Archives of “Wall Street Crash of 1929” tag

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Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points

  
Analysis, Education
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Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).

  1. Da Vinci’s “Salvator Mundi” sold for staggering record $450mn
  2. Bitcoin soared 677% from $952 to $7890
  3. BoJ and ECB were bull catalysts, buying $2.0tn of financial assets
  4. Number of global interest rate cuts since Lehman hit: 702
  5. Global debt rose to a record $226tn, record 324% of global GDP
  6. US corporates issued record $1.75tn of bonds
  7. Yield of European HY bonds fell below yield of US Treasuries
  8. Argentina (8 debt defaults in past 200 years) issued 100-year bond
  9. Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP
  10. S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low
  11. Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap
  12. 7855 ETFs accounted for 70% of global daily equity volume
  13. The first AI/robot-managed ETF was launched (it’s underperforming)
  14. Big performance winners: ACWI, EM equities, China, Tech, European HY, euro
  15. Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira

As Hartnett summarizes, “2017 was a perfect encapsulation of an 8-year QE-led bull market”

  • Positioning was too bearish for either a bear market or a correction in risk assets.
  • Profits were higher than expected (global EPS jumped 13.4%) this time thanks to a synchronized global PMI recovery.
  • Policy was aggressively easy, as the ECB and BoJ bought a massive $2.0tn of financial assets; fiscal policy also easy (e.g., US federal deficit up $81bn to $666bn).
  • Returns were abnormally high in 2017 (Table 3); corporate bonds and equities soared, but the biggest surprise was stubbornly low government bond yields: thematic leadership of scarce “growth” (e.g. tech stocks), “yield” (e.g., HY, EM and peripheral EU bonds) and “volatility” once again remained the core of the bull.

Great Quotes by Market Wizards -Collection

  
Analysis, Education
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The quotes listed below come from interviews Jack Schwager conducted with top Traders in his best seller Market Wizards.

Jack D Schwager

Trading provides one of the last great frontiers of opportunity in our economy. It is one of the very few ways in which an individual can start with a relatively small bankroll and actually become a multimillionaire.
Of course, only a handful of individuals succeed in turning this feat, but at least the opportunity exists.
A rigid stop-loss rule is an essential ingredient to the trading approach of many successful traders.
Winning streaks lead to complacency, and complacency leads to sloppy trading.
As I use the term, a ‘trader’ would be primarily concerned with which direction the stock market was heading, while an ‘investor’ would concentrate on selecting stocks with the best chance of outperforming the market overall.

Joseph Marshall Wade

If I wanted to become a tramp, I would seek information and advice from the most successful tramp I could find. If I wanted to become a failure, I would seek advice from men who had never succeeded. If I wanted to succeed in all things, I would look around me for those who are succeeding and do as they have done.

Michael Marcus

Taking advantage of potential major winning trades is not only important to the mental health of the trader but is also critical to winning. Letting winners ride is every bit as important as cutting losses short. If you don’t stay with your winners, you are not going to be able to pay for the losers.
In addition to not overtrading, it is important to commit to an exit point on every trade. Protective stops are very important because they force this commitment on the trader.

Bruce Kovner

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My take on how to read financial news headlines

  
Analysis, Education
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Headline: Stocks Rose/Fell Today by 1% Because of _______
How to read it: Millions of shares traded hands today because investors all have different goals, strategies, risk profiles, holding periods and ideas.

Headline: [Popular economist/fund manager] Expects Market Volatility to Pick Up Later This Year
How to read it: Saying you expect volatility to pick up at some point in the future is like saying you expect it to rain at some point in the future. And volatility works both ways — to the upside and the downside — so really this is just a way of saying the markets will fluctuate, which of course they will.

Headline: George Soros Gained/Lost $1 Billion
How to read it: Soros has around $25 billion so what he does with his money shouldn’t concern most investors.

Headline: Markets Got Slaughtered Today: A Sign of Worse Things to Come?
How to read it: No one ever really knows why stocks rise or fall on a single day. The market is up just over 50% of all trading days and down just under 50% of all trading days so you can never put too much stock in any one day.

Headline: Investors Are Dealing With More Uncertainty
How to read it: The future is always uncertain. The past just feels more certain because now we know what really happened.

Headline: Are Market Overbought Here? 
How to read it: Ask us again in a few months.

