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Trading cool head in hysteric time

Discussion in 'Shares' started by wdongli, 25th Sep, 2011.

  1. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    It is the time full of uncertainties in global economies while the market swings its pendulum to extremes. Are you keeping up at night? Do you feel your impulses quicker and quicker? You need to cool down but how?

    There are road map to stay sane in an insane market time.

    For a month, the global markets shot up and down four times and XAO went madly much more than most of other markets. These roil and uncertainty of markets make the economy in the way we have not seen since 2008. All the turbulence has forced market warriors in stampede and affected their psyches.

    As always, money and crowd psychology are inextricably affected each other. XAO is skittish to exaggerate any little causes. Fear and panic are the main driving forces to sell, which absolutely would result in irrational-exuberance and burn the money on fire.

    The collective insanity implies that in addition to crowd psychology, almost everyone has his or her own individual psychological issues with money. In the time stock market crash,

    1. some could have too much mortgage payments
    2. some could feel the threat to lose the job
    3. some could have the loss which are understandable
    4. some could work too hard to exaggerate the causes of stress
    5. some perhaps have more significant problems with money stem from their own internal issues

    All could drive people to act irrationally in uncertainty and market turbulence without matter economies will fall into recession or not.

    Have you read any books about the classic money-related pathologies we all should familiar with? Some would say they know them very well but in fact we just know how to talk about them but could not stop them to play the part in our market practice. What are they? What are

    1. gambling addiction,
    2. overspending,
    3. hoarding and

    How do they affect our behaviors and our behavior affects the economy and market negatively?

    Do you see

    1. you are unable to deal with day to day financial tasks,
    2. you jump over fence to get rich quick schemes,
    3. your income never could cover your excessive expenses so that you have to overdraw or get excessive debt
    4. you could not think important long-term financial issues?

    All of these addiction and bad behaviors result in too many turn market to be a huge Casino!

    Irrationality with money plays big roles everywhere.

    1. unintended messages to the children regarding money. Some youth at 30s with $60,000 yearly salaries, who still live with their parents, find the salaries are too little and they have to get the car loans.
    2. social relationship problems arise over insignificant amounts of money.
    3. difficulties to manage the money is a big reason for a lot of divorces.

    The financial crisis is the result that largest financial institutions and regulatory agencies made decisions that were clearly problematic and avoidable.

    All of us including the nations have the money problems. We have better computers and systems, right? All of institutes or big boys could stop losses but if they spend more than means, who or what could save them?

    When so many people allow the money issues become survival issues when the market crash somewhere else, XAO could not be stable and since it has got the lessons in GFC it wants to crash quicker and more effectively than anyone else. But the stress is the best teacher to correct the bad behaviors around the money if a man is not idiotic for his life.

    Bad things are the start for good behavior individually or collectively! Market players would feel the necessities to hold the value with the margin of safety even to most of them they get the lessons too late and they could not get the guts to stay in the market. Too many things they don't have time to sort out before they lose all!

    Unfortunately new generation doesn't have these kind of lessons. Old generations have got the lessons but they could not go too far or too long in future! So collectively we become wiser but time would wipe away the wisdom and new gambling generation repeat the same mistakes...

    Naturally we need the wild fires: old gone; new comes in; fire on everywhere; sky looks in risk; everything become normal and abnormal regularly in the life cycle of human being.

    Why Warren Buffett could be so successful? He knew the money issues when he was a kid. Why did I make mistakes at 40s ad 50s? I never thought about the money issues until I needed it to settle my own family down! Actually I really have enough time to think about the money issues just after I quit my job which happened after the GFC.

    The time to think about the money is too little. 2+2 = 4 is simple but when 2+2....+2+2... needs for calculation day and day, you could be bored and get wrong result times by times. I never thought boring could result money on fire but in the market it did happen. How many people are trapped there since some very small mistakes? I just wanted to wait for a few months to pay less tax legally and then the losses started its snow-ball building process.

    We need to replace our instinct with intuition based on the life logic and common senses. It should be in each cell of our body and blood; it should let us up right way to correct the small mistakes by using a systematic process based on the direct goals and indirect goals; it should be made in a pleasant way which let us dance to work on it.

    Do remember if you google for data to support your ideas only, you are stupid. Do remember if you read but don't ponder to know the simple things good enough you would be idiotic; Do remember if you don't realize you could be stupid, you would be stupid! Instinct would make you stupid when the market as a whole becomes hysteric.

