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Balancing Emotions of trading

Balancing my emotions is trading stock is one of the hardest things I personally have had to do.   Balanced emotions are necessary to make good investment or trading decisions.  As the market rallies, and I sit short in my positions that I am losing a lot of money in.  I find my self smiling writing this article.  Hardly the way I felt when I was very nervous about the long position I had a call option yesterday that I worried all night about. Wish I held on to that.  What I take away from that is that I have a negative bias on the market even if that makes me wrong.  I feel more stressed out when I have a long position in the market.  Part of me to be honest is afraid of some sort of a disaster in the world and finds it easier to see the argument for the down side in the market.  Needless to say this feeling needs to be put in check. 

Asking myself a simple question is also helpful.  Which direction would I be if I was the market maker. Is his trade accounting buys against sells   likely balanced or way out of wack.    The market maker is the one guy that can’t lose or the market would not operate.  In recent times I have seen a market that feels like it could fall apart.   Just because the markets are automated doesn’t mean the system can lose money.   So trades will usually go the opposite direction of the emotions of the average trader.   Am I acted opposite of Joe investor? or am I acting like Joe investor?  If acting as opposite Joe investor I probably should have more confidence if I have come up with the trade for good fundamental/technical tools that brought me to take a chance.  On the other hand if I am on the same side of average Joe investor.  i.e. I felt like selling when the market was down this morning becuase the bank of England held rates steady to fight inflation.   I should have felt more confident with my long position.    I should reflect to the reasons I entered the trade, realize the market should move higher because by this point in the sell off everyone is selling and the market maker can’t lose money.  The market maker needs to at least get closer to even on his buys and sells. That’s why markets peak, and bottom when everyone is buying or selling.  The market maker has the biggest advantage at this point if things go the opposite direction.  To do this he must drive the others out of their positions.   So maybe I cracked the alogorythm of the automated market maker.  Good luck balancing your emotions.   Much of the market volatility can be expected as the market maker moves the market to keep his trades balanced.  Here are five (okay eight) quick ideas I am going to try to follow.

1. Stay on the side of the market maker.  Be aware of who the buyers and sellers are in a stocks

2. Only enter the best trades.

3. Be patient.

4. Limit position sizes to an amount I am comfortable losing.

5. Review the risk reward of a trade before making it. 

6.  Use bollinger bands (moving average trading range).

7.  Be more balanced to the fact that the market is priced to all known information.   The future is unknown.    

8.  Reading other intelligent stock trading blogs (Kirk report a top blog) and books.  CNBC seems to be overly biased at times to boost television ratings.

  9.  Work hard, and continue to review my material to make good decisions

January 10, 2008 Posted by | Stock investing links, ideas, and opinions. | , , , , , , , , , , , , , | 2 Comments

Economic policy to keep America strong in the face of a bear market

 Economic policy to keep America strong in the face of a bear market

The government needs to cut taxes, liabilities, and debt to stay competitive in the global marketplace. To pay for these tax cuts the government should offer to settle estate taxes early for those over the age of 65.  Also, possibly negotiate the settlement of retirement benefits to reduce estate taxes owed at death for the many retirees that don’t need the money. 

The rate of profit a business is expected to return in the future declines because competition around the world competes at higher capabilities.   The government currently carries idiotic large debt loads because of the inappropriate influence of money. The budget needs to balanced and idle money needs to be taken out of the market. Many municipalities and local governments will default at some point in the future with higher borrowing costs, high debt loads, and stagnation. 

The government should work to reduce medical payments paid out through government programs.  This can be done in part by expanding the number of specialized doctors around the country. To meet the growing demands our country has for medical care and ensure competition is competitive.

Greatly expanding the number of doctors in training admitted to doctoral programs is essential to making this happen.  The supply of specialized doctors has been limited by Universities whom I speculate have received large contributions from alumni to unconscionable fail to expand the number of doctoral training programs needed to keep pricing competitive, and pass along the gains our society has made to be able to produce highly educated citizens. Government intervention in any area that money inappropriately influences is necessary and key to a moral and efficient society.

Education is the most cost effective way to deal with all the world’s problems and is not something to be feared.  Education programs should be spread and kept affordable to help society reach our potential in life.

 As our capitalist society matures, private citizens have stored up large amounts of wealth, governments have high levels of debt/obligations, and much of the infrastructure we need going forward is already built. As a result, rates of profit will be lower, and the government needs to intervene to ensure moral as well as proper financial decisions are made.

The government can take passive ownership in large corporation or in real estate to settle estate taxes, and allow citizens to maintain control of the properties that they have obtained over their life time. The government can help facilitate business, and greatly reduce the costs of businesses to operate.

