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Trading Ground rules?

Discussion in 'Shares' started by wdongli, 29th Jul, 2012.

  1. wdongli

    wdongli Well-Known Member

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    Are there some ground rules for both trading, investment, and business? Few thought there are but I believe so.

    Do you want some profit every day? Yes but who could be sure for that? Traders believe they could get the profit everyday or at least losses are much less than the profit. However in no sense there is any rate of return guaranteed to them.

    We need to know whether we do a good job or a poor job is not to be measured by whether we are plus or minus for the day, month, or year. We need some yardsticks for the means of long term.

    ***
    All of us know we should know enough is enough. But what is the enoughness in the stock market? If our record is better than that of these yardsticks, we consider it a good year whether we are plus or minus. If we do poorer, we deserve the damages.

    Market would follow the economies and share price would follow the performance of the businesses. However sometimes the market does discount or over price everything. You need to get the profit by getting into the market at discount and selling them above the means.

    There is not a straight line between discount and means. The price could be much lower than the means. You need rebalance your portfolio to lower the cost and hold your position for the market turns its course. You need the vision and gut to hold your position.

    ***
    How long would you like to see into? Some believe they should buy and hold forever. Some believe they should close their position everyday. Have you felt some senses of extremes and insanity?

    Based on my experiences, I much prefer a seven -year test since it should be a period of a intermediate economy cycle. However I feel three years is an absolute minimum for judging performance. It is a certainty that we will have years when all of bums and genius are poorer, perhaps substantially so.

    We need to look after the profit annually but if any three-year or longer period produces poor results, we all should start looking around for our safety and new chances. Don't mix strategical and tactical methodologies together. Here is about strategies.

    ***
    Traders usually are the businesses to predict the market fluctuation and have no senses about economies and businesses. Investors tend to ignore the market fluctuation and then they fail to buy anything in discount.

    You have to hold some truth for long term if you want to get your fortune with the lucks of everyone has. The fluctuation is the appearance but not the truth why the fortune could be accumulated by us. I would learn to run my trading or investment business for the discount to the means of long term. I would not run my business of predicting general stock market or business fluctuations.

    Before 2004 I did thing I could run for profit in the waves without knowing the true cause. I do realize I cannot do this and I do realize it is insignificant to an trading or investment program. No one could be very rich in the ruins or at the peak or keep running without home.

    ***
    We could not promise ourselves for profit at any given time. But we could and could do to buy at the lowest end of price probability distribution which is far away from the means.

    If means is the value and I believe it is, we could choose our trading or investment targets on the basis of value, not popularity. We should attempt to bring risk of permanent capital loss to an absolute minimum by obtaining a wide margin of safety in each commitment and a diversity of commitments.

    Few traders believe they could get 10 bags regularly. Me too. But who bought SIR at $0.06 would be in winning position as FMS, SSN, PRR and so on. Market doesn't crawl but jump. It jumps into deep discount and then jumps to make everyone laughs.
     
    Last edited by a moderator: 29th Jul, 2012
  2. wdongli

    wdongli Well-Known Member

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    Don't look down the power of philosophy

    Without matter you are traders or investors, you could not look down the power of the philosophy, the right one.

    Fortune don't come from your portfolio without good philosophical bases. It is hopeless to think your portfolio holdings insolently. We don't need to divulge that, but we must be in the honest reveal of an investment philosophy.

    It is not easy to have vision on a sound philosophic view. We were not born to be wise but use our eyes and ear to guide where we go. Sometimes it works but most of time you fail.

    ***
    We have to know we will not be right simply because a large number of people momentarily agree with us. We will not be right simply because important people agree with you.

    How could you know you are right? By watching YouTube or copying and pasting others' article? It did, does, and will not work. You must be right. You will be right over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct.

    Do you know any kid can make a buck; grown-ups minds know how to keep it! Have to say I was wrong in last one year. I fail to know how to keep my big enough paper profit. It is a terrible mistake. What's the opposite mistake? I sold SIR too early. I should hold it for two more days at least.

    ***
    Could we be quite sure that over the next 10 years there are going to be a few years when the general market is plus 20%, a few years when it is minus on the same order, and majority when it is in between?

    Could we figure out the sequence in which these will occur?

    The history have told us we should ignore market gyrations. Too many traders and investors have trouble looking ahead 10 days, let alone 10 years. It is paramount to be sure the safe return of capital. It is always to lose your shirt in a bid for a meaningful return in days.

    ***
    Nothing is new. Risk aversion is hard-wired in human nature under current market environment. A greedy market feeds on fear. Otherwise we don't need to keep a lengthy time horizon.

