gut, poor plan, less prudence, and tending to be the captives of crow sentiment in euphoria! LOL!

In long term BHP sounds right but seriously saying individuals have to know what's the direct impact of the exiting market sentiment and economic realities.

1. EU debt crises are very serious and if it could not get its resolution on 23 October 2011, the market sentiment would be worse and could result in domino effects to Italy and Spain.
2. Fed and China could not or be reluctant to stimulate the economies as they did in GFCI if they don't feel the sky is in risk as RBA does now.
3. It is a time to deleverage and it would leak the necessary forces from private sectors.
4. So everyone is thinking how to be self-safe which would drive the protection and trade barriers between nations or at least have this tendency.
5. US leading indicator shows US has chances into recession again and actually XAO has priced it at the beginning of August 2011.

BHP is right to buy bargains at reasonable price since its great cash vault. However if as individuals we fail to accumulate enough cash reserves before May 2011, we would have any chances to buy since we face different tasks from that BHP is taking. We have to be survival if the market become worse and we really don't know.

I just thought about what I did when I geared into property market in 1994/1995. Actually by that time, I didn't have any saving but I tried all to figure out what's the worst scenarios. I did it after I believed I could be survival.

Now I had made mistakes to let the cost run and cash reserves depleted first. I lost the qualification to buy worst in time average. I still have to deal with a task how to avoid selling on fire and get more cash back for the level I feel comfortable.

1. Prudence and intelligence need peaceful minds.
2. The profit if big enough need right and decisive forces.
3. It is a time still need enough cash and bonds for cash inflow in my case since my portfolio still is not very balanced:

bad time but not worst time: 80% bonds or cash and 20% stock
worst time around : 50% bonds or cash and 50% stock
at the time worst just passed: 20% bonds or cash and 80% stock
optimism time: hold all without change
over-optimism time: increase bonds or cash and sell stock to lock the profit.
euphoric time: 70% bonds or cash and 30% stocks
Market anxiety time or in denial: 100% cash or bonds and 0% stock

The above is an ideal play and more work and pondering needed to get a trustful plan and rules to play. More challenge would be in psychology! Another challenge is how to get the castles with great economic moat in the worst time and get the dirty-cheap fishes when the worst passes by but the fishes with internal explosive powders are still in the dreadful situation.

Market is never a game board with black and white line for winning and losing. Each approach needs necessary conditions and context for their viability. How to avoid the catches? A very tough task we could not ignore under any conditions and we have to be right but also need some lucks!

 

The core of problems in EU

1. Greece itself is not a problem for market
2. Italy and Spain default is what market really worries
3. Strong economies in EU are reluctant to pay high costs and they just could not act as US government in GFCI decisively since each nation in EU has conflicted interests and pressures from votes for different goals.
4. So politicians in EU have a paradox: avoiding domino effects of Greece default, Italy default..., and a lot of financial houses defaults around the world vs internal pressures for their own national interests.
5. Bond investors are to get enough yield without the worrying to lose the primary capital. They don't have paradox but clear direct goal: less losses and run away if primary capital is in stake. They would not buy anything more if no sure their capital and interest is secured at this bad time.
6. Problem is politicians can play the game ignorantly and arrogantly and fail to decide when they have to as leaders.
7. That is the reason why all of the world timidly watch the play in EU.
8. It is not about crisis in EU but GFCII. Market sentiment once collapses, it would beat anyone and anything along the way until GFCII becomes true.

In this cloud of worse scenario, GFCII, 23 October is a time line very importantly. The market has shown its resolution in last few days. Good news for a security of Italy and Spain, drove the market up greatly; bad news hit the market down as though no tomorrow.

G20 has warned EU how serious consequence would be if they do not enough on 23 October 2011.

The above is not to say what would happen but the understanding of the background for what would happen. Don't expect I would do any better this time since I had made enough mistakes but do want to record what I see, I do, and I think in this crisis for a prudent mind and keep me to be highly alerted by the system risks in future.

