``Believing that the market is “wrong” is one of the worst mistakes a trader can make. When an investment goes against an ego driven trader, they tend to play the blame game. It must be the economy... the Fed... the price of oil... bad earnings from another company in the sector. In other words, the blame is placed on everything, except for their own infallible analysis.”-Charles Delvalle, Investor’s Daily
The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups—Henry Hazlitt
Tuesday, October 17, 2006
Genius is A Rising Market! Prudent Investors as Contrarians (UPDATED)
Sunday, October 15, 2006
Global Equities Celebrate; Competitiveness as Drivers to Equality
``Once everything is in a state of flux, everything which happens is an innovation. Even when the old is repeated, it is an innovation because, under new conditions, it will have different effects. It is an innovation in its consequences … In any economic system which is in a process of change all economic activity is based on an uncertain future. It is therefore bound up in risk. It is essentially speculation."-Ludwig Von Mises
Figure 2: Bloomberg: Hong Kong’s Hang Seng and
Figure 3:
Figure 4: Bloomberg:
Dis-Inflation Inflation?
BCA Research observes a similar Broadening of Global Equity Rally, ``Our breadth measure for 36 major country markets has rebounded sharply in recent weeks, indicating that there is increasing participation in the equity rally. This reflects growing optimism that the
Figure 5 Economagic: CRB Futures vs. CRB Spot
Figure6 Moneyandmarkets.com: Crowded Trade
Phisix Supported by Local Buying Amidst A Rising Peso
US Trade Deficits: Be Careful of What You Wish For
US trade deficit for August leapt to a record $69.9 billion. This trade deficit borne out of the global vendor financing scheme trade structure has been a very important source of worldwide liquidity, as
Figure 8 Gavekal Research: US Current Account Deficits and Financial Crisis
Saturday, October 14, 2006
Reuters: Online brokerage account scams worry SEC
While online trading is still in an embryonic stage in the Philippine setting, the functional equivalent of “an ounce of prevention is worth a pound of cure” means recognizing risks posed by “Incursion scams” and taking the necessary security measures to prevent from falling victim to these predations. Here is an important excerpts from the Reuters,
Sunday, October 08, 2006
Are Equity Markets Defying Gravity?
The Dow Jones Industrial Index, one of the key yardsticks for US equities hit milestone record highs last week!
Figure 1: Chartoftheday.com: Record High but needs a Hurdle to clear
Figure 2: stockcharts.com: Phisix-DJIA Close Correlation
Since the
2. Lower Energy Prices are helping CONTAIN INFLATION.
3. Stock buybacks are DRIVING earnings.
4. Money from Housing and Energy or those from the sidelines will SHIFT to Equities.
Now as to the argument that lower energy prices help contain inflation is grounded on an equally flawed premise. Dr. Frank Shostak of MAN Financials, in his very insightful contributory article to the Mises Institute, “Will An Oil Price Fall Push Inflation Down?” explains why (emphasis mine)...
``If the stock of money rises while all other things remain intact, this must lead to more money being spent on the unchanged stock of goods — which means an increase in the average price of goods. (The term "average" is used here in conceptual form. We are well aware that such average cannot be computed).
Are the Financial Markets Fighting the FED?
These are hardly bullish factors for US assets going forward as about 78 million baby boomers (birth years: 1946-1964) enter into the retirement age in the coming years.
Election Season: Big Brother’s Hand “The Gorilla in the Room”?
This leads us back to the present fix, “Why are the markets rising amidst a mid-cycle slowdown?”
During the past month, as the seasonal strength favored rising gold prices, an abnormal degree of selling pressure sent gold prices plummeting. I initially suspected of government’s hand in trying to “manage our inflation expectations” by dumping on the gold market, and was proven right, apparently my suspicions have been confirmed by more sales by the European Central Bank according to their recent disclosures. This seems to have been timed as the calendar year for the European Central Gold Sales Agreement closed last September 26th, where they are allowed to unload 500 tonnes annually.
Bullish Momentum, Flexibility and Trading Advices
According to George Soros, ``One can never be sure whether it is the expectation that corresponds to the subsequent event or the subsequent event that conforms to expectation. The segregation between thoughts and events that prevails in natural science is simply missing.” In this context, I remain uncertain of my convictions over the interim simply because events have turned against them.
Yet as prudent investors we do not fight the tape. In the invaluable words of legendary trader Jesse Livermore ``There is only one side of the market, and it is not the Bull side or the Bear side, but the right side.” We have to remain flexible, in view of these circumstances.
Figure 3: Contraryinvestors.com: Second Year Presidential Cycle Pattern
TailPieces
Thursday, October 05, 2006
The growing sophistication of Asian M&A
As an Asian bull, I noted that the ongoing financial integration will boost valuations aside from the activities in the regional corporate arena.
Go no further, the boom is yet unraveling.
