Join our investing community

Out of woods?

Discussion in 'The Economy' started by wdongli, 12th Apr, 2010.

  1. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    The global economies have been hit by the worst disease in 70 years. The more economies indicators have shown it turns better but looks definitely not out of the woods.

    News said "The panel of economists responsible for identifying changes in the U.S. business cycle said Monday that it's "premature" to say whether the recession that began in 2007 has ended." It is a rational statement from a authorized institution who could declare the beginning and ending of the recession.

    The news and the statement of NBER are in the followings:
    Economists: Recession isn't over yet - Apr. 12, 2010
    Business Cycle Dating Committee, National Bureau of Economic Research

    Very interesting facts are the peak and the trough or end of the recessions are usually declared much later than the time they happen:

    The December 2007 peak was announced December 1, 2008.
    The November 2001 trough was announced July 17, 2003.
    The March 2001 peak was announced November 26, 2001.
    The March 1991 trough was announced December 22, 1992.
    The July 1990 peak was announced April 25, 1991.
    The November 1982 trough was announced July 8, 1983.
    The July 1981 peak was announced January 6, 1982.
    The July 1980 trough was announced July 8, 1981.
    The January 1980 peak was announced June 3, 1980.

    From the above data it could be seen all of the peak and end were declared more than half year later. In the transition time among the peak and end, if economy indicators strong enough to confirm the peak or end, the committee would review the economy data for judgment of the economy status.

    W. Buffett said we should be fearful when everyone is greedy and greedy when everyone is fearful. NBER should waste its time to announce a intermediate statement about economy if it could not feel the recovery of the economy and concern the market sentiment.

    I translate this not "out of woods" as a good signal of the economies in the backdrop of the worst crisis in 70 years. If we could have enough reserve cash to avoid the sale on fire, and in years of boom prospective we move into the market at each dip of the market, we should get a very good position to get the discount.

    EU agreed to bail out Greece even it would not claim what it would do, would be bailing out. The weakest point in EU seems more stronger and market sentiment would be better. In the crisis the most powerful enemy to the economy is the fear.

    I have put all of my movable cashes into the market between Dec 2008 and March 2009, and the correction between Nov 2009 - Feb 2010. Not sure how good or bad of the recovery before the next boom but I do hope before I use up my cash reserve, the boom could pass by the trough. I feel it would be a matter in a year and very likely we have been there.
     
  2. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Imagination of the economy and the decision in th emarket

    All of market players have three critical times regularly to act based on the economy fundamental(the main forces and themes of macro economies), which have the physical consequences to our market practice.

    1. When to buy
    2. When to sell
    3. when to hold

    These three time of one business deal in the market would define what we could get since we have to make the decisions based on our imagination. Here we have to know the imagination is generated based on what we could see, feel, and touch, and our processing facilities in our minds.

    Have we out of the woods of the financial crisis? We get a lot of news. we have got a lot of contradicted feels and touche but have we got good enough mental intelligent frame to processing them?

    Just reading a book, the cambridge companion to ADAM SMITH to know more about the economy, to help me to build this mental intelligent frame. Based on Smith, "the imagination is a mental faculty by means of which people create a distinctively human sphere within the natural world."

    Could we make a roughly right imagination of the international economy and its trend and make a decision to catch up the chances from the trend. The decisions are the action of our imagination and we have to accept the consequences from our decision.

    The satisfaction of the consequences of the decisions carries its own pleasure, whereas frustration brings “wonder and surprise” and, if prolonged, anxiety and unease.

    No one could say the economies are out of the woods but could we get the satisfaction after we see definitely the economies have been out of the woods for our market playing? Could we wonder and surprise? What if we would wonder and surprise? Could we even the wonder and surprise take longer time we still could not be in anxiety and unease?

    Yes each of us would have to work in the distinctively human sphere with the market and economy reality. Could we let our imagination much more close to the reality in future and no worry if our imagination is wrong?

    We could but we should know more in economies and have to integrated our mind with broad enough knowledge.
     
  3. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    You sound like a confused person...
    Why don't you read Adam Smith's - "The Money Game"...'the market is like a beautiful woman, endlessly fascinating, endlessly complex, always changing, always mystifying'.

    Oh yes... "Stocks are now what looks like a permanently high plateau" - Economist Irving Fisher - the week before 1929 crash.
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    How did you go and did you buy many different stocks or on a few?
     
