Phisix: Playing Out Our Script

``Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success.'' –Warren Buffett

Finally, the market plays out our long and much awaited script!

While it may be close to impossible to determine such timing with pinpoint precision, market CYCLES eventually PREVAIL.

We had earlier described the local market as “knocking” on history’s door based on the bullish momentum in an attempt to crossover the resistance level. We also observed that budding speculative fervor from within represented risks of EUPHORIA, where similar circumstances in the past alluded to imminent TOPS. [The Phisix fell 7.35% over the week!]

We also discussed of the extreme bullishness as not being confined to the premises of the domestic arena and that the pervasive winning streak in global equities has led to similar sentimental buoyancies here and abroad. We even cited China and Vietnam experience as examples of a brewing “mania”. [China fell 9.2% in a single day!]

If there is any one indispensable lesson from this week’s activities, it is that WORLD dynamics and NOT local events have now proven to be the major determinants of the directional paths of our market, in stark contrast to what has been long promoted by our “experts” and the media. FINANCIAL GLOBALIZATION has been its KEY catalyst, where as described over and over again, as with the shared benefits comes with it the risks of contagion. [World markets from the Americas, EUROPE, Asia and MENA regions have taken a beating!]

Moreover, because of the growing significance of the asset markets in shaping today’s “finance-based” economies, governments have been sensitive to such developments and have attempted to extend CONTROL, which has lead to UNINTENDED consequences. Last week’s “Shanghai Surprise” as some market pundits call it, a crash which resonated around the world, and previously in Thailand serves as concrete examples.

Lastly, as also described in the past, RANDOMNESS, or aptly known as “Black Swan” or HIGH SIGMA standard deviation or “FAT Tail” [low probability but high impact-events], applies to the market beyond the confines of any sophisticated high tech mathematical or chart models. Here, past actions have failed to determine future activities. [There is much surprise to the markets than we are wont to believe.]