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:
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.
Another example:
Morningstar commissioned a few years ago to teachers Bernatzi, Kahneman and Thaler to conduct a survey to determine the extent to which U.S. investors were subject to the problem of over-optimism. The study was done in 1999 just before the outbreak of the bubble and the question was simple:
When you pose a financial investment Spending more time thinking about the benefits that could gain or losses that might cause?
The responses were the most impactful, both appearing in some psychology books:
- 39% said it spent much more time, almost all the time, thinking about what was going to win.
- 35% passing more time thinking about what was going to win.
- 19%, did the right thing, that is, spend the same time valuing the gain or loss.
- Only 6% said it spent more time assessing the loss.
- 1% said that almost all the time spent evaluating the potential loss.
I think the results are for all of us to ponder. 74% of those entering the market does so because it believes it will win a lot and does not adequately assess risk. Only 7 percent were very concerned for the losses. 74% vs. 7%! and a paltry 1 percent of people who are concerned about extreme form for the losses compared to 39% who cares only about what is going to win. That is why the excessive optimism is so serious ...
And now we return to our own mental patterns: Is it not true that if you buy something and get in because we secure the gain but we have not sold and if we buy low and as we recover our level we are keen to sell at the same price as before seduced us to buy? The share and the price is the same, only our perception has changed.
I think I exciting, there are serious studies have found that even the relationship between sunny days and increases in bag! All this shows that the stock market is not an entelechy that handle some characters inaccessible with superior intelligence, is something as human as any other activity, and sometimes their impulses are so irrational because they are a true reflection of ourselves and our mindset. ( continue reading ...)
Droblo written by the November 19, 2008 with 276 comments
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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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The nuclear power plant in Springfield where Homer works, shows us an excellent opportunity to discuss the monopolies and competition.
In this monopoly, has come mainly by two factors. First by high barriers to entry (not exactly cheap to build a nuclear plant and will need several decades to be paid off) and second because there are no substitutes (in the case of Springfield have total dependence on electricity produced by the plant).
In one of the best episodes of the Simpsons (Who shot Mr. Burns, Part 1). Montgomery Burns, the owner of the nuclear power learns that one of the substitutes for the electric light was threatening its dominant position and fix it by buying the competition:
Smithers: Well, sir, certainly has defeated all his enemies: the school, tavern, the residence of the elderly ... should be very proud.
Burns: [looking at the money in your wallet] No, not while my great nemesis continue offering our customers free light, heat and energy. I call this enemy ... The Sun. Since the beginning of time, man has yearned to destroy the sun. Siguiete ... And I will block it.
Smithers: Very good!
Bums: Imagine, Smithers: Electricity and heating power running all day
Smithers: But sir! All plants and trees will die, the owls will leave us deaf ... and the sundial of the people will be useless. I do not want to be part of this project is unimaginably diabolical.
Monopolies are not always so exaggerated, dangerous and unfair. Sometimes it is more than a company with the creation of a "cartel". One of the best known is the OPEC formed by the major oil-exporting countries (They control 75% of oil reserves) which will cut production enough to trigger a price increase. That is the basis of a monopoly, its ability to influence the price of goods.
Other times monopolies are simply making good business, as was the case of the agreement between Google and Yahoo! they finally broke last week due to the pressures that were legal. Another good example was the aggressive distribution strategy from Microsoft that led him to the European courts for more than 10 years.
In the interbank, there is no monopoly but sometimes I get the feeling that they are acting as a cartel What if there is no explanation that the Euribor is ticking so high a differential with regard to the official price of money?. Recall that the official price money in Europe is at 3.25%, we are talking about a spread of more than 1.25%. The number of transactions that ultimately intersect in the interbank is so low that if a few banks are agree are able to raise the value of Euribor above its natural value. (Continue reading ...)
Written by Carlos Lopez on November 12, 2008 with 291 comments
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Personal comment.