Headline: [Democrats/Republicans/current or past president] Caused X% of Economic or Stock Market Growth
How to read it: Presidents or political parties don’t personally control economies or stock markets made up of millions of participants and trillions of dollars all wrapped up within a complex adaptive system. These things don’t come with levers that you can pull to make them rise or fall.

Headline: The Stock Market Enters a Painful Correction
How to read it: Retirement savers rejoice as stocks fall on the week. Those with decades to save & invest should hope it continues.

Headline: _____ Could Cause Gold Could Rise to $1500/oz.
How to read it: Total guess. No one has a clue.

Headline: Is This the Stock-Picker’s Market We’ve Been Waiting For?
How to read it: It’s both always and never a stock-picker’s markets because it all depends on the quality of the stock-picker, not the market.

Headline: Goldman Sachs Expects Stocks to Rally For the Next 3 Months
How to read it: Big financial firms have so many strategists that there will surely be a research piece put out in the coming days that totally contradicts whatever they just predicted.

Headline: When Will the Fed Raise Rates?
How to read it: Has Fed policy really ever helped you make better investment decisions? Even if you knew exactly what they were going to do in the future you still have no idea how other investors will react. 

Headline: Investors Panic as Stocks Enter a Bear Market
How to read it: Don’t panic — expected returns and dividend yields go up during bear markets. This is a good thing for long-term investors.

Headline: A Perfect Storm Caused Markets to Fall
How to read it: Stuff happens in the markets and we like to attach important-sounding narratives to everything. 100-year storms now seem to come around once a month or so. (more…)

25-One Liners for Traders (Read and Understand ) -Anirudh Sethi

  
Analysis, Education
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  1.  If you need to spend your money in a relatively short period of time it doesn’t belong in the stock market.
  2.  If you want to earn higher returns you’re going to have to take more risk.
  3.  If you want more stability you’re going to have to accept lower returns.
  4.  The stock market goes up and down.
  5.  If you want to hedge against stock market risk the easiest thing to do is hold more cash.
  6.  Risk can change shape or form but it never really goes away.
  7.  No Trader is right all the time.
  8.  No  Trading strategy can outperform at all times.
  9.  Almost any Trader can outperform for a short period of time.
  10.  Size is the enemy of outperformance.
  11.  Brilliance doesn’t always translate into better Trading results.
  12.  “I don’t know” is almost always the correct answer when someone asks you what’s going to happen in the markets.
  13.  Watching your friends get rich makes it difficult to stick with a sound Trading plan.
  14.  Day trading is hard.
  15.  Outperforming the market is hard (but that doesn’t mean it’s impossible).
  16.  There is no signal known to man that can consistently get you out right before the market falls and get you back in right before it rises again.
  17.  Most backtests work better on a spreadsheet than in the real world because of competition, taxes, transaction costs and the fact that you can’t backtest your emotions.
  18.  It’s almost impossible to tell if you’re being disciplined or irrational by holding on when your investment strategy is underperforming.
  19.  Reasonable investment advice doesn’t really change all that much but most of the time people don’t want to hear reasonable investment advice.
  20.  Successful  Trading is more about behavior and temperament than IQ or education.
  21.  Don’t be surprised when we have bear markets or recessions. Everything is cyclical.
  22.  You are not George Soros or Jesse Livermore
  23.  The market doesn’t care how you feel about a stock or what price you paid for it.
  24.  The market doesn’t owe you high returns just because you need them.
  25.  Predicting the future is hard.

JPM Develops A.I. Robot To Execute High Speed Trades, Put Humans Out Of Work

  
Analysis, Education
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With high-margin FICC revenues stuck in a secular decline across the financial industry, banks are forced to extract as much profit as possible from existing product lines. Which explains why JPMorgan will soon be using a “first-of-its-kind robot” to do away with carbon-based traders altogether and execute trades across its global equities algorithms business using a “robot”, after a recent trial of JPM’s new artificial intelligence (AI) program showed it was “much more efficient than traditional methods of buying and selling“, the FT reports.

JPMorgan, the world’s biggest bank by revenue, believes it is the first on Wall Street to use AI with trade execution and said it would take rivals 18 to 24 months and an investment of “multiple millions” to come up with similar technology.

 The AI — known internally as LOXM — has been used in the bank’s European equities algorithms business since the first quarter and will be launched across Asia and the US in the fourth quarter, Daniel Ciment, JPMorgan’s head of global equities electronic trading, told the Financial Times.

