Make that change in your life now!
Stop hoping, wishing or praying for SUCCESS. You can EARN this SUCCESS like so many other past graduates from this program. All you need is to be TRAINED, SKILLED and MENTORED by the longest enduring Teacher in the business that knows everything about failure and success in one of the most cut-throat businesses in the world.
PATTERN TRADER TUTORIAL PREVIEW
Next Preview in Singapore will be on:
Wednesday, 24 September, 2014 @ 19:00 hours (7pm)
Adam Khoo Learning Technologies Group Pte Ltd
991 Alexandra Road, #01-05 Garden Office, Singapore 119964
Reserve your seat for the next session now!
Drop an email to: firstname.lastname@example.org (For classes in Singapore)
It always makes my day when someone takes the effort to make an acknowledgement to help me inspire other to do the same …
Success comes to those who
work at it the hardest and
believe in it the longest.
Meanwhile, in Kuala Lumpur at about the same time …
Rock on MY27! Keep up the good fight and always stay in touch. Your real Trader’s Journey begins now. Happy Hunting!
I have been accused of being bearish. People have told me that I publish nothing but bad news and bearish outlooks. Some even berate me for being too bearish and scary.
But I am a Bear!
Its like accusing me of being male and publishing male-related things and being too manly.
Well that’s because I am a man!
Being a Bear is something I chose to be because it is my style of trading. That does not mean that I only trade downwards and can’t be bullish. I guess most people don’t understand the concept because most players in the local markets are Bulls. They’re Bulls because they have little idea or any concept of what being a Bear is about. Most local players are actually investors who only want the market to keep rising. The so-called traders here are actually investors who don’t know the difference and mostly maintain bullish mentalities. Some can’t even grasp the concept of Short Selling or Puts because it is such an alien or unnatural thing to do.
There is nothing wrong with being a Bull or having a confused bullish mentality. Just like there is nothing wrong with being a Bear with a multi-directional mentality in a multi-dimensional market that is too dynamic to be so bullishly biased. After all, when you look at the market since 1999, out of the 15 years, 70% of the time (over one-year periods) the market was sideways, volatile or bearish. So why would I want to have a bullish bias when the odds don’t favour the Bulls?
Being a Bear not about being negative or pessimistic. Its not about being a doom and gloom soothsayer. I don’t live in a cave and my life is certainly not dark and foreboding.
Being a Bear in a market full of Bulls (with tons of bullish shit and bull-shit) keeps me defensive. Its a common-sense thing. If there are so many Bulls scrambling to make the same buck, doesn’t it make sense for me to be a Bear to make the Bulls’ monies when things go against them? With far fewer Bears, that same buck is multiplied when the many Bulls lose it. In other words, there more bucks to be made by the few Bears from the many Bulls than the many Bulls could possibly make from the few Bears.
And because the Bulls outnumber the Bears, it is only right and meet that I take on a defensive attitude. The other advantage of being a Bear in a Bull-ladened market is that when the many Bulls panic, it is the most beautiful thing for a Bear like me. I don’t need a Bear market for that – all it takes is a scare, a rumour, an irrational trigger and the market tanks like a brick in water. If you’ve never seen a herd of Bulls stampede, you won’t appreciate how beautifully scary it is.
It takes approximately four times longer for a Bull to make a buck than a Bear. This is because when the market tanks, it tanks much faster than it rallies. Thus the saying;
The Bull walks up the stairs while
the Bear jumps out the window
Take a look at a typical sell-off. In May 2012, the DOW erased four months of bullish profits in a single month! In Singapore that same year, the Bears wiped out five months of profits (January to May) in 12 trading sessions (2.5 weeks) the following June.
I don’t need to convince you to become a Bear so I will not preach about the advantages and wonderful things that Bears achieve in the market. At the same time, don’t hate me for being a Bear. Don’t berate me just because you prefer to be a Bull and only choose to see bullish shit and bull-shit.
At the recently concluded Financial Mastery Workshops in Singapore and Kuala Lumpur, I had a flood of queries about why I had such a bearish outlook for the rest of the year when the S&P500’s PE was deemed “affordable” and “fair-valued” by bankers and analysts. Thanks to a good friend whom I will only name as Rich-M, I am able to break it down into simple terms for you to understand …
Table A shows the PEs of an imaginary index of 5 stocks having an average PE of 26.6 (grossly over-valued) when it is obvious that only one of the five stocks (MSFT) is grossly over-valued. Its high value has raised the average PE of the whole index to make it look unattractive to buy. In truth, KO, PG and JNJ are still buyable at 14, 15 and 16 respectively.
Table B on the other hand shows that all the components are over-valued but the average on the index is lower than Table A, giving the impression that Table B is less risky to buy than Table A.
So how relevant is the index’s PE in relation to the broader market? Very often, market mavens will use such statistical manipulation to hype up the situation and ease the fear so that the market gets another leg up. If you have no idea what their game is, you will be in for a shocker. That’s when the Bulls always repeat the same rhetoric; “If I only knew …“
Furthermore, when most of the broader market is correcting by 10% or more, how can anyone claim to be in a Bull Market? If you didn’t know, the S&P500 is NOT the market. In fact, it only represents the better 500 of the over-8,000 issues on the NYSE.