    Never and ever think you could be much more clever than anyone else in money issues. It needs a master mind with the education on something like the art of war! If you like the money but have to work in your office to drill a perfect and very clever holes, you definitely is a market idiot until you update your mind for the market.

    If you have this intuition, you could make the system work for you. If you don't have this intuition, your system would fire backward to hit its only enemy, yourself. It would effectively stop too many people want to hold the resources they don't deserve to hold. Natural laws and rules seems run us very economically!

    Not matured in money issues in early ages is main reasons for so many genius to lose the shirts always even they have IQ to design the rocket or system... We are designed to be losers financially since resource is scarce. It is gift/curse to be matured early or try to be mature after 50s, which usually is the time to give up or follow the way we get used to.

    You may make the money but you are abnormal. Life is nor perfect... In life and market, nothing is absolute right or wrong, which are not be accepted when we believe or disbelieve things too much.
    Last edited by a moderator: 25th Sep, 2011
  2. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    After the biggest crash since 2008..

    Last week, all of big stock markets lost its biggest money since October 2008. Anyone who still stay in the market have been punched more or less. GFCII seemed just move in. In a time a little bit less than two month, after XAO beat itself for 3 months, the panic caused by US default drama and EURO deficit crises caused 4 sub waves of a market tsunami in August and no sign to reduce.

    1. Could you survive in the current waves of market crash selling?
    2. Could you get your corner stronger and prepare to get a part of ownership of some great castles with great moats?
    3. How could you organize your market service business far from front line of the wars in market so that you could make smooth and trustful profit safely?
    4. How could you prepare for next market crash which is unavoidable to make the profit and safety?
    5. Could you sell all or most of your fishes and swans after the market become euphoric but become anxiety since the music in the party seemingly is being stopped?
    6. Could you hoard the cash but little in the stocks so that you could buy them back when all of the warriors needs the cash desperately?

    I accept the following assertions:

    1. Crash destroys value and deteriorates fundamental!
    2. Crash makes shirts loss for anyone who stand in the way!
    3. Crash would generate a wild, quiet, unpleasant environment for the market and economies as a whole so that we would be in denial, fear, desperation, panic, capitulation, despondency, and depression always!
    4. Crash would force people to sell on fire which would make everything in discount at last
    5. Crash would make everything dirty-cheap which would just happen after the panic selling and bargain hunters as a whole start lose their shirt!
    6. Crash is abnormal which is a matter to happen every 2, 4, 5, or 10, or 20 or 30 depending on what is the economic cycle you target!


    This is a image how George Soros see the crash. Generally I accept his idea about the crash rather than sky falls down, which definitely doesn't work if sky is gone. Crash is different from no sky anymore even most of warriors have lost the hopes for the sky now!

    I am a die-hard believer for sky and rising Sun after the crash! A lot of people say Soros is a trader or speculator but he is a very fundamental guy in the market in my view. he has his lattice of mental network even its contents smell not very refresh. He plays the cliches in a creative ways so that he can hire the genius at the right time and fire them before they would break their wings.

    In the crash you could buy dirty-cheap fish or dirty-cheap swans or dirty-cheap castles or dirty-cheap sheds. You could not buy the dirty-cheap fishes for holding too long! You even could not buy the dirty-cheap swans for holding 10 years! You could not hold the castles whose moats have been deteriorated days and days!

    You have to select for your direct goals and indirect goals. Dirty cheap fishes are some ugly devices to leverage good or bad. Warren Buffett used the Cigar Butts at the right way and right time for his first bucket gold.

    However Cigar Butts also made a lot of headaches for him. Risk needs to be taken and should be played when the portfolio could be no loss even in the crash time. Castle with excellent moat could act as high-yielding bonds with extremely safety. If you could get the castle with excellent moat into your hand, your portfolio would reward you.

    Castle with the moat is the place after you have turn you from bums to the gentlemen. Hi, don't put too much meanings about the bums and gentlemen here. They are just roughly sorted out based on how much money you have rather than good or bad!

    Could you have the skills to identify the castles with excellent moat? Could you just buy the castles at reasonable price in normal time and aggressively buy them after crash has discount them into dirty-cheap level? The castles with great moat is what you should buy after crash and prepare to hold forever until the moat is nearly gone! Could you know the moat would be gone? Don't tell anyone it would never happen since it sounds and really is stupid!

