Monday, September 7, 2009

Whats obvious is obviously wrong.

Learn to expect the unexpected

Anthony Bolton says: "When I became optimistic about markets in the last quarter of 2008 and the first quarter of 2009, I received a huge amount of push-back from the audiences that I spoke to. Didn’t I understand that the economic outlook was dire and possibly the worst for a generation, they asked me?" "One surprise about the stock market is that, often, it doesn’t move in a rational or logical way. As a result, people who succeed in other walks of life through a logical approach to business are perplexed that they are unable to do as well in the stock market by using similar methods" Yep old AB went a bit too soon but then managed to get his second breath. This might be of interest to some of you. Sorry if you cant see the whole article.

Posted by techieman @ 01:38 PM (1306 views)
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19 thoughts on “Whats obvious is obviously wrong.

  • He was def too soon, I recall him calling a new bull market at least a year ago, and I guess if he invested at that time he would be breaking even right now.

    As you said sometime the March lows were so obvious at the time, that I think I even called them, there is however a big difference between that and backing the hunch, and I certainly never thought the markets would come so far.

    About 18-24 months ago I just had a passing interest in stocks and I was surrpised to see them rallying at the time despite the awful outlook, I’m no less surprised today and without the sentiment upside that clearly existed in March see absolutely no reason to take a punt in this market, when I struggle to understand it, or the valuations being placed on things.

    I guess if I’m wrong and we go into a period of unexpected well grounded prosperity and growth there will be time enough to invest, but I still see the outlook as dire and just not priced into a lot of stocks.

    The only thing that worries me is that I might be too attached to my view, I am aware for example that I would take far more pleasure from the market falling, to what I see as realistic values, than from it continuing to rallly – kind of irrespective as to what side my money is on. Balanced against this I suppose there needs to be a relative constancy to perspective, changing perspective based simply on others not agreeing with your view is not going to be a recipie for success.

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  • Bolton certainly got that call more or less right, but at the same time Neil Woodford has been very pessimistic. Which guru does one follow? Considering the debt still out there and the prognostications of the small but erudite band of Gillian Tetts and Vince Cables, it would seem to be mostly hope holding up the markets, a pretty flimsy substance.

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  • b/weather – we all look for people, or should that be to people that reinforce our view. Been there done that dont work. As you said AB is being a bit cheeky, but it just illustrates how hard this is to do.

    Did you see my link to the wiki on Paul Tudor Jones?? Now there is some guru (as LTF puts it) to follow.

    I agree with your view that the boat has been missed – there isnt gonna be an extra 50% up from here…..or is there? :-).

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  • mountain goat says:

    B/W changing perspective based simply on others not agreeing with your view is not going to be a recipe for success.

    As he says at turning points especially, the correct view is, by definition, the minority view. So the skill really is identifying turning points, or realise that a turning point has happened and that it is now time to follow the emerging trend.

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  • Who was it that said “Be greedy when others are fearful and fearful when others are greedy”?

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  • Bluebeach….

    Warren Buffett

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  • I would say it is impossible to pick turning points, or anything else specific. What one may be able to do is assign a (rough and ready) likelihood of a direction and taylor judgements/investments accordingly. How to estimate such probabilities? You tell me.

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  • LTF – its not impossible to pick turning points just difficult. Of course we are talking areas here not exact turning points. What is an area also depends on what you are comfortable with.(i.e. what you are willing to risk). Personally i have called many turning points – however i would say that i hardly ever trade them, but normally look for confirmation. And the reason i look for confirmation is, by there nature turning points are risky (but very rewarding if you get em right).

    As to how you actually do it? Well that boils down to a few indicators which in my view work. However IF the area where you think there will be a turning point doesnt conform then (in a bull) you say if thats breached its PROBABLE that we will go to the following area. Of course in hindsight they are obvious. But with hindsight we would all be…….

