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India’s growth fails to reduce poverty; ranks 119, China 89

  
Analysis, Economy, Education, Life

India has failed to make any significant improvement in its poverty figures, with over 400 million – more than the total in the poorest African nations – still struck in poverty, the Human Development Report 2010 said, listing India at the 119th position on the Human Development Index. Though India has jumped one position during the last five years, it continues to have high absolute poverty of people living below $1.25 per day along with high incidence of multidimensionality which is characterized by lack of access to health, education and living standards.

“Eight Indian states with poverty as acute as the 26 poorest African countries are home to 421 million multidimensionally poor people, more than the 410 million people living in those African countries combined,” says the report issued by the UN Development Programme.

At present about 1.75 billion people live in multi-dimensional poverty and 1.44 billion live below absolute poverty in the world. While Norway, Australia and New Zealand lead the the world in HDI achievement, Niger, Democratic Republic of Congo and Zimbabwe figure at the bottom of the pile among 169 countries in HDI – a composite national measure for health, education, and income.

In sharp contrast, China moved up the HDI ladder by 8 positions to occupy the 89th rank in the world during the last five years. China is now estimated to have 16% of its population living below $1.25 a day and 12% of the people caught in multidimensional poverty.

Since its inception in 1990, the UNDP’s Human Development Report has become a barometer to judge how countries are performing in improving the social, economic and political well-being of their population.

Justification Mode

  
  Education
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“The ego is not your friend as a trader. The ego wants to be right, it wants to predict, and it wants to know secrets. The ego makes it much more difficult to trade well by avoiding the cognitive biases that hinder profits.” – Curtis M. Faith

 That quote came to mind this morning when having a conversation with a fellow trader who I think is in what I call “justification mode.”

Justification mode is when traders (or investors) find themselves having to justify poor performance on something that seems logical and which helps comfort and protect their ego without having to own up and face a big mistake.

In this trader’s case, like a lot of people it seems he went and stayed short when the market rolled over last month. Although he won’t admit it to you now, I know from our prior emails he was sucked in by the infamous “death cross” and, in spite of a strong reversal, has now refused to reverse his short (and losing) positions. In fact, his ego is so involved with this short-trade that he’s recently doubled down when the market refused to roll over even using lots of leverage to prove his point. Now he’s in a painful position of being trapped between owning up to the mistake and taking the painful loss or doing what so many tend to do – find a way simply to justify his actions and let a growing loss have the potential to wipe him out entirely.

In our conversation this morning, this trader kept talking about “the market is in a trading range” and “ready to roll over.” That’s fine and well as long as the price action confirms that view, but it hasn’t yet. As I asked him this morning, “Can you afford simply to stay wrong just to protect your ego?” He didn’t know how to respond. In fact, it became clear that he didn’t even realize that his ego was becoming such a strong influence over his entire market analysis. I suspect, as he does as well now after talking to me, that if this trader’s positions were different, for example aggressively long the market instead of short, this same trader would not be seeing a “trading range” or a market “ripe for reversal.” Instead, he would see nothing but more upside potential. This is why human traders, with human egos, are often at a significant disadvantage.

Trust me, at one point or the other, we’ve all done this. I know I have been in justification mode many times even when I didn’t even realize it until much later on. However, over time, I’ve learned to spot to tell tale signs that I’ve fallen trap to this and then have learned to take immediate corrective steps to right the ship. Moreover, as many of you also know, at all times I also trade in a way that makes sure that when I do make mistakes (which are often) that they NEVER have the potential to wipe me out. When your ego gets so involved in your trading, the potential for catastrophic losses are tremendous which is why we’ve all have to learn and know when we’ve fallen into justification mode. (more…)

Paul Tudor Jones: 13 Insights

  
Analysis, Education
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13 Insights From Paul Tudor Jones

1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape (and proud of it).

2. Younger generation are hampered by the need to understand (and rationalize) why something should go up or down. By the time that it becomes self-evident, the move is over.

3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. (Why work when Mr. Market can do it for you?)

4. There are many more deep intellectuals in the business today. That, plus the explosion of information on the Internet, creates an illusion that there is an explanation for everything. Hence, the thinking goes, your primary task is to find that explanation.

As a result of this poor approach, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.

5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it. (more…)

A Trade or a Gamble?

  
  Education
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I love to trade a lot – which is of course a euphemistic way of saying I love to gamble. Although I have been to Vegas more than a dozen times I never laid down so much as a dollar bet in any casino. I have absolutely no interest in backjack, craps, slot machines or any other games of chance and I look down with disdain at the excited masses crowding the cavernous Vegas gambling halls. But deep down, if I am honest with myself, I have to admit that whenever I trade a lot I am just as much of a sucker as every hopeless loser that gives up his hard earned money to Steve Wynn or Sheldon Adelson

If you are constantly trading just for the sake of trading, just for the rush of being “in the game”, just for the momentarily thrill of being right you are gambling. You are trading without an edge, without any solid information and are therefore completely vulnerable to the random vagaries of price. (more…)

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