    It is excellent and simple idea to buy castles with moat! It is the same as any good idea that you need to know how to use it. You don't know the ins and outs? The excellent idea could be the money slaughter table for you!

    When do you buy, run away, hold, and unfold? Timing by guess? It doesn't work! Timing by inverting for value and the corresponding discount or margin of safety? You have chances to get a no loss position! Timing by checking margin of safety to hold some castles with moat and aggressively to buy them after blood flows in Wall Street and becomes a little bit dried, you get the key to the gold vault!

    Would you buy castles now? I am not qualified! No too many retail market players are qualified. We are all limited by the background in our offices and workshops! However I have started to work on this issue.

    Before I could own the castle I have to own my lattices of mental networks for the ever-changed market.
    Last edited by a moderator: 25th Sep, 2011
  3. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Castle for ghosts or happy people?

    Castle with solid structure and a lot of people for business not crazy spending should be targeted but histories tell us some castles could have some fatal issues in design, maintenance, and operation, which have more debt than its owners could service let alone to make more money for their inhabitants.

    People are greedy for money. Some would attack the castles if the castles have made a lot of money for their inhabitants. War always consumes the money or resources. If the moat is not wide and deep, castle could be taken over and all of its inhabitants could lose all if the castle falls. So how could you trust the castle for your future holding? If you mistrust or blind believe on castle and buy and hold, you would be the losers.

    Too many retail market players have accepted too many wrong statements from fund managers. Such as "buy and hold forever" it has its own conditions and context. Philosophically nothing could be bought and hold forever without losses. A comet rain just hit your holding and then you have to change.

    Never timing? If the rumor for the comet rain has been confirmed to be wrong, should you buy back on time in case its price shoots up? You are timing; I am timing; Soros is timing; Fund manager are timing; But fund managers don't want their clients timing. The problem is whether you really understand how and use what for timing.

    What would result in if you don't timing and buy at the very beginning of 2008? What would result in if you don't timing after GFC crashed all into lowest level between November 2008 and March 2009, you would miss the V-shape recovery! Timing is a word and everyone could make it alive for losses and profits! Timing right is hard and then all of right for money is hard even could be very simple in concepts!

    How to find a castle with moat? A lot of genius use great systems to get the answers. Since the systems are so complicated and need a lot of efforts to maintain its operation only, most of their operators lose the basic logic and common senses in the market. They just could play the relative strength, relative price differences between today and tomorrow, and then all of are relative until all become absolutely wrong.

    So the great players, who know the basic onto the earth, hire and fire the genius as operators, for the absolute basic or roughly right in the market. As small players we could not hire the great players so we have to make us the masters in basic and get our first bucket of gold first. Masters for basic are few. Genius to operate the complicated systems are huge. Actually I could gear into house market in 1994, survive in IT bust, get some profit before April 2011, and lose the paper profit again now just because I am right or wrong in basic about my understanding about the market.

    Before October 2008, there were some very clever traders in ShareCafe wanted to vote collectively to choose what would buy to beat the bloody market by profiting tomorrow. Most of them were excited by this rare chances since in the market it was too hard to get a loose linked people work under one flag. We are all mates in Australia, right? We could work in a team, right? But in the market, it would just result in crowd effects. War needs the control hub and all of the army are the tools to achieve the strategic goals of the war! Could you believe these genius were so stupid about the basic? They did! The action based on the vote finished terribly before it could take fly since GFC crashed all of the vote!

    Should we get cheap fishes, swans, sheds, or castles after the crash makes all into desperation, despondency, and depression? Should we run under the rising Sun or just cry in the ruins under the rising Sun if your duty is not to make the order and suppress the riots due to the extremely abnormal mass craziness? When I bought in the GFC ruins and call my mates to run under the Sun to pick up the gems along the way, nearly all of my mates there cried very loudly. They don't just cry but bury the chances for them!

    Most of the traders in ShareCafe, not ShareCafe but OzStock, have gone and the residuals of them just twisted the words or move away for a new life in the market with the belief they could fail if they don't change their mind quickly enough! Nearly all of trade forums become ghost sits if the administrators could not stop the personal provoking in time when the loss, panic, depression, and pain spread wider and wider! Day traders or system operators need to see the profit on the chart rather than in their vault.