But having said that, there is a way to use the S&P500 to determine if the market is truly over-valued. Its a simple common-sense method that only requires a watch list of all 500 components.
Put up the watch list and list the companies by their PEs – highest at the top, lowest at the bottom. Then scroll down to the company with a PE closest to 15 and place it in the middle of the watch list.
As you can see, The scroll bar is pretty low down on the list. As of yesterday’s close on Wednesday 17 September 2014, 403 of the 500 components on the S&P500 have PEs above 15 – that’s a staggering 80% of all the S&P500 companies! A little more than 260 (more than half the S&P500) have PEs above 20 (below).
So now, what do you think about the relevance of the index’s PE ratio?
That’s how a Bear thinks and works. Bulls only want to hear bullish stuff and will live in denial about the really bearish stuff. I love being a Bear. I never was that profitable as a Bull but when I became a Bear, my whole world changed and I have never looked back since. Give me a Bull Market anytime – its easy to make money in one. But I prefer a Bear Market anytime because I am always ready for the quick bucks!
One more thing … if you can bear with me for a bit more …
In real life, there are more bulls being killed everyday as cattle and such. Other bulls are put to work in farms and breeding stables. Others yet are bred for slaughter in the bull pens of South America and Spain.
There are far fewer bears in the world today and most are protected species. And best of all, most of the bears in the world roam free.
Don’t miss this upcoming …
7-HOUR CANDLESTICK &
BREAKOUT PATTERNS WORKSHOP
Next Workshop in Kuala Lumpur, Malaysia will be:
Sunday 28 September, 2014 from 10am to 6pm
(Tutorial Preview on Sunday 16 March at 2pm)
Venue: AKLTG Malaysia Office (See address below)
Public Admission Fee: RM100
Pattern Trader Graduates: F.O.C.
Malaysia Office B-1-12 TTDI Plaza Jalan Wan Kadir 3,
Taman Tun Dr. Ismail 60000 Kuala Lumpur, Malaysia
Office : (60) (03) 7725 0212 Fax : (60) (03) 7725 8212
Reserve your seat for the next session now!
For bookings, costs and queries, Drop an email to:
email@example.com (For classes in Malaysia)
*LIMITED SEATS, SO BOOK EARLY!!
With the market looking extremely toppy, you might want to consider some safety in defensive stocks. And there is none more defensive than Big Pharma.
Its been three years since we last featured this sector and given the current market, macroeconomics and geopolitical environments, it is timely that we revisit this recession-proof sector.
Get your report from www.patterntrader.com: Monthly Sector Report: Pharmaceuticals
August was a slow and easy month for me. Took time off to chill, reflect and plan for the rest of the year and into next year. The time off also allowed me to get back to trading and spend more time with the family. I guess it was timely too because AKLTG is in another transition – the landlords at Alexander Road can’t make up their minds if their want us out or not – and it has been a frustrating fight to plan ahead. For as long as the training centre remains in limbo, I can only plan for weekend batches in Singapore for October and November. So rather than fight an impossible situation, I decided to take time off and chill.
I did do a little spot for Popular Bookstore in K.L. on 27 July for which they later sent me this great piece of appreciation and a thank you note;
Now that August has come to an end, so does my slow-down period. Its back to the grind in September and for the rest of 2014. And there’s no better way to get back into action than with a re-emergence into the public speaking arena. After staying out of the public arena for almost two years, I will be doing my first major event at this year’s Financial Mastery at Singapore Expo on 6 and 7 September. As I have done at previous events like this, I will be presenting two mind-blowing topics (rather than hard-selling) that I am sure you will treasure. I hope to see a huge turn out that’ll make my hair stand!!
Date: 6th – 7th Sep 2014 (Sat – Sun) 9.00am – 7.00pm Daily
Venue: Singapore Expo, Hall 2B, 1 Expo Drive S’pore 486150
First Session 6th September – 1 to 2:30pm (Singapore):
Synopsis: With markets at a high and threatening to break down, where do the real traders put their money to work? The commodity trade is the oldest trade in the business preceding any other instrument or derivative trade. It is also the most reliable in terms of this cycles and seasonalities. While most deem it as the riskiest and costliest trade in the market, many have made a living out of it. I will reveal the What, When, Why and How the commodity market can be your lowest risk trade if you’ve never considered it.
Second Session 7th September – 2 to 3:30pm (Singapore):
CYCLES, CYCLICALS AND THE CYNICALS
Synopsis: All through market history, one constant has prevailed that few know about and many don’t teach or write about. It has been the constant that has been the difference between those who make it and those who don’t because those who don’t never knew about it even when it was right in front of their eyes. By blending Macroeconomics and Cycles, with my research on Sector Rotation and Cyclical Trading, I will show you the most reliable source of my success by using Cycles to anticipate the markets’ and economies’ next move.
Don’t forget to book your seats early: http://financialmastery.sg/fm14fb/
Then the circus goes to Kuala Lumpur on Sunday 14th September. I will be speaking at 2pm on Cycles, Cyclicals and the Cynicals.
