The bag and psychology

Sometimes in trying to understand all stock movements forget a maximum fundamental: the bag move people with mental outlines some very similar to ours. Even the automatic programs that generate so much volume are based on basic psychological patterns. An example: A year ago, when someone earning about 5% by buying shares in Santander to € 14 had no hurry to sell, saying that "so what am I gonna do with the money?", Was an upward trend calm now if it earns a 5% by buying a few shares of Santander 6 € to be in a hurry to sell, appear to burn. This happens because volatility creates fear and lack of confidence, it does not matter the price, and the action is, in short, is pure psychology.

And is that almost all the great masters of the science of money were unable to become millionaires. I do not mean to get rich selling textbooks, but speculating. To my knowledge, no more than three business days speculators in the economic history:

• Cantillon (http://www.eumed.net/cursecon/economistas/cantillon.htm), who ended up murdered,
• Ricardo (http://es.wikipedia.org/wiki/David_Ricardo), which bet on the victory of Waterloo buying the English public debt, and
• Keynes (http://es.wikipedia.org/wiki/Keynes), who, after a brief stumble, it was rich in the currency market.

Ie, knowledge economy does not turn anyone into an expert in making money.

However, with psychological patterns if you can make money. An example:

Some years ago the brothers Hirsch, one of the best firms on a global search for seasonal patterns, published a few details: that the days of the week are not all equal to the hours of trading. The Dow Jones from 1990 to 2006, if you look through days of the week would have given the following records:

• 6460 points Monday.
• +1615 Tuesday.
• +204 Wednesday.
• -226 Points Thursday.
• -523 Points Friday.

I am not a psychologist but these data are truly amazing and I can think of two interpretations: the beginning of the week makes us more willing to invest and to action that is approaching the end of the week we wanted and we spend more on Rest and also to open markets and give us a quiet activity that does not give us the weekend. I think that even if markets do not close this schedule will never disappear.

So chalk up the meantime, trading for short it is best to buy and sell Friday at the close on Monday. However, if during the weekend unleashes a world war ... care.

You see? I also have this psychological pattern in mind.
(continue reading ...)

Droblo written by the November 19, 2008 with 276 comments
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Guessing the future

Niels Bohr was a physique Danes to which he was in his honor on behalf of the chemical element "Bohrio" (Bh), a highly unstable isotope which may never see it because its half-life is just 0.44 seconds. But what interests us from this man is this great quote:

"Prediction is very difficult, especially if it is about the future."

It is curious that a scientist (one of the few professions in which after much experience can be made reliable prediciones) dares to say what many economists are silent, our inability to know what will happen. But when the forecasts are positive and we creernoslas are more aware that when they are negative, the most obvious example is the current crisis hidden in its gestation both by Governments and by the media as for ourselves. In fact, in this very blog I cortaypega in early January about a pelín pessimistic forecasts for this year that passed without penalty or glory for his catastrophist dye.

But this is not new and not go further in 1999 in the stock market boom of technology companies (the famous bubble. Com), was published the book "Dow 100,000 myth or reality" that you can still buy on Amazon, this is a short summary of what is going.

Many magazine articles and even books tell you that the stock markets by the end of the 90 are in a dangerous bubble. No one can know when will the crash but many people think we're very close to the next big economic curve. Kadlec, chief investment Seligman Advisors has a different point of view: the bad things happen now and forever, but the Dow Jones will reach 100,000 points in 2020. In other words "two decades of growth above average." This represents only a 11.1% annual growth in the share price, which is completely unrealistic.

We can find similar books written that year:

• Dow 40,000: Strategies for Profiting From the Greatest Bull Market in History
• The Dow 40,000 Portfolio: The Stocks to Own to Outperform Today's Leading Benchmark
• Dow, 30,000 by 2008 Why It's Different This Tim
• Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market

Ya see, as were the predictions for nearly 10 years, the markets were going to go up to infinity and beyond, that looked like an auction ... 30,000, 36,000, 40,000 and 100,000. Let us not forget, we now have the U.S. stock market (Dow) in 8500. (Continue reading ...)

Written by Carlos Lopez on November 18, 2008 with 370 comments
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The week in the markets (6-13 Nov)

Personal comment.

