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Trading Be worse before getting better!

Discussion in 'Shares' started by wdongli, 4th Jun, 2012.

  1. wdongli

    wdongli Well-Known Member

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    Just a few weeks ago, few traders in XAO believed it could be less than 4000 but now it is. Could it be worse? Probably I guess. 17 June is a trustful date for things to change in the stock market even we don't know where it would go.

    What after this date? XAO should find its foot on the rock but it should not move up dramatically by itself before 1st July. There are so many losses there. Traders are experts to declare the losses. No losses no traders.

    Three things are there:

    1. It's going to get worse before it gets better
    2. No one know when it would be better in days or months
    3. A long-term upswing is inevitable if it is worse and worse for long enough

    ***
    Have you heard mean recursion? Mean is simple, is to recur, is excruciatingly boring, but is deadly accurate. Fundamentally, it explains how highs and lows in a stock market, or any asset class, are temporary and will trend back to average over time.

    1. In a bull market, it travels above the long-term average and traders or investors tend to believe it is all.
    2. In a bear market, the world seems changed forever and long-term trends are discarded to the rubbish bin.

    Mean recurs though. It is a powerful natural force which seems a God favorite. When it comes to playing markets, traders or investors are taking a major risk by ignoring it.

    ***
    However people tend to go extreme for mean recursion. Some investors, especially the experts to sell their ideas for live said:

    1. we should not be hoodwinked into trying to pick market lows and market highs.
    2. No one can pick a top or bottom and they are better off buying quality stocks with strong dividends and ride the wild swings of the market out.

    Logically you could not say they are wrong but they oversimplify the complexity of the real world and can mislead the passive investors to buy at peak and trapped there or here.

    ***
    Logically it is different matters you can not get the lowest and you should try all to pay less than you would get. It is not about how long you hold but how less you pay than the mean.

    Do you know the mean and do you know what is qualities? Do you have your mental framework to see what you pay is much higher than it is now and be sure it would be much higher than you paid?

    You don't need big mistakes to destroy your money but a step further from the logic and truth. It is so obvious that few trader/investor really know it.
     
  2. wdongli

    wdongli Well-Known Member

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    At peak you need to harvest for the bottom. Market never move in mean it over swings around it. Why don't you collect your profit at peak? Not only is this an abdication of duty, it equates to massive value destruction for you.

    You don't timing and you just buy and hold since 2007? Anyone who bought shares in 1969, 1987 or 2007 would have to wait more than a decade to get a positive after-inflation return, a result or failure of buying and holding.

    Mean recursion means long term. What is the long term to you? What's your life span? Why Buffett can accumulate the fortune more than the average return allow?

    ***
    Over the course of more than 100 years, the Australian stock market has clocked up annual returns of slightly more than 7 per cent, not including dividends. But it also destroys 20 billions of dollars today or hundreds of billion dollars in last one year!

    You could not ignore the timing of the market. You could not ignore your capability to hold what you have got when it is lower than mean but become worse and worse. You must to learn how to be balanced between short term and long term.

    Do you see both Buffett and Soros take great care about the budget every year? Don't abuse one logic with your bias of another logic. Logic have conditions and contexts to play its parts.

    ***
    We need to know where we are in a bear market. How could we know? It is not to be crazy about "stop losses" or buying and holding" but see how the history behaves. Do you know the history in stock market?

    November 1992 was the end of the last secular bear market, how it went to the end? By then the Australian market about 4½ years past its peak. It was about 23 per cent below the mean. The question becomes, is that enough for our exist bear market?

    Between 1992 and November 2007, XAO rose at an annual rate of 11 per cent, some 4 per cent above the average(7% is mean for 100 years of XAO). At the peak on November 1, 2007, XAO was about 43 per cent overvalued.

    ***
    As mean played the rule, XAO flighted from its peak and 43 per cent of peak was wiped out in the 2008 bloodbath. What from the bloodbath? It was a case of trying to find the bottom and how much the market would go below the average.

    Now we were approaching the end of the current bear market. Too many traders or investors know it but don't understand the closer the end comes, the riskier the traders would face. It seems the end would come late 2012, or possibly early 2013.

    The Australian market would finally finds its feet and start to rally for several years. I firmly believe this scenario has a great chance of playing out. However I do believe it could last half year longer to end too. The crowd sentiment needs the time to come into mean too!
     
  3. wdongli

    wdongli Well-Known Member

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    Don't think I am predicting the future. I am not. We behave in the road as we should and get what we want.

    The crowd, the policy maker, the economies, the business, and traders or investors, as a whole, could not change its behavior their systems allow internally or externally. You could not tell the extension but you could know the road map of them.