Book your seat here: http://financialmasteryasia.com
On Sunday, 28 September in KL, I will be having the Candlestick and Breakout Patterns Workshop in Kuala Lumpur. (Details Here) Don’t forget to make a booking before attending and BRING A FRIEND! Its seven hours of pure edutainment that I am sure won’t disappoint you given the low, low entry fee for so much education.
The market was rocked in August by boat-loads of geopolitical issues ranging from the Ukraine-Russia conflict to Israel-Hamas to Iraq to the Icelandic volcano … and of course by a whole bunch of divergent macroeconomic numbers that don’t tell us if America is truly on the mend or if China is really in trouble or if Europe is on the verge of another major crisis.
The last week of August saw Europe deliver very hawkish numbers which suggested that the European growth engine is beginning to falter.
In spite of all the macroeconomic fits and starts, against its reliably bearish nature, the month of August 2014 made its best gain since August 2000. But having said that, it was a bumpy ride with all sorts of intraday gyrations and reversals.
As of the close of Friday 29 August, the DOW is up for the year at +3.1% while the NASDAQ has the best YTD gains at +9.7%. The S&P500 is +8.4% and closed out the month above its psychological 2,000.
Bond yields flattened and narrowed the 2/10 yr spread to 186bps from 205bps at the start of the month. This has been the sharpest one-month drop on the 2/10 in over two years.
As the cheap US money dries up and the buy-backs slow to a stop, with Yellen’s back to the wall and Europe on the verge of a QE-styled program that could flood markets with cheap EU money, who is to say this rally won’t continue. As long as you keep adding air into a bubble, that bubble will grow.
This third biggest stock bubble in history is about to become the second biggest by surpassing the 2000 bubble. Only 93 of the 500 S&P500 companies have PE ratios below 15.00. In other words, 81.5% of the S&P500 companies are overvalued. That means that this market is now officially more overvalued than it was in 2007 on volumes that are less than 40% of what it was in 2007.
September is the last and worst month of quarter three which is traditionally the worst quarter of the year. September 2014 has twenty-one trading days and one public holiday. In the last 63 years since 1950, September has been the most bearish month of the trading year for the DOW and S&P. It is also the worst month of the worst four months (July to October) on NASDAQ.
- Monday, September 01 is Labor Day – Markets are closed
- The day after Labor Day or the first trading day of September has been up on S&P 12 of the last 18 and up on the DOW 13 of the last 19
- However, 4 of the last 5 first trading days of September have been down on the DOW and S&P, including last year
- The next three sessions after the first trading session tends to be bearish
- The second week of September is the month’s most bullish week
- Market remembers 9/11 (Tuesday) of 2001
- Monday of Expiration Week is usually bearish
- Expiration Week of September tends to favor the bears
- Wednesday 17 September – FOMC Meeting
- September 19 is Triple Witching Friday with the DOW up 9 of the last 11 (last year down)
- The fourth week is bearish, going down on the DOW 18 of the last 23
- Watch out for Portfolio Dumping/Window Dressing in the last week of the month/quarter.
- The last day of Quarter Three has been down on the DOW 12 of the last 16
- The first trading day of October has been down on the DOW 5 of the last 8
- Crude usually tops out in September and reverses mid-month
- Nat Gas continues its strength till October
- Gold and Silver tops out in September
- Copper consolidates and turns down
- Soya stays weak and Corn continues to slide down
- Wheat stays strong but can weaken depending on weather
- Cocoa weakens mid month till end October
- Coffee normally tops out in the first week of September
- Sugar bottoms and consolidates
Its going to be very interesting to see what this year’s September will bear (pun intended). September, after all, its reputed to be the most bearish month of the calendar year over the last 80-plus years with the worst volumes of the year. The weak volumes make it easy for volatility to dominate proceedings as investors and institutions normally consolidate their positions ahead of a threatening October, famous for market crashes when the market has been at a top – and the market has been very toppy for many months now.
Original article from Shareinvestor.com published on April 27, 2012
This article “Why more ignorant money is lost to less smart money.” by Conrad Alvin Lim was first published in the Apr 2011 – May 2011 Issue of INVEST magazine and is reproduced in this blog in its entirety. The author fills you in on the invisible hands at play that drives stock market action. An insight to the mindset vital to a successful trader in a marketplace where sentiments rule the day …
Through the years, trading has always been a pipe dream for most who wanted to get filthy rich. With the advancements in technology over the last decade, this pipe dream has been brought closer to home than ever before. Today, it is a very accessible dream to anyone and everyone. All you need is a computer and an Internet connection.
And of course, you need the right kind of market.
This is where the hype starts. We have been over-exposed to all sorts of advertising and promotional rah-rah that makes us believe that it is actually possible to make that fortune a reality. We see ads with winners making really fantastic profits from a single trade and we hear of friends who make a living from trading and living the good life. We see the rich and famous on TV that have made fortunes in the market. We read about people making fortunes from the comfort of their homes.
We believe we can be one of them. Worse, we believe it is really that easy.
What we don’t see in most cases is the real ugly truth. We don’t get to see losers, we never see the many hundreds or thousands that get wiped out and we definitely never hear what happens to the few winners when the market turns.
We never get to see how difficult it is for those successful few to make that living. We don’t see how much studying, hard work and endless hours of practice it takes to achieve that “easy” life. We definitely don’t hear about how much losses were accrued before the wealth accumulation started.