On Friday the markets seemed to launch a feeling of strength: General Motors touched historic lows and reported that without government help would go into bankruptcy and unemployment in the U.S. grew in two months in more than half a million people and yet the stock market rose. However, if one takes into account that since 1896 he had never lost the Dow Jones in the three days of a presidential election, which the lower SP on Wednesday and Thursday together is the biggest in two days since 1987 and that the rebound technician, was lowered after so much with little volume, and could give an explanation and feared it was an exception to the trend weekly. The large package of measures the Chinese government at the weekend ($ 600 billion is the fifth of GDP, "it will be another and a few cartridges) extended this positive feeling in Asia and Europe on Monday morning With the exception of Ibex. There are over the joys until the afternoon of Thursday in USA.

The bank Santander on Oct. 28, at the mouth of its CEO Alfredo Saez, refused to need more capital. On November 10 announced an expansion. In these few days has been convinced of the impossibility of selling the Bank of Venezuela, the assets in ABN shares, Cepsa, which manages the funds and insurance, at the price demanded. In short, you have bought unsold before and now has been found with a liquidity problem ... (safe somewhere caught in a mortgage-bridge that sounds something) and the expansion is costing him all shareholders in market capitalization million euros. And serve to illustrate what is happening with the economy and that makes this crisis unique: no matter how much lower interest rates, including the Euribor, if that cheaper finance is not paid and if there is interest in using this possible liquidity to invest. Until Santander wants to sell assets and unable to do so raises the liquidity of its shareholders or tries to tap new. Santander can do that but, how many companies can do the same, how much they will get lower financing rates?

I attached two charts USA, with shaded on the cycles of recession, one is the unemployment rate in the U.S. and its forecast to reach 8%

This is another of the ISM manufacturing index:

In Spain the situation is similar, we have known in the past economic data and much worse if we do if the figures do not even bank bad debt is still worrisome (http://www.economistas.tv/la-morosidad-oficial-no- is-so /) As can be seen in other economic cycles figures have been more hopeless, it could be a cyclical crisis and give more reason for the optimists who think they can get out of it in months. But it is necessary to recover the credit market, without that status data will continue to deteriorate and, as we have seen this week, the suspensions of payments that began in financial, went to banks and then to insurance companies, will reach shops and industrial companies.

And that perception is reversing in the economy and stock markets, the beneficial impact of lower interest rates. If we add to this the fact that I commented on the need to sell assets as they lose value to dispose of cash, accounts for the balance of the week. The best quality of the bag-your-liquidity is now one of the biggest obstacles to the upward trend because it is one of the few markets to resort to if you need cash, even at the level of citizens is easier to sell shares even though much is lost to try to sell some other property. As positive aspects of this bad stock market week, two factors: the low volume on downhill (although it can mean that we are still far from the capitulation of course also of the soil) and the finding by the Telecoms sector as a refuge-of-date valid. Now we have to have faith in the famous meeting this weekend but particularly in the aspect stock market got more faith in the possible manipulation of the bullish effect by next Friday 21 to the expiration of some futures (which is the Ibex) and options almost all indices. In fact, statistically the next week is a pretty favorable to the stock exchanges.

Finally, it is very remarkable, despite a rebound from yesterday evening, the lower crude (although the effect of the weakness of € and other causes less understandable its effect on the price of a liter of fuel is less noticeable) of gas natural and generally of all raw materials. This is no longer seen as something positive on the stock exchanges because it's getting a lot of problems in economies where there are a lot of money invested ... the prime example is Russia. You may see manipulative maneuvers to prevent the oil-icon of all raw materials-stop-down and personally I hope to make a speculative-operation in a possible rebound in oil prices and gold. (Continue reading ...)

Droblo written by the November 14, 2008 with 337 reviews
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Real CPI

Since he is no longer the "gold standard" and a ticket does not represent anything physical but simply faith in its issuer has formalized the old adage that says that the basis of the economy is confidence. As long as there is confidence the economy may go well although there are points "dark". Why? Because if consumers and businesses and banks believe in a good future, spend, invest and lend and this will generate well-paid jobs so the virtuous circle will continue to operate and will continue to spend, invest and banks to finance projects future.

