The jump from trend to bubble is faster than ever

What’s the rush?

What's the rush?
I love this quote from George Soros because it is more true every day. He said it in his book on the crash of 2008 but he might be talking about fake meat, marijuana or electric cars today.
We can all see trends towards environmentalism, renewables, e-commerce, the internet, eating out and TV streaming along with a dozen other things. The reaction function of the market is to identify a trend and throw money at it in a virtual gold rush, hoping that one day the claims will pay.
Last year we saw it in WeWork. Co-working was undoubtedly a trend and WeWork was the biggest and best-known name in the space. SoftBank and others drove the company valuation into the stratosphere but it all came crashing down when the collective conscience of the world realized the business model could easily be replicated.
The big macro trend of the generation is low and falling inflation. We’re at the point now where every bond investor — voluntarily or not — is betting on low inflation. The perception (or perhaps misconception) is that inflation will stay low forever. If the market is wrong, it would be the mother of all financial busts. The bond market is worth more than $100 trillion with a myriad of derivatives layered on combined with endless knock-on effects, like mortgage rates.

Continue reading »

George Soros' Best Investment Advice

The Best Investment Advice George Soros Ever Gave.  Here it is:


“Economic history is a never-ending series of episodes based on falsehoods and lies, not truths.  It represents the path to big money.  The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited.”  ~ George Soros
Think about that statement for a minute. For everyone who is in the so-called bear camp, and thinks the current “recovery” belongs in quotation marks, this is an exceptionally meaningful quote.
Of course, everyone who has been bearish on the markets since 2009 has largely lost money, and been quite aggravated in the process. Had trillions in stimulus and quantitative easing not been injected into the economy (the big banks for the latter), our economy would have simply restructured and our markets would have bottomed at values far lower than they did. Bearish market participants have been investing with the philosophy that this will still happen.
Many bearish market participants have recognized the dynamic that there are long-term structural deficit and various economic issues, and that the economy is simply being goosed by trillions in cash and dangerously low interest rates. In other words, the bears scream that “the economy is unsustainable;” If and when rates rise, servicing trillions in debt is going to require even more debt issuance, leading to ever higher rates and a crowding out of the private sector. At this point, people draw different conclusions as to what happens next.
Others note that the euro is going to break apart, and it too is only being held together by programs like LTRO and other central bank intervention.
Regardless, many have come to the conclusion that our equity markets are fundamentally overvalued and do not discount the structural issues we face. The best argument I’ve heard for overvaluation is that corporate profit margins will contract rapidly when the U.S. government needs to start cutting its budget; we may be approaching that day with the creeping “fiscal cliff” at the end of the year. Continue reading »

Quotes on Psychology

The most important single factor in shaping security markets is public psychology. – Gerald Loeb

Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes. – Jesse Livermore

There is nothing more important than your emotional balance. – Jesse Livermore

There are styles in securities as there are in clothes. A security may be undervalued, but if it is also out of style it is of little interest to the speculator. He is, therefore, compelled to study the psychology of the stock market as well as the elements of real value. – Phil Carret

When events have thinking participants, the subject matter is no longer confined to facts but also includes the participants’ perceptions.  The chain of causation does not lead directly from fact to fact but from fact to perception and from perception to fact. – George Soros

The Education of a Speculator – Victor Niederhoffer (Great Quotes )

I always mark possible quotations when reading a book. This book is so full of them! Here are some random excerpts:

  • “Risk taking…is positively correlated with how well we feel about ourselves.” (page 113)
  • “One thing is for sure. Among the emotionally charged, you will not find one single long-term winner. Where are they? According to Bacon: “These quiet professionals are quite inconspicuous unless you look for them, because there are so many careless gamblers, crazy amateurs, jumping from one crackpot idea to another betting on hope and fear”. I show this passage to any trader in my office who is showing color or palpitation.” (206)
  • I find that Chinese handball has much to teach me about market practices. A limit order is a good tactic for Chinese trading, but a market order works best for handball trading. The direct market order against a quickly moving target frequently leads to a fast rebound against. The game is then over before it starts….I use limits orders. I don’t win fast, but the losses are a lot slower in coming.” (397)
  •  ”…chain smoking, temper tantrums, screaming…these expressions of emotion have within them the seeds of destruction. I enforce a ban against all jocularity and temper tantrums.” (207)
  • “Offering advice without expertise is aggressive ignorance.” (188)
  • “With the increasing specialization in modern times, born losers are commonplace.” (85)
  • “During the 10 years I traded for George Soros, I never heard him speak about a winning trade. To hear him talk, you’d think he had nothing but losers. Conversely, listening to the biggest losers, you’d think they had nothing but winners.” (95)
  • “Do not follow the mentally lazy habit of allowing a newspaper or a broker or a wise friend to do our security market thinking.” (114)
  • “The best opportunities come out of the clear blue.” (129)
  • “The exchange is a market ecosystem.” (353)
  • “Oracles, forecasts, and prophecies are a business. They should be evaluated with the same skepticism and savvy that would be applied to a used-car dealership.” (64)
  • “The only newspaper I read is the National Enquirer. I don’t own a television, don’t follow the news, don’t talk to anyone during the trading day, and don’t like to read books less than 100 years old.” (ix – preface)
  • “My resistance to conformity has been the bedrock of my speculative persona.” (110)
  • “…institutional learning, like the Harvard Colleges and Lincoln High Schools of Life – the kind that prepares most of us to become good soldiers, true believers, and conformists.” (110)
  • “An incapability of relying on oneself and faith in others are precisely the conditions that compel brutes to live in herds.” A quote from Niederhoffer’s intellectual hero, Francis Galton (136)