Monday, September 25, 2006
Wisdom of Money:The Way You Think Dictates Your Spending Habits
Wisdom of Money imparts a very important message not just on spending but on investing habits, quoting them verbatim...
Wisdom of Money: The Way You Think Dictates Your Spending Habits
Prosperity thinking can be defined as a trusting attitude that things will work out. It is an optimistic state of mind, and an empowered orientation toward money. Prosperity thinking means aligning our beliefs, attitudes, expectations, goals and behaviors toward realistic levels of abundance, confidence and gain. It increases financial and personal self-esteem and assists in using our feelings and intuition to deal with money more successfully.
Poverty thinking, on the other hand, is a mistrustful state of mind that says things will not work out. It embodies pessimism, fear, and a passive relationship with money. A poverty thinker aligns beliefs, attitudes, expectations, goals and behaviors toward unrealistic levels of scarcity, fear, and loss. It diminishes our financial and personal self-esteem and decreases confidence in handling money. Such messages can cause us to distort how we perceive an event and explain why we react irrationally. Almost everyone, including highly wealthy people, is a victim of poverty thinking to a certain degree.
Prosperity and poverty thinking are two important concepts for understanding the psychology of money. Studying various spending personalities and behavioral patterns provide us with an awareness for making smarter financial decisions of our own. Because the mind takes precedence over our actions, to think and feel more prosperous creates new opportunities for experiencing financial freedom.
World Equities: Knockin’ on Heavens Door or Facing Hell?
``The game is always changing and evolving, and it pays to pay attention to new theories. The bottom line is to always be open-minded, to try and improve the way you do things." -Brian Cashman (GM, NY Yankees)
Figure 3: Phisix: Knockin’ on Heaven’s Door?
Of course with the momentum going in one’s favor, would one even care to listen to what may derail it? As we have previously noted, the average investors normally extrapolate the immediate past as the likely path of the future.
I’d like to point out to you that the ongoing activities in the US Treasuries market have not been singing hallelujahs as the consensus have it. In fact, if one looks at the present activities, the rapid decline of the 10 year bond yields point towards, expectations by bond investors of an ‘accelerated’ mark down in the US economic growth cycle and inflation expectations as shown in figure 4.
Figure 4: Stockcharts.com: Bond Yields Suggests Big Slowdown Ahead
Figure 5: Stockcharts.com: Knockin’ on Heavens Door or Facing Hell?
If these
On the other hand, if the prospective slowdown in the
Thai Coup: Hardly A Ripple
``The coup has also highlighted some of the fragility inherent in Thailand's social fabric: so very much of the nation's unity and order rests on the shoulders of one remarkable man, His Majesty, the King.”-Andrew T. Foster, Director of Research, Portfolio Manager, Matthews International Capital Management, LLC
One major distinguishing factor that has so far contributed to the triumph of the changeover has been that the military group, who were seen adorned with yellow ribbons meant to demonstrate their loyalty to
Many pundits have thrown their opinions as to the possible repercussions. A surprisingly big number of analysts, mostly from foreign institutions-gleaned through Bloomberg’s interviews, have said that this opportunity could signify a “screaming buy” given that the present political impasse would be disentangled given the makeover. Some like those from Morgan Stanley downgraded their Thai outlook.
In the past I have noted that domestic volatility have markedly ebbed as global markets have slowly integrated...
Figure 1. Yahoo: US/THB; stockcharts.com
To give it a more balanced perspective, Asian currencies have been largely down led by
For as long as the Thai incident would remain contained, orderly and peaceful, we are unlikely to see a contagion effect towards other the ASEAN nations which I view as rather low impact low probability event. In contrast to the Asian Financial Crisis in 1997, where structural infirmities such as pegged currencies, massive deficits and mountain loads of external or dollar denominated debts gave way to simultaneous capital flight, today’s ASEAN economies appeared to have learned from the past and have adopted a more flexible stance.
As for General Sonthi Boonyaratkalin leader of the coup, like the JRR Tolkien masterpiece the Lord of the Rings, we will see if he will be consumed by the power he arrogated upon himself (what I call “personality based politics”) or indeed stay loyal to the cause of the King and permit for a transition government. By the way, coup has been a way of life for the Thais; this has been the 18th during the past 60 years for the Land of the Smiles!
Finally, I’d like to make a short comment on the observations of a very high profile contemporary, who made a ‘rationalization’ that Thursday’s decline at the Phisix had been due to the Thai coup. Our expert analyst simply parroted what the average investor would have thought. However, being an analyst, I guess I’d be responsible enough to point out that in spite of the impression of so-called “foreign-investors-pulling-out-of-ASEAN” due to the Thai development, internal market data showed that foreign buying heavily supported the Phisix in nominal and in broad market terms, which simply belies this claim. Further, Ayala insiders or the Zobel group represented by MERMAC sold 6.9% or Php 10.56 billion worth of AC shares to a foreign group on a special block sale also during that fateful day. So listen to your high profile analyst, who is after all, not after the truth, but for publicity (smiles!).