    There are some imaged sword hang over the sky. The crowd can see them even they could not figure out why the swords would be there. XAO needs to fall further into the back end of the year, testing the lows we experienced in August 2011 and quite possibly the 3100 mark touched in March 2009.

    Don't use any beliefs to put your neck under the swords which the crowd believe would drop off.

    ***
    What's this type of decline by the beginning of next year to mean? It would result in XAO falling to about 45 per cent below its long-term average, which actually wipe out all surged above the mean in 2007. The resource booming may be helpful for Australia to avoid some recession but mean recursion plays the parts always.

    Have you asked the reason why does the market need to fall further before it can end? Secular bear/boom markets are fundamentally about two things - time and price.

    1. Over the past five years, every time the market has rallied, economic events have pulled the rug from under the feet of traders/investors, causing a sharp decline in equity prices.

    2. Not stock market only follow the rule of recursive mean. All follow it too. House, commodity, retail, and energy prices are starting to fall after a decade of trumping the mean.

    3. Following commodities closely is the depreciation of the Australian dollar, which will head towards its long-term mean of US75¢.

    4. Company and household debt levels are moving back to more normal levels.

    5. Housing prices abroad have already adjusted and, at last, the stubborn Australian residential market is heading towards a long-term average, even though it still has further to go.

    Things can be better or worse but we do need to be ready for the worst. After the worst happens, you have chances to buy and hold or timing again.

    ***
    It seems sure that high government debt levels would be reduced. It seems sure too we all would like to reduce the debt level too.

    This will require a combination of significant spending cuts and a marked increase in taxation. As all try to reduce the expending, economy will slip back into much slower track if not recession. Deleverage is painful but necessary to longer term prosperity for the world and ourselves.

    There will be a tremendously difficult six months ahead, but once we get to a point well below the long-term mean, it will be the start of a long journey to the mean and beyond.

    XAO 5000 or 6000 or 10,000 only can be seen when the dusts are settled down if we would like to ignore the spikes.
     
  4. wdongli

    wdongli Well-Known Member

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    Sick Qantas vs Bloody devil Greece

    Is it Qantas cheap? Some said so but some questioned. Yes, it dropped so much and its price much less than $2. Yes, it could be worse.

    Who is right? Is it really matter now if you don't hold Qantas? Qantas is just a Aussie company which has not so much power to force XAO lost billions in days. So why do the people worry and what forced RBA cut the rate again?

    It is about Greece and its pardon, EU, the Chinese economies, and US economies let people worry. What is trivial matters? What is vital few now?

    ***
    I don't bother one bad apple, as an investor, Qantas but I do worry the domino effect from Greece. If you are some kind of investors you should know why Buffett stopped its partnership in 1970s around. Why?

    I don't bother about it as an trader too. It is crashing down to the downward slop and no any patterns can tell you it would be in upward trend too.

    We are in the early time of a tsunami, which has high probability to sweep through the world. We may be lucky not in GFC II but it should be big enough to force RBA slash the rate today proactively.

    ***
    I am never so concerned about the tsunami in the stock market so much. I should wait and see what happen. If no tsunami I could fish in the stock market a few months later. If there is a tsunami in months, I would be much safe in my corner.

    Most of traders and investors just hold some big words but no brain to ponder. They rather stay at the root of a tree and lose all after the tree falls down in tsunami. They rather stay in the sky and ignore the root of a tree, which becomes empty and then the fallen tree wipes out all of their money.

    I might be one of them but I don't want to be one of them any more. I am staying in my corner to ponder how I could be safe this year and get some good profit next year. Safety is the base of happy life. Few of traders and investors know. They just copy and paste for their own feeling. It is pity!

    ***
    Human never be great in the eye of tsunami. Is it logic and always right? Some would say yes but some would say no.

    Human never has no problems and crisis but some would run in the tsunami and some would stay steady for their own safety or better others. Some want to prove they can run against the tsunami without protection or don't think they need.

    Sometimes the market is a place where you run you die. Human doesn't need to run successfully in the tsunami.

    ***
    Most of human are smart enough or wise enough not to show he is stronger than the tsunami even it is never true in stock market. Sometimes I just wonder how human can be so successful after seeing so many traders and investors have lost their shirts.

    One possibility is market is not a scientific laboratory. It doesn't allow you put your cards on the table without consequences, getting the profit or losing all or losing some. "Stop loss" is all, someone said but they can not say anymore after trapped in the valley of death. Some prefer buying and holding but never buy anything in right time. They just use the holding as excuses for their craziness and laziness.

    Too many traders and investors want to be admired. They do so hard to show how clever they are but they just lose their shirt for their cheap self-promotion. We don't need to be admired by anyone but we have to get the profit back to home.
     
    Last edited by a moderator: 6th Jun, 2012
  5. wdongli

    wdongli Well-Known Member

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    Vision is a art!

