Psychological Risk Management

  • If you’re out of balance, you’re going to make bad decisions, and trading the market is a decision game
    • If you’re overtrading, you’re out of balance
    • If you’re overcommited, you’re out of balance.
    • If your dollar risk is too high, you’re out of balance.
    • If you’re hung over, you’re out of balance.
    • If you’re sick, you’re out of balance.
    • If you need the money, you’re out of balance.
    • If you make too much money, you’re out of balance.
    • You’ve got to take time off. You can’t trade every day.
  • Pay more attention when you account size gets bigger
    • I’ve noticed over the years that when my account has been small for whatever reason, I have been really careful with it. I watch it like a hawk. When my account gets rich, I tend to fall into a habit of neglect. I’m making money. I have profits, and I’m more comfortable. I don’t keep as close an eye on it. That’s very foolish.
  • Take profits out of your account
    • You should spend some profits rather than letting the money stay in your account indefinitely. That’s been important to me over the years. I withdraw money from time to time and take a vacation or buy a new car. From a behaviorist’s standpoint, it gives a sense of reward. It provides conscious and subconscious motivation.

Eurozone March construction output -14.1% vs -1.5% m/m prior

Latest data released by Eurostat – 19 May 2020

  • Prior -1.5%; revised to -0.5%
  • Construction output -15.4% y/y
  • Prior -0.9%; revised to +0.2%
No surprises here as we see dismal figures in construction activity amid lockdown measures in the region in March. The release here doesn’t matter all too much since this has already been reflected in Q1 data with April to also reflect more subdued conditions.

Germany May ZEW survey current situation -93.5 vs -86.0 expected

Latest data released by ZEW – 19 May 2020

  • Prior -91.5
  • Expectations 51.0 vs 30.0 expected
  • Prior 28.2
  • Eurozone expectations 46.0
  • Prior 25.2
Despite the headline reading slipping a little bit more – reflecting more subdued economic conditions – optimism is actually growing that there will be an economic turnaround in Germany and Europe from the summer onwards.
ZEW notes the significant improvement in expectations for most sectors of the economy as growth is expected to pick up pace again starting from Q4 2020.
That said, ZEW reaffirms that any return in economic output back to pre-coronavirus levels will take a long time and is only seen around 2022 at this stage.

BOJ calls for unscheduled monetary policy meeting on 22 May

BOJ to hold an unscheduled monetary policy meeting this week

The meeting will take place at 0000 GMT on 22 May (this Friday). The BOJ says that the meeting is to discuss new measures to provide funds to financial institutions, following up on instructions by governor Kuroda from the 27 April meeting.

Their next policy meeting was supposed to be on 16 June but Kuroda had already hinted that they were looking to do something like this before that meeting here.
So, this is merely to follow up on that as they will introduce a funding scheme to aid the financial system and inject more liquidity. But the sudden call here isn’t going to be all too comforting and it’ll prompt questions on if there are any banks in trouble.

China says that US’ letter on WHO tries to mislead the public to smear China

Comments by the Chinese foreign ministry

  • The letter tries to shift the blame of the US’ own incompetence
  • Says that now is not the time to call for a coronavirus probe
  • Says carrying out review of WHO response during this time will have negative effect
In case you missed it, Trump tweeted out the letter sent to the WHO in which the US administration criticised the lack of independence from the organisation when dealing with the response of the coronavirus outbreak in China.
The fallout from the virus outbreak is building and it may not be pretty:
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