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The Wisdom of Burton Pugh

  
  Education
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It was true when he wrote it in 1948, and it’s still true today:

“To the professional short-turn trader who can spend all his time at the exchange, it
is, of course, permissible and expected that he will try to secure frequent fragmentary profits in an effort to compound them into larger funds, but this is not investment. Few are the ones who can afford to become ‘professionals’ and, in the final wind-up of a financial campaign, the outright investor following [a] plan will far exceed the results achieved by the less patient in-and-out trader.”

Investment Jokes

  
Education, Humour, Life
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The Godfather, accompanied by his stockbroker, walks into a room to meet with his accountant. The Godfather asks the accountant, “Where’s the three million bucks you embezzled from me?” The accountant doesn’t answer. The Godfather asks again, “Where’s the three million bucks you embezzled from me?”

The stockbroker interrupts, “Sir, the man is a deaf-mute and cannot understand you, but I can interpret for you.” The Godfather says, “Well, ask him where the @#!* money is.”

The stockbroker, using sign language, asks the accountant where the three million dollars is. The accountant signs back, “I don’t know what you’re talking about.” The stockbroker interprets to the Godfather, “He doesn’t know what you’re talking about.”

The Godfather pulls out a pistol, puts it to the temple of the accountant, cocks the trigger and says, “Ask him again where the @#!* money is!”

The stockbroker signs to the accountant, “He wants to know where it is!” The accountant signs back, “Okay! Okay! The money’s hidden in a suitcase behind the shed in my backyard!”

The Godfather says, “Well, what did he say?” The stockbroker interprets to the Godfather, “He says that you don’t have the guts to pull the trigger.”

The Pessimist sees the glass as half empty. The Optimist sees the glass half full. The Stock Market Day Trader JUST ADDS WHISKEY …

Market statistics are like a bikini:

What they reveal is important, what they conceal is vital!

Uncertainty

  
  Education
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1) Uncertainty is always subjective. It is a state of mind that is derived from a mix of objective data, emotions and personal experience. To say that the market is always equally uncertain is to say that mood is always the same. It is not. It constantly changes.

If the perceived uncertainty is always the same, earnings reports would not have such huge impact on prices. We all know that this is not the case. In many cases, earnings reports provide new data that changes market expectations and therefore prices. Options premium is higher before earnings exactly because uncertainty is higher.

2) Uncertainty has become a synonym for bad mood in our everyday life.

The future is always uncertain, but our perceptions of the future vary. And perceptions define actions. Actions (supply and demand) define prices. Somehow uncertainty is used with a highly negative connotation in our everyday life. It is a game of words. Just like the weather people always say that there is a 30% chance of rain and never that there is 70% chance of sun.

3) Uncertainty is basically another word for market sentiment. High levels of perceived uncertainty (bad mood) and high levels of perceived certainty (good mood) have historically been good contrarian indicators, IF your investing horizon is long enough.

4) There are different types of uncertainty.

There is an economic uncertainty. Uncertainty leads to a decline in economic activity. Less people are hired. Old machines and software licences are used longer. Investments are cut. This is what it has been happening in Europe for 2 years.

There is market uncertainty that impacts volatility. When correlation is close to 1.0 (another way to say that stocks move together disregarding of their individual characteristics), uncertainty is perceived as high. It leads to choppy environment that market timers prefer to sit out in order to preserve monetary and mental capital. Perceptions define reality.

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