Six EU states to scrap bans on short-selling after today

Austria, Belgium, France, Greece, Italy and Spain decide to scrap bans on short-selling stocks that began back in March

Besides Italy, the other five EU states will see the bans expire at 2159 GMT today and they have decided against renewing it. For some context, the bans were introduced back in March due to “excessive market volatility” and were extended back in April here.

As the other market watchdogs choose not to extend the bans, Italy is following to cut short their short-selling ban – supposed to be until 18 June – to align itself with the others.

Sell Buy

The Federal Reserve flags risks and twice–yearly report on financial hazards

Federal Reserve publishes its 2020 financial stability report

  • warns financial sector vulnerabilities likely to be significant in near-term
  • pandemic strains on household and business balance sheets likely created fragility’s that last for some time
  • warns banking sector may experience strains as a result of economic and financial stocks
  • Banks so far have been able to meet demand for credit line drawdowns while adding to loan-loss reserves
  • some hedge funds have been severely affected by large asset price declines and volatility, contributing to market dislocations
  • primary dealers struggled to provide intermediation services at peak stress periods
  • asset prices subject to significant declines if pandemic worsens
  • funding markets were less fragile than in financial crisis but still suffered strains required Fed intervention
  • high levels of business debt likely to make economic fallout from pandemic worse
  • pandemic poses severe risk to businesses of all sizes and millions of households
  • pandemic to cause a sharp rise in defaults on household debt
  • market debt for long dated treasuries and treasury futures in March fell to record low and has shown only modest improvements since
  • mortgage servicers under strain from forbearance could lead to less mortgage credit and some failures in the future
  • further dollar appreciation could put additional strains on US firms that rely on exports and supply chains in their operations
  • Covid 19 risks, a no deal Brexit, still poses risks to European and US financial systems

China will limit short-selling on market reopen on Monday

China will not allow short selling on their stock markets when they reopen for trade on Monday 3 February 2020

The information comes via unnamed sources cited at Reuters . saying China’s regulator (China Securities Regulatory Commission (CSRC)) had issued a verbal directive to brokerages to not permit clients selling borrowed stocks.
  • It was not clear if the suspension – which was first reported on Sunday by Chinese media outlet 21st Century Business Herald – would be extended beyond Monday, one of the sources said.
Over the weekend Adam outlined various other stabilisation measures being taken in China:
  • China unveils economic measures in effort to promote calm with markets set to re-open
On the PBOC cash injection, its not as big as it seems:
  • PBOC to inject cash funds today
Its going to be an “interesting” welcome to the new year for financial markets in China today.

20 Insights from Peter Lynch

1. Invest In What You Know

This is where it helps to have identified your personal investor’s edge.  What is it that you know a lot about?  Maybe your edge comes from your profession or a hobby.  Maybe it comes just from being a parent.  An entire generation of Americans grew up on Gerber’s baby food, and Gerber’s stock was a 100-bagger.  If you put your money where your baby’s mouth was, you turned $10,000 into $1 million.

2. Let Your Winners Run

It’s easy to make a mistake and do the opposite, pulling out the flowers and watering the weeds.  If you’re lucky enough to have one golden egg in your portfolio, it may not matter if you have a couple of rotten ones in there with it.  Let’s say you have a portfolio of six stocks.  Two of them are average, two of them are below average, and one is a real loser.  But you also have one stellar performer.  Your Coca-Cola, your Gillette.  A stock that reminds you why you invested in the first place.  In other words, you don’t have to be right all the time to do well in stocks.  If you find one great growth company and own it long enough to let the profits run, the gains should more than offset mediocre results from other stocks in your portfolio.