In hindsight, it seemed right to buy some in last a few weeks and hold enough cash reserve to see what happen on 23 Oct 2011. No good enough solution, the market would crash since no greed but fear only now. It would generate a chance to buy at extremely low or lowest points for years ahead. The reason is the sky would be assumed to fall down but it could not!

By now, XAO has shed back all of its tiny gains built this morning and its traders are trying to close the long position for a felt safe weekend. Safety has its cost and now no one know they are right or wrong!

 

Why does Gross lose sleep?

Bill Gross has presided over Pimco Total Return for nearly 25 years. He has fame as well as fortune. He’s also well known for his clever commentaries, which are posted monthly on Pimco’s website.

In March, Gross made his big call for this year: “Who will buy Treasury when the Fed doesn’t?” he wrote. “Yields may have to go higher, maybe even much higher, to attract buying interest.” Yields up and bond price down.

It seemed very right at the time. But the economy didn't keep to be stable. Weakened and the EU debt crisis flamed up again. And all did what they did in 2008, took the flight to the safety heaven of U.S. Treasury. Worse that it occurred even after the U.S.’s AAA rating was cut in August.

The flight-to-safety rally drove the yield on the 10-year Treasury note down to 1.72% from around 3.5% in early March. Gross admitted and wrote: “This year is a stinker. Pimco’s center fielder has lost a few fly balls in the sun.”

“As Europe’s crisis and the U.S. debt ceiling debacle turned developed economies towards a potential recession, the Total Return Fund had too little risk off and too much risk on."

Yes, I did worse and are in a situation having "too little risk off and too much risk on."

No intention to make Gross's name dirty. He is a great trader(even great lucky too) in the market. I just read what he wrote with my own mistakes for my own lessons! He seems like all-or-nothing bet. It is very effective if right and also very destructive if wrong! What's the lesson? Don't be arrogant and hubris. You may be genius but you are lucky if you win! Market doesn't care about whom you are if you play the card wrong!

Gamble and lose too much if you bet too much. Nothing in hands if you never gamble or bet too little. At last your portfolio should be never in losing position even worst things happen. No standard way to get these sound conflicted but necessary balanced playing. It is a challenge for all of the market players. Otherwise we could win a lot of little profits but lose all in a few days!

 

"Why does Gross lose sleep?"

Why have you been born Chinese?

 

In time, the market should do the rest

In time, the market should do the rest after you pay and hold.

1. at what price you pay
2. couldn't you be forced to sell on fire

For each share, you need to buy for enough margin of safety for the time period you would like to hold and you need not to sell on fire when market moves against your desire. You need "stop-loss" as your tools but it should happen you are convinced that the margin of safety is too little or gone. It is to deal with your human-errors not as a strategy to buy and stop losses every day.

For your portfolio, each buying has to be evaluated without loss for the portfolio as a whole under any assumed scenarios or episodes. So that some should be bought for high expected profit and least risks; some should be bought for profit at normal time or conditions; some should be bought at low tail improbable price for high risk and high consequences; and the losses of any shares in worst case should not set your portfolio in red.

So you have to pay the price for low cost of the outcome from your warrior service business, collect profit for your direct goal such as labor value for your job as market players and necessary outlays of your business along the way for market to move from relief and hope to the euphoria, hold maximum cash reserve when the market turns to be anxious about tomorrow, do nothing in the crash, start to buy the share back after crash happen and market has the sign on the rock bottom, and hold your position with enough cash reserves for you to hold the position.

Don't forget we all need organized, analytic, objective, and self-reliant. We should do so at business level, strategic level, and macro- and micro-economic level, which need both of the top view and bottom view!

All of these are not to prove we are genius. It is not important you are genius or not to design a rocket but you do need to make profit every year and for all of the years. Who care about whether you will fail to create some great theories or things if you lose your money in the market?

You fail your job if you fail to make money in the stock market!

If you buy right, you should leave the market do the rest and you should have enough cash reserves for market to do the rest. I hope I could do right and market just could do rest everyday. It could speed up the production rate for my profit but I do realize I just could not do so every day, every week, and even every month.

