School of Hard Knocks 02 (Jan 10 - Jan 13)

[winston]

In the short term, the trend is your friend

However, if you are investing for the long term, then you may want to take some chips off the table, if you have not done so, while waiting for the next opportunity...

[kennynah]

i think we still need to reason....although one can try this method...commonly known as the "T" method...

draw a T and on each side, write down the pros and cons of this rally... the side that wins formulates a stronger case to either go Long or Short...

[winston]

TOL:-

How can one remain Neutral when observing a situation ?

Example:-

If one has been in Cash, one would naturally want the market to crash so that one can deploy those Cash. Therefore, whatever one sees, it tends to support the initial hypothesis that the end of the world is coming.

It does not matter that those things that one saw, are not investable ideas eg. US going bankrupt, Japan going bankrupt, Chinese NPLs in 3 years, Europeans going bankrupt etc.

In times like this, I need to work on looking at both sides of the argument. I also need to spend time only on Investable Ideas.

There are plenty of "experts out there", plenty of useless academic studies and plenty of emotional people who wants the marke to go a certain way.

The trick is to keep a cool head, use logic to analyse the situation, understand why you are buying or selling and time those positions accordingly

As of today, I have 15% Equities, 1% Short and 5% Gold ...

Be greedy when others are fearful but dont be too early to the party else you will have to wait a long time for the others to arrive

[winston]

SJM in HK is up 5.2% now. This is another example where you need to know what you are Buying or Selling, rather than to behave like the lemmings that are selling when everyone is selling and buying when everyone is buying.

[winston]

Just watched Obama's speech on CNBC ..

I'm starting to lose respect for Obama. First, he was trying to score points on the unemployment numbers and now, he's trying to score points on BP.


A few lessons for me from this BP fiasco:-


1) Different people have different personal interest.

BP was trying to plug the hole. They were not thinking of the consequences of the oil touching shore. Someone ie. the US government, should have thought about removing the oil of the water surface before they touch shore, while BP was focussing on plugging the hole.


2) Trust but Verify

The US government should have taken matters into their own hands after a few days. It was obvious that BP did not know what they were doing. In a Crisis situation, you dont have the luxury of time to experiment.


It's very clear to me that Obama screwed up big time on this one. He allowed things to become what it is today. You can make the best speeches but the facts are still there for all to see. The Oil has touched shore, destroyed the environment & industries and the leak is still not plugged ....

[winston]

If You Knew What Jim Brown Knows by Alexander Green

Jim Brown is arguably the best all-around athlete ever.

He was a track star, one of the nation's finest lacrosse players, averaged 38 points per game on his high school basketball team, and broke NFL records as a running back for the Cleveland Browns. In 2002, The Sporting News named him the greatest football player of all time.

He was pretty handy with a tennis racquet, too. And he liked to wager on his matches.

At a Las Vegas tennis club in 1979, Brown was frustrated when his opponent cancelled a money match at the last minute.

A stranger approached him with a young boy. His proposal - delivered in a thick foreign accent - was preposterous. He bet Brown that his nine-year-old son - short and scrawny even for his age - could beat him in tennis.

And he was cocky about it. He offered to put up his house.

We can only imagine what ran through Brown's mind as he sized up the half-pint. After all, this wasn't a bet. It was an insult.

The stranger had chosen the wrong man to outrage. Brown wasn't just an athletic phenom. His NFL career could be summed up in his oft-quoted remark, "Make sure when anyone tackles you he remembers how much it hurts."

He countered that they should make the bet an even $10,000.

The club owner tried to warn Brown. And while he did reduce his wager, he wouldn't be talked out of the match, insisting, "the man needs to be taught a lesson."

And so Jim Brown strode off to the courts. With Mike Agassi and his young son Andre in tow.

It didn't take Brown long to recognize his error. He had been hustled.

We seldom deliver lessons in humility. More often than not, we wind up on the receiving end. This is especially true in my bailiwick, the investment arena, where high confidence and big egos are routinely taken down like the Berlin Wall.

Every successful investor develops an abiding sense of humility, a deep respect for the unknowable. What will happen tomorrow or next week is always an open question.

And if you don't know who you are, the stock market is an expensive place to find out. Just ask Victor Niederhoffer.

A professional trader and former finance professor, Neiderhoffer established his reputation as hedge fund great George Soros' partner, managing his fixed income and foreign exchange investments from 1982-1990.

Niederhoffer is a smart guy and an unorthodox thinker, drawing on many disciplines - including psychology, philosophy and advanced mathematics - to make his trading decisions. His 1997 book, The Education of a Speculator, was a New York Times bestseller.

But in the fall of that same year, he got his post-graduate degree. Viewing the Asian market meltdown as a once-in-a-lifetime opportunity, Neiderhoffer invested his hedge fund in Thai bank stocks, confident the government would never let them fail. He was wrong. His fund quickly lost more than three-quarters of its value and he was forced to close its doors.