  5. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Thank you, Tropo. I have got the book "the money game" and will read it to know more about Adam Smith. Before IT bust, I never thought about different views and didn't really understand our perception is the reflection of the reality based on our primary instinct but never good enough to tell us what the future will be. The loss and the pain often then not happen after we feel very good or excellent time, which put us in paradox. Actually in life we have too many paradoxes.

    Any man is attracted by a beautiful wan with endlessly fascinating, endlessly complex, always changing, always mystifying but don't know the woman and could not make decision to love in full or stop, is stupid man. The problem is not the beauty, the attraction, the changes, but the mystifying, but could a man handle or deal with them properly.

    Knowing the woman and market are challenging. To get the beautiful woman we need to change ourselves externally and internally. To let Mr. Market work for us we need to touch his pulses and put our money on his ladies we know and love in best. No one would comes to us to teach all of these skills and knowledge which are far out of the price of the shares.

    Adam smith set up the basis of modern economies, market, money game, art, and so on. As a market player, we need to be get balanced on the tightrope toward the raining gold and we have to be speculators after we get the value to maximize out return. We need a intelligent metal frame to guide our sensing, judging, and decision. I want to see how he saw the world, how he got his vision, and how he dealt with the uncertainties of the future. I want to get right in the philosophy of the market. the war, the art, and so on.

    When I try to get this goal, I have to pass through the stage with confused mind and perception but fortunately all of us have got some life logic and common senses. The problem is how to use the common senses with good enough understanding of the context.

    Mind changing could be very risky but no changing we would not go too far. Somebody said if we keep to continue to do one thing with expectation of the different consequences we are insane. We are in paradox again. How to avoid the risks but get the benefit in the market?

    I believe we should put two things as our priority list:
    1. Never loss, never forget loss, and never try to stop loss. It is the safety belt for our learning and practicing in the market.

    2. Read the classical books about the philosophy, economy, market herd effect or psychology, and history for the necessary knowledge to be a master of the market.

    I call this as mind set updating and use the English as my learning benchmark since most of my English terms before 2004 were Engineering relative. In the market practice I follow the rules below:

    1. Buy hard to get extremely low which I believe would happen in the bust and correction.
    2. Hold hard if anything shoots up, then the deep reading about the causes, and has good enough fundamental and speculative advantage.
    3. Sell when the market turns into hot and mania.

    To be good enough in the market, we need to be an market artist with the deep understanding of the value. To do so, I want to spend two years to read the classics. Could I get rid off the confusion then? I don't know but I believe I should be benefited.

    Thank you again for your recommendation of the book. Let's change the mind set, get less primary instinct, and get some instinct generated from our ever-changed intelligent mental frame.
     
  6. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    I am still not traditional value investor but I use the value shown in the historical bottom setup by the market votes.

    1. Before the crisis, I only bought the pennies whose price dropped down to the lowest edges of the historical channel in last 5-10 years in the explosive event generation sectors, the resource and biotech. I would sell the winners after the swing up more than the top edge of the historical channels.

    2. I had done a statical analysis of the pennies which shew 4 or 10 could shoot up between 3 months - 12 months with the profit more than 50%, 2 of 10 double or tripped.

    3. Before the crisis I nearly tripled my capital of my personal playing portfolio.

    4. I believe pennies could not be analyzed and the buying price must be extremely low and low to unbelievable level. They have the causes to be deserted but we just want to get some puffs more than we pay.

    5. I never buy any penny with the capital bigger than 4% of my capital

    6. I never buy any two pennies at one time.

    7. I never follow the market sentiment to buy.

    8. I believe buying hard for the margin of the safety and the buying roughly define all if you lose of profit.

    I was influenced by Warren Buffett very much and like his cigar butt theory very much but knew I could not have his value skills based on the financial statement, the deep understanding of the economy history, and the herd effects of the market crowd.

    ***
    The crisis beat my investment fund managed by the professionals terribly but my penny portfolio went through the acid test of the crisis. It gave me the faith of the rule: no loss, never get loss, and never forget no loss. No loss is a intention of the buyers not the consequences since we could get bad black swans since we don't know the pennies enough which to me is impossible.

    In the crisis I was influenced by a lot of great people from their books. I like the words, inverting, keeping to invert, and never come to the place you know you would die. I like you should be fearful when everyone is greedy and be greedy when everyone is fearful. Human is rational but we usually to be rational based on the backward mirrors in a few days or months.