They are endless! If you are just to by one trading book, this is it. Enjoy!

10 Famous Quotes for Trading

There are some meaningful and aspiring quotes that i have read from books or i heard from my coaches. Today i’m going to share with you guys. Hope that it will inspire you and you might use the quotes as a daily reminder or as a form of motivation.

“Trading is hardwork, laborious and boring, just like any other jobs. If you are excited about it, you are gambling” by Conrad

“There is no calamity greater than lavish desires. There is no guilt than discontentment. And there is no greater disaster than greed.” by Lao Tze

“Its not about being right or wrong, rather, its about how much money you make when you’re right and how much you don’t lose when you’re wrong” by George Soros

“Luck is what you have left over after you give 100 percent” by Langston Coleman

“In the business world, the rear view mirror is always clearer than the windshield.” by Warren Buffet

“Experience is a hard teacher because she gives the test first, the lesson afterwards.” by Vernon Sanders Law

“Human beings, by changing the inner attitudes of their minds, can change the outer aspects of their lives.” by William James

“The only that overcomes hard luck is hard work.” by Harry Golden

“A goal without a plan is just a wish.” Antonie de Saint-Exupery

“If i can do it, so can you” by Adam Khoo

23 Trading Lessons

1. All successful traders use methods that suit their
personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.
2. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.
3. To be a winner, you have to be willing to
take a loss; 
4. HOPE is not a word in the winning Trader’s vocabulary;
5. When you are on a
losing streak — and you will eventually find yourself on one — reduce your position size;
6. Don’t underestimate the time it
takes to succeed as a trader — it takes 10 years to become very good at anything;  
7. Trading is a vocation — not a
hobby
8. Have a business/trading plan; 
9. Identify your greatest weakness, Be honest — and DEAL with it Continue reading »

Between Theory And Fear

Hell tortures you to stop learning.

 George Soros is setting up institutions to study the failure of economic thinking. They have succeed in demonstrating failure, he said this afternoon at the CEU in Budapest, but not in discovering what to do about it. 
The source of the problem, he explained, is relying too much on theory, on knowledge, and not on how our not knowing what to do makes us act in ways that change the world, which world we don’t see because we expect it to conform to our theories. We need to be able to discard our theories when they are proven wrong, and we need to understand that no general theory is enough, because our actions are constantly changing the world we need to respond to and understand.
 
So I said to him after his talk:
 
– You have divided human activity in two parts, theory, and manipulation. Theory doesn’t work, and manipulation of markets is based on crowd behavior, that is, fear. But since ancient Greece, the parts to human activity have been divided into not two, but three: you have left out practical action.
 
Practical action differs from manipulation, fearfully following and leading each other, in that its end is making learning easier. It’s purpose is outside of itself, in the part of life where we learn, where we find beauty, what makes life good.
 
Why not establish institutions that study how economic relations are practical: what forms of cooperation lead to a life of learning and freedom from manipulation, and which don’t. And study how to make the transition from the present institutions based entirely on greed and fear to the kind we need to have. Do you understand?
 
– I have studied maximization of happiness.
 
– No that’s not what I mean. Counting results of fear based behaviors: doing that is living still in the world of the theoretical and the manipulative. We need to study how to cooperate, study what forms of cooperation help us learn to make our lives better.
 
Let’s go, says George Soros assistant, urging him as she has been doing for the last few minutes as we talked. OK, I say, I tried. You remember me, right?
 
– Yes, he nods his head.
 
I’d asked him for a job the day before when I saw him walking down the street from the University to his hotel.
 
Practical necessity. I need to get out of this hell of Budapest, this place putting pressure on me not to learn.
 
People say it is difficult to diagnose the political problems of our times, but I don’t see the difficulty. We’re together in this hell trapped between theory and fear.