3. On Growth Stocks

There are two ways investors can fake themselves out of the big returns that come from great growth companies.  The first is waiting to buy the stock when it looks cheap.  Throughout its 27-year rise from a split-adjusted 1.6 cents to $23, Walmart never looked cheap compared with the overall market.  Its price-to-earnings ratio rarely dropped below 20, but Walmart’s earnings were growing at 25 to 30 percent a year.  A key point to remember is that a p/e of 20 is not too much to pay for a company that’s growing at 25 percent.  Any business that an manage to keep up a 20 to 25 percent growth rate for 20 years will reward shareholders with a massive return even if the stock market overall is lower after 20 years.
The second mistake is underestimating how long a great growth company can keep up the pace.  In the 1970s I got interested in McDonald’s.  A chorus of colleagues said golden arches were everywhere and McDonald’s had seen its best days.  I checked for myself and found that even in California, where McDonald’s originated, there were fewer McDonald’s outlets than there were branches of the Bank of America.  McDonald’s has been a 50-bagger since. (more…)

17 Trading Rules

1. Trade needs to fit like a leather glove. 100% your terms or pass. Follow your instincts!!
2. A complete trade plan consists of entries, STOPS, and profit targets. Set a hard stop immediately for ½ position and watch other half for better exit.
3. Stick to plan and cut losers immediately! You can ALWAYS re-enter.
4. Respect your max daily loss and liquidate all positions immediately if/when hit.
5. Focus on only 1 position during the first 30 minutes for complete, undivided attention.
6. Never long a stock that is red on the day until after half time and very, very selectively (<10%).
7. Treat every trade like it is your only trade of the day/month/year.
8. Add to winners by recycling shares. Cover 1/2 into washes and re-short 1/4 on pops but reduce size each time.
9. Take a considerable timeout before switching bias from short to long.
10. Avoid shorting day 1 on low floaters – only para scalps with cover into following wash.
11. Wait for the back side of move to bring the hammer down when shorting.
12. Focus on the meat of the move, not trying to top and bottom tick everything.
13. If you have given back ¾ of daily profits, call it quits. You should never turn a green day to red.
14. Just had a monster day (good or bad)? Take tomorrow off.
15. NEVER say NEVER! Even shit can fly high if thrown hard enough.
16. Be very cautious when dip buying (small size, tight stops) – especially near potential back side.
17. 3 day rule. Better to bring the heat after day 3 of big moves.

18+1 Trading Rules for Traders

  1. NEVER, EVER, EVER ADD TO A LOSING POSITION: EVER!: Adding to a losing position eventually leads to ruin, remembering Enron, Long Term Capital Management, Nick Leeson and myriad others.
  2. TRADE LIKE A MERCENARY SOLDIER: As traders/investors we are to fight on the winning side of the trade, not on the side of the trade we may believe to be economically correct. We are pragmatists first, foremost and always.
  3. MENTAL CAPITAL TRUMPS REAL CAPITAL: Capital comes in two forms… mental and real… and defending losing positions diminishes one’s finite and measurable real capital and one’s infinite and immeasurable mental capital accordingly and alway.
  4. WE ARE NOT IN THE BUSINESS OF BUYING LOW AND SELLING HIGH: We are in the business of buying high and selling higher, or of selling low and buying lower. Strength begets strength; weakness more weakness.
  5. IN BULL MARKETS ONE MUST TRY ALWAYS TO BE LONG OR NEUTRAL: The corollary, obviously, is that in bear markets one must try always to be short or neutral. There are exceptions, but they are very, very rare.
  6. “MARKETS CAN REMAIN ILLOGICAL FAR LONGER THAN YOU OR I CAN REMAIN SOLVENT:” So said Lord Keynes many years ago and he was… and is… right, for illogic does often reign, despite what the academics would have us believe.
  7. BUY THAT WHICH SHOWS THE GREATEST STRENGTH; SELL THAT WHICH SHOWS THE GREATEST WEAKNESS: Metaphorically, the wettest paper sacks break most easily and the strongest winds carry ships the farthest,fastest.
  8. THINK LIKE A FUNDAMENTALIST; TRADE LIKE A TECHNICIAN:Be bullish… or bearish… only when the technicals and the fundamentals, as you understand them, run in tandem.
  9. TRADING RUNS IN CYCLES; SOME GOOD, MOST BAD: In the “Good Times” even one’s errors are profitable; in the inevitable “Bad Times” even the most well researched trade shall goes awry. This is the nature of trading; accept it and move on. (more…)

