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Trading Wisdom Via John Templeton

  
  Education
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  1. There is only one long term investment objective, maximum total after tax return.
  2. Success requires study and work. It’s harder than you think.
  3. Outperforming the majority of investors requires doing what they are not doing.
  4. Buy when pessimism is at its maximum, sell when optimism is at its maximum.
  5. Therefore, buy what most investors are selling.
  6. Buying when others have despaired, and selling when they are full of hope, takes fortitude.
  7. Bear markets aren’t forever. Prices usually turn up a year before the business cycle hits bottom.
  8. Popularity is temporary. When a sector goes out of fashion, it stays out for many years.
  9. In the long run, stock index prices fluctuate around the EPS trend line.
  10. Stock index earnings fluctuate around replacement book value for the stocks in the index.
  11. Buy what other people buy and you will succeed or fail as other people do.
  12. Timing: buy when short term owners have finished selling and sell when they’ve finished their buying, always opposing the fashion.
  13. Stock prices fluctuate more than values. So stock indexes will never produce the best total return performance.
  14. Focus on value because most investors focus on outlooks and trends.
  15. Invest worldwide.
  16. Stock price fluctuations are proportional to the square root of the price.
  17. Sell when you find a much better bargain to replace what you are selling.
  18. When your method becomes popular, switch to an unpopular method.
  19. Stay flexible. No asset or method is forever.
  20. Stock market investing takes more skill than any other kind of investing.
  21. A person can outperform a committee.
  22. If you begin with prayer, you will think more clearly and make fewer mistakes.

A Monster $69 Trillion Order Wreaked Havoc On The Stockholm Stock Exchange

  
Analysis, Education
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Trading was halted in index derivatives on the Stockholm Stock Exchange today after a monster futures order valued at around $69 trillion appeared in the system, according to Swedish business newspaper SvD Näringsliv.

 The “trade” was a buy order for nearly 4.3 billion OMXS30 warrants (valued at nearly 460 trillion kronor), an amount over 131 times Sweden’s GDP. The OMXS30 is the exchange’s flagship stock index, and the error apparently caused enough problems to force a closure of the market.

A report in Investment Europe said that despite safeguards, “somehow the order made its way into the order book, causing chaos for traders.”

SvD Näringsliv’s Gustaf Palm reports (via Google Translate):

According to the Exchange spokesman Carl Norell has no order of that size team into the system. Instead, it is about a parsing incurred in exchange system due to a technical error. The order, Norell writes in an email, anullerades, but still remains a problem why the index derivatives market is closed since just before 10 am this morning.

For Stocks, September May Be the Cruelest Month

  
Analysis, Education, LINKS
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sept09

601

September is fewer than three weeks away. Feeling nervous? Maybe you should be. For investors, the period between Labor Day and Halloween is proving an annual fright show. And no one knows why.

It was, of course, in September last year that Lehman collapsed and everything fell apart. But then it was also September-October 2002 that the last bear market plunged to its lows.

The 1998 financial crisis? It began late August, and rolled on for two months

The famous crash of 1987 came in October. But most people have forgotten that the market actually started sliding downhill in late August. (more…)

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