When the market is rallying at full steam, you always get to see new gurus hyping up their courses, authors of all sorts publishing their version of making a fortune from the market and everyone rushing to brokerages to get an account open. Workshops of all kinds will be touting their software that makes profits without the trader having to put in much effort. Some gurus will adapt their classes to ride the trend of the market – if Options is the way to go, you’ll get Options teachers by the dozens … if Forex is the flavor of the trend, then that’s what you’ll get lots of.
The market in itself is hyped. When everything is running up the charts, it is so easy to make money from the market. Everyone seems to be getting in on the action when a bull run is in full steam. The hype worsens as these bull-run winners put more money into the market to help the rally climb even higher. Pretty much like what is happening in our property market today. The “Aunties” and “Uncles” at the coffee shop also seem to have the best tips and everyone in the neighborhood is an expert at stock picking.
Scandals also abound when the market is in full hype. Hedge funds and pillion-trading are two of the many ways these scandals begin. In some recent cases, the owner of the fund starts living lavishly on his clients’ monies even before the fund is profitable. This adds to the hype. We see fund managers driving fancy sports cars and living it up in penthouse condos and sprawling landed properties. Everyone wants that life and the market can give it to you.
So the average Joe, or in our case, Ah Seng, joins the hype bandwagon and puts his hard earned money into a few bets in the market. It makes money for sure. The bull-run continues. So Ah Seng buys more and grows his wealth. He tells his friend, Ah Huat, about it and he joins the bandwagon. Soon, the market is flooded with Ah Sengs and Ah Huats who know little about the danger they just got themselves into.
The fact is the market had already been running up like mad which is where all the hype came from. By the time the new gurus, workshops and books emerge, the rally is almost always halfway there. This is when the aunties and uncles get wind of the easy money and this brings on the Sengs and Huats. Next thing you know, the market is over-cooked. Yet it continues to rally, albeit on suspiciously lower volumes.
The lower volumes are an indication that the smart money is already sidelined and waiting for the inevitable. The smart money knows when to get out and stay out. They know because the ignorant money has started to flood the market.
“When the market is greedy, you should be fearful.” ~ Warren Buffet
Then the inevitable happens – the market stutters and falters … the easy money slows down … volatility begins to rule the market … the ignorant money slowly realize that they have left their asses hanging in the wind without protection. But they’ll continue to live in denial because of the hype.
The market slides south. But not in a hyped-up crash, mind you. The market is a sneaky place that gives you more rope than you need to hang yourself repeatedly. It takes a slow and steady slide with the occasional bull-trap to keep the ignorant money believing that the correction is a “normal” thing in this business. After a brief reprieve to bring hope to those living in denial, and possibly bring in more ignorant money, the market continues its sneaky slide south. This goes on for a while and before the ignorant money realizes it, more than half the investment is down the toilet.
By this time, some of the gurus quietly “disappear” from the press, some workshops cease to exist, software traders start complaining that the systems are not working as promised, fund managers appear in the news for the wrong reasons and my class starts filling out with dozens of traders looking for a fix and a more realistic way to survive the market.
The market gets down to an impossible low. Gone is the hype and all that came with it. In its wake, it leaves a massive trail of destroyed lives and emptied bank accounts. The market is now “a dangerous place” when it was once a dream maker. The market is a “casino” when it was once an ATM. When the hype is all gone along with the money, people get serious and stay away from the market.
This is when the smart money returns.
And this starts a new hype cycle that brings in the new ignorant money.
The question you should be asking is not; “When will the ignorant money start to suffer?” If you thought of asking that question, YOU are the ignorant money.
The only question you should be asking is; “How do I become the Smart Money?”
To get the answer to that question, we commit to the next big mistake – The Education.
Most people know that trading is a stressful and dangerous job. Most also know that it isn’t easy and takes a lot of work and learning. Of course, there are the few who believe that the market can be beaten with a system or with some high-tech software. Then there are those who cling on to the ignorant belief that the market is a place that can get them rich quick.
Let’s not waste time discussing the dreamers and ignoramuses. Rather, lets look at the fellow who knows what it takes and is ready to work for it. Let’s look at the fellow who sincerely wants to learn all there is to know about this business but is unable or unwilling to get a formal education for it. It has been argued that one is able to learn about trading by reading books and obtaining information through the Internet.
So if it is that simple, why do so many still fail? The answer is just as simple; Learning the wrong thing without realizing it.
Most of the books available, either at bookshops or at the library are about INVESTING and very few are actually about TRADING. So what happens is that most people don’t realize the real difference between investing and trading and will assume the two to be the same with slight variances. That could not be farther from the truth.
Investing is much easier to learn – like learning to drive a Honda Jazz. It doesn’t take much to learn it and it is easily understood and put into practice without much difficulty. The trick thereafter is not to crash.
Trading, on the other hand, is a very different skill and mind set. It is akin to driving a Formula 1 car. Unlike the Honda where the manual version has the clutch on the left foot, the F1 car’s clutch is a very different mechanism and is controlled by the right hand. Unlike the Honda which packs less than 80bhp, the F1 car stacks up an earth-shattering 900+bhp which, in untrained and inexperienced hands, could end up killing the driver.