Niederhoffer is an experienced, insightful guy. But I wish he'd written The Education of a Speculator after his hedge fund collapsed, not before. That would have been a book worth reading.

Niederhoffer is hardly alone, of course. History has not been particularly kind to all manner of experts and their definitive pronouncements:

* Anglican Archbishop James Ussher (1581-1656) researched the dates of Biblical events and painstakingly subtracted all the Old Testament generations. When he finished his calculations, he proclaimed that the earth was created on October 23, 4004 B.C. at nine o'clock in the morning. (We now know he missed his mark by 4.6 billion years or so.)

* In 1899, Charles H. Duell, commissioner of the United States Patent and Trademark Office proposed shuttering the office. "Everything that can be invented," he said, "has been invented."

* In 1927, The New York Times heralded Philo T. Farnsworth's new creation, the television, with a front-page article and this subhead: "Few Commercial Possibilities Seen."

* Walter Lippman, one of the 20th century's most respected journalists and thinkers, wrote in a column dated April 27, 1948, "Among the really difficult problems of the world, the Arab-Israeli conflict is one of the simplest and most manageable."

* In 1962, a little-known Liverpool group called The Beatles auditioned for Tony Meehan of Decca Records. They performed 15 songs in just under an hour. Decca sent them packing, saying "guitar groups are on the way out" and "the Beatles have no future in show business."

It's not just the "experts" who flounder, of course. Life is one long lesson in humility. Our perceptions can deceive us. Trust gets misplaced. Knowledge grows and opinions change. Even when the truth is with us, there are often exceptions.

It's natural to seek out experts who can guide us. But outside of physics and chemistry, predictions about the future are best taken with a whole shaker of salt.

We are all swimming in a vast sea of the unknown. The sooner we recognize this - and embrace it in our personal and business lives - the better our chances of staying afloat.

Source: Spiritual Wealth

[winston]

TOL:-

If you are sitting on only 20% Equities going into a prolonged bear market, you could still be hit very badly.

And I tend to take more risk when I'm sitting in Cash. Therefore, one of the ways is to put the Cash somewhere else where it's not so accessible eg. fixed deposit

Market is improving now and because I think that this is a trading market, I'm selling into the rally.

[winston]

If you are using Astrology or Feng Shui to speculate in the market, think again ...

I posted the following article on July 29. The guy is supposedly one of the best market timers in the past 30 years and he got it so very wrong this time ...

An interview with Arch Crawford

Are there particular days you think could be especially important this year?

Crawford: Definitely. When I spoke this past spring to the Hard Money group in Tempe, Arizona, I said the next important dates were April 26th, when Saturn opposes Uranus, June 26th, which is a lunar eclipse conjunct Pluto, and then July 30th to August 3rd. I've also mentioned these dates several times in my letter.

Crawford: Well, we'll be short the stock market through inverse ETFs. You could also short stocks or buy puts, but not too many people are comfortable with the risks of options, so I don't recommend it to clients

You may recall that on Aug 2, the Dow spiked up 208 points !

[winston]

Goldman Tells Its "Special" Clients To Sell Gold Even As It Raises Its Price Target On The Shiny Metal by Tyler Durden

A week ago Goldman raised its price target on gold to $1,300/ounce, an action which judging by the firm's historical record of putting its clients' interest in its rightful last place, led us to be skeptical:

"The report will likely result in a brief pop in spot as the idiot money rushes into the latest Goldman trap. Alas, it also means that GS is now offloading. Be very wary of market dynamics over the next month."

Today we realize our skepticism was perfectly justified: in the latest Perspectives from Goldman Sachs Asset Management (intended FOR BROKER-DEALER, FINANCIAL INSTITUTION, OR INSTITUTIONAL INVESTOR USE ONLY. NOT FOR DISTRIBUTION TO CLIENTS OR THE GENERAL PUBLIC), in addition to summarizing all the other recent actions presented by the firm's key departments, way in the back, in very small print when discussing commodities, the letter author notes:-

"Shifted our stance on gold after years of being long; see gold as vulnerable to Central Bank inactivity in the face of rising deflation risk."

Once again, those who bet that Goldman does precisely the opposite of what it tells clients to do, win.


http://www.zerohedge.com/article/goldma ... hiny-metal

[winston]

TOL:-


Did you remember Jim Rogers saying that you can never lose with Commodities ?

1) if the economy is good, commodities will go up because of the increase use of raw materials

2) if the economy is bad. comoodities will go up because of the liquidity in the market from the printing presses

And what happened ? Commodities then collapsed because of the Financial Crisis. Every Asset Class was hit...


And we are now facing the same question with QE2 ...

1) If the economy is good, equities will go up from improved earnings

2) if the economy bad, QE2 will be unleashed

So it looks like a sure thing , right ?

And what happens when QE2 is unleashed and but everything collapses again, possibly from something unexpected, just like the last time ?