Irrational exuberance 3/4/06

"but I don't think Perky really is looking for a 4800 was he ?"

Do not ask me...Ask Perky.

 

You guys (Tropo, Perky et al) seem to know your stuff, do you mind me asking what your involvement is in the share market? Are you guys professional traders, brokers, etc or is it just about personal investment? I am just interested for the sake of curiosity.

As an aside, I see BHP is < 30, Lihir lost almost 0.4 and OSH is feeling the pain too. AMP is still pushing onwards though. I swear it was only a few days ago when I saw they were 8.5!

 

I am only a private person but I was privately trading Stock Market for quite some time in the past.
Actually I do not trade S.M anymore because I trade different market.
My involvement with the S.M is passive because I invested my $ in N.Fund.

 

I am always staggered at the knowledge people on the forum have and have also wondered if people are professionals in the market etc..

By N fund do you mean Navra Aust shares fund? Why don't you trade the SM anymore Tropo, I'm sure you'd do well?

MJK

 

Yep.....by N I mean Navra Fund.

I do not trade S.M for few reasons:
Not enough leverage
I am too lazy to trade two different markets in the same time.
I do not need to argue with my wife anymore what to buy, where to put stop loss, etc...(my wife is competitive trader)

Instead of trading S.M, I trade FX from quite some time which I found very rewarding.
Daily FX turnover now is around US$ 2 trillion per day (excellent liquidity). In comparison average daily turnover of all the world's equity exchanges combined is around US$ 180 billion per day.
No transaction cost (in and out) as such.
I can reverse trade (If I am wrong) in the matter of sec.
I can play with straddle if I am willing to trade tight range or announcements.
I can almost program in whole trade ( buy/sell order, position size + stop loss/limit level) and enjoy few beers in the pub.

FX leverage is the big advantage compare to Stock Market.
The most common margin rate is 1% or 100:1 so, with just $ 1000 in my account, I can trade amount of $ 100 000.

I guess you have got enough reasons from me why I do not trade Stock Market anymore

 

ahhh FX, I'm half-way through a uni assignment on derivatives issues. Specifically NAB, Barings Bank and Metallgesellschaft (not FX though). That leverage you mention didn't quite work the way Leeson and the NAB guys hoped.

It's amazing that these scandals continued after Leeson managed to shut down a 400 year-old bank with just a few trades (and a pretty big earthquake).

 

Yup, you guys amaze me. This stuff is so far away from my sphere of understanding. Are you self taught or did you work in financial world in a previous life?

MJK

 

"That leverage you mention didn't quite work the way Leeson and the NAB guys hoped "

Why ?

 

Losing a combined $2billion+ may have had something to do with it. Especially Leeson; he couldn't have come close to those losses if it wasn't for the leverage. Maybe he would have come back if it wasn't for the Earthquake, but I think his strategy was fundamentally flawed. Actually, I think it must have been more about emotion than his strategy. If I crossed the billion dollar mark in terms of losses for my employer, I'd probably act irrationally too.

 

If you are a willing to learn you understand.
After all if you are going to invest even using NI you should have a basic understanding of Stock Market.

In the not so distant past I had a good teacher/s and I learnt as much as I possibly could.
I am still learning. This is a never ending process...
But in my previous life ..... I was known as .... Louis the XV

 

Well, well....same old story.....I guess that his money/risk management strategy was not as good as should be.
Anyway ... Good luck with your assignment

 

I think for most of these guys it turns into an addiction just like gambling. It's probably against any sort of money management fundamentals to not only put all of your money on one trade, but illegally obtain millions more for the same trade.

 

I was looking for around an 8% dip. Today the market is a little up, many stocks are bouncing back from yesterday a little (having said that, HDR dropped 27c yesterday and is up 10c today, quite a volatile stock that one).
Believe me, I am not in the same league as Tropo. Would love to know more about how he trades in the FX - maybe he can post one day

 

I tend to agree with you.
But do not forget that trading as such is very addictive especially if you are doing well.
As you know, even very aggressive form of trading has NOTHING to do with gambling IF certain rules are followed by the "players" (traders).

Some time ago well known pro trader Vic. Sperandeo blew himself sky high because he broke one of his own rules.
Too much ego killed a lot of traders. That is why women are better traders than men

 

"Would love to know more about how he trades in the FX - maybe he can post one day"

Perky,

It's not easy to tell you (a lot of writing would be involved and I am a bit lazy and busy now) how I trade FX.
But even if I did, would you be able to trade somebody else's system?
I tried ones to trade it, and I will never try again. I found it almost impossible to trade. You cannot read other people's minds.
The best way (IMHO) is to develop your own system by reading what you can, attend some courses, try it, make errors etc... and stick to it !
Stay

 

Watch out today, down down 214 pts overnight.
Check out this article.
http://www.smartmoney.com/news/ON/index.cfm?story=ON-20060517-001169-1715

 

At least the cross-rate should fall for those in the Navra US Fund.

I'm trying to think positively for the coming day.............

 

Good point Tropo. Our lecturer talked a lot about behavioural finance yesterday. I think only robots can stick to their plans 100% of the time. Or maybe the drill sergeant from Full Metal Jacket; he seemed fairly disciplined.

We also did some FX yesterday, specifically the covered and naked interest rate parity models. The funny thing the lecturer said is, the easiest way to cut down a model is to ask about transaction costs and taxes. I find it funny because I've been doing a bit of modelling (not the cat walk type) lately and they all seem great until I consider these two things.

He also used some of his behavioural finance background to explain TA. A week ago he said that TA was rubbish but I had a big debate with him earlier in the week and yesterday he agreed it wasn't completely rubbish. My point was that human tendencies, company trends and a million other anomalies could create price patterns in a stock regardless of any quantitative financial model. I think it struck a chord with his behavioural side and he spent an hour explaining his view in class. I think he always believed, but didn't want to 'corrupt' our minds. Most other academics seem to take TA personally!


-T-

 

I read an interesting comment the other day in BT's margin matters newsletter.

Basically the thesis was that altho some things shouldn't rationally affect markets BUT if enough people both hold a certain view AND act accordingly then it becomes something of a self-fulfilling prophecy.

I expect we'll see some volatility today but the strong commodity prices, company profits (altho perhaps that's starting to level off a bit) and inflation within bounds should mean there's no reason for a sustained fall...but then if enough people believe otherwise and act accordingly...

I wish someone could fix my crystal ball

Cheers
N.

 

We may need parachute today but we are still well in the range (IMHO)