Day Traders : Read These Rules EveryDay-Spend 10 Minutes

  1. There is no single true path. 
  2. The universal trait is discipline.
  3. Trade your personality.
  4. Failure and perseverance are part of every successful trader’s life.
  5. Great traders are flexible.
  6. It takes time to become a successful trader.
  7. Keep a record of your market observations.
  8. Develop a trading philosophy.
  9. What is your edge?  Big picture tech, change, on the cusp, understand big trend before others, shifts.
  10. Confidence is important, and you build it from hard work.
  11. Hard work.
  12. Obsessiveness.
  13. Market wizards are innovators, not followers.
  14. To be a winner you have to be willing to take a loss!
  15. Risk control.  Stop-loss, or reducing position size, limit initial position size, short selling.
  16. You can’t be afraid of risk
  17. Some limit downside by focusing on undervalued stocks. (but still can drop.)
  18. Value alone is not enough.  Need catalysts.
  19. The importance of catalysts.
  20. Focus not only on when to get in, but when to get out

10 Most Foolish Things a Trader Can Do

The Ten Most Foolish Things a Trader Can Do

  1. Try to predict the future movement of a stock, and stay in it no matter what.
  2. Risk your entire account on one trade with no stop loss plan.
  3. Have a winning trade but no exit strategy to get out, no trailing stop or exhaustion top signal.
  4. Ask for and follow the advice of others instead of trading with your own trading plan, method, rules, and system.
  5. Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.
  6. Trade your opinions, not a quantified method.
  7. Do not bother to do your homework on trading, just jump in and trade, you are smart, you will figure it out.
  8. Short the best and most expensive stocks in the stock market and buy the cheapest junk stocks.
  9. Put on trades you are 100% sure are winners so you do not even need a stop loss or risk management.
  10. Buy more of a trade that you are losing money in and sell your winners quickly to lock in small profits.

WISDOM FROM BERNARD BARUCH – For Traders & Investors

From the SAME AS IT EVER WAS file: Bernard Baruch, a colleague and friend of Jesse Livermore’s, who made a fortune shorting the 1929 crash, and then who later advised presidents Woodrow Wilson and Franklin D. Roosevelt on economic matters, listed the following investment rules in his autobiography published in 1958 entitled Baruch: My Own Story.  These rules are still as applicable today.

1.  Don’t speculate unless you can make it a full-time job.
2.  Beware of barbers, beauticians, waiters–of anyone–bringing gifts of “inside” information or “tips.”(Avoid  Blue channels )
3.  Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth. (Don’t Trust Indian Management )
4.  Don’t try to buy at the bottom and sell at the top.  This can’t be done–except by liars.
5.  Learn how to take your losses quickly and cleanly.  Don’t expect to be right all the time.  If you have made a mistake, cut your losses as quickly as possible.
6.  Don’t buy too many different securities.  Better have only a few investments which can be watched.
7.  Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.
8.  Study your tax position to know when you can sell to greatest advantage.
9.  Always keep a good part of your capital in a cash reserve.  Never invest all your funds.
10.  Don’t try to be a jack of all investments.  Stick to the field you know best.

Traders -3 Points U All Must Read

Valuation alone is insufficient reason to get short a stock — History teaches us that cheap stocks can get cheaper, dear stocks can get more expensive

ALWAYS work with a pre-determined loss – either a physical or mental stop loss — Never leave yourself open to infinite losses

Fundamentals tell you WHY to short something, not WHEN to short it. ALWAYS have some technical confirmation before shorting. Make a short selling wish list, then WAIT for technical confirmation.

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