Have we underestimated this?

#2
This one should make things more vivid. Collected from the net

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A Short Story
I am writing this newsletter on a bus from Kuala Lumpur, Malaysia to Singapore. It's funny how I can surf the internet on an air conditioned bus that is WiFi enabled in South East Asia, but still lose my mobile phone service when I enter my driveway in Southern California. Speaking of things Asian, many people I have spoken with are interested in how Asia is viewing the economic slowdown in America. I was a guest on CNBC Asia last week and have also been following much of the local financial news. The economic crisis in the US is taking the forefront globally.

I have a copy of the Straits Times and in glancing the headlines of the money section, there are titles such as, "Rebound in Asia iffy give fresh Wall Street jitters." Watching Wall Street is a critical tool in the Asian Trader's arsenal. Another article really gave me pause though. It was written about the recent ban on naked short-selling in the US exchanges and a fear that the same tactic could be used at the Singapore Exchange.

What exactly is naked short selling? No, it's not trading when you are too lazy to get dressed in the morning, although that should probably be banned as well. It is the practice of brokerages and institutions shorting a stock without first borrowing it. This is a practice that has been going on for some time and the US government has recently banned the practice in an attempt to prop up the financial industry and the market as a whole. There are several problems with this governmental interference into the financial markets. The first is that it will raise costs for the brokerages. Before you start saying, "Good, they should pay," remember, they will pass their higher costs onto you the client!

The second and more troubling effect will be the false rally that we have been seeing in the markets. Most retail investors and traders have been waiting for a market bottom. This rally was not a bottom but a flurry of buying sparked by naked short sellers closing positions. A few "bottom feeders" were sucked into buying as well but the upward move will not last. In my classes, I discuss sector rotation and how a rally in the financials can usually lead the market out of recession. This IS NOT THAT RALLY! This has been another attempt by the government to rescue the financial markets, and like the others, it is only a temporary fix. We have already seen two more banks taken over by the government last week. First National Bank of Nevada and First Heritage Bank were sold to Mutual of Omaha in a deal announced Friday. These are the sixth and seventh bank failures this year and will surely not be the last.

We have seen this governmental interference before with the sale of Bear Stearns and the changes in the Federal Reserve Term Securities Lending Facility (TSLF). Neither one was a permanent fix nor did they stop the markets from declining. The Fed and the government are trying to place band-aids on a major wound. We would expect nothing less especially in an election year. Restricting free markets is a bad idea and will only lead to a prolonged recession. There was talk about restricting commodities trading to "help alleviate oil prices."

The markets did rally yesterday on a higher Consumer Confidence number and falling oil prices. I hate to be the bearer of bad news, but the Consumer Confidence number is not an accurate reflection of spending in the US. Let's see what Non-Farm Payrolls bring us on Friday. We have been in a steady rise of unemployment and should see the trend continue. As for commodity prices falling, before you celebrate, I want to refer back to my article called, xxxxxxxxxx (edit). Measuring the peak from bonds, I estimated a start to the recession at September of this year. From the peak of the equities market, we should have a recession beginning somewhere between July to September. And in the article, I mentioned that commodities usually peak two to three months prior to the start of a recession. Are you still happy about the drop in oil and gold prices? The world will survive the upcoming recession. We must be smart about it and for you traders out there, make sure you look for those shorting opportunities, and just make sure you are dressed!
 
C

Czar

Guest
#3
what you say is true & those who were to default already have so its just that the system will take some time to absorb the impact, also The only reason FED crashed the Interest rates is so the house owner don't default due to high interest rates, also the big banks who have these properties now lying with them & a blank cheque from the US Govt. are going to mint on this issue in the years to come, As Buffet said every disaster is a big opportunity to make big money (or something like that) cause 1 of the many thing that is out of production is land...

Also due to low interest people are now getting to buy now & keeping the currency down is encouraging outsiders to invest in properties, the house is open my friend those who can will benefit... over the longer period...
 
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#4
Another one. This one from EWI