In the latest victory for robot kind over humans, LOXM’s job will be to execute client orders with maximum speed at the best price, “using lessons it has learnt from billions of past trades — both real and simulated — to tackle problems such as how best to offload big equity stakes without moving market prices.” (more…)

Learn from Jesse Livermore's personal life than from his trading techniques :Jesse Livermore Boy Plunger

  
Analysis, Education
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1929-crash

Jesse Livermore, the so called “Boy Plunger” and probably the greatest Wall Street Trader who ever lived, died $340,000 in debt.

Many look at his life to learn the secrets of his often extraordinary trading success. A better track for financial prosperity is to study and learn from mistakes he committed in his personal life.

The clues for true riches can be found there. The lessons from his personal failures are exponentially more important for modern investors than his exploits in the commodities and stock markets.

During the Stock Market Crash of 1929, Jesse Livermore made $100 million dollars betting that the stock market would plummet in spectacular fashion.

When he arrived home after another appalling day of market bloodletting in October of 1929, both his wife and mother-in-law met him at the door in tears. (more…)

DOs and DONTs of any sort of correction

  
  Education
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DOs and DONTS of a market crash

1. DO notice how cyclical markets are
2. DONT react emotionally
3. DO stick with your plan
4. DONT rely on gurus, shamans or talking heads (1000% Avoid Blue Channels )
5. DO note your own state of mind
6. DONT take actions while in a state of discomfort
7. DO notice the panic around you
8. DONT try to time the markets
9. DO look for signs of capitulation
10. DONT confuse the short term for the long term

Bonus: DO have a sense of humor

Great Trading Books -Just Read If U Have Time

  
  Education
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MY-LIBRARY

Trading Psychology :

  • “Trading to Win: The Psychology of Mastering the Markets”
  • “Trading in the Zone: Maximizing Performance with Focus and Discipline”
  • “The Psychology of Risk: Mastering Market Uncertainty”
  • “The Mental Strategies of Top Traders: the Psychological Determinants of Trading Success”
  • “Hedge Fund Masters: How top Hedge Funds Set Goals, Overcome Barriers and Achieve Peak Performance”
  • “Mastering Trading Stress: Strategies for Maximizing Performance”
    • Prior to his passing, I had been organizing a conference with Dr. Kiev.  He revolutionized the hedge fund industry in terms of trader performance
  • “Psychology of the Stock Market” – G.C. Selden
    • The book was written in 1912, but offers great insight in stock market speculation.
  • “On Managing Yourself” – Dr. Mario F. Conforti
  • “As a Man Thinketh” – James Allen
    • A timeless classic in my opinion.
  • “Fighting Attachment in Trading” – Jon Ossoff (Active Trader, August 2011)
  • “The Crowd: A Study of the Popular Mind” – Gustave Le Bon, 1896
  • “Who Are You?” – Linda Bradford Raschke (SFO, Aug. / Sept. 2003)
    • Linda has made a number of contributions to trading and I have utilized several of her general market observations and concepts.
  • “Maintain Your Mindset: Using the Three R’s & Positive Thinking” – Linda Bradford Raschke (SFO, July 2004)
  • “The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust” – John Coates, 2012
  • “Deny Your Inner Gamble Monkey” – MarketWatch.com (December 11, 2012)
  • “Why Smart Traders Do Dumb Things: Understanding Prospect Theory” – David Silverman (SFO, July 2005)
  • “Self-Attribution Bias in Consumer Financial Decision-Making: How Investment Returns Affect Individuals’ Belief in Skill” – Arvid O. I. Hoffmann Thomas Post
  • “Conquering Sabotage Traps in Your Trading” – Adrienne Toghraie – INO.com
  • “Five Guiding Principles of Trading Psychology” – Brett N. Steenbarger, Ph.D.
    • Brett is one the must follows in the field of trading psychology. He has written so much on the topic and all is easily accessible on the web.
  • “Explaining the Wisdom of Crowds: Applying the Logic of Diversity” – Michael J. Mauboussin (Legg Mason, Mar.2012)
  • “The Playbook: An Inside Look at How to Think Like a Professional Trader” – Mike Bellafiore, 2014
    • The most comprehensive book I’ve read on what it takes to become a professional trader.  A lot of books talk about the concept, but this lays out a step-by-step blueprint. Very well written.

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