    We need to stay cool in the market flotation. We need a long lens. Six months’ or even one-year’s results are not to be taken too seriously. The market performance of our portfolio must be judged over a period of time, with such a period including both advancing and declining markets.

    There are lessons on temperament, value and being a voracious learning machine. All of the great traders and investors do it the way. We’ve got to do massive amounts of homework and have the patience to wait for the right price. Anyone dealing with their own money should study that before they do anything in the market.

    ***
    We have to preserve the capital in down markets, not chasing the market in runaway years, and focusing on long-term challenges and results.

    Too many traders and investors have failed to grasp the ground rules. They have been trapped in ruins to be passive buy-and-hold; buy-on-the-cheap; hold and monitor.

    We have to go for the undervalued common stock, opportunistic workout situations, and if possible we should wholly or majority-owned “control” businesses which have been discounted greatly.

    Yes we have to get the control on what we could for our profit and be sure we could be profited for years and decades without matter the market is good or bad.
     
    Last edited by a moderator: 29th Jul, 2012
  3. wdongli

    wdongli Well-Known Member

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    8 times earnings...

    Over the past three months, Hong Kong’s Hang Seng Index is down 8.5%, South Korea’s Kospi is lower by 9.5%, and India’s Sensex has dropped 1.8%.

    Chinese stocks have fallen to extreme levels. With the Hong Kong market trading at an average price of between 8 and 8.5 times earnings, compared to a historic price-to-earnings ratio of between 12 and 13 times. And the South Korean market’s P/E ratio is forecast to fall to 8.3 next year.

    Generally speaking, when the market is trading at 8 times price-to-earnings, it’s saying that something’s wrong.

    ***
    There are positive view on Asia, but it’s still in the crossfire of Europe and the U.S. The EU crisis have spread across the global landscape.

    1. Europe has been battling with its debt crisis for more than two years, while the U.S. has struggled to kick start its economy after the financial crisis in 2008-2009.

    2. Asia exports to Europe have been under some headwinds. European banks tend to have a big balance sheet and provide a lot of the credit to other regions. If they are repatriating capital back to Europe, this puts some stress on the funding markets.

    3. On the U.S. front, there are not so worried, but the momentum is not so good. People said they are not betting on China suffering another crisis but they are really concerned about Europe.

    Aussie traders and investors want the big-bazooka fixes in China, the U.S. and Europe. They haven’t had it. That’s why the markets have been very sluggish, unloved, with very low turnover, not much interest.

    ***
    Without matter how promising of Asia and BRIC, in the stock market people hate them at the moment. Every one of them has a specific issue. It’s now just a brick.

    In China people worry about its property market, off-balance-sheet bank lending and possible bad debts from local authorities, Do said. There’s also uncertainly ahead of China’s leadership transition set for November of this year. Some think that Chinese banks have not provisioned sufficiently. It’s a lack of confidence, a lack of trust. Chinese bank P/E ratios have fallen to 5 to 6 times earnings, which is far below even the extremely low level of the broader market.

    Meanwhile, growth has slowed in China, with gross domestic product expanding 7.6% from a year earlier in the second quarter, down from 8.1% in the first quarter. Nothing seems good to the market.

    ***
    Asia market are thought as risky one. High risk is taken for higher returns. However money comes in and tends to exit quite quickly in times of stress.

    This volatility, has impacted the markets very heavily. Australia stock market actually is one of the worst performer. But, if and when, foreign trader and investors want to come back to Asia, Australia market will benefit the most as their liquidity provides ease of entry and exit.

    It would likely see a V-shape performance if such a scenario appears. When? No one could be sure but get a position when market is valued at 8-time earnings.

    ***
    Valuations would be expected to play a key role in any such market turnaround.

    Some think that maybe the time for China is the last quarter of this year, when we know who is in charge. In China, politics plays some very strong influence to the market sentiment. China has underperformed for more than two years. Value have started to be seen.

    On the fiscal side, China has started to step up measures. It works hard for a soft landing scenario. In the third quarter of 2012, or maybe in the fourth quarter, there could even be an acceleration of growth.

    Aussie stock market actually follow the trend of China market very much in last two years. If China market turns over, Aussie market would follow.
     
  4. wdongli

    wdongli Well-Known Member

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    Death of Buying and holding?

    Each idea becomes popular with conditions and contexts. It is not exceptional for buying and holding, which worked wonderfully through the 1980s and 1990.