 

It is my luck/no-luck to be born in China as anything around me philosophically.

Why does Gross lose sleep? I guess he has some similar reasons as I have.

1. He has made some human errors unfortunately.
2. He did know he did something wrong or something market just didn't like to see.
3. He does have gut to admit his mistakes and not feel shamed to tell you he was up right in the night.
4. He knows if he lost so much and just tried to gloss his mistakes he would lose more.
5. He love the profit more than the glossy name.

I guess he could be so successful is because he learns from his mistakes, he tends to be right up if he does anything wrong; he know he needs to think deeply and widely enough in a quiet time; he should not just hit his head against the wall of his study room; he has motivation to do so since he could not forget his responsibilities for his family and his clients; he knows he could make new mistakes, and he wants to figure out how to reduce the impact of the mistakes as less as possible. Too many worry too much but never learn anything. I believe he is different from the warriors who just lay out in flat and cry in the ruins. I appreciate anyone who dare to be right up to ponder about his mistakes.

You have to be honest for yourself in the market. If you just tell the story you make the fortune but never make mistake, it should never be true. No one could make fortune without mistakes. Loss is the mother of success in Chinese. I guess it should be true in English, isn't it? If you lose the money always in the market, you are the dog without matter where you were born. No anyone else turns you to be a dog but yourself! I just realized it now which triggered by your questions. LOL.

Good luck, tropo, my mate. Hope you get profit every year and all of the years and I would never ask where you were born! I don't have any enemies except myself even sometimes I am crazy to twist words with my mates here or somewhere else and every time after I was crazy, I felt shamed about myself since I did be stupid.

 

All of systems faile with a little bit salt of greed or fear

What happened in EU which had setup the roots for the debt crisis? What could we learn or what couldn't we learn since we are never so wise not to repeat our follies? In 2004 I read "the crowd." which told me we were insane in the market times by times. I did feel the toughest challenge for a market player was in psychology rather than knowledge or IQ. We are so easy to be greed and fearful. The greed and fear put ourselves in the corners to be beaten while Mr. Market lured nearly all into the euphoric parties and pitch darkness. It put a lot of prudence into my bloods and cells but far more enough. So I was fearful to play in the market before GFCI. By then I could not tell what really happened fundamentally but I did know I have to buy anything with great buffers. If there were not dirty cheapness and no great safety to my capital I just refused to buy. The extreme prudence to greed let me pass the acid test of GFCI.

In GFCI, all crashed at the speed I could not understand the reasons then. However I did feel it was exuberance of irrationality of fear once the price lower than some threshold. I did felt fearful to death but I wanted to judge independently then. Buffett said US economies were in Pearl Harbor in Oct 2008. I read what he said words by words to sense the bottom. Didn't know what the bottom was then but fortunately I had collected enough cash, I did have a job for my labor value, and I did warn me I could not get in too early. You could not be survival when a dam of a great river with full water, just broke out. I held until the end of November 2008 and then I started to buy in time average, the shares which just crashed more than 95% and became stable. I just thought that if the sky fell down no one would be alive and if the sky was safe, it was impossible all of the shares would lost more than 95% for years. Fortunately the sky was there and V-shape recovery came into its course. Big reward and a lot of 3-20 baggers.

Success when you have not good enough mind is the most dangerous. Slowly I became more arrogant and thought I was not ignorant anymore. Ignorance is not a problem if you know you are ignorant and you could be prudent and carefully deal with it. After I locked a few quite big profit, I started to act as though I was invincible even consciousness told me I should not but I just could not stop acting greedily and being synchronized with the market sentiment. I put me in the valley of death without any protection after big profit has been accumulated between Oct 2010 - April 2011. I found all of excuses to reinforce my greed. I wanted to lock the profit after June 2011 to avoid paying too much tax. I didn't realize or refused to see the reality that EU debt crisis could tip off the global financial system; GFCI and the collective actions to save the sky by the governments around the world had turned credit crises into a sovereign debt crises. The saving sky was necessary but who would pay the bill? I read a lot since I quit my office job as a full time market students; Reading to extend the knowledge base and update my mind was not a mistake but reading without the prudent attitude to the reality is very harmful to anyone who is in a war place. Unfortunately by then I didn't accept the concept "market is a war place" and we have to run around our corner for chances and protection!