After the miracle that was expected (and confirmed) this week, which is called a black and Hussein Obama becomes president of the USA (another miracle is that she does), I received news of aid from our government the mortgage and I thought if there were any other one this week and the government would have done if we are from here when called for direct aid to the people. But I am afraid that has not happened: the government first decided to deny the crisis and support the banking industry after a series of measures hardly justifiable to the alleged strength of our financial sector. Now they have submitted results boxes and banks and profits have continued to be astronomical (if they are not means that aid has not been a change of transparency, still missing that no entity in Spain this loss when there are solutions in other countries more solid than ours) decide to "help" directly to individual mortgaged helping them go through this slump. But once again become a more aid for banks to the public. I think in the forum has already been felt all the opinions on this subject and I must also say that very acutely so I just want to emphasize again that the prevailing idea is something like: "We are in the worst of the crisis, guaranteed deposits until 2010 and helped the mortgaged two years and then with the revival that will fix everything is "What will happen if those unemployed after a two-year moratorium can not find work? For this reason there is no response.
Of course it is desirable that all this is a bad streak but most cyclical of time this seems far removed from reality. The numbers continue to decline week to week and what is valued as improvement may simply be adjustments after a very sharp. Fixed in this original graphic where we can see how it appears the trend for banks to borrow from the Federal Reserve is changing, but if we compare with other periods in which there is not even needed to resort to the EDF, it is easy to appreciate the level of banking crisis of the USA and alejadísimo that this is settled:
I do not see any signal that enables believe that this crisis will last only a few months. E insist not to confuse the bag (which may well bounce for a few weeks as he was bouncing a few days) with the real economy. The macro data are disastrous, unreservedly and hope that the lowering of rates might change, whether justified or not-only be realized within several months, and that if this drives the rebate credit. If not, only reduce the benefits of saving without encouraging the activity to the investor. And the worst thing is that the states are running out of room for maneuver as in Spain itself has acknowledged Solbes (http://www.elpais.com/articulo/economia/Solbes/dice/habra/recursos/afrontar/crisis/elpepueco / 20081105elpepieco_6/Tes)
Turning to the bag, the idea of "This is a pothole, a historic opportunity to buy, but months back in the upward path" is being installed. And yet this week (except in Europe, from Thursday to Thursday-closed flat, with some better rates and other worse) has come to a negative balance. And that if we look at the percentage rise since we have been minimal, is notable because the descent was very sharp. And was the upward trend in November and the maximum rise (Tuesday) after a day of low volatility (Monday). But neither with the help of central banks has been with the resistance led by commenting two weeks ago and is still stuck in a dangerous area. The Dax rose well above 5000 but has been unable to keep them in the SP and the arrival in 1000 has been the perfect excuse to very aggressive sales. The Dow and the Ibex nor have approached the 10 mil ...
The fear is still there as we saw on Wednesday because although statistically markets operate best on the day following the victory of a Republican than a Democrat the truth is that it should have been positive that the forecasts were met and there were no surprises, however these As of last week to buy the rumor and sell the news is becoming a habit and this caused a deep bearish movement. As I commented last week, while there are rises in quiet but there are a lot of threat falls hurry to sell. And he has returned to fulfill. However, I detect many voices that speak of buying in the fall of the year-end rally is possible .... I remain neutral and to envy to keep clear at these levels because I keep seeing danger to both sides. Today it is known the figure of unemployed last month and is feared to be disastrous, most of -200 thousand. As a curious statistic you remember that it was not a bad figure since March 2003, just the month in which he died the previous bearish trend and started the bull that ended in the fall of 2007.
And with regard to the Euribor, a point: that is truly novel now has one year deposits in financial institutions and which are due before 2010 and thus are guaranteed by the state, giving a return similar to the cost of a mortgage. It seems to me that an abnormality was corrected when 2009 arrives and there is much need for liquidity in the face of squaring balance at the end of the year. The Euribor rate comparing to a year with the intervention to 14 days of the ECB should better compare the returns offered by your bank for a year and what you pay for mortgages at that same bank and verify that the differential is not so much . Not to defend the banks with this, just describe a reality, the battle to capture a liability is so great that the differential between what it receives a customer with money and what they should pay that money for a mortgage is minimal. One consolation: yesterday in U.S. rates were at 1% and libor to 12 months to 2.84 (a 184% more), here had to 3.25 and the Euribor to 12 months to 4.70 (a 44.62% increase). But much remains could be even worse ...
(continue reading ...)