    All of us need the lessons and if we forgot what we have done terribly wrong we would be insane again and again until we put us into the Graves.

    I really wanted all there could know the basic and we argued furiously on everything. At last we all turned to be ugly and provoke personally after GFC made the losers and V-shape made the winners. I slowly changed since then. I realized in the market the self-esteem based on over-confidence is the certification note of death financially even sometimes I fought for it in void. However I do believe market playing is a very personal matter. We have to get our own mind and we have to make our judgment. We have to accept the consequences since we don't have any other options!

    So if you want to check the castle and its moat, please be sure the basic is right, the logic is simple, and then the check should be in processed as you run your business with clear goals and corresponding criterion. Don't allow you die in glory to protect a crashed castle someday later! We do need to protect our capital and make the profit in normal time and no loss in crash!

    Do you expect V-shape recovery again? I do but prepare for the future without it. The future recovery could be in different forms or patterns. There are a lot of patterns in history after crash. We could have new pattern since all of the underlying forces play differently. We all more focus on our own problems in this crash than GFC. We all desperately want to avoid sky fall down in GFC. I could not see European deficit would bring the sky down.

    German, France, UK, and other big forces in EU have more moat to protect them. US seems unable to be default if the politicians are not crazy. China has a lot of problems but tipping off seems a great exaggeration. The sky falls down needs all crash down in a days or months based on the status of the sky at moment. The market turbulence in this time could last for another few weeks and should not be more if it fails to put a end for the sky!

    I feel I could get part of my paper profit back before next March! This crash does let me know Australia could not rise the Sun or drag the Sun into the ground. Its fundamental still sounds if we see our own matters and what happen is Asia. I just read and ponder to update my mind and warn me I have to be prudent. I need to know the castle and its moat!

    No anyone in the market is stupid for all but we do be stupid sometimes and then we give the right to others who could believe we re all stupid forever in the market! And after losing the shirts you may be very sure you are stupid and could not be clever anymore in the market.
    Last edited by a moderator: 25th Sep, 2011
  4. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Where are the castles and its moats?

    There are real or false castles and moats in the market as there are true ugly with the dreadful bones and bloods and those of future beauties. It is very important to know this facts in the market and behave prudently and intelligently.

    Some castles could be collapsed and a lot of ugly would die in the market crash such as GFC or the perhaps GFCII, GFCIII, or whatever powerful enough bad news. Something would fall down if its internal structure has been rotten. It is a logic all we know but if without GFC, the current crash, the pain, and the lessons from pain, I just refuse to think about it.

    Crowd is not stupid but competitive to be alive instinctively when they see the clouds get heavier and heavier and the following tsunami would destroy the castles, sheds, fishes, and swans in the way. To be alive they would run as quickly and energetically as they can. All of the crowd would get the same perception that if you don't run you would die. We should know:

    1. the crowd is not completely irrational since it is very true the tsunami would destroy a lot of assets and value.
    2. the crowd is not experts to predict anything and they act as they guess. In the fear and panic, they tend to overreact to the castles, fishes, and swans which are not in the eye of tsunami.
    3. it is difficult to predict how risky a tsunami and then everyone should be very cautious and have to take all of necessary measures to protect themselves rationally.
    4. it is better to get your plan B if you are trapped somewhere in the area of tsunami and don't race with crowd and let them stampede you down. The stampede usually damages more than tsunami itself.
    5. calm down and think hard to lower the damage if you could do something rather than run! You could not win if you race with the tsunami if it run in your ways or the crowd desperately crash each other to the cliff!

    If you could not find better solution than run, stay where you are. The damage after so many people predict the coming of tsunami, all of castles, sheds, fishes, and swans, have being sold on fire. It is most risky thing in the market to sell on fire. What could you get to stampede should not better than you do nothing.

    What if the tsunami just change the course? It is guess work too and no one could be sure. It is too late when the crowd has been triggered to stampede. The internet is too powerful to calm down anyone and no one care about where is the eye of tsunami. We all predict the sky is falling down or tsunami could damage all and perhaps all are zero.

    So that "market is racing to zero" is so sensational headlines everywhere. You could lose everything but you should lose your mind. If you lose the mind you lose the chance to be a man. Could you be sure you would not follow the lemmings but try all if you have to drop down at cliff it is tsunami not the crowd lead you do so?