There is so much more to trading than investing. The skills involved are very different, the psychology is worlds apart, the knowledge needed requires way more weeks and even months to acquire and the amount of research needed to be a good investor is nothing compared to the daily research and monitoring the trader is required to do to survive the market day in and day out. Where investing requires little or no practice, trading demands hours and hours of practice time to hone the skill. The financial management skills are also extremely different in that the investor protects his capital by how much he invests while the trader requires a different skill set to manage his finances – its called “cutting loss” – something easier said than done.
So without realizing it, most beginners will pick up an investment book or visit sites hosted by investors or have contributing members who are investors and assume that all that knowledge gained will stand him in good stead as a trader.
And when things don’t work out, it gets confusing. The common query that follows is always, “Why is it others can make it but I can’t?”
You can’t blame the poor fellow because there isn’t much literature on this subject and even some so-called gurus don’t know the difference. But all you have to do to know that this is true is to just look at Wall Street – how come the investors don’t have to be on the floor of the exchange everyday while the ones on the floor everyday are known as traders?
Knowledge … a little of it can kill you quickly while the wrong kind will slowly bleed you to death.
Finally we look at a controversial reason why most traders fail – The Attitude
It starts right at the start where most newcomers think that the market can be a get-rich-quick plan. This is akin to thinking that the market is like a casino. Consider this fact – the house ALWAYS wins. So if you treat the market like a casino, it will make you feel like most gamblers do. Gamblers always win a few but lose a lot.
Some trade like the market is a system to be beaten. Such traders ought to give themselves more credit. You’re insulting yourself if you have this attitude. To think that the market is a system is to include yourself in that system. Therefore, the system you are looking to beat includes you. Give yourself some respect and while you’re doing that, give the market the same respect – we’re not robots in the market and we’re definitely not part of a system. We’re humans that are driven by emotions. The market is an emotional place, not mathematical. You cannot have a system to beat an emotion because there is no math that can factor emotional irrationality.
Then we have those that don’t realize how unscrupulous the market is. Their ignorance is evident when they correctly assume the market is not that clear cut but will still buy into the hype. What is obvious is that the market is made up of all kinds of people especially those who will do anything to get an edge, even through illegal and criminal means. It is also full of experts who have spent years in Harvard and Princeton and then more years with established institutions such as Goldman Sachs, Morgan Stanley and the like. They have hugely experienced mentors to guide them to become the next generation of world class traders. These people have so much leverage and influence on market sentiment and to make their advantage more unfair, they collude with their competitive counterparts in order to corner the larger market for their own gains. With such power, how is a three-day workshop graduate expected to beat the odds? Yet more and more look past the obvious and end up throwing their hard earned money to the power-brokers.
These are also those who buy into the idea that the market can be analyzed fundamentally with valuations. Such valuations do help to reduce risk. But that is an investment-styled strategy and not suited for trading. Trading is way faster and seldom allows the security time to flex its fundamental muscles before the next gyration takes out the profits. Read the previous lesson to know the difference between the investor and the trader and you’ll have a clearer understanding of this.
Others rely purely on technical analysis. I can’t deny that I base a lot of my analysis on technicals. But that is not the end all. All it takes is one bit of macroeconomic news and all that technical analysis is out the window faster than you can say “Cut loss!” Technical Analysis is great as long as there is no news to upset the prevailing sentiment and as long as volumes don’t dip. But the market is never so generous. So in the end, Technical Analysis is only a “best guess” … and contrary to common belief, Technical Analysis is not the best guess of when to buy or sell – rather it is most reliable when used to guess the best potential against the least risk or the most risk against unfavorable potential.
Then there are those who believe that a good tip from a trader is the key to easy money without putting in any effort. For this, I have only one analogy; will you take a heap of hard-earned money out of your wallet and give it to someone you hardly know and expect to get it all back after a few weeks? And if that person was trustworthy, would you still do it? And do you really believe that it will come back with more than you gave him? If in life we don’t make such practices, then the same principles should be applied in the financial world and most of all, in the market. The desire to get-rich-quick-and-easy makes simple people do really silly things with their money. And it is always only after getting burned that you hear those famous last words,” … if only I knew …”. Yes, you’ve heard the horror stories time and again and so has everyone else. Yet people continue to write new chapters into this horror story ever so frequently … all in the name of greed, gluttony and sloth.
The financial markets are like an office block in a busy business district. The people who go to work there are serious professionals who take what they do very seriously. They are highly experienced, very influential and extremely powerful. It is also like a hospital where the surgeons, doctors and nurses are highly qualified and trained professionals. People put their life in their hands everyday.
Then one day, some over-zealous graduate with three days of workshop knowledge comes into this office block and expects to beat everyone out of their jobs. Or this hyped-up graduate with only three days of experience comes into the hospital and expects everyone to trust him with their lives.
Okay, maybe that is a bit of a stretch but the implications are no different. Every professional takes years to study his craft and then spends more years honing the skills with hours and hours of practice and hard work. They also have a mentor to constantly guide them till the day they are ready to go solo. There is no easy path to success and there will be failures along the way. The financial market is to be respected and feared. There is no other attitude except humility that will help a trader survive it.
