The "so called" experts
1. Most Singaporeans are brand orientated. They want big local names like analysts from DBS or fund managers from blah blah blah company. Somehow the company name adds extra weightage onto those "experts" words. On some trading website, I saw people saying that they had made a bad trade because they failed to read analyst report beforehand. I find that entirely bullshit. Now you must be thinking what makes my words so strong. Of course, I have found some allies.
2. The great Warren Buffett, my best friend lol. Read his article here on his wager with the wall street experts.
3. "ALL TIPS ARE DANGEROUS- TAKE NO TIPS!" Jesse Livermore
4. Another example that I got from CNBC.com
"Should we laugh or cry? Merrill Lynch financial analyst Guy Moszkowski has just downgraded Lehman Brothers [LEH 23.75
-3.75 (-13.64%) 
] , ONE DAY after affirming his BUY rating and ONE WEEK after raising the stock to BUY. Huh?
Here's what he just said in a note to clients:
"Removing Buy a week later and 10 percent lower is not easy but scale of Q2 loss and capital-raise indicate lower ROE [Return on Equity] potential and lower confidence, esp. given LEH's remaining exposures."
On June 4, with Lehman at $31 and change, Moszkowski raised his recommendation on Lehman to Buy, saying "Share correction overdone in our view."
I think this analyst is gone by now. Wonder how he keeps his job.5. For those with trading accounts. Tell me how many sell calls (telling people to sell a stock) are there in comparision with buy calls (telling people to buy a stock) right now. Worse still, trace back all the way to October 2007 and tell me how many freaking stupid buy calls at STI 3800 (straits times index, basically a measure of the overall market trend). It's alright to make some mistakes but look carefully again and tell me how many reports are there that rectify their previous mistakes. =)
6. Dated back in October 2007, an analyst from a well known brokerage firm (hint: top retail firm) said that STI will be going toward 4200. Just some fact that my friend told me before.
7. Last but not least, why should you listen to me? LOL, I'm no expert in the sense that I don't carry any tags with me. Of course even most of my friends don't listen to me when I try to explain or teach them certain things. There are only a handful that trust my brain. I speak from a neutral point of view.
Simple Yet Effective
I think I have mentioned this before but never really brought it out and discussed openly. This theory is the "whole number" theory. Not my theory, just a simple fact and a bit of psychological thinking.
Stocks have a tendency to face some price resistance when they reach a nice whole number. It is a psychological thing. Most people like to use whole numbers to place their orders. For eg. they will want to sell a stock at $30 and not at $30.20. It is a common thing so you actually see lots of volume queuing up at the whole number level.
It is probably easier to explain using real life numbers. For example, Semb Corp. was on a super nice uptrend towards $5. However, once it hit $5, no one seemed to be buying anymore and lots of selling came in and Semb Corp is trading at $4.5 right now. There are most reasons why it does not break through $5 but we don't care at this point of time. I just want to illustrate that at $5, all those reasons start to kick in and we have Semb Corp trading below $5.
Another recent example, Wilmar International. It was also on a nice uptrend but because of recent selling, Wilmar was at a pivotal price of $5. Here we see $5 as a support. It was trading at a high of $5.5 before. If you see the chart, you will notice something else at $5.5 but we ignore it for now. On Tuesday, Wilmar closed at $4.97 below the psychological $5. You can be quite assured that Wilmar still go down somemore because the support of $5 can't hold anymore. Wilmar kept falling on subsequent days.
We move on to US market and touch on Lehman, the hype of the market right now. I mention shorting Lehman over the weekend because it broke the $35 level. Note that whole number doesn't always have to be a nice number that ends with 0. $35 was a number that I get from my charts. The price was about $32 something. However on monday, Lehman opened at $30 and started to move below $30. I could tell that it would open below $30 by looking at pre-market trading so I keyed in my orders before the market opened. Seeing that the $30 can't hold anymore, I know that it will plunge downwards in a very ugly manner. It is important to look again at Lehman as it reaches $30 because $30 is a nice psychological barrier. Day after day, lehman keeps falling and is standing at close to $23.75.
Other examples that are for you to think about is Oil at $100 and Gold at $1000.
Btw, I have a big news to announce. We have a HINDENBURG OMEN last friday. UH-OH.
Latest Updates
Cover Lehman at $20. Maybe during the day it will fall below $20 but I highly doubt that Lehman will close below $20. I expect to see some short covering. Short interest is close to 14%. Short from $30 to $20 is a nice 33% in a week's time. Honestly I don't really think that Lehman is the next Bear Sterns. Just think about it, the reason for Lehman to plunge somemore today (thursday 9pm Singapore time) is the exiting of CFO and COO. Sounds like the end of a story.
Ok, really very sorry for this. I am quite concerned about the short interest right now. Honestly I wish to wait till friday before pulling out of Lehman. Lehman is about $22 at 9.39pm singapore time right now. Maybe you wish to cover half of your holdings right now at this price.
We have an interesting comment. Very nice things to ponder over. I will give some serious thoughts and reply on weekend's post. Cheers.
"I know from experience that nobody can give me a tip or series of tips that will make money for me than my own judgement."
Jesse livermore
1 comment:
Hi there,
First of all congrats on having such a well organised and informative blog. I like some of the interesting observations you have posted.
Reckon that you'll be having a very favourable P/L this month for your oil and index shorting plays!
Something to ponder:It is far from clear that Trichet's USD-negative comments are bullish for crude oil or the other commodities.
The bullish argument is essentially:
ECB raises rates -> EUR surges / USD falls -> Oil rises -> Inflation rises
But if the ECB's comments in fact mark the start of a global tightening cycle that could eventually force the Fed's hand, it could well mark the beginning of the end of the commodity bull market.
The Central Bank of Russia (TsBR) has already raised interest rates this morning. And central banks across Asia and the Middle East are coming under intense pressure to tighten monetary conditions to fight soaring inflation rates. Rate cuts no longer appear to be on the table in the United Kingdom as inflation is poised to breach the government's target.
As noted before, the turning point in commodity markets will be marked by one or more of three factors:
(1) End of Asian fuel subsidies and price controls
(2) Deep recession in the advanced industrial economies
(3) Inflation-driven rate rises from the western central banks
The subsidy regime is already cracking (1), and arguably the ECB's comments signal (3).
That will not be a lot of comfort to anyone caught holding short positions in the mid to low 120s.
And commodity prices could still spike much higher if Trichet and the ECB pull back from the threat to raise rates, or the Fed decides to risk a further devaluation of the USD below 1.60 EUR rather than shift to a less accommodating stance, which would be seen as a green light for a further escalation in energy and commodity costs.
But it is far from clear that the confluence of events was really bullish for the oil market at all.
If anything, the volatility that will persist for this week and the next provides opportunities aplenty to take profit safely. A 5 dollar differential/spread daily simply means a safe profit margin of about 3 dollars.
We should see a short revival for the USD aginst EUR and GBP from US market opening tonight till the weekend, a reversal of the past week's moves.
Next week will be a pivotal week for Currency and Commodities.
All the best!
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