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Why 'Bye, Bye Bears' Means Just the Opposite
"Bye, bye, bears," said the wonderfully flamboyant Jim Cramer on his Mad Money T.V. show this week on July 30. "I'm sticking my neck out and calling the bottom," he said, mainly because he thinks that negativity in the market is striking. We applaud his willingness to take a bold stand particularly since we know from experience that it takes fortitude to call tops and bottoms. But we think it might be just a bit early. After all, it's not even obvious that people have given up on the stock market. In fact, his hopeful sentiment is exactly what bear markets bring out in investors the hope that things will turn around just after the next market dip. This is analogous to investors worrying at the beginning of a bear market, a behavior that famously has been shortened into the adage, "bull markets climb a Wall of Worry." In contrast, Bob Prechter calls the bear-market behavior "sliding down a Slope of Hope." Read more about how you can really tell what a bear market looks like in this excerpt from Prechter's Perspective, where Bob Prechter answers questions from the media.
* * * * *
Excerpted from Prechter's Perspective, 2004
Q: What are some characteristics of a major market bottom?
Bob Prechter: General despair. Investors completely give up. Sometimes you even begin to hear arguments as to why that market really has no reason to exist. For instance, in 1932, people said capitalism was dead, stocks were dead, and they'd never go up again. We had that situation in gold in 1971, when the government decontrolled it. Several economists came out and said that as soon as they took off the price controls at $35 an ounce, gold would drop to $6 an ounce because it had no industrial utility.
Q: The market is an amazing beast. It even manages to do damage on the way up. Richard Russell has said that the "diabolical objective of bull markets is to advance as far as possible without any people getting in." The opposite is apparently true in bear markets.
Bob Prechter: Exactly. It's the old story. Bull markets climb a Wall of Worry. I made up a parallel maxim: bear markets slide down a Slope of Hope.
Q: In the mid-1980s, you anticipated this idea in the great bull market when it was just getting under way. You said, "Somehow the Dow has to get to 3600-plus with almost nobody aboard.
Bob Prechter: All I really meant was that for the mechanism of the market to be satisfied, there must be reasons for people to disregard really important advice at the time it is most important that they actually take it. The psychology of 1984-85 was exquisitely instructive in this regard. Advisors, newspapers and brokers hated the markets. They were amazingly bearish. So the market went up with the fewest possible people participating. In fact, they were shorting and losing money as it rose. The history of markets shows that over 90% of investors cannot make money in the market. The few successful ones you occasionally hear about usually took the approach of long-term buy-and-hold, without regard to trend, and they were lucky enough to be in a multi-year bull market.
Q: What about so-called typical investors?
Bob Prechter: So-called typical investors just don't make money for long. They get interested in the markets at the top of every bull trend, and they get scared out at bottoms. The short-term traders lose even faster. They're sending 2% or 3% of their accounts to the brokerage industry in commissions every week or so. How long can you survive that without a good rate of market success? Since people's hopes and fears are the engine of the market their hopes make it go up and their fears make it go down the result is that most people must lose money. It is their fears that make them sell near bottoms and their hopes that make them buy near tops.
Q: Let's say you could dissect the average investor's stock portfolio over the course of a full cycle. What would it reveal?
Bob Prechter: More than 75 years ago, Don Guyon, the pseudonymous author of One Way Pockets, wanted to discover why his clients always lost money in a complete bull-bear cycle. It might be argued, he reasoned, that, at worst, they should have broken even, since at the end, prices were back to where they were at the start. He found that the answer lay in the clients' temporal orientation to the market's future. At the beginning of a bull market, he found all his clients were traders. At the top, they were all "investors." This is not only precisely the opposite of the correct orientation for making money, but also entirely natural for human beings and a key reason why the market repeatedly behaves as it does.
Q: Why do you say we are experiencing a long-term top of historic proportion?
Bob Prechter: Partly the pervasive market psychology of buying and holding stocks. "Focus on the long term and hold your stocks" is what people said right after major peaks in the 1930, 1946, 1969 and 1973, too. Back, in 1974, 1978, 1979 and 1982, you almost never heard that kind of commentary. The public certainly had no truck with it. Today, it's everywhere. People are writing books about how if you just buy stocks and hold them, you'll get rich. I think that's an excellent description of the past, but I don't think it's going to describe the next 10 years at all.
Q: When will we know for certain that we have seen a market top?
Bob Prechter: For certain? When it's too late to act!
Q: If you don't know until it's too late, should traders try to pick tops?
Bob Prechter: By all means, yes. Waiting for certainty means waiting long enough to miss it.
Q: At what point in the Dow would a crash scenario become a possibility?
Bob Prechter: Any time it's open.
 
#5
Black gold might not be as scarce as we thought. This week oil prices escalated to a record $139 per barrel, but that may partly be because the amount of available oil in known reserves has been significantly underestimated.

So says Richard Pike, a former oil-industry adviser and chief executive of the UK Royal Society of Chemistry, who blames flawed statistical calculations.

Oil companies produce a bell-shaped probability distribution for how much each oil reservoir might hold, and then quote as an indicator of the reservoir's capacity a figure they are 90 per cent certain they can exceed. When publishing a result for multiple reservoirs, they simply add up the figures for each one. And this is where the problem lies.

"They should be combining the bell curves for each reservoir," says Pike. Adding the numbers for each reservoir ignores statistical information about the extremes of the distribution, giving a result which underestimates the true total figure for all the reservoirs.

According to published estimates, there are 1200 billion barrels still to be extracted, but Pike says there could in fact be twice as much. "The figures are almost meaningless and just provide a conservative estimate for shareholders."

Ovarian Cysts No More
 

pkjha30

Well-Known Member
#7
Black gold might not be as scarce as we thought. This week oil prices escalated to a record $139 per barrel, but that may partly be because the amount of available oil in known reserves has been significantly underestimated.

So says Richard Pike, a former oil-industry adviser and chief executive of the UK Royal Society of Chemistry, who blames flawed statistical calculations.

Oil companies produce a bell-shaped probability distribution for how much each oil reservoir might hold, and then quote as an indicator of the reservoir's capacity a figure they are 90 per cent certain they can exceed. When publishing a result for multiple reservoirs, they simply add up the figures for each one. And this is where the problem lies.