    I believe good follows the bad and bad follows the good. I read some books in economics. I believe we are in the best times of the human kind. I believe the crisis are the problems when the human kind is trying to make the new history for pride and glory. Boom is the forces to make us better off but it would be overdone based on our nature.

    I was noticed the different consequences of the 1929 crash and the 2008 crash. I was noticed by the global economies structural shifting from single engine, US to one big engine of US plus several small engines. I was noticed the Japan economy expansion had taken decades and its great impact to Australia economy. I was noticed by the great consistent expansion of Australia economies since 1973 when US was in the great recession.

    BRIC would contribute great to Australia resource and old economies, good or bad. Australia and emerging economies could not decoupled from US and EU but if they are stable BRIC would push Australia economies to another level.

    I noticed the impact of the Keynesian economics to the world between 1936-1970. I noticed the impact of its resurgent momentum during and after the crisis. I take the deficit crisis as the continuation of the financial crisis, which should be carefully dealt with by the policy makers since no one would like the domino effects are there.

    1. I have bought a lot of pennies who deserted between Dec 2008 - March 2009, when I found the price was too far from their worst points of the normal market time.

    2. All have the tends to recur to its means. The extremes have to stop to swing greatly to the opposite extremes.

    3. My penny portfolio had ride on the V-shape recovery. My question since last November was where the economies would go and what the chances and risks and if I should bet on the resource boom.

    4. I believe low interest rate and the huge government speculation would generate the demand which would slowly but decisively to improve the employment and put US into the normal track.

    5. Internet has greatly to show the bad and good potential of any policies to the economies and it would introduce the much quicker feedback to fine tune economies. Actually the Australia and China tightened the liquidity of the money told us this improvement. I believe the recession would take much less time than the Great Depression.

    6. Looking back all of the recovery and boom, the longest time between the last peak and the trough of the next boom is about 36 months. Since world war II most of them are less than 18 months.

    7. We need the boom to get the profit since no one would lose too much in the boom but no one could get profit too much in the recession or bust.

    8. What we need to know is if we are wrong to get the boom in the expected time scope could we afford the waiting; if we wait and get the boom could we get much more to jump right or left of the fence?; if we are totally wrong, what the risks are?

    9. I do feel in 2 years we would be in another boom if no big enough bad black swans hit at us.

    ***
    I have about 30 pennies. I got some gold pennies for insurance if Gold ultimate bubbles come in. We need the bubble and if we pay very low, we do need one bubble in the fields we are in.

    Economies need back to normal. Penny's price would be too. Some will die and some would be appreciated greatly. We need to let winners have the wings if the trend would be there.

    Some great investors bought between 1932-1933 and held, which laid out the basis of their financial independent. I believe this crisis is the biggest opportunity in the market with the biggest risks. .

    Fortunately the risks could be controlled and managed. We would win if we tighten our belt very carefully.

    No risk no opportunity. No opportunity no future. We need the vision, the gut, the knowledge to ride the opportunities as we command the war to deal with them as art. Art needs the feeling with strong common senses and life logic. Adam smith may help us to know the life logic in context.
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    wdongli

    Thanks, for the long post. :)

    I had a read through it and although it was interesting to read, you should know that most people don't read more than a few sentences so if you keep on typing the chances are that you are not getting your message through.

    Just a thought...

    cheers
     
  8. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Hi Billv, thank you very much for your advice.

    It is true simplicity is beauty and it is always my problems to simplify the things good enough without losing the points.

    To win in the market and get good enough about economy is too hard without confusion and the necessary simplicity. Knowing nothing -> knowing some but confused -> Knowing enough to distill the gems out for simplicity, which is what I am trying to do.

    Please forgive my complication and confusion.
     
  9. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Out of woods, why bother?

    When we buy and sell in the market we have unknown and known. What we know and what we don't know? Comparatively we should know what we don't know.

    1. We know past and present if we really want to know
    2. We don't know the future even we could get the imagination about it?
    3. We know the crisis and recovery and know the consequences of our decisions in the crisis, recovery, and correction, to our present personal financial status.
    4. We don't know what our perception if and when the global economies would be out of wood.

    Could we find a way to get the certainty of our winning in the uncertain market?

    ***
    These known and unknown mean the risks and chances.

    1. Except that we just short for bad trend, we have to figure out when and why the global economies are out of wood and what would lead them out of the woods.

    2. Simply saying we need the chances. Financial crisis naturally puts more clouds about the future boom and force us to think the risks more than chances.