Lessons of the Legendary Traders

What do the worlds best Trading masters differently than the average investor? Can the average investor learn from the Player Legends success stories and their techniques used? What do the most famous Players have in common that can be applied by the average talented trader?

Before we should give some insights on those questions lets have a look at some of the most successful Trade jockey Legends:

Nicolas Darvas turned an $ 36000 account into $ 2000000 in 18 months!!!
Ed Seykota, a Turtle Financier, turned $ 5’000 into $ 15’000’000 in 12 years!!!
Jesse Livermore made several multi-million USD fortunes in the early 1900’s
Richard Dennis, another Turtle Player, made between $ 100 and $ 200 000.000
George Soros is believed to be one of the greatest Trade jockey of all time!!!

The results are quite impressive and some different amazing Financiers should be added easily to the list above. Why do these guys have such tremendous results?

There are common factors, that can be observed through most of the successful Pitbull Legends:

They have a Strategy that they strictly follow.
Most of them have a trend-following average trading style.
Most of them have a mid- to long-term approach. Some of them burned their fingers over the preceding 3 years and some even lost a fortune. Here are some examples of observed behaviour patterns:

Losses are not slice early enough.
Investment with a short-term horizon become long-term horizon in hope of raising asking prices.
People listen to the advise of their invested $ Trade facilitators and Analysts.
People risk coin in hot issues recommended by colleagues of their colleagues.
People have no plan for their investments.
Money Management is not considered at all.
Greed and fear is omnipresent.

What can average talented trading insiders learn from the above and how can the mistakes listed above be avoided? The after key notches can be learned from some of the most successful Trading expert Legends:

Each investor has its own personality. Some of the investor have a very aggressive paper trading style and are stockmarket trading very frequently. Some prefer shares as different are increased risk oriented and speculate in contracts. Other players want only spend a minimum of effort. An investor need to reflect on his outline and choose a note trading approach that fits his personality.

A trade needs to be completely planned in advance. g. when they go on holiday, when they move house etc. But do they have a plan when they invest? An investor needs to have a method that helps him to be prepared for all scenarios of a exchange. One needs to know in advance when to buy, how much to buy, when to exit. Once a buy / sell is executed the bottom line of the instrument (stock, promise note, fixed interest paper etc.

The most important component of a stock trading method is Cash Management? Surprised? Lots of pitbulls and super traders spend most of their time developing a very advanced trade entry strategy. But the entry methodology contributes only approximately 15% to the success of a Note trading Method based on academic studies.
The most important question of a Paper trading Technique is how much to risk bucks and how many deals to trade at the same time.

A can do attitude is required to buy / sell successfully. Why? Because with phrases like it should be great, but I cant or one day perhaps I should succeed in the lottery, but until then I must work hard they have already lost.

Lessons from the Wizards

3994One of the first books I read in this business oh-so many years ago was Stock Market Wizards. It had a profound impact on my thinking about trading, psychology, risk, capital preservation, etc.

  1. All successful traders use methods that suit their personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.  
  2. What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.

    To be a winner, you have to be willing to take a loss

  3.  HOPE is not a word in the winning Trader’s vocabulary;

  4.  When you are on a losing streak — and you will eventually find yourself on one — reduce your position size;

  5.  Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything

  6.  Trading is a vocation — not a hobby Continue reading »

The Legends Are Abandoning the Markets

The legends are abandoning the markets. 

Stanley Druckenmiller founded his hedge fund Duquesne Capital in 1981. From 1986 onward he maintained average annual returns of 30%. He also managed George Soros’ Quantum Fund from 1988-2000. During that latter period he famously facilitated Soros’ “breaking of the Bank of England” trade: the legendary trade which netted over $1 billion in a single day. 

Druckenmiller closed Duquesne Capital in 2010, stating that he was no longer able to meet his investment “standard[s]” in the post-2008 climate (he made money in 2008 before the Fed began to alter the risk landscape). 

Druckenmiller’s key strength has always been macro-economic forecasting. That he would feel the capital markets were not offering him the opportunities he needed says a lot. 

Seth Klarman is another investment legend who is returning capital to clients. Widely considered to be the Warren Buffett of his generation, Klarman recently cited a lack of “investment opportunities” as the cause for his decision to downsize his legendary Baupost Group hedge funds. 

Other legends or market outperformers who have returned capital to investors or closed their funds to outside investors are Carl Icahn and Michael Karsch. Indeed, even value legend Warren Buffett is sitting on the single largest amount of cash in the history of his 50+ year career as an investor, stating that stocks are “fully valued” at current levels (Buffett largely does not believe in shorting the market, so his decision to be in cash is a strong indicator of opportunities). Continue reading »