    It works in long upward trends. If this trend is broken, it would die until a new upward is formed and could be seen by the crowd. However any beliefs, if die, would die hard. Yet die they must since the stormy climate since GFC have destroyed enough fortunes of the people who bought at the peak and hold until now.

    Do you believe the death of Buying and holding? Yes if the conditions and contexts would stay for an decade. However it would mean no boom in future. Do you believe that?

    ***
    You have to hold for some times and you have to hold when everything seems beautiful. In this senses, holding forever is always wrong and only could result in the destruction of the fortunes.

    There are always the time the tsunami hits everything. You need to get out before that. There are always the time that all of the genius and bums make money. You need some big picture in months or years and have to be alerted by the looming tsunami.

    Some said you need to bury the past and quickly. Yes if you see the ending of a secular bull market you should do so; if you see the ending of a secular bear market you need to buy and hold.

    ***
    Why do you hold? What is the reason for your holding? If you pay $0.01 for $1 why don't you hold. If you pay $10 for $1, why do you hold? Buying and holding forever is wrong logically or philosophically. You have to hold with great discount and sell for locking the profit if no discount or too much premium to the value.

    The time for buying and holding for long term is during a secular bull market, like from 1982 to 2000. When you’re in a secular bear market and no sign for its ending, which we are in, out jobs mainly are manage risk and preserve capital and get the chances in discount which have enough buffer for your safety.

    We could not ignore what just happened and what would happen. The tsunami has destroyed too much and we need to ask how long the price could keep to drop while we stay defensive with stock positions. The stock market’s signals aren’t just mixed, they’re scrambled. Have we got a clearer picture to develop, which is the base for what we should do.
     
    Last edited by a moderator: 31st Jul, 2012
  5. wdongli

    wdongli Well-Known Member

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    IAU: value vs tsunami

    It seems that IAU's gold project is very fat and too many want to get it without payment.

    So value has been challenged and its shareholders' heart have been broken. What will win, the value or the tsunami in Indonesia caused by the questioned policy and corrupted businessmen or politicians? In the eye of tsunami before and during it comes in, no one can win. However how about after the tsunami has made its destruction?

    Things become very intrigue and the traders have been jumped in/out in hours if not in minutes. It is a pure number game and will be until some news, good or bad to break or charm their hearts.

    ***
    Today a news came in. The losers anyway found a exit to run out. The bullish day traders jump in to grip on the bargains.

    To losers, since they were in a very dire position, tend to enlarge the darkness. "I hate to say it, but today is probably a chance to sell IMO. There has been no real commitment shown by the new subscriber," said a loser in hotcopper. The new subscriber was said a powerful man in Indonesia. The traders actually don't know anything enough.

    IAU needs the local hand, which has the motivation to fight for IAU. It is not bad to see IAU could response so quickly. It is good sign even not good enough.

    ***
    In the dire position, the losers just could not see the positive impact of the placement.

    "If he(who gets some free shares) paid for the shares - that would make a big difference to me, but he has received a free prize from readers digest, and needs to make a phone call to be in the running."

    It is normal that people want the free super but it never exists. The placement makes me feel all are reasonable and logic. Sometimes you have to give something away and you can get what you want.

    ***
    "Demonstrates desperation of the situation to me, as lawyers would be much cheaper than $5m approx. Things are looking hopeless."

    It is not a matter a layer could fix in short term. If the thing keep to run too long, the damage would be very profound and everyone around IAU would be the losers.

    Anyway it seems there are a lot of people feel better. Its price recovered very much even not good enough. I don't believe its gold project in Indonesia would be deleted to zero.

    [​IMG]
     
  6. wdongli

    wdongli Well-Known Member

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    IAU: if it could come back to $1.00...

    The bargain hunters have been swapped up by the traders who star at the value of IAU. IAU's management team seems understand what its problems lay in. Business is about promising for win-win. Sometimes it is necessary to share.

    The traders or investors around IAU seems know the significance what IAU is doing. The conditions to give shares away if IAU price could be bigger than $1. The thing seems that if IAU could come back $1, it would be back $1.5 or more since something must be good significantly with the combined efforts of the local and international shareholders.

    Anyway IAU's gold project is great one. It is not due to the fade only for it to be more than $2 after GFC. Now the market worries about its ownership of this gold project and it has been sold as through it would have lost the project completely. The giving away shares are huge and should be enough to motivate people to do all for IAU's fair right and their shares!

    [​IMG]

    IAU has only one problem in my view, that is whether or not it could hold its ownership of the project. If yes, all just have bought in within a month are winners otherwise it could be disastrous for everyone.

