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Sarkozy Threatens To Pull France Out Of Euro

If you were wondering why the market is spooked by rumors that Germany may be returning to the DM, here is actual fact that French President is on the verge of reinstating the franc. And with that, the euro is nothing more than a political toy for Merkel, Sarkozy and whoever the current non-indicted head of the Italian government is, to achieve their political goals. The currency is now dead. Parity coming within a few weeks.

From The Guardian:

 
 

The markets were initially unsettled by news that the French president had threatened to pull France out of the eurozone. The startling threat was made at a Brussels summit of EU leaders last Friday, at which the deal to bail out Greece was agreed. according to a report in El País newspaper quoting Spanish Prime Minister José Luis Rodríguez Zapatero.

Zapatero revealed details of the French threat at a closed-doors meeting of leaders from his Spanish socialist party on Wednesday.

Sarkozy demanded “a compromise from everyone to support Greece … or France would reconsider its position in the euro,” according to one source cited by El País.

“Sarkozy went as far as banging his fist on the table and threatening to leave the euro,” said one unnamed Socialist leader who was at the meeting with Zapatero. “That obliged Angela Merkel to bend and reach an agreement.”

A different source who was at the meeting with Zapatero told El País that “France, Italy and Spain formed a common front against German and Sarkozy threatened Merkel with a break in the traditional Franco-German axis.”

El País also quotes Sarkozy as having said, according to another of those who met Zapatero, that “if at time like this, with all that is happening, Europe is not capable of a united response, then the euro makes no sense”.

Well, an epiphany 10 years late is still better than no epiphany. And, of course as many will say, he who panics first, just may salvage something. Which for most American citizens still infatuated with their currency, may mean very bad news.

A Bird’s Eye View of Yourself

When did position management enter my consciousness?  I think it stems from experiences that gave me an appreciation for the psychology behind our behavior.  Sure, I had read the classic from Edwin Lefevre, and believed in William O’Neil stop-loss rules.  The image that still sticks with me comes from a tiny book I read in 1994 that doesn’t get the pub it deserves.

In his tiny 1930 classic, Fred Kelly gives the example of the farmer who had 12 chickens in a cage, and one slipped out.  So he propped open the door and set food out in an attempt to lure the chicken back.  Of course, 2 more chickens now escaped.  Surely, he can’t accept having only 9 chickens when he just had 11.  His repeated efforts to get back to “breakeven” left him panicking to salvage 2 at the end…sound familiar with anyone’s early trading efforts?

The lessons stayed personal until managing an order desk stamped those lessons as universal.   Seeing these episodes play out over and over among traders led to a true appreciation of the human wiring that wreaks havoc with our trading.  These observations led me in the late 90′s to step outside of myself on every trade and ask if I was that person.  Am I holding a short against a wave of strength that will sweep me away tomorrow anyway? If so, why not cover now instead of panicking with my fellow (wrong) shorts later? It was in those moments that I realized the power of anticipating group emotions.  I already had a respect for taking losses, but I gradually moved from exiting in panic, to exiting in fear, to exiting when the slightest bit of hope creeped in.

Remember this…if you’re hoping a position bounces back to being a winner, you’re not alone at that moment.  Hope is said to be a good companion, but a poor guide.  Turn that on its head by realizing that you have a chance to act in defense of your equity by taking your loss before the other “hopers” are forced by emotions to act.  Sure, you’re putting yourself in a position of huge regret if the position then recovers, but you’re also preventing the possibility of acting in a panicked state later.  Stops can be great teachers…if you find yourself repeatedly getting stopped out just before your idea gets recognized, then you need wider stops.  Been there…I now operate with smaller positions and wider stops, giving myself room to be right but not putting my equity at undue risk.

If the image of the farmer doesn’t do it for you, consider 2 traders, Roger and Andy.  Both are caught in a bad situation, hoping for the best.  Andy decides to come clean and admit his mistake.  Roger decides to dig in and show he’s right.  Bad idea.  A small lie today will be a bigger lie tomorrow…rip the band aid now.  Any idea who played that trade right?

It’s OK to be wrong, not OK to stay wrong…that’s the difference between champ and chump.  The longer we stay in a trading range, the more explosive the resulting trend will be, and there will be no place for hope.  Be ready to trade today’s ego hit for a chance to play again tomorrow, and you give yourself a chance to replace any negative episode with your best one yet.

5 Emotional Stages of a Loss

Stage 1: Denial
This is when you have the first sign of a loss. However, you justify this loss. You deny it’s true form and decide that it could be a winner…but you just have to “wait it out.” “Afterall, I bought a lot of time on my option.”
Stage 2: Anger
The loss judt got worse. Now you look to place blame. Freakin’ blog! I hate the marketcast anyway!!! Why didn’t I do my own analysis????

Stage 3: Bargaining
If somehow this stock can move in your favor, you promise you won’t do it again. Or even worse, you start to think of ways to salvage. Desperation sets in.
Stage 4: Depression
It couldn’t get worse huh? WRONG! Now this makes a huge mark on your account, your spouse is going to kill you, it is going to take forever to make it back, and you start to panic.
Stage 5: Acceptance
Alright, I will take the loss.

The 5 Emotional Stages of a loss

Stage 1: Denial
This is when you have the first sign of a loss. However, you justify this loss. You deny it’s true form and decide that it could be a winner…but you just have to “wait it out.” “Afterall, I bought a lot of time on my option.”

Stage 2: Anger
The loss judt got worse. Now you look to place blame. Freakin’ blog! I hate the marketcast anyway!!! Why didn’t I do my own analysis????


Stage 3: Bargaining
If somehow this stock can move in your favor, you promise you won’t do it again. Or even worse, you start to think of ways to salvage. Desperation sets in.

Stage 4: Depression
It couldn’t get worse huh? WRONG! Now this makes a huge mark on your account, your spouse is going to kill you, it is going to take forever to make it back, and you start to panic.

Stage 5: Acceptance
Alright, I will take the loss.