    3. To get the chance we have to be confident that the economies would be out of woods.

    ***
    1. To be winners we need to know more and more about the matters that are critical for the economies out of the woods. They should be the main forces of the economies.

    2. At moment, they are the policies made by the governments for the leadership and nearly all of the advanced and emerging economies have braced the Keynesian economics.

    3. No Keynesian resurgence, it is impossible to turn a potential Great Depression into a Great Recession, which is also the causes of the deficit crisis and asset bubbles in the emerging economies with the risks of inflation.

    4. I do feel we are out of the woods but sooner or later the economies have to be landed softly after the drastic emergency measures.

    ***
    There are still plenty of worries and the market usually climbs up the wall of worries driven by the policy makers, who worry the deflation too.
     
  10. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW

    Hello, welcome to the mental health hotline. :D

    If you have obsessive compulsive disorder, press 1 repeatedly.
    If you are co-dependent, please ask someone to press 2 for you.
    If you have multiple personality syndrome, press 3, 4, 5, and 6.
    If you suffer from paranoid schizophrenia, we know who you are and what you want. Stay on the line so we can trace your call.
    If you are delusional, press 7 and your call will be transfered to the mothership.
    If you are hearing voices, listen carefully and a small voice will tell you which number to press.
    If you are manic depressive, it doesn't matter which button you press. No one will answer anyway.
    If you are dyslexic, press 96969696969696.
    If you have a nervous disorder, please fidget with the pound button until a representative comes on the line.
    If you have amnesia, press 8 and state your name, address, phone number, date of birth, social security number, and your mother's and grandmother's maiden names.
    If you have post traumatic stress disorder, slowly and carefully press 911.
    If you have bi-polar disorder, please leave a message after the beep. Or before the beep. Or after the beep. Please wait for the beep.
    If you have short term memory loss, please try you call again in a few minutes.
    If you have low self esteem, please hang up.
    All our representatives are busy. :eek:
     
  11. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Mental health hotline? I need it sometimes!

    Hi, Tropo, thank you very much for your mental health hotline.

    I hope I could call it if I find I have these mental diseases, all of which are terrible dangerous in the market. What's the market? A tightrope hovered over the hell financially!

    I wonder why around 2000 I didn't know this services! Damned and then I lost too much hopelessly. It was crazing and insane and then no way to keep the balanced on the rope.

    Trapped in the hell for 4 years after IT bust. I never and ever dare to forget I could have some mental diseases in the market.

    Yes no loss, never lose, and never forget no loss, and I need to extend my knowledge to get the immune capability. But very hard, terrible hard, and impossible for all what I do.

    Never and ever buy anything without margin of safety even we still could get the loss, which if affordable is intelligent one.
     
  12. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Guarded optimism

    I thought we need guarded optimism.

    Being optimum to get the chances. Being defensive strongly to put the risks into the box everyday we could see. Now I just get the concept but have not the capability to get a intelligent mental frame to realize them.
     
  13. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    Hi, Tropo, thank you very much for your mental health hotline.

    I hope I could call it if I find I have these mental diseases, all of which are terrible dangerous in the market. What's the market? A tightrope hovered over the hell financially!

    I wonder why around 2000 I didn't know this services! Damned and then I lost too much hopelessly. It was crazing and insane and then no way to keep the balanced on the rope.

    Trapped in the hell for 4 years after IT bust. I never and ever dare to forget I could have some mental diseases in the market.

    Yes no loss, never lose, and never forget no loss, and I need to extend my knowledge to get the immune capability. But very hard, terrible hard, and impossible for all what I do.

    Never and ever buy anything without margin of safety even we still could get the loss, which if affordable is intelligent one.


    I thought we need guarded optimism.

    Being optimum to get the chances. Being defensive strongly to put the risks into the box everyday we could see. Now I just get the concept but have not the capability to get a intelligent mental frame to realize them.


    Amen ....
     
  14. tradeonauto

    tradeonauto New Member

    Joined:
    19th Apr, 2010
    Posts:
    3
    Location:
    Queensland
    Hmmm dear oh dear,what long winded analysis.

    Rather than focus on "are we out of teh woods yet" to which the answer is clearly NO, simply focus on what is in vogue, buy it, sell it.

    There is nothing more appalling than the nonsensical term " time in the market".

    Ensure your capital is in tact as much as possible. Stocks are a great game if you understand the simple principles of the moves in the market at various times - whether that be commodities as in now, or biotech, or software etc.

    At least that way you will be trading liquid markets to begin with.