    "Vision is the art of seeing things invisible to others."

    I am not sure but just learn to get some vision:

    1. If no Greece exit, the experienced "mini-correction" is coming into its end but...

    2. The stock market is waiting for the date 17 June and after that it would get its bottom for the current correction.

    3. Bear in XAO fears shooting up and Bull worries about 17 June. Bear still shorted but covered very quick.

    4. Bull went into bonds in early April, and is now preparing for another rotation back into stocks after June.

    Vision is allusive too. You could not miss it always and you could not hold it under the tsunami too. Vision should not be the excuse to be insane or ignorant or arrogant. Vision needs crystal to filter the noise not from the God or nature, the human nature.

    ***
    Strategically I am bullish with the reasons(not too long before I was arrogant after years insane). What makes me so bullish? The answer is simple:

    1. The payout for betting on the negative Black Swan likely no longer exists after 17 June systematically even micro-economically would not be true.

    2. A significant Crash/massive correction in absolute terms has already happened in XAO, which happened in August 2011 and all ensuing events are ripples from it.

    3. XAO is the hostage as it is always. So it would wait for leaders for its own behaviors. It cannot decoupled from DOW and what China acts.

    4. US bond market has behaved like a Lehman event/credit seize-up has actually occurred.

    Lehman, in the current stock market, where are you? In the shadows of GFCI people in XAO asked similar question, even Aussie GDP was 4.3% now. It sounds too good to be true.

    ***
    17 June theoretically or holistically is a perfect day for the bulls who could lock the profit before all of the dates, July 2008, Oct 2009, April 2010, April 2011, and April 2012.

    The stock market gives the chances or risks every year, which is rare in history where the market was much stable. It is very hard to get right vision.

    What should I do? I was right in 2008, 2009, and 2010 but I did fail in 2011. The risks to make mistakes are high. Could I do right in 2012? Could I lock the profit into my rental houses, which I could but didn't do in 2000, 2009, and 2011?

    1. the train leaves without me? I have a balanced portfolio even it could not harvest as that in 2009 and 2010.

    2. the train crashes down? My portfolio should recover if sky is there and I could jump in without parachute after damage done. It is the time I should service the warriors who are in the valley of death.

    What after the Pigs are slaughtered? What after the Pigs cheer for their unity and freedom in the stock market? Could you save yourself before you save the world as Karl Marx said to the workers?

    ***
    Since 2000, the stock market is a place full of the Pigs even most of them don't admit they are. Don't want to be a pig to follow the pig chiefs? You have to know you are a pig and have the resolution to change.

    Feel bad to read my posts or anyone's ones posts, tells a truth: you are a pig! Pig feels too good or too bad when they should not put their neck on the edges of the sword.

    Don't mistake me as though I am selling my posts. You can ignore them if you are not insane but you should not be irritated by any words. If you can get the wisdom get it. If you can not you need to ignore them.
     
    Last edited by a moderator: 6th Jun, 2012
  6. wdongli

    wdongli Well-Known Member

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    Plan A or B?

    It seems we, the traders or investors, who jumped into stock market, could have another excellent experiences that all of the world have expected the worst for too long so that it could not happen.

    2K bug, do you remember, worried the whole world since no one know if the date, the computer originally designed would not supported, due to the memory limitation. We passed by 2K unprecedentedly and safely.

    Better than expectation, IT and internet suddenly seemed open the door for great human future. By clicking based on the lines and patterns we believe we could have made fortune as we hoped.

    IT booming seemed no one can stop and all of us just have Plan A: flying with IT in the stock market and all of dreams could have become true. Unfortunately few did get the plan B ready. The traders or investors born around 2000 got their first sale on fire.

    ***
    I have my plan A and B now for the Greece and EU plus possible booming or bust ahead.

    1. If Greece can not drag EU down, my shares in hand should play their positive parts
    2. If Greece drags everything down, I have locked profit in April 2012 and capital for my cash holding for two years.

    Policy makers would not let the sky down. They can work together at least now. Two years are long enough to wait.

    ***
    It seems policy makers are wiser than in 2008. They started early to leave no room for Greece to trigger the domino effects. Even I still worry about the election result of Greece and will open to my plan A and B at the same time, it seems I can depend on my plan A.

    Why don't I drop off my Plan B? There are still some probability that Greece would exit. Who don't want to get some fortune? The reality is your fortune needs some necessary conditions, such as lucks! One lesson I have got in the last decade was we could not hand out ourselves on the lucks.

    Plan B is for worst cases logically. I would like to see my Plan A would take effects. I would like to be sure my direct goal works, which is the budget in a year. If Greece cannot drag all into the water we have some years ahead to run under the Sun.

