Posts Tagged ‘emotion’

Get An Emotional Margin of Safety

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Get An Emotional Margin of Safety

emotional investing, stock market

Courtesy of Tim of The Psy-Fi Blog

Businesslike Investment

Warren Buffett states, quite frequently, that the most important investment statement ever made was that of his mentor, the father of value investing, Ben Graham:

"Investment is at its most intelligent when it is most businesslike"

Now if you’ve ever wondered exactly what that means you’re not alone. But it’s really one of the most important business lessons any of us can ever learn. It encapsulates the idea that investment isn’t about individual subjective feelings but about general objective rationale. To be good investors we need to learn to control our emotions. Unfortunately it’s got a bit more difficult since Graham first wrote those words.

Unemotional Investment

We find Graham’s statement difficult to understand because we don’t understand Graham’s – or Buffett’s – viewpoint. Although both men are amongst the best communicators the world of top-class investment has ever thrown up they still sit in the rarefied atmosphere of that elite group of investors who are able to step away from their own emotions when they come to investing.

By “businesslike” Graham meant “unemotional”. At the root of all good investment, he believed, was a focus on the underlying numbers. Graham, far more so than Buffett, was focused on the investment ratios and balance sheets of his investments. To be “businesslike” the individual investor needs to ruthlessly focused on the numbers, not the stories associated with them. Thus Graham and Buffett aim to remove the behavioural biases that affect most investors.

Of course, there’s no doubt that there are a select group of people who are more easily able to ignore the impact of group psychology than the rest of us. It’s possible – even probable – that the great investors of the world are simply psychologically unusual people who are capable of ignoring the impact of normal behavioural biases. These people are so rare that it would be interesting to take one of them and wire up their brain to a computer to see whether their responses are different from that of normal humans. Only trouble is they’re so rich that they can employ really big bodyguards and generally reckon their brains are their own concern.

Emotionless Delusions

Antonio Damasio has conducted lots of research
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Money Management: The Key To Survival

Excellent Money Management Advice, via Karl Denninger at The Market Ticker

Money Management: The Key To Survival

punishmentMany people have had some horrifying punishment meted out to their accounts the last couple of months (and especially in the last month), just like many did in late 2008 and early 2009 (on the other side of the trade.)

This is what happens when you don’t use sound money management:

As you know, during the crash of 2008 I was away from trading due to an accident and I was fortunate to have someone like Atilla to take care of my account which was worth about 350K at the end of August 08.

Market crashed and the person I trusted my account when I was away turned out to be one of the very few in financial world who called and traded the crash of 2008 timely. Later when I reviewed my statements I saw ES and option trades that made more than 70 points in less than 20 minutes on September 30 or October 1.

When I was back, I had an account worth near 4M and I decided to open a restaurant in NYC. I quickly found out that even Manhattan wasn’t immune from financial tsunami, so I was back to trading. With a larger than ever account. With a gross confidence, with a pride to be in the other class. A new player in a new game. However learning process became expensive.

When I switched from short term to intermediate term trading, I thought the only thing that matters is time frame. No I was wrong. This was completely a new game.

Yesterday was the day I could not hold on to my mistakes. I called the person who made me millions during the crash, who I tried to follow after the crash.

That’s $350,000 -> $4,000,000 -> $0

Look, we all take losses as traders.  I don’t care how right you are today, some day you will be wrong.  Badly wrong.

Leverage + too big of a bet + failure to segregate speculative accounts from core capital = you will eventually die.

Every time.

Not some times.

Every time.

Jesse Livermore blew himself up more than once, failing to protect fortunes he made trading that reached as high as $100 million during
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Zero Hedge

Visualizing China's Belt And Road Investment Map

Courtesy of ZeroHedge. View original post here.

The fifth anniversary of China’s Belt and Road Initiative (BRI) was recently marked in Beijing.

This 900 billion U.S. dollar transcontinental development project was launched in the autumn of 2013 when president Xi Jinping proposed the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road – the two main segments of the ambitious economic cooperation campaign. ...



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Phil's Favorites

Data deficit means we're in the dark about the digital divide

 

Data deficit means we're in the dark about the digital divide

Cellphones are everywhere in Africa - but that doesn’t mean the digital divide is closing. Legnan Koula/EPA

Courtesy of Alison Gillwald, University of Cape Town

Digital concerns underpin many of the UN’s Sustainable Development Goals. Gender equality, good health, quality education, industry innovation, smart and sustainable cities: these all require strong information and communications technology systems to become a reality.

For all of this to happen, developing countries will have to overcome the &ld...



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Kimble Charting Solutions

Party Like 1999 & 2000 or respect bearish divergences?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

This 4-pack looks at the DJ Home Construction, Banks, Junk Bonds and the S&P 500, highlighting that bearish divergences took place in 1999 and 2007 at each (1). These assets were sending bearish topping messages “BEFORE” the tops in 2000 & 2007.

Looking at this year, each asset has been creating bearish divergence since early 2018 at each (2).

Are each of these assets sending an important Risk/Reward message again or will it be different this time?

Just the Facts Ma’am– The majority of stock indices remain above respectiv...



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Insider Scoop

28 Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga.

Gainers
  • Globus Maritime Limited (NASDAQ: GLBS) rose 34.9 percent to $10.59 in pre-market trading following Q3 results. Globus Maritime reported third-quarter earnings of 0.08 per share, up from $(0.05) in the same quarter of last year. Sales came in at $4.861 million, up from $3.982 million year-over-year.
  • Avenue Therapeutics, Inc. (NASDAQ: ATXI) shares rose 33.4 percent to $5.55 in pre-market trading after InvaGen announced plans to acquire 33.3 percent stake in Avenue Therapeutics, a Fortress Biotech company.
  • Pyxis Tankers Inc....


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Members' Corner

NY Times: OPERATION INFEKTION

 

This is a three-part Opinion Video Series from NY Times about Russia’s meddling in the United States’ elections as part of its "decades-long campaign to tear the West apart." This is not fake news. Read more about the series here.

OPERATION INFEKTION

RUSSIAN DISINFORMATION: FROM COLD WAR TO KANYE

By Adam B. Ellick and Adam Westbrook

EPISODE 1

MEE...



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Chart School

Weekly Market Recap Nov 11, 2018

Courtesy of Blain.

This past week was saw another positive move up by bulls – especially in the Dow and S&P 500; the NASDAQ was not quite as enthusiastic.   Wednesday’s rally was on the legs of an election that was seen as market friendly or at least not as bad as it could have been.   Essentially – paying people a lot of money to get nothing done the next 2 years – woo hoo!

The market is interpreting Wedneday’s result as insuring that “no big things will get done,” in Washington between now and 2020, Craig Birk, chief investment officer at Personal Capital told MarketWatch. “The market appreciates the relative certainty of the slow legislative agenda.” he said.

“As President Trump plans his 2020 reelection campaign, a gridlocked Congress is unlik...



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Digital Currencies

Bitcoin's high energy consumption is a concern - but it may be a price worth paying

 

Bitcoin's high energy consumption is a concern – but it may be a price worth paying

Shutterstock

Courtesy of Steven Huckle, University of Sussex

Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.

However, the price to pay for all of this innovation is a high carbon footprint, created by Bitc...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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