It is said that more than 80% of the market is made up of those who lose and less than 20% are winners. The truth is that those statistics apply to any profession – how many top rated lawyers, engineers, surgeons, etc are there compared to the many also-rans?
The big money is always at the top where there are few who have it while the small money is at the bottom where most have to fight for it. And there are only two ways to be at the top – either you are already there or work hard to get there.
I love to cook. I love preparing food for my family to eat. And my family loves eating what I cook for them.
But there’s more to just cooking than meets the eye. Today, when it is so convenient to order in or “ta pau” or just eat out, why, in my busy schedule do I still persist to cook at least seven meals a week for my family?
It is my form of therapy. It serves as a means to calm me and slow me down from the fast-paced nature of the market and the hectic schedules that my life presents. Most importantly, it reminds me that this is Life – this is what Real Life is all about and everything we do is about this.
This bowl of salad represents the end product.
This is what we see served to us when we eat out. We dig into it without considering anything else except for how it looks, tastes and fills us. Some of us will be concerned about its freshness, crunchiness and its calorie levels. Others will be considering the value-for-money factor. After finishing every last morsel of the salad, we move on to idle chit-chat or slam our faces in our mobile coms while someone else clears up the mess.
For most, this is life … their life – meaningless, routine and superficial. For them, instant gratification is normal. It is a way of life and thus becomes an expected given. As long as they can afford it, these expectations must be met. They care little for cause and consequence because this is what affluence is all about. This type of life breeds sloth, gluttony and pride.
This sort of existence always leads one to chase dreams that are unrealistic and unachievable. It inevitably makes one pursue the wrong things that almost always never delivers on its promise. It makes victims out of the naive, gullible and ignorant dreamers who will insist on living in denial and will never own up to their flaws even when hit with failure. Instead, they will look for the next best thing with the next best promise of instant gratification.
I should know – I was guilty of it. Then bankruptcy hit me and woke me up.
Let’s get back to that salad and let me show you what went into making it …
I found a packet of greens that I bought a little less than a week ago. Some of the greens were soggy and spoilt but there were bits that were still fresh and crunchy. I had to sort them out.
It took 20 minutes to clean and sort out the rotting greens from the good greens. On the right, you can see how much of it I cleared out. On the left, more than half the pack was still in good shape. In the sink, you can see from the colour of the water (compare the colour of the steel surrounding the water-filled basin) how much work went into sorting them out.
Wouldn’t it have been easier to toss out the whole bag and buy a fresh lot instead?
Yes … and if you were thinking that, then you’re missing the point – that’s sloth – that’s exactly the type of life I don’t desire because it starts me down a path that’s all too familiar and undesirable to me.
I painstakingly removed all the rotting bits from the fresh bits even though it took time to do it. This is the same approach I take in business and in trading – I remove as much risk and liabilities as I can before I consider taking the next step in my analysis for my trades or business. I never rush the process and will pay special attention to every detail before making the next move. Likewise, I don’t want my family eating rotting greens so I will take the effort to remove that risk.
Then I had to boil up the pasta, two hard boiled eggs, slice up the sausages and braise them along with the pasta, slice up the tomatoes, shiitakes and onions and start laying up the salad. The greens, shiitake and onions were mixed one layer at a time, each time adding olive oil, my own blend of herbs and peppers, a sprinkling of salt and garlic power, then I lay over the next layer of greens and repeat the process for at least four layers. This way, the flavours are properly and evenly blended with the greens when I toss them.
Next, the cooled pasta is laid down like a bed on the top of the greens and the sausage slices (also cooled) on top of the pasta. Around the edge of the bowl go the tomato slices and to top it all off, the hard boiled eggs are sliced and take their pride of place above the whole heap. Finally, one last sprinkling of salt, herbs and parsley flakes.
Wouldn’t it have been easier to just toss everything into a bowl and mix it all up? After all, we’re going to gobble it all down and it won’t make a difference in our bellies, right?
Yes … and if you were thinking that, then you’re still missing the point – that’s gluttony – that’s exactly the type of habit I despise because it pays no attention to detail, its slovenly and smacks of ill discipline.
Although I never attended cooking school, I am a graduate of Taste & Smell from the University of Culinary Trials & Errors. I have studied my craft and applied my methods with almost surgical precision. I pay attention to detail and am constantly looking for ways to improve the style. I am more interested in the process than the final result just like I am more intrigued by the journey than the destination. This way, I get to enjoy every bit of the entire experience and not just savour the end result.
I took this same approach when I decided to take trading seriously. I studied the craft and practiced painstakingly to improve my style. I broadened my knowledge of the business by learning economics, risk management, history, monetary policy, politics and psychology. I applied through trial and error everything I learnt. Like cooking, sometimes things didn’t work out so you start over with a new plan. With no one to guide me, the market became my test examiner while my wit became my teacher.
Wouldn’t it have been easier to just get some financial expert to tell me what to buy? Then if I lose, I can blame him instead?
Yes … and if you were thinking that, then you’re still missing the point – that’s pride – that’s exactly the kind of attitude dreamers have. They want to get rich quick without any effort and yet hold someone else responsible. Regardless of who is irresponsible, the bottom line is you are going to lose your money and you’ll be too proud to admit that you were too cowardly to pull the trigger yourself.