    ***
    I like and want to run under the Sun even I prepare all in the cold water.

    People can argue 80% or 97% of traders or investors would lose the shirts at last. I would try all to get some profit at least every year rather than one of these losers. They are warriors and the valley of death is their destination!

    I am struggling to figure out if I need to get another job, which would leave more room for me to wait, or continue to improve my English listening, which would speed up the updating of my mental framework.

    ***
    It was my fault that I let the chances gone to lock the profit and then put them into properties at 2000; I let the chances gone to lock the profit and pay off my debt in property.

    Market is fair and if you lose the balance you have to pay.

    I lost the balance between bond-type and stock-type asset since I refused to lock the profit so that I deserve to be pressured to get the balance with more pains.

    ***
    Why don't you jump in? If I would have locked the profit at April 2011, I would be qualified but I am simply not qualified to do so. Who is qualified here? Hope all else are qualified and just let me and only me feel shame.

    If you really feel shame for what you have done or got, you can be motivated to do better. What if you don't feel shameful for what you fail as genius? You simply insane. Do you know you are insane? Nothing is not what we could not do if we have to do. I need the room and also a good brain but I may have no chances to get them at one time. Which should I take first?

    Let me decide in July when I would know more about Greece and EU! Let me check my portfolio especially the cash element for my own option.
     
    Last edited by a moderator: 8th Jun, 2012
  7. wdongli

    wdongli Well-Known Member

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    It is not its faults!

    RBA said it's not fair to blame the mining boom for the all of weakness of those sectors stuck in the slow lane of the multi-speed economy. I said it is not fair to blame others for your own losses. It is the faults of the insanity and greed which made your heads hot in the booming time.

    Yes the mining sector was crimping other parts of the economy by drawing away labour capital and pushing the exchange rate up. "It is doing that. But slower growth in sectors that had earlier done well from unusually strong gains in household spending would have been occurring anyway, even if the mining boom had never come along."

    There had been an extraordinary period prior to 2007 when household wealth rose strongly, mainly due to rising housing prices and savings out of household income fell to very low levels. Too many jumped onto the board since 2006 and now they just have lost their shirts. All contribute to the self-destruction there and here.

    ***
    All changed around 2007, the year the global financial crisis began, but traders and investors mostly failed to identify the changes. They saw the cakes in the sky gone but could not figure out what were the root-causes.

    1. Savings includes debt repayments has picked up and consumer spending per head at first contracted then resumed growing, but at a slower rate than before.

    2. "But this sort of growth is, in fact, quite comparable with the kind of growth seen in the couple of decades leading up to 1995."

    3. These "circumspect, but more typical" trends in saving and spending had been reinforced by slower growth in the prices of assets, both housing and shares.

    4. "But this would have occurred with or without the mining boom"said RBA.

    Traders and investors have been struggled in this de-leverage trend. They failed to lock the profit at the peak and also failed for shirt losing in the valley of death.

    ***
    It sounds ridiculous to hear the curse about resource booming as though if it was the huge gold piles in the ground of your backyard which would have got your failure. I just feel they are a group of spoiled children.

    "In fact, without the mining boom and its spillovers, we would have been feeling the effects of those adjustments rather more acutely than we do now." So it is not the leverage, the BHP or RIO, the little capital in your hand but your brains and behavior.

    It is very true household wealth was now about where it was five years ago but fortunately at some point would begin to increase again. People were now saving from their incomes and investing it and traders and investors learn to lock the profit.

    ***
    It is the time to build wealth the old fashioned way, I do feel. It seems less and less traders and investors have their head cold even frozen.

    Please remember while the course of asset prices over the short term was unpredictable, "wealth will surely resume an upward track, sooner or later". Of course you have to remember it is very cold outside even we start to hear more sensitive words rather than cursing or crying. Definitely there would be some act as head-less cats in the stock market.

    Do remember the crowd is very powerful and very fragile. We need to identity the time when they are very weak or very strong. Be strong when they are weak and be week to get you strong when they are weak.

    ***
    One of my lessons is don't waste the bust and boom. Don't let you be the pigs with insane vision.

    They are the most difficult time for anyone to judge intelligently and wisely. We all can get some penny profits purely due to lucks time by time? Who really get some fortunes in their life due to their lucks? Fortune needs both good lucks and good brains.

    Let the crowd run in the ruins. Let you wake up as early bird in the coming booming. Let yourself run under the sun. Do remember RBA doesn't want give any individuals the rate cut as gift but it does see some risks ahead to all and had to do.

    The crowd is making the market for its bottom, its rock bottom, while RBA tried to put circuits for the boom and now tries to put some oil for hopes. RBA has its limitation and it could not stop the crash even it can reduces the damages.

    Be patient for the rock bottom there, which is a process too!
     
    Last edited by a moderator: 9th Jun, 2012