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Greece – About to Hit the Panic Button?

  
Analysis, Economy, Education
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Well it would appear that all the talk of the European Union and the IMF standing at the ready did not calm the markets when it was being discussed over the past month. It was hoped that the markets would be calmed if they knew that Greece had support from its neighbors.

That was Plan A, now it is time for Plan B, or C, D, E…

The Greek government’s cost of borrowing has hit a new high as talks on a joint eurozone and International Monetary Fund (IMF) rescue plan begin.

The interest rate on 10-year government bonds hit 8.3% – the highest since the euro was introduced.

Rates rose as it became clear that talks over the aid package may not be finished until days before a multi-billion-euro loan is due for repayment.

Investors are becoming more convinced that Greece will need to be rescued.

Greece’s finance ministry said the talks with the European Commission and the IMF would take about two weeks, with a joint text issued on about 15 May. […] (BBC)

It would appear that Greece is about to hit the button

Wednesday, April 21, 2010 1:27:13 PM
Greece Fin Min: Will make decision on whether or not to trigger the aid mechanism soon – Notes that the IMF will have discussions over the competitiveness of the country. No further austerity measures this year are likely.

Good Luck Bad Luck!

  
Education, Life
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horses-gallopThere is a Chinese story of a farmer who used an old horse to till his fields. One day, the horse escaped into the hills and when the farmer’s neighbors sympathized with the old man over his bad luck, the farmer replied, “Bad luck? Good luck? Who knows?” A week later, the horse returned with a herd of horses from the hills and this time the neighbors congratulated the farmer on his good luck. His reply was, “Good luck? Bad luck? Who knows?”

Then, when the farmer’s son was attempting to tame one of the wild horses, he fell off its back and broke his leg. Everyone thought this very bad luck. Not the farmer, whose only reaction was, “Bad luck? Good luck? Who knows?”

Some weeks later, the army marched into the village and conscripted every able-bodied youth they found there. When they saw the farmer’s son with his broken leg, they let him off. Now was that good luck or bad luck?

Who knows?

TRADING WISDOM

  
  Education
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1. The market expects you to accept losses.  If you want to play in the market you better be prepared to play by the market’s rules.  Accept the losses, make them small based on proper risk parameters, and the market will consider it a tithe.  Just set it aside and help pay for a pew, not the entire church.

2.  The market wants you to admit when you are wrong.  Commit to admit.  If the market is always right, and it is, then go ahead and let the market know NOW that you understand and accept its omnipotence.  Broadcast it to the heavens and to depths of the earth; broadcast it to your friends and family; broadcast it to your neighbors; broadcast it in every chat room you use to brag in.   Let everyone know you will be wrong more often than right and that you are OK with that.  If the market knows you do not mind being wrong the market will leave you alone.

3.  The market will reward your discipline.  Let’s face it, the market is one disciplined son of a gun.  When it says it is going to crush the bears with their death cross and the bulls with their golden cross it does.  When the market says a bearish economic report does not matter I am going higher anyway it will.  When the market says that cute little support line you drew is nothing but “a lead pencil and I am an eraser”, then erasing it will go.  Stick to a discipline of listening to what the market is saying and the market will whisper its direction instead of shouting its lies.

4.  The market is the calculator.  If you are attempting to reach 10 via the calculator, there are many and various ways of getting there:  5+5, 2+8, 15-5, 25 –15, or even  2 + 2 –1 –1 –2 –2 +3 +3 +3 + 3.  When it comes to making money in the market our calculator may want to make it to 10 much quicker than the market does and we may want to add 5 + 5 to get there but be prepared for the market to take its own sweet time adding things up.  If all that matters is getting to 10, then make sure the road you take is paved with minuses along with pluses along the way or all your money will be going to the 5508 (punch this number into your calculator and turn it upside down to see what it spells), which will make the employee a very unhappy and broke individual.

Following my Parameters

  
  Education
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1) Relative Strength or Weakness- there’s no reason for me to pick from the mushy middle, as the biggest movers come from the best and worst 5% of the market.

2) Abnormal Volume- it can be abnormally high or abnormally low, but I’m looking for stocks that are doing something different that they’ve done in recent days or weeks.

3) Abnormal Range- again, high or low tells me something…average tells me nothing.

4) Identifiable Support(Longs) or Resistance(Shorts)- I have no need to be the first, that’s for the really brave and really smart(maybe).  If the idea is that good, I’ll have days/weeks/months to milk it…in case you haven’t heard, the second mouse gets the cheese.

4) News Absorption- I like to participate AFTER news events…it gives me a good idea of the temperament of a stock’s owners. It may have broken out from a base.  It may have been crushed but then built a base.  It may have reacted poorly to a “great” report. In any case, I want to see how a stock reacted the last time there was real news, and position myself on the side that has taken control since then.

6) Doubt- this is a tricky one, but our ideas should not be SO obvious that our relatives and neighbors love the idea.  Buy worry, short hope.  Buy after panic, short after euphoria.  I’m not saying to ignore an idea because your Twitter stream agrees with you…haven’t we filtered our list to only those we respect?  But take a second to check your spot on this curve, and where you sit on this idea.

The coming economic crisis in China

  
Education, Life
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By Jim Jubak

Jim JubakI think investors are worried about the wrong kind of crisis in China.

Worry seems to focus on the possibility of an asset bubble and the chance that it will burst sometime in the next two to three months.

I’m more concerned about a slide into a crisis that will be an extension of the Great Recession. That slide could begin, I estimate, sometime in the next 12 to 18 months.

I understand the worry about the possibility of an asset bubble in China. After all, we’ve just been through two horrible asset bubbles — and busts — in the U.S. and global financial markets. And a Chinese bubble is a distinct possibility, one that should certainly figure into your investing strategy.

But China’s economy and political system are so different from ours in the U.S. and those in the rest of the developed world — and its relationship to the global financial market so unique — that I don’t think we’re headed toward any kind of replay of March 2000 or October 2007.

A bigger worry is a long-term slide into a lower-growth or no-growth world in which nations strive to beggar their neighbors and all portfolios slump. As crises go, it’s very different but ultimately just as painful for investors as the asset bubbles that draw all our attention now.

To paraphrase Leo Tolstoy in “Anna Karenina“: Happy bull markets are all alike; every unhappy bear market is unhappy in its own way.

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