In my younger years, I used to rush to get to the final product. (Maybe that’s why I never finished what I started.) I was impatient, stubborn and proud. As a student, I didn’t care much about the learning process as long as I knew I could get my answers right. (Maybe that’s why I flunked out.) As a Film Producer, I didn’t care much about the process and got others to take care of the processes for me as long as my end product was approved. (Maybe that’s why my productions had low profit margins.) During my media days, I hired people to manage the process so that I wouldn’t have to. (That’s why I lost everything.)
But all that changed when I was hit with bankruptcy. As a result of not knowing the process behind running a business, I could not account for why I had failed so spectacularly. I couldn’t hold anyone responsible for my company’s collapse and I certainly could not blame anyone for my stupidity and ignorance in financial management. I had only realised my errors when I studied the process that led to my downfall, after the fact. It then became clear to me why I had failed so many times in the past without realising that I was repeating and compounding the same mistakes with each episode.
This totally turned me around and gave me a greater appreciation for studying the process, planning the process, working the process, improving the process and learning from the process. I began to enjoy the journey more than the destination. I fell in love with the concept of working it instead of instant gratification. I realised that things last longer if the process is well thought out and executed with passion.
I learnt that a really good bowl of salad is one made with love, patience, passion and from painstaking attention to detail.
I finally discovered the secret to long-lasting and truly gratifying success – its not the end product but the process that makes success.
Success belongs to those who
work at it the hardest and
believe in it the longest.
This is the same approach to which I raised my kids. Nothing could be done in haste. It was never going to be a one-time lesson for all time. The lessons had to be taught one painstaking event at a time. I gave my kids my undivided attention and made sure they were loved every bit of the way. I made them my best friends when they became teens so that I would be theirs. This made me the first and last person they would go to if ever they needed a friend to lend them a ear or simply a shoulder to lean on. I changed my ways so that my kids would have a good role model to mirror and a dependable friend they could trust.
I still continue this painstaking task today knowing that there is no instant gratification in raising my family. There will be more lessons between now and when they become parents themselves. And I will still be guiding them on how to be good parents when the time comes. There will be no expectations from me when they finally come into their own. I will die knowing I did my best for them because this is what I lived for.
And it was all because of a simple bowl of salad that took me one hour to prepare for my family.
Happy National Day
to all my Singaporean readers!
Parent to child;
“You must study hard, spend 6 years in primary school, 4 to 5 years in secondary school, 2 to 3 years to get a diploma and another 3 to 4 years to get your degree before you can consider a professional job. Life is not easy and there are no free lunches. You have to work hard to become rich and achieve your dreams.”
Three days later, the parent signs up for a three-day workshop to become a full-time professional trader on the promise that no hard work is involved, it is easy and you can become a millionaire and achieve financial freedom like it was a free lunch.
Parent to child;
“Don’t lend money to anyone. People can’t be trusted. When you have money, they all want to be your friend. When you don’t have it, they don’t know who you are. When they owe you, they will avoid you. Never trust anyone with your money because you are never going to get it back”
Three days later, the parent puts the family’s life savings in a leveraged fund with a banker they hardly know who will ask for more investment power later who cannot promise that you will get it all back. When its all gone, the banker doesn’t seem interested to do business with you anymore.
Parent to child;
“Money is hard to earn. You must learn to spend wisely. Buying things without thinking is reckless and immature. You must plan to buy what you can afford and only buy what you need. You must stay within your budget. Shop around, do your research, wait for discounts and save as much as you can. Don’t just buy because everyone is buying the same thing.”
Three days later, the parent pumps more than 50% of his investment capital into a company he hardly knows anything about. He buys it without researching its fundamentals, he averages up as the stock keeps rising without waiting for a dip and he bought it because his friend had a tip from a friend that everybody else was buying it.
Parent to child;
“You mustn’t feel bad about losing, son. Sport is about participation and completing what you started. It’s about training, concentration, emotional control and doing your best. It’s about playing by the rules. If you did everything right and you put in 100%, then it is not a loss but a personal achievement. You should be happy and proud about that.”
Three days later, the parent is ranting and raving about losing money in the stock market. He broke his own rules because he lacked practice. He had gotten emotionally attached to the trade and had been living in denial. He procrastinated, was preoccupied with business issues, had become complacent and didn’t concentrate on his stock position. He didn’t take his profit when he had it because of greed and didn’t cut his losses until it was too late because of fear. He was angry because he lost money …but he won’t blame himself.
Parent to child;
“Don’t believe everything you hear. People like to lie to you and tell you things you want to hear so that they can get what they want from you. The only reason they are nice to you is because they want something. They will lie, cheat and double-cross you just to get what they want. The more convincing they sound, the more they are lying. You must check them out properly first.”
Three days later, the parent jumps into a stock with all guns blazing because there was some news about it. No research was done because the article was written by a ‘credible’ analyst from an established institution. The price target given was so realistically achievable and tempting and the reason for the “Buy” rating was so convincing that Eskimos would have bought a fridge.
Just like that and July is done and dusted. It was a really busy month and I had a great time.
WATMY27 completed their Tutorial on 20 July after two brain-busting weekends.