For that confidence is not lost speeches by political and economic decision usually mostly reassuring because if you lose falling economic growth and are entering a vicious circle: consumers do not spend, businesses earn less and reduce their investment and the banks get the credit because bad debt increases. And the order may be reversed as is happening with the current crisis: the banks reduce credit before the outbreak of the housing bubble and late payment by bad investments, get the credit to businesses and consumers, scared by all this, spending less and therefore less to buy companies that reduce their profits and, ultimately, generate unemployment. Besides the problem in society that this generates, it is clear that if unemployment rises and companies and banks earn less income are also lower because of the administration are charged less tax at a time that should increase social spending.

All this is very basic, nothing original but there is one factor that can undermine the confidence that usually goes unnoticed: the veracity of official data. And because they are not certain or not, but by the manner of calculating them. And it would take pages to explain how such data in the USA is distorted industrial orders each month with the orders of governmental machinery of war or the handling of the Department of Labor with the monthly employment data ... there are many examples. However, one of the most striking to me is the calculation of the CPI.

Take the example of Spain, whose CPI in 2007 was 4.2%, which should mean that average prices rose by 4.2% but it is clear that a TV-for example, do not shop every week or even every year But the milk (which went up 31%) is almost daily, or the pan (+14%) and fuels (+16.2%). Some say that the perception of these costs-to-be everyday makes us believe that inflation is higher than it is but I think that is the weighting system which is not fair.

How is it possible that if housing prices went up by 30% annual inflation was only 3% if half of the household budget goes to pay the house itself? Let us go further: In the mid-20, share prices in the U.S. grew an average of 3.5 times in five years, but the prices of consumer goods did not vary significantly. Should we conclude that there was no inflation? Why? Why exclude the rates of inflation, for no reason, financial assets? If low interest rates we had in Spain in recent years had flow, rather than mortgage credit, to consumer credit, the CPI would have been fired (instead of housing prices) and it would have suffered Official inflation.

The current base weights of 2001 and are adjusted each year minimally. The latest data available are these:

With these data you can see that inflation affects the poorest who are based consumption especially in the first paragraph.

Now that every reader will see if this table is in line with their usual costs and check that this calculation very similar in all the countries around us, is very subjective ... Of course, while we believe the data and return to the issue of confidence - Everything will be fine and accept that our salaries and pensions go up each year, the official CPI and so we think that we do not lose purchasing power.

At this official website you can calculate the CPI has risen far from the official dates (data from 1961):

PD - Still others are doing worse, look at the figures of the country most inflationary in the world:

Summary: press

• The German economy entered into recession after contracting 0.5%
• U.S. will not buy more active "toxic" but will invest in banking capital
• BBVA forecasts: the rates drop to 1.5% and the Euribor will be at 2.5%
• Up to 25,000 shops miss the closing this year
• The interbank still does not work: only cross transactions a day
• Santander began the largest capital increase in cash from Spain
• The government shuffled back onto the light in January
• The crisis that Spaniards will spend up to 11% less this Christmas

Droblo written by the November 13, 2008 with 428 comments
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The Economics of Homer (II)

Some economists argue that bureaucracy and the public sector has a very strong tendency to increase their budgets beyond what is considered efficient.

I do not know your work, but mine have cut costs wherever they can, in travel, meals, recruitment, office supplies, telephone, Christmas (yes, it is already here!), And so on. Should we not demand the same from those who are managing our taxes?. Ojo, I do not speak at the official, speaking on a strategic level and move toward smart spending, leaving the studies of the degree of hybridization between the common quail and the Japanese quail for better times.

So after this pataleta by the waste of government to step in the press briefing a day that passes the American elections, touching look at the economy of truth.

