Archives of “Epistemology” tag

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Fed’s Beige Book: Economy expanded at slight-to-modest pace

  
  Analysis
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Highlights of the Fed’s anecdotal economic summary:

That’s a downgrade from modest previously.
Highlights:
  • Businesses see expansion continuing, many have cut outlook
  • Business activity varied across the country
  • Districts in south and west were more upbeat that midwest and great plains
  • Spending was solid on balance, housing market conditions changed little
  • Some districts suggested persistent trade tensions and slower global growth weighed on activity; early impact of GM strike was limited
  • Most expect economic expansion to continue; however many lowered their outlooks for growth in coming 6-12 months
  • A number of manufacturers reduced headcount because orders were soft, some cut hours rather than reduce staff
  • Wages rose moderately in most districts, with upwards pressure noted for lower-skill workers
  • Employers continued to use bonuses and benefits to attract and retain talent
  • Most districts characterized the recent pace of prices increases as modest
  • Retailers and manufacturers noted rising input costs
  • Shipping rates remained lower than they were earlier in the year because of excess capacity

What’s the probability of a Fed cut now?

  
  Analysis
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Fed cut probability for October

Fed cut probability for October

The chance of a rate cut currently at 68.7%, which is well done from a figure of 90% last week. The CPI data will be important on Thursday for the US and any upticks in inflation will reduce this rate cut probability further. A miss in CPI and the Fed will be seen as more likely to move to cut rates. Also, we have Fed’s speakers in the mix too. So, we are back to watching data and Fed speakers to get a handle on the next direction of the USD.

Oil – Aramco says repairs to Saudi plant could take many months rather than weeks

  
Analysis, Crude
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DJ with the report on a more pessimistic outlook for repair time compared to what the market was led to believe last week.

Oil traders might like to take note, should be a bullish input (compared to otherwise)

Weekend HK press – China questions whether to continue trade talks with the US

  
  Analysis
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An opinion piece from an account associated with State media Economic Daily newspaper expressed pessimism about whether trade talks with the United States should continue

This in response to US President Trump’s new tariffs on China
  • It said Trump’s latest threats as “destructive”
  • “The US has again stepped back from their promises for two reasons: to pressure China into fulfilling [America’s] expectations in the deal, and to attain someone’s political aims by meddling in the Sino-US trade talks”
  • via South China Morning Post
Negatives build for  China proxy trades (such as AUD)
An opinion piece from an account associated with State media Economic Daily newspaper expressed pessimism about whether trade talks with the United States should continue 

US President Trump says Congress have reached a deal on debt limit suspension

  
  Analysis
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As if there was ever going to be any doubt the US would once again add to its gargantuan deficit

Trump says a deal has been reached between Congress and the White house
  • debt limit ratcheted higher
  • for the coming two years
For those with a stick up their you know what – this is not a real photo, K?
US once again add to its gargantuan deficit

Intuition

  
  Education
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A hunch can be trusted if it can be explained.

Though intuition is not infallible, it can be a useful speculative tool, if handled with care and skepticism. 
If you are hit by strong hunch – put it to the test. Trust it only if you can explained it. That is only if you can identify within your mind a stored body of information out of which that hunch must reasonably be supposed to have arisen. 
Be wary of any intuition that seems to promise some outcome you want badly.

Wisdom is knowing the limits of your knowledge

  
Analysis, Education
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What does it mean to be wise? What is Wisdom?

One of the more interesting aspects to wisdom is self-awareness. “Thinking about wisdom,” writes Stephen Hall in his book Wisdom: From Philosophy to Neuroscience, “almost inevitably inspires you to think about yourself and your relationship with the larger world.” The book is an investigation into fuzzy questions such as how can it help us shed light on the process by which we deal with big decisions and dilemmas.

He writes:

Wisdom requires an experience-based knowledge of the world (including, especially, the world of human nature). It requires mental focus, reflecting the ability to analyze and discern the most important aspects of acquired knowledge, knowing what to use and what to discard, almost on a case by case basis (put another way, it requires knowing when to follow rules, but also when the usual rules no longer apply). It requires mediating, refereeing, between the frequently conflicting inputs of emotion and reason, of narrow self-interest and broader social interest, of instant rewards or future gains. Moreover, it expresses itself through an insistently social vocabulary of interactive behavior: a fundamental sense of justice (which is sometimes described as an innate form of morality, of knowing right from wrong), a commitment to welfare of social (and, for that matter, genetic) units that extend beyond the self, and the ability to defer immediate self-gratification in order to achieve the greatest amount of good for the greatest number of people. (more…)

Examine Your Beliefs

  
  Education
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There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.
If you want to increase your muscles you go and lift weight
If you want to improve your stamina, you go and run daily
If you want to reduce weight you eat less and exercise more
What exactly do you need to do to improve your psychology.
First starting point if you want to improve your psychology is by examining your beliefs
You can only trade what you believe in.
Your beliefs drive your behavior. (more…)

OPTIMISTIC & PESSIMISM in Trading

  
  Education
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PESSIMISM 

Pessimism is defined as a tendency to stress the negative or unfavorable or take the gloomiest possible view.  Obviously, the successful trader is not pessimistic. If so, then he would never trade in the first place or if he did, he would only trade short; a “permabear” if you will.  A purely pessimistic trader would also doubt his edge, doubt any market direction, only trade after the move has happened, cut his winners short while allowing his losers to run, overtrade, under invest, etc etc.  In other words, a purely pessimistic trader would break all the rules.

OPTIMISM

Optimism is defined as the inclination to anticipate the best possible outcome while believing that most situations work out in the end for the best.  The unsuccessful trader, especially the beginning trader, is optimistic about getting rich in the stock market.  No matter what every trade will eventually make money he reasons.  The optimistic trader also loads up on a “sure thing”, seeks to justify every trade via confirmation bias, adds to losers, brags about winners while hiding losers, refuses to develop as a trader, etc etc. Just as with pessimism, the optimistic trader breaks the rules.

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