Then on Sunday 27 July, I was at KLCC at the largest book fair I have ever been to. Very impressive. It is so good to know that Malaysians still read books and the proof were in the many basket-trollies I saw laden with massive amounts of reading material, lining up in droves towards the cashiers. Keep reading, Malaysia!
Then on 30 July, WAT73 completed their Tutorial in Singapore at 1am on Thursday morning after eight mind-crunching weeks. Now their journey to the next level begins!
You’re staring at the Singapore Debt Clock as of 1 August at 12:20 SG time. Indeed, we’re the richest country in the world and one of the top 10 most expensive places to live in. But we also have the highest household debt in the world.
The interest per year on that debt is a staggering S$8,255,403,808! That works out to S$262 per second. With a population of 5,399,494, each citizen’s share of that debt (including non-working adults, children and infants) is a world’s record high of S$70,662.
Why is this important? Those who remember, will recall this posting from end 2011 …
We, or our personal debt, will be our greatest downfall because it is currently our greatest threat. Most who can afford their lifestyles now are living on a shoestring that has been carefully budgeted to a ‘T’. The problem with that is that all it will take to hurt them is a rise in interest and/or borrowing rates or a cut in salary or worse, a job loss.
If, and more likely, when it happens, defaults are going to go through the roof and we’re going to see this country’s most major recession since SARs. Already, the cracks have begun to show as property prices fall. Stubborn/greedy, overleveraged and inexperienced home investors who should have sold their liabilities last year now start to panic. The flood of sellers usually follows … and it often happens in quarter three …
And remember, I warned us all three years ago about the dangers of cheap money and the gulf it would have created between the rich and the poor and how it would bring us down. Its all here in this blog … buried and forgotten.
But I don’t forget.
All over the Internet, analysts and economists are writing that this bull market is becoming unsustainable. There are quantified reports too that this is now the third, and arguably the second biggest stock bubble in history after 1929 and 2000.
Liquidity is also drying up as the Buybacks that have kept this rally going for the last year are coming to an end. Plus with Tapering ending in October, the easy money days are numbered.
I never thought it was possible but the DOW hit 17,000 in July on 30% of the volumes that saw it rise to 14,000 in 2007. Much of that rally was from the Buybacks.
Lest we forget, I have reasons to be bearish given the negative January Barometer at the start of this year and last year’s miserable Black Friday/Cyber Monday numbers. And although we close above the December Low by the end of Q1, the first quarter was negative for the year.
Maybe the market lost sight of its traditional fears as a result of those massive Buybacks but the bottom line is clear – the market is over valued with less than 25 of the S&P500 components’ PE Ratios between 2 and 15. More than half have PEs above 20 and a third have PEs above 25. The real nail in the coffin is that earnings haven’t been that stellar to warrant such overvalued PEs for most of those companies.
In a nutshell, it’s a stock bubble. By my calculation, it’s the third biggest stock bubble in history with the worst liquidity ever.
Given that its been a tumultuous year on the geopolitical and economic front, it wouldn’t surprise me if the market collapsed spectacularly from now till the end of the year to teach us all a lesson in the consequences of easy money policies.
Latest Edit (31 July AMC)
The DOW fell -317 points on the last day of the month and triggered a Death Cross on the 10 and 20 DSMAs – the most serious since April and January this year.
It was the single biggest loss since 1 February and the second biggest drop for the year.
It has also put the DOW in the red for the year in one single session.
August can the most volatile month of the year and is known for its extreme volatility. August 2014 has 21 trading sessions and no public holidays. The month starts and ends weakly and the middle of the month is its strongest period.
August is fast catching up with September as the most (historically) bearish month of the year. Since 1987, August has been the worst month on the DOW, S&P and NASDAQ.
- August starts in reliably weak fashion
- The first trading day of the month has seen the DOW go down 10 of the last 15 but up 4 of the last 6.
- The first nine days of August are the weakest first days of any month.
- The second week continues the weakness while the Friday of the second week is reliably bearish.
- Expiration Week of August is its most bullish week.
- The Monday before August Expiration has been up on the DOW 13 of the last 19.
- August Expiration Friday has been bullish with the DOW up 8 of the last 10.
- The week after Expiration Friday is bullish but not as bullish as week three.
- The Monday after Expiration Friday is reliably bullish and the Friday following that Monday is also reliably bullish.
- August traditionally ends poorly but has been ending stronger in the last 10 years.
- The second-last trading day of August has been down on the S&P 14 of the last 17.
- August 29 is the Friday before Labor Day on Monday 01 September (Markets are closed) making it the eve of a Three Day Weekend. Watch for a rally before the holiday weekend.
- Crude stays on the high range but tends to weaken late in August
- Nat Gas continues to show strength
- Gold and Silver is strong in August
- Copper stays weak
- Soya and Corn are also weak in August but Corn tends to have counter-rallies depending on the weather
- Wheat maintains its strength
- Cocoa starts to get very volatile
- Coffee bottoms in early August and reverses upward by mid month
- Sugar is at its lows in August.
Now we go into the worst three months of the year. Given that the market has been anything but normal, I will be cautious about shorting anything ahead of time. Let’s not forget that’s how the hedge funds got into the red in May and June.
Let’s play it smart and wait for it rather than anticipate it. For those who know how, your best strategy is to be hedged.