Since May 2011, I have realized my mistakes but my mind was far away from good enough to deal with my personal crises from a series of my mistakes I had mad. I was idiot for things which had happened and would happen in EU, China, Australia, and XAO fundamentally and psychologically. I didn't understand the market psychological cycles especially the parts of market crash. The lack of knowledge about the stages of anxiety, in denial, fear, desperation, panic, despondence, and depression to the market price collectively, let me make more mistakes to allow cost running and cash reserves depleting in May and June 1011; to guess that there would be a few sunny days in July and August 2011 which would give me chances to get more cash reserves. All turned to be wrong. XAO after selling on fire in its selling seasons of May and June, started running for GFCII ahead most of stockmarkets around the world. All of the troubles have reinforced at the scale I could not image before they unfold.

Fortunately/unfortunately I have got a much better minds than before. I could not find any excuses to say I was not wrong; I could not blame the market as I did in IT bust; I could not even let me feel better to say "market is unpredictable" and all of us are human and sometimes we make mistakes since I do know we could be prudent and should be prudent to avoid putting our toes into the place we would die!; You put yourself into the war as a warriors and the war does consume warriors!; You don't want to die but you careless let you into your grave! Who could save you? I do blame myself very much. I don't want to repeat it anymore. I don't want to find any excuses for my insanity! Right up in the night and ponder all I have done. I want to get the lessons. You could not beat anyone down in the market but you have responsibility to let your up when all of the market crashes.

I understand it is tough and sometime impossible to admit my own mistakes. All of us love to be the winners but the paradox is that if you are not honest for your mistakes, you would be losers sooner or later. Self-esteem to a loser in the market or war means nothing. If you lose or could not win enough you have proven you fail in the market and war. Market is fair to anyone. You have to be right and decisive. Any others are important only after you go away from the war and market. You never could be not ignorant but if you are arrogant and want to pretend you just could make profit with any system, you are idiot! Between 1999-2001 and between Oct 2010 - July 2011, I was an idiot. I could deny it but I was and if you were idiot, you would lose! It is the rule of the war and market! Don't tell anyone you are great but could not make money in the market and could not survive in the war even you are really not lucky. Why don't prepare for your unlucks? Why don't you say NO to your unlucks? You don't need to kill yourself for your dream and you just could not do so!

Don't be surprised if you are right up in the night since your ignorant. It is warning signals that you never know you are ignorant to the market and ourselves. Never be right up in the night? You are arrogant and ignorant or you are not responsible for yourself and your family at least! If you are ignorant and arrogant in the market, you would dig out the grave financially for yourselves. NO one could avoid this fate if they are ignorant and arrogant. Humility, prudence, Great senses of reality, and realization of ignorance are virtue in war and market.

 

Design for fail-safe and future profit needs

As we look to the future, it seems the time between the present and the future is shrinking! When a PC bought today is made obsolete in 6 months by a new model with twice the performance at less cost, how can you protect your investments you make today? It is a very basic question in utility system design, which needs full view to avoid strategic mistakes.

When I prepare to pick up a spade, I do feel we need to ask the similar questions in the market. Any profit and loss starts from buying. The market has performed as a huge rollers-coasters. How could we buy each share for a sure profit with enough protection for our capital and paper profit?

Obviously, there is no way we can keep up to know everything to buy. We must rely on others to keep us informed, and who we select to keep us informed is critical. With every purchase, we must evaluate not only the quality of the underlying business, the market sentiment, and our own mood, but what's the future tends.