    Happy to see IAU management team work and be creative to hold its ownership! The gold project said to be worth about $5billion. If they can work with locals to hold it tightly it would be marvelous.
     
    Last edited by a moderator: 4th Aug, 2012
  7. wdongli

    wdongli Well-Known Member

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    Safest way in the market?

    Where are the safest ways in the stock market now?

    After the finger burning or shirt losing, all seem want to know the answers. Yes there are safest ways but there are not general ones.

    The safest ways are any ways which could have some sunny days and you are on the way under the Sun.

    ***
    Why Lehman, Bear Stearns, and AIG dragged all of the world into the mess?

    Have you remembered anything of the hair-raising moment of truth that was the credit crisis of late 2008. In a flash, huge institutions, Lehman, Bear Stearns, AIG went belly up. Along with them went our cherished notions of safety:

    The run on Lehman in turn caused a run on cash itself. The Reserve Primary Fund, a pillar of the money-market fund universe, broke the buck.

    ***
    It seemed that the problem wasn't the bad Lehman securities held by the money-market fund. Rather, it was a run on the fund itself as nervous depositors requested their dollars back.

    Flooded with redemptions, the Primary Fund's net asset value fell below $1 per share , and the fund was done. Investors eventually sued to get their money back.

    Every so often, you get a glimpse of the cracks in the machinery. Normally liquid, deep, and generally trusted by the world over, our markets, nevertheless, offer up periodic moments of panic:

    1. The nerve-racking “Flash Crash” in stocks in May 2010.
    2. The significant rise and fall of XAO in August 2011.

    ***
    Once some conditions and contexts are available nothing could be safe rather than the safest. It is you who could be self- and environment-aware to make your safe or risky!

    I lost a $100,000 chance since I sold SIR just two days earlier. In hindsight I was very fearful after the bloody 2011/2012 stock market.

    In the market you have to be fearless and also not greedy. You have to know the environment and yourself. It is hardest task to do for anyone in the stock market.
     
  8. wdongli

    wdongli Well-Known Member

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    Sentiment and fundamental

    It is a time all are fearful. We fear the collapse of EU, US, and China and we fear the coming boom goes forward without ourselves.

    It is mad and everyone is crazy. DOW and all of stock markets in this world could drop down 1-2% a day and jump up surprisingly next day to cover all of losses plus some extra value appreciation.

    I missed SIR's staggering shooting up since I was so fearful to sell it at $0.27 and see it jumped up to nearly $1. IAU was deserted as though it would have lost all of its projects and its price lower than its cash reserve.

    ***
    Today XAO lost more than 40 points and all if assumed risky were sold on fire.

    Some sold 40 millions of GOA shares and pushed its price down 28% around. However this night US surprised the world again. Its job data is too good to believe. So DOW jumps up more than 200!

    XAO is in one of the best economies but its traders or investors have to buy and sell as though if we don't do so, all of shares would be priced for nothing.

    ***
    Anyway, I bought IAU at $0.20 and would like to see its price is recovered to $0.35 after desperate sale today.

    27 millions of shares have changed hands today. What cause IAU price crashed? What cause the price recovered? These sellers run in the ruins and few would get good enough benefit I assumed.

    I bought 240,000 exm at $0.001. I hope I could bought all of 3500000 I have ordered. The market needs good news. US has led the way today. Hope China would follow and EU becomes stable. If so we could expect a upward trend to next March.

    ***
    Could wish become true? I don't know. I just do based on my own calculation with the help of diversification and time average.

    Not very successful since I started to buy in May and the profit just is about 80% of my annual expenses. All need some luck and I hope IAU could become a 5 bagger winner at least. If so I would get what would be needed for the living expenses for a year.

    As an full time student I need this profit to support myself and my family. If so I would also buy in the necessary time to get ready for next boom.
     
  9. wdongli

    wdongli Well-Known Member

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    Maker, burner, perfect storm, survival, and revival

    Someone said "what goes around comes around." Two weeks ago, some men ordered the 460 workers to stop work. Intrepid Mines' Aussie staffs were told to go home at the Tujuh Bukit gold mine.

    A perfect storm hit IAU's company maker, who acted as the project's operator. Its shares were promptly lost half in price. It happened after XAO had deserted any risky shares based on people's assumption or fundamental. The company maker has turned to be money burner, IAU just turned itself from its revival to its survival.

    All of its value based on this project had been completely wiped away by the market. All around it just wanted to get out. In two weeks before and after it happened, 300million shares around against 600 million outstanding have been changed hands.