"They should be combining the bell curves for each reservoir," says Pike. Adding the numbers for each reservoir ignores statistical information about the extremes of the distribution, giving a result which underestimates the true total figure for all the reservoirs.

According to published estimates, there are 1200 billion barrels still to be extracted, but Pike says there could in fact be twice as much. "The figures are almost meaningless and just provide a conservative estimate for shareholders."

Ovarian Cysts No More [/url]
and because of that no more Ovarian cyst for you.
I don't get the link :confused:

pk:)
 
#8
When the markets are rallying so furiously, there will be no takers for my collection of bear stories. So today, I am posting an article by Joe Ross. I find it down to earth and one of the most useful advise given by Joe
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PRIDE GOES BEFORE A FALL

Have you ever been tempted to go into a chat room and brag about how well you did on a good trading day? Perhaps you called up a friend under the guise of giving emotional support, when what you really wanted to do was brag about how much you made that day.

It may be fun to build yourself up from time to time, but you pay a price for it. The more you focus on maintaining an image of yourself as a winning trader, the more you make trading interpersonal. You start to care what other people think, and suddenly a profession that is usually a solitary business requires that you consider what others think. If you keep on depending on what others think, pretty soon you are no longer an independent-minded trader, but a slave to your reputation. In the long run, you probably will start cracking under the pressure of maintaining an image of yourself that is hard to keep up. Trading is one of the few professions in which the only person you are competing against is yourself.

Although you often trade against other traders, they aren't aware of what you are doing, and you have no personal connection to them. You don't know who they are, and they dont know who you are. All you ever see are the consequences of their actions. It's important to keep that in mind as you trade. The more you can trade independently, the more you can trade without feeling that you have to prove anything. You are free to be creative in your trading. Trading alone keeps the kind of pressure off of you that comes with having to perform for others.

Successful traders work independently and don't care how others are doing. They follow their own way, their own instincts, their own timing, and their own passion.
As a trader, you are the one who needs to sharpen your trading skills. You are the one who has to find a method that matches your aptitudes, your personality, and your own level of comfort.

What you see of the price movement is the only thing that matters. Your opinion isnt worth anything. The only thing that matters is how you react to what you see. You have no need to see how others are doing. How you perform has nothing to do with how others perform.

Comparing yourself with others will almost surely mess you up. You really do not need to know how others are doing. The only thing that counts is how you are doing.

Comparing yourself with others takes away your focus from your own trading.
Don't look at anyone's record but your own. You may be tempted to compare your current performance with that of others, but dont do it. I know that if comparing yourself with others is what youve been doing throughout your life, it's not easy to change. But with trading, you must control the urge.

Everyone has a different learning curve. To keep your spirits up, you'll do a lot better if you focus on improving your own past performance record, rather than looking at those of other traders. You don't know what factors created their performance, so comparisons can only mislead and hinder you. Other people's records do not have a direct bearing on your own record. By searching for factors that are going wrong with your own trading, you can identify the personal problems that have been holding you back, those that are unique to you.

Avoid comparisons with others. Don't make trading be about keeping up with your friends or maintaining your reputation. Trading independently requires that you go your own way, and you can't go your own way when you're preoccupied with what others think. So keep to yourself. Maintaining your reputation is nothing more than pride, and pride precedes failure.
 
#9
Somehow my collection of bear stories refuses to die down. See the latest addition

http://biz.*****.com/ap/080920/financial_meltdown.html

http://biz.*****.com/ap/080920/financial_meltdown_banks.html

http://biz.*****.com/ap/080920/financial_meltdown_economy.html

Also give attention to the fact reported in one of the news items that U.S. bank failures can go well in to next year summer.

Somehow I am getting an erriee feeling that "it is like applying bandaid to the leg which requires immediate surgery"

Problem is with uncontrolled spending (both by US government and its citizens). So far I donot see any measure which controls spending habit. All that I see is infusion of more and more money in to the system only to clear up earlier bills and spur up even more spending. How far can the other world economic majors fund US? Will it (i.e. infusion of funds by Europe, Japan etc.) come at the terms desired by US or upon the terms dictated by new lenders?

By the way, how do you view Fed Reserve raising 180 Billion U.S. Dollars from Japan etc.? Are you seeing it as a great booster to the market or the worrying sign that Fed Reserve is running out of funds even to deal with emergency situation?

And, finally, the ever perplexing and bothering question. Why the hell markets are rallying? If this rally is induced by ban on short selling, how far can it go?

I am worrying. Am I seeing things in wrong manner and in wrong perspective? Should I change my views?

What are your feelings?

Edit: links are masked by ******* It is Y A H O O
 

vasa1

Active Member
#10
and because of that no more Ovarian cyst for you.
I don't get the link :confused:

pk:)
That was part of the sig file, I think. Sig files need not have anything relevance to the post.

Perhap the poster wants to make people aware of how one can be informed about ovarian cysts before it's too late for treatment. (I didn't visit the link).