• Trichet would lower rates today by 0.5% (at 3.25%) and place them at 2% in 2009
• Ordonez estimates that banks can absorb up to 9% of delinquencies
• Bankinter contemplates returning to some customers for losses by Lehman
• Wall Street slows dry after the End of the Obama effect rebound?
• Industrial production suffers the second largest drop in 15 years
• The boxes prefer to pay exorbitant rates before they go to the bottom of the Government

Written by Carlos Lopez on Nov. 6, 2008 with 282 reviews
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Miscalculations

An ancient legend has it Sheram, the Indian prince, was so astonished when they learned the game of chess, who wanted to reward generously Sessa, the inventor of that entertainment. He said: "Ask me anything you want." Sessa replied: "Sovereign, which sends me a grain of wheat delivered by the first section of the board, two for second, four for third, eight in the fourth, and so on until the box 64".

The prince could not please, because the result of that operation S = 1 + 2 + 4 + + 2 ... ^{63 is} about 18 trillion grains. To get that would sow the entire Earth 65 times.

Sometimes I think that some banks have been passed as the prince's story, which first promised the money and then we have estimated and that is not what they had or had human form that he had.

In February 2006 there was a political controversy in the United States following the purchase of the management of six major ports by a Dubai state-owned. The President Bush hailed the operation but the Congress, arguing national security, managed to go delaying the agreement until finally a U.S. company took over the contract. Many Americans were afraid that Dubai-ally regarded by the government but in Muslim-majority manage something as important as the safety of the major seaports of the country.

However, in the financial world, the main U.S. lead months and months looking for money regardless of their origin. The liquidity crisis of confidence and has given back to the tortilla and not know what Americans think of walking but no executives do not disclose financial problems to the savings (and therefore also the management of pensions in a country where they are mostly private), the decision to grant credits and direction of investment by major banks in the world (in the list of those who have received money from Asia are also the Swiss UBS and Britain's Barclays) are largely mediated by governments that are dictatorships (such as UAE and Kuwait or China where there are elections but women could not vote), representing a population largely anti-Western and whose geostrategic interests (such as Chinese) are conflicting with the USA interests.

To top the liquidity available in the U.S. for equities (in the fixed income process is not well) according to official figures has been largely designed by fund managers to buy outside the country:

In the first eight months investors Americans took 68 bn. $ Of equity funds, of which 51.8 bn. were funds that invested in U.S. stock market. A year ago was much worse: entries from 81 bn. $ In equity funds with sales of 16.4 bn. funds that invested in U.S. stock market.

That is, in 2007 bought a large amount of money outside the U.S. and made money out of the bag USA. It could have been by $ distrust toward a thought (that was correct until very recently) of higher returns on assets in yen and € but it is symptomatic: USA managers draw money from the American equities even uptrend and now begging for money Arabic and Chinese.

Should not because the U.S. authorities in their efforts to monitor these flows interventionist? And investors should not arise in Asia that might not be best to buy where there sell? And the big question: Will there be enough money in the world to address this or as the story will have to wait 65 crops?

PS: And since today is a day in which as noted is consummated a change in the chairmanship USA and we're talking about miscalculations might be interesting to recall the cost of the Iraq intervention that the Nobel JOSEPH E. STIGLITZ estimated in March this year and $ 3 trillion according to some voices that should already be in the 4 billion. Money which, remember, has been thrown sunk by as many taxes they pay to state that some companies have won contracts in Iraq, will not arrive or 10% of that figure. Who says that the reason for all the depth of this crisis can not be in this cost themselves when U.S. authorities argue that less than 1 trillion will fix the financial crisis?

And to complete the usual summary of the press in which we are all aware of as he lay on the economy Obama's victory:

• Oil soared more than 10% and again surpasses the $ 70 per barrel
• Martins offers some creditors to pay only 50% of its debt in exchange for being the first to recover
• The price of housing down more than 10% after 14 months of fall and placed in a minimum of three years
• The foreclosure moratorium for the unemployed will cost between 100 and 400 million
• Obama's victory opens the way for a new relationship with Spain
• The march green: Gamesa, I. Renewable, EDF, EDP and Acciona raised on the stock exchange before the new 'President'
• Fagor sacrificed pay extra to pay for retirement
• Solbes: Spain has "exhausted" the scope for anti-measures
• The sale of assets to E. ON of Endesa profit shoots a 243.8%
• Caja Madrid announced the postponement of the banks placers Cibeles

Written by Droblo on November 5, 2008 with 259 comments
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