Reducing the money supply will take stagnant money out of the economy, and help society adapt to a more competitive environment. The economy can operate with lower margins as society becomes more efficient; additionally, continuing to add value to society.

The reasons why we need to take these actions 

  China is moving deliberately, appropriately, and swiftly to achieve advantage over the United States.   Much of the nation’s problems can be eliminated with the early settlement of retirement benefits, and the settlement of death taxes.   Restoring our competitive place in the global market and benefiting everyone.  The country would be aligning our national interests with all other nations in particular the Chinese, and greatly reducing the risk and or inappropriate reliance on wars in the future.  Trade balance between competitive nations’ are supposed to be equal. In economic theory a nation is supposed to export as much as it imports from a competitive nation.  Over time with the right policies we can find this balance with all nations as we should have been doing so in the past.  It is pure garbage that is our nation’s interest to keep operating with trade imbalances.  

    The Chinese government has recently moved from a communist society to one that is a 50/50 ownership between society and the private citizens.  I assume they chose the 50/50 rate to give both maximum flexibility and to target the best estimate of long run improvement in efficiency over a life time.   China is currently using a 15% rate of taxation on many of its enterprises because they own half of the large corporations. So they achieve the same tax revenue stream as the United States from businesses’ with one third of the taxation rate. This gives Chinese business’s a huge long term advantage that will compound over time. This could result in disaster for our nation if we are unable to achieve a comparable business model.

China has a lot of idle money in United States government securities compounding interest over time, and extending the competitive advantage of China to compete in the world economy.  We must negotiate with China and find compromise. We need to begin to settle these debts for assets reclaimed in the early retirement of estate taxes and become close allies of China working toward the common good.  We have lots of technology to share that will greatly benefit both societies in the long term.

  

We have made huge advances in solar technology, and salt water was recently made drinkable with the use of a special ray of light in a university lab. We need to move rapidly towards making solar technology and all energy saving a bigger piece of the solution.  Finding ways to share these technologies on our terms with other nations can be very helpful in promoting common welfare, economic growth, and sustainability.

A Capitalist model working together with a communist model has the greatest benefit for everyone.   Both capitalism and communism can work together to add the most value to society with the least risk.  A pure Capitalism system pits those with money against those without money looking for no common ground. A pure Communist system fails to account for individual needs and abilities. Pure capitalism produces violent economic cycles with all classes suffering. Pure Communism produces a less productive society.  Money also becomes isolated in pure Capitalism and leads humans to make inappropriate choices. You see this played out in our society as special interests have inappropriate influence over government officials. Causing politicians to neglect the best interests of the people they represent.  In the past, our nation has resisted renewable energy such as the sun, in favor of importing large amounts of oil overseas and causing unnecessary environmental damage, so a small group of people could get unbelievably rich. 

Many American corporations and citizens currently have large buying power, and will lose those benefits without appropriate intervention.    The cutting of taxes, reduction of current/future liabilities, and retaining of purchase power by our nation is in the entire countries best interest. As well as the world we live in. 

 United States runs a dangerous risk of ruining its credit rating at some point in the future, and can be particularly damaging considering will become more scarce in the future.  Sovereign wealth funds can become more dangerous if we become very weak.  Contrary to what you may have been told about a recent purchase of 7% of Citi group by a foreign sovereign wealth fund is it was made in preferred stock. If the company fails, the sovereign fund will own a much higher percentage than when it originally was reported to have taken a stake in Citi Group Corporation.  Keep in mind they paid cash, and if they become more aggressive they could take control of so much more of the world’s technology.  If we try to limit this investment we run the risk of being cut off of natural resources.  China has recently made a purchase into Black Stone group a corporation that specializes in corporate take over’s. This makes it very clear why trade balances are necessary to be balanced over time.  Isolation is not the solution.  United States corporations receive much of their revenue from foreign nations.  Finding common ground is the solution.

 Our dollar has stood as the world’s storage of wealth because of faith our government could always figure out the answer to any problem.  Well that view is being challenged in the mind of everyone because of poor choices, and arrogance.   The world has limited resources available and we need to be mindful of this.

  As the dollar weakens in a pure capitalist environment it would be in the world’s best interest to exploit this and take advantage of opportunity for their benefit.  We need to switch to a government policy model that seeks sustainability and quality of life for all to bring the world together.

 Humans breed like rats in conditions of poverty and that is arguable the most important reason it is in our best interest to make sure everyone in the world has a good quality of life.   Deals can and need to be made to individuals or nations to control the populations as seen in China.  Are poorest citizens having the most the children and our government subsidizes the problem with payments.  The problem grows and gets worse over time.  Instead we should pay the poorest not to have children and share technology in exchange.  The world can live happily ever after with proper planning and appropriate actions as our world become more advanced.