    XAO is at price lower than 4000 now. What more damages could it be to you if XAO would be 3000? Could it come back to 4000? How long would it be at 3000? What could drive XAO to be 3000? I am think to take a spade in a office or workshop again if it happens. You have to do what the environment wants you do if you refuse to follow the crowd into the hell!

    As the followers of the crowd you would be one of them. We should be the leaders for the crowd. I should sell in April and I didn't which put me in the crowd's journey to the hell. How could I be the only a few survivals who could find a corner in this tsunami and refuse to join in the stampede? I believe so since I could not image it is the last days for everyone. The nature just doesn't want too many could live on the stock market since the resource is scarce.

    Why don't you cry? It is useless and helpless and just confirm you are the members of the crowd. The crowd at last would be the losers! I never learn so much in the market before April 2011. I never really feel it was myself to make the consequences in the market. In IT bust I blamed the management teams who run the business I had some ownership. Before GFC, I learned to find what wrong in my mind and try all to update it for life logic and common senses and then I had not time to blame but buy the dirty-cheap with good enough cash reserves. This time I know I have made a series of mistakes and all were my own faults. I could not blame the market, the management, the crowd, and even the economy, all of which are the part of the environment I have to work in.

    If you could no be survival in this tsunami happened in this environment, it is your fault or bad luck! Most of crowd would be into the hell in this tsunami and some of masters could die just because they stay in the castles with the moat but in the way of tsunami. The worse case become best case would destroy all except some one who prepare for the sky falling down. I am a risk taker in worst case let alone my silly mistakes are there. When you miscalculate the worst case and don't have big enough cash reserve to buy after all of crowd down from cliff, you just could strengthen your corner, get lessons, and prepare to do anything for survival!

    It is life logic, isn't it? It is obvious but why do you write so much? I know too much but use them often than not in wrong conditions and context. The crash is the best class to learn what is the risks and how market could be worse or better than everyone's expectation. No this tsunami I would never think about my faults so deeply and widely! I hope it is a turning point in my journey to update my mind for market war!

    Are you painful to see the tsunami is moving in? Of course. However in the market you don't make any real holes or hammer the nails on the wall, if no pains it means you would get the resource without paying. Market's function is to lead the money from low yielding and return of capital to the high yielding and return of capital. You just only could get your payment if you could join this positive cash movement for the economies. It needs more work than in office and workshops if you want to get high payment!

    As one of bargain hunters, I know their greed and fear. They could sustain the ripples in the low part of bottom channel but they could not sustain the pressure from the coming tsunami. They would be the last batch of the crowd onto the slaughter table. Once they are in the hell, the market should be not too far to come back into the peaceful place where bloods and corps are everywhere.

    It is not bad idea to buy shares in the lowest tail range of price probability distribution, which means, if the fish or castle would exist, they should regress to means. However when the crash comes in, this top level playing based on the price needs very tough bottom picking skills and no one could be sure they could pick up the fish at the lowest price. We could make human errors without matter what we use or how clever we are let alone I am just a fool without enough mental and financial power to govern my fear and greed.

    Market place is a war place. In the war you have to protect yourselves and make the chances to win. The dirty-cheap fish could be swans but they also could be sharp and fast falling knifes. Yes the castles could collapse and this thing could happen in days but usually castle could attract more interests and logically if we are prudent as we buy the dirty-cheap fishes we could be warned. Could I get reasonable profits and much less risks to be hit by the falling knifes?

    Dirty-cheap fish could reward you greatly if you are right. Dirty-cheap fish could destroy you if you are wrong. I have tried to use diversification and time average to filter the risks out for dirty-cheap fishes. I could use the same techs for the castles and moats. I prefer to buy in worst time for bargain but I could buy the qualified castle and moat after everything has gone through a acid test such as GFC.

    Yes, sheds could collapse, faked castle and moat could be gone. The real castle would be beaten but should stay there after the tsunami just passes by. And after all of warriors have been crushed down in the valley of death. The competitors would have to get breathes to survival.

    How long have I known the above? I knew it when I was 16 but when I came to the market, I just simply ignore it since my mental model just simply reject it. Stupid or something else? Computer system or life logic challenge?
    Last edited by a moderator: 26th Sep, 2011