Written by Droblo on November 7, 2008 with 295 reviews
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Sometimes it seems that markets have entered a dynamic so strange that even acting against what would be logical: OPEC lowers production and instead of rising, oil low, the stock market collapses and gold instead of serving Value refuge, also collapses, USA has the largest deficit in the world, which will be maintained for years, with a central bank that is assuming the risk millionaire asset that nobody wants and that its currency, the dollar reaches maximum years . I'm beginning to think that facing the end of the year and more than likely departure of money from investment funds what is happening is simply that all positions are rolled back in search of liquidity. And of course, as lower the percentage is more active and feedback movement. And also to push sales in other non-stock, hence, not hedges. But that same process also works the other way around because if the market rises there is less interest in selling, it's like the one that has a debt and has only one floor, according to the low price of the floor more quickly is worth before they sell it unless debt but if you have the floor suddenly rises in price no longer needs to sell it because you can get the liquidity it needs with the assurance that floor without the need to get rid of him. This causes a lot of volatility.
But why not just the irrationalities: Now the stock market likes that the crude will rise and depressed when low and the same with the €, unlike that for months, Cepsa (much smaller and lower profit at least 7 times) has come to worth more on the stock exchange that Repsol by the sharp drop of it, (this reminds me of when they arrived in Telepizza worth more than Domino's Pizza or Terra more than BBVA) and according to Bespoke 10% of companies that have submitted results in line with Expected been completed on the day of publication with an average drop of 1.80% (as if the results had been ill). However, the biggest example we know that Volkswagen had reached a EGY 90 when the Dax has a PER this year of less than 8 and Daimler has it at 3.7 and have even more value for capitalization that all companies producing cars of world together. Are we really learning something from all this if we continue to promote bubbles as dangerous as these?
Beyond these factors, there is a rational exercise we can make each of us self-polls. There are many securities that are in 2002 prices and are tempting us to make some investment but ask ourselves: Is the economy better or worse than in those years? And most importantly, our confidence in leaving the rut, Is now higher or lower than then? Then I remember that the biggest economic problem was the fear of terrorism and that it would start a war in Iraq ... now we still have more that all the problems we have been talking for months: credit crisis, high inflation, housing bubble and so on. and joined it in recent weeks: Stop worrying figures, emerging markets to the brink of collapse, public deficits to astronomical assumed by mismanagement of the banks and so on. I mean, what's the same bag goes up, that's something unpredictable at least for me, but since then it is clear that the real economy is not invited to optimism. Yet it must be stressed that in the USA have left two data consecutive home prices that give a respite to the bearish trend, at least in that sector and in this country ...
The summary of the week can be summarized in a nutshell: On Friday marked minimum annual all bags that I still except the Chinese and, curiously, the Dow Jones and SP500. On Monday, China, all European and Brazil signed the new minimum but not American. Tuesday marked the first bars minimal Japan and China but no more. However, if we take into account the future it that both the Dow Jones SP500 marked as the minimum of 5 years and a half but perhaps there were some concerns that they did not want to be in regular time mark. On Tuesday, with rumors of a sharp drop in rates in Japan, the USA had the second highest increase in history. On Wednesday, rose much Europe but not USA, which broke the increases in minutes from the descent of the EDF. And on Thursday, thanks mainly to Japan, continued to climb. ¿Conclusion? After so many vicissitudes week (Thursday to Thursday) has had a very positive (except on Ibex and China that ended flat to lower in recent days by 6% in total, all have had remarkable progress) and many believe has already passed the worse in October and has complied with its reputation for month of the crash but also from the soil ... I keep seeing that the resistance of speaking last week (1000's sp, 10 thousand of Ibex and the Dow, 5000's Dax) are still there and only have been overtaken, on Thursday for a few minutes, the Dax, who this week has behaved in plan rate banana republic by the theme of Volkswagen.
And just months and despite what has been disastrous and it has not observed any statistically negative-except for those who want to invest we can be confident that it will comply with these average data showing that November is the best month of year for the stock market since 1980:
However, against my usual, I will "get wet" a little more: to bet on a possible upward rally in November or even early January and be more secure is important to see what makes the bags on the first day of November . If you go up, does not mean anything special but if you fall, it is better to keep out of the bag because that means the funds are still undoing positions (the term that is becoming fashionable is "desapalancamiento") and not spend the cash to equities. So my advice is to wait until the end of Monday or Tuesday that the opening of comprobéis not dropped before they come to buy, if you decide to buy.
(continue reading ...)
Written by Droblo on October 31, 2008 with 247 comments
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