In the office we could spend enough time to find all information to evaluate our buying. In the market we seldom spend time to buy for fail-safe and economics of our buying. We need to act the right questions in the market and do the right job! I never see any Engineers just hold a few words to get a system work reliably and economically but in the market we could do all just based on some words like "stop loss" or "buy and hold forever!" Design and job means some details and processes. A buying in the market just based on the price and feeling would result in losses sooner or later.

Could our new buying meet our future profit needs with least risk to lose too much? Do the underlying businesses have a migration path to enhance themselves for better future? Select the right circles for yourselves in the market will ensure you stay informed about new and future of the economic and business chances which you could take and deal with.

How could you extend your circle out of your box without getting lost? It is a challenge design task: how to design our market playing for fail-safe and future profit needs.

Is it a joke to make anything good just because we feel good or not? All of us sometime bet on too much without any senses but good or bad feeling. Yes this atomic reactor is great since I feel it is great. Would you be scared to death when you hear anyone say so. In the market all of people in all of trading forums just do everything based on their feeling.

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Safety or fail-safe usually have been decided when you buy and how you deal with the events when you hold for your profit.

1. Why do you buy? Is the market hot or cold? What's the market sentiment would affect the price and underlying value of the asset you want to buy? Is it possible the price would be push down more in days, weeks, or months? What's the force to drive the price down? How do you know or evaluate the market sentiment? Do you know you are human and you could have errors in your evaluation? Is your buying with the consideration of the possible deterioration? Could yo list the hard fact to support your understanding of market sentiment?

2. Do you know the worst case and the probability? How long do you want to hold? Do you know the price in worst cases? How could you get the price in worst cases with minimum guess work but sufficient analysis of different scenarios? Do you know all of scenarios with the underlying businesses? Is your buying is absolute cheap but no value? Have you checked it for last 2 years, 5 years, and 10 years of time periods for its performance? Any feeling or intuition is against the common senses and life logic? Is it too good to be true or too bad to be true?

3. Have you checked your evaluation with tech, financial statement analysis, and probability analysis to be sure your buying has the feature of high yield and low price even you count on your human errors and black swan elements? Do you question your confidence about your buying? Do you believe your buying from cool mind and intelligent analysis?

4. Have you checked your budget and the affordability if you completely wrong even all of us to buy with the confidence to buy completely right? Are you bored to question your buying from one extreme to another until you could feel you are buying with the fail-safe or no loss to your portfolio? Could you list the elements, such as capital allocation to each of your buying, time average for your buying of one shares, the impact of your completely wrong decision, which could be sure you are fail-safe or no loss?

5. Do you figure out when or under what conditions you should sell? Do you buy for "stop loss" or "buy for holding forever?" Do you know you should buy for profit for the holding time period with clear profit objectives of your portfolio? Have you done the due-diligence before your buying or put enough time to prepare for your buying?

6. Do you know your direct or indirect goals? Do you know your labor value? Have you got your labor value now? Why do you want to hold longer? Is the price going up too far if you lose you would painful? Do you know the market is hopeless, hopeful and relieved, optimism, over-optimism, exciting and thrilling, euphoric, anxious, being in denial, fearful, desperate, panic, despondent, or depressed?

7. Have you known your ignorance very clearly and have you checked your arrogance since you believe you could beat the market down onto the ground? Have you risked too much to your labor value or your direct goals? Have you seen the risks market would crash or drop down big enough? If you could not see the risks to crash what could make you to see the impending crash now? If you could not get right mind about the impending crash, how could you be fail-safe?

We need our blood and brains full of wisdom, intelligence, organization, self-reliance, and then we could behave properly in the market and get the profit with fail safe. Do you know everyone can be wrong in fail-safe but you could not? They may just could afford the losses or enjoy the twisting of the winds but you need the profit for your personal legend. You can not afford to play without fail-safe!

Don't go to the place where you are not sure you could be alive! Don't feel shame to be right up in night to correct your mistakes or get lessons! Don't pretend you are genius in this fool game. It is a job to play the risks for profit. You could not let risk run and profit down. Fortune comes from risks but prudence and protection also.