    A case in point was the $/£. I said on here (and i was just applying a rule – which of course i will keep to myself, mainly because the rules change depending on the way the market moves) that we should look for a high of 1.70 – i think the market was 1.63 at the time, (before that when it was 1.58 i said we would go up to around 1.65). I then saw it get there quite quickly and said right 1.73 is the next level. The actual high was 1.70 and change.

    As for buying actual shares you know i have no interest in that, although also that can be done – i.e. finding tops / bottoms (i have known those that used to do it).

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  • but then i would say that wouldnt i! Have a good evening LTF.

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  • We seem to be at a larger turning point with utterly unprecedented levels of national and personal debt, making credit expansion, our engine of growth for the past 30 years unviable and with no obvious alternative.

    I feel that this is not understood and there is a huge belief in governments and central banks capacity to get us back to normal where normal was the problem all aling.

    This is not 1929 – 1932 because structurally in terms of debt, malinvestement and overcapcity it’s far far worse.

    There is also a weird disconnect between what I see in my day to day as a commercial lawyer and what is reported. It is not that everywhere I see people losing jobs, although there are a quite a few, but that the income of lawyers, other professionals and business people is being significantly compromised with no obvious route to return to where they were in 2007.

    Just as well we are not a country whose future is based largely on consumption I guess.

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  • 9. bellwether – even the Weimar Republic had its golden years, I feel we are mirroring that period now.

    Ride the wave until March then run for Gold!

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  • Techieman
    Did you still see us reaching for new lows after hitting about 5100 or so ?

    Bellwether
    I too feel everything is way overvalued, given the fundamentals of the world economy in general. I didn’t believe government and central banks would be able to take us back to where we were and thought ourselves to be well & truly screwed. However, I did underestimate the lengths that government and central banks would go to to undo the mess they’ve created.

    I therefore feel I should trade what I see, but do my best to keep 1/2 of my positions short so if the markets decide I was right all along and do collapse overnight, I will of limited the damage.

    I’m not sure what type of platform you’re using to trade but you had mentioned switching over to spreadtrading platforms. Were you aware that a stop isn’t a stop unless it’s a guaranteed stop.
    IE. If you had a long position at £10 per point on a £10.00 stock with a stoploss in at say £9.90, so you weren’t risking more than a £100 on that position. If the Dow suddenly fell after our close, followed by the Asian markets shedding say 5% overnight, that £10.00 stock could re-open the following day at say £9.40 and you would be automatically filled by your stop at that price and you would loose not the anticipated £100, but £600. Now multiply that over 10 or 12 long positions !

    And that’s why I’m currently looking for short opportunities – just in case.

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  • Hi str 2007 – YES i am. And am happy to back that up with some serious cash, after probably a couple of dips of my toe. Look up the wiki of Paul Tudor Jones and you will see the philosophy.

    Yes Mind the Gap! :-). I AM certain B/wether would know that.

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  • Thanks Techieman

    Glad I’m not the only one on that wave length.

    Do you have a stratergy in place as such for when and if the day comes. I’m assuming it’ll be sudden and largely done in a shortish period of time ( a week or 2) ?

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  • str 2007 i think you will have some time to get in. as usual “it depends”. Hace a good one!

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  • Thanks, where can I find Hace, I can’t see it listed in 350 ?

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  • str2007 – typing not a forte (they are in the indexes by the way). As i said if (very probable) it breaks 4950 then probably up to mid 5100s if it gets there then could go further. That all depends HOW it gets there.

    As always everything is probabilistic – no certainties (sadly) :-). After the end of this upmove since march things good get Europhic and then everyone says we are off to the moon. Thats the danger time. [a bit like people predicting the average house price being £2m by 2020 in mid 2007 – we all know what happened next!].

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  • Well do keep us posted on your views, I have started a bit of trading now as I said I would. I missed the best part of a good bull run being off sick for 3 months, but back in action now.

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  • better than me – I took my eye of f the ball and forgot to remove a load of puts that have now caused me a massive loss. Bldy expensive holiday

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