    ***
    Why its price could be more than $2 at its peak after GFC $0.08? It was the time all worried about the sky!

    1. Tujuh Bukit has 25 million ounces of gold, 80 million ounces of silver and 7 million tonnes of copper.
    2. It is shaping up to rival Newmont's monster Bata Hijau copper/gold mine.
    3. It may be a third the size of Freeport-McMoRan's Grasberg, the biggest gold mine in the world.

    If and if only IAU could hold its project, it would be a company maker otherwise it would be money burner. All of people around IAU just could not understand why it would happen! Under the perfect storm, the shareholders have no option but run in the storm.

    ***
    I sold it for about $0.5 at the buying cost at $0.10 and was really regret to see its price rise and rise after my sale.

    At $0.20 I struggled to figure out what happened and bought in. Now its price recovers to $0.35. I need to ponder what I should do without fear and greed.

    1. if it could get the ownership back, it would be worth more than $1
    2. if it lose it, it could not be much less than $0.20 since its cash reserve was about $0.26 based on my calculation.

    It was good bet at $0.20 with highly likely it would get part of ownership back!
     
  10. wdongli

    wdongli Well-Known Member

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    IAU: What happened?

    There is some issues of sovereign risk in the countries as Indonesia always.

    The Java evacuation flared up the consciousness of this kind of risks. Before that a lot of investors took the long-handle to IAU. What's happened before the evacuation? Intrepid's partners in Jakarta had brought in new investors on the project and were cutting the Australian explorer out of the picture.

    Having spent $95 million proving up Tujuh Bukit, Intrepid was fuming. Its CEO, after trying to put out the frantic fires on the shareholder front, flew to Jakarta.

    ***
    To save the project, IAU stitched up a deal with an Indonesian businessman, Suryah Paloh.

    1. Paloh was issued 5 per cent of the company's stock, with options over another 10 per cent.
    2. It was said it was because he had "vast experience in navigating the waters of Indonesian business".

    Effectively, it had allotted 13 per cent of its shares at a discount to a unknown Indonesian businessman who might be able to buy influence; All were to get them back to the negotiating table with its own partners.

    Incidentally, Paloh owns a TV station and the president of this TV station is Adrianto Machribie, a non-executive director appointed to the Intrepid board last year.

    ***
    All shareholders just questioned: did Intrepid ever have a legal entitlement to the project in the first place?

    Where was the Java gold project came from?

    1. This was not the first evacuation at Tujuh Bukit, nor the first time Maya and Reza had traded in one set of investors for another.
    2. It was a couple of Aussie lads, Paul Willis and Sam Garrett, who first discovered the resource, with some clues from old Placer Dome geological data.
    3. Needing a local partner, they struck a deal with Maya and Reza.
    (Under Indonesian law, foreigners could not legally own shares in Indonesian companies so their private company, IndoAust, had an arrangement with Maya and Reza's company IMN.)
    4. IMN held the mining licence, known then as a KP.

    ***
    As the stunning drill results came through and the project started to hum, they started to look for partners.

    In August 2007, they found Emperor Mines, which was soon to be renamed Intrepid. I bought EPM just before this happened and bought more IAU at $0.08.

    By January, 2008, the drilling program had gone so well that Gordon told the stock exchange that Tujuh Bukit was a "company-maker".
     
  11. wdongli

    wdongli Well-Known Member

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    IAU: after Agreement with its partners fallen apart...

    By January, 2008, the drilling program had gone so well that it was called that Tujuh Bukit was a "company-maker".

    But in March 2008, the alliance agreement between IndoAust and the then Emperor Mines had fallen apart. A dispute between the parties ensued. Intrepid chairman, Colin Jackson, said this week he was bound by a confidentiality agreement not to talk about the events of 2008 but it seemed that Willis, Garrett and IndoAust were squeezed out of Tujuh Bukit.

    In fact, IndoAust and its workers were forced to evacuate the site in April 2008 in the same dramatic fashion as Intrepid two weeks ago.

    ***
    Sovereign risk is rampant in Indonesia, it would appear. It would also appear that Intrepid has left itself susceptible to severe shareholder angst and even legal action.

    Its desperate deal this week to buy influence through an Indonesian businessmen, to get its hands back on what it has always purported to be its own resource, is a signal that all was not well from the beginning.

    The intricacies of Indonesian laws are too much to delve into. Suffice to say that Intrepid's predecessors were advised by Jakarta law firms, including a Baker & Mackenzie affiliate, that they never had a legal entitlement to the resource.