Conclusion

Taking responsibility with these aggressive actions will help us meet the challenges of the future.  By using the most responsible way to handle our debts, and deal with predictable problems that could arise from the financial burden of our debt we will greatly benefit. 

Corporations could better focus on meeting societies’ needs. All would benefit from the increased efficiencies of scale and sustainability.  It’s a simple change switching from that of a growth dominated society to one of sustainability.  The later should receive a higher valuation in the world market.   The reduction of government debt, entitlement payments, and government ownership is in the best interest of everyone.    

Handling these sensitive issues quickly would be prudent to show Americas’ ability to respond quickly to changing information.  This legislation can be spread broadly to individual states, and the nation.   Please share this idea to gain the support of all and find the best solution. The quality of life for the nation, the environment, and the world’s population depends on good judgment.  Please investigate my ideas, and pass legislation early to the benefit of all.  Any one in elected office can win any election with good policy judgment!

  

Resources

  

Trend Following by Michael Covel

2006 by Pearson Education, Inc.

Contradictions of Capitalism & an introduction to Marxist Economics by Lenny                        Flank      Red and Black pub. Aug 1, 2007 

                                            

  

Education

Excelsior College   Bachelors degree in the liberal arts of science with a major in economics and a minor in education

January 10, 2008 Posted by | American Politics and Policy Ideas | , , , , , , , , , , , , , , , , , , , | Leave a comment

Short Sold QQQQ

Be careful, and don’t be long this market are my thoughts.  I cashed in my long position on a QQQQ  I went long based on the oversold condition and hoping the British Central bank would lower rates.  They cited fear of inflation as the reason for not doing so.  Not a perfect exit near the low on the open this morning the QQQQ’s.   Then I resumed my short position as the market came close to neutral on the day. Bill Seidman the guy who fixed the savings and loan crisis in the 1980’s was just on CNBC saying the current situation has similarities to that of the 1980’s.  Bill was concerned if the consumer realizes things are getting bad they may tighten up and make the situation worse. That should surely fuel the fire as more investors wake up to reality. With economy weaknening, defaults risings, credit tightening, and the stock market being a forward indicator I will continue to go in and out the market shorting the market.   The trend is lower. (I giving back my profits on this one)

I should have waited to catch a pop in the market.  With alot of people selling or buying you know there is going to be alot of volatility.  So try to buy low and sell hi. (talking to myself on this one…lol)  with a Crashing the stock market is the easiest way the rich can protect their buying power in a weak economy. Its going to get worse in my view.

January 10, 2008 Posted by | Uncategorized | , , , , , , | 1 Comment

Short Sold CRM, over priced stock in a weakening economy

Given the weaknees in the market, and a number of competors in the CRM sector this stock should tank.  I first took the idea from Jim Cramer’s Mad Money last night about  CRM stock being priced for perfect earnings.   I further found they had very little earnings.    I bought the Jan 55 option puts.  It can take a long time for big shareholders to get out in a stock with low volume.  The stock has crossed below the 50 day moving average which should bring more sellers into the picture.  Besides insiders never miss a day to sell the stock check out insider sales on yahoo finance.  Auto sales have taken place just about every day!!

Be careful, and don’t be long this market are my thoughts.   Bill Seidman the guy who fixed the savings and loan crisis in the 1980’s was just on CNBC saying the current situation has similarities to that of the 1980’s.  That should surely fuel the fire as more investors wake up to reality. With economy weaknening, defaults risings, credit tightening, and the stock market being a forward indicator I will continue to go in and out the market shorting the market.   

 Steve Leisman pointed out today that software stocks are vulnerable in 2008 with 30% of Ceo’s saying they would cut back on CRM software if they needed to cut back on spending due to weakness in the economy.

This article is for entertainment purposes only, not investment advice.  Do your own research and only make educated decisions when trading

Now you add in my brother in law works in the sector, and he said he was expecting a flat year for the sector.  Hardly a situation that a hi growth company can be overly successful in.

CRM could go up on the other hand because it has recently sold off, and is obviously the stock is over priced because investors pay for growth, and buyers/sellers set the current price.   Kramer did say the risks were 10 points up and 30 points down. That means it could go up 10 from here.   Always remember to look at the other side of the trade, and only take the best opportunities.  Rember this site is so you can learn from my mistakes as well as succeses. Good luck

January 10, 2008 Posted by | Uncategorized | , , , , , | Leave a comment