Trading Could the Quake drag the sky down?

Aussie market players are in panic again.

Natural disasters have done its parts so dramatically to the market, economies, and market sentiment, but at last if the quake could not drag the sky done, the life and market must go forward and the disasters just open the door for the weak hands in the market to burn their money on the fire and perhaps another chances for value lovers to buy in great discount.

I am waiting for the right price to use some of reserve cash for value. Abnormal matter is always temporary even it could be very powerful to destroy everything. If my dirty-cheap fish portfolio could repeat the performance it did since GFC, I would be much more confident about my mind and its updating.

Let's ready to fish in the market! The sky looks very strong and it has been so strong for hundreds of years. It is possible for it to crash onto the ground but unlikely, I do feel.

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I do feel the bad events in the last few days did move the selling in May to now. If the sky would be there, you didn't buy without consider the margin of safety, it is a time to hold and check our understanding about the herd, the Aussie herd in the market. Could this selling would result in market indifference until the end of June?

 

Looks it is quite possible but unlikely in my view

What happen after bad things have happened in the market? Market would react and response correspondingly, that is it has to move down and down until the panic selling becomes exhausted or gets balanced to the brave buying.

Usually the selling side is very emotional since they act by following what they could see, the existing evidences, which usually is very fearful. Yes, Japan's nucleus power plants are being melted down. Human efforts could be destroyed by the uncontrolled natural forces. What if this, that, or these or those all crash together? Are they thinking rationally? When you are panic, could you get the right decision made? If you could not be rational let alone intelligent, you just speed up the failure and make the failure worse than you should! I never be happy to burn the money on the fire. I never think it is rational even in the IT bust I emotionally did so. Sometimes the damages have been done and you don't have to run in darkness madly. You may be better off to stay in the place where you are trapped in case...

How about the buying side? They could be wrong and terribly wrong too. Something is always out of our imagination, but they should be more rational since they have to get the gut against what the existing disasters. No too many bargain hunters would buy blindly and usually if they are wrong they would make the genuine mistakes, which is a matter deserved the celebration if they know the risks and leave enough margin of safety for their risky action, and more important if they know the intrinsic or probable value of what they are buying. Buying is always a matter: right time, right place, and right gut for the right price in the market without matter how you are clever or stupid.

So far I am happy for what I have paid which still have made some profit this year even 80% of them just gone in the disasters one after another. Seriously saying I really don't know the worst situation is there or not. Could we get another batch of selling on fire in the market? I am monitoring and pondering to hit out if I believe the market as a whole is at a solid bottom. Don't be sorry if we could not get the chances now or later. We do need to bet right and absolutely right in the market since market is always making the chances if we could avoid the unaffordable risks.

If the storm could not destroy my ship in the market, I do hope it could be more ferocious as GFC, which could give me the chances to buy cheaper from the toughest bargain hunters! If so I would be very happy and would be very confident I would get the value with the most trustful margin of safety! I am a value investor, ain't I?

Cheer for the tsunami of the selling on fire! Cheer for the rebuilding of the homes which have been destroyed in the disasters!

 

Is the quake what Japan and this world really needs?

It is a history lesson that some huge disasters put someone in the edge of death or survival and motivate them enough to make new life. Have you heard reflexivity of the life and market before? Have you the experiences in your life when you felt nowhere you could go in the old way and it forces you to find new way rigorously, effectively, and efficiently? Risks mean the chances if people could use them properly. Is the quake what Japan really needs?

Ever since the stunning end of a massive credit binge in the 1980s, Japan has been a punching bag for the global economy, demographics and nature. Its companies and households have been shrinking and deleveraging for two decades, its government finances have teetered on the brink of ruin and its cultural and political influence have ebbed into a sad and shadowy irrelevance. I do feel that it is the last thing that Japan needed now is the events to motivate its mind dramatically for change and then get its economy out of the depression which has last for decades. Could it was an earthquake, tsunami or nuclear energy catastrophe and could it be resolute enough to turn Friday’s terrible turn of events to its favor. In my view if the sky is there, its fate could hardly get worse.

In the last two years, Japan tried to fix the problems caused by the bursting of its incredible credit bubble in 1990 by manipulating the private debts into the public statements. Its debt ratio is 200% around for gross debt to gross domestic product. It is so large that any attempts to change is very painful and so far failed. Japan once so thrifty and elegantly rich but now... Despite this high debt it has to pay whatever the rebuilding needs, which should be huge.

"To pay for reconstruction, Japan will need to float a lot more debt, and must keep the yen from rising to keep new borrowing costs manageable. It will also buy a lot less U.S. debt, which means the Federal Reserve will almost certainly have to launch QE3 when the lifespan of QE2 is up in June to prevent bond prices from crashing and rates from rising.

The reason the yen is so strong is that the country has a huge current account surplus and thus massive piles of foreign assets in addition to its own debts. Basically, it buys very little from other countries except bonds.

So this is the broad demographic backdrop for the disaster. All sophisticated investors know this already, and many have lost fortunes trying to take advantage of the country’s plight over the years by shorting Japanese government bonds, called JGBs for short, or the yen.

Now the paradox is that Japan is also the world’s largest foreign creditor. Through the end of 2009, its net foreign assets were around $3 trillion, according to Goldman data, which dwarfs even the total in China." Could quake jolt Japan from its slumber? Jon Markman's Speculations - MarketWatch

Don't want to predict anything and actually we could not predict future evidences. However we could use the history and human nature to understand what could happen and avoid crying in the darkness hopelessly. We do need to get the intuition about the risks and chances and it is best we could hit out when all of the market could not make its mind. Look for ahead is always needed in the market!