Holiday

Sorry for not posting at all in the last couple of weeks, I was on holiday, I will come back later with additional details ... and some photos.

Buying or gambling?

"Remember that stocks are never too high for you to begin buying or too low to begin selling. But after the initial transaction, don't make a second unless the first shows you a profit. Wait and watch.
I don't mean to be understood as advising persistent pyramiding. A man can pyramid and make big money that he couldn't make if he didn't pyramid; of course. But what I meant to say was this: Suppose a man's line is five hundred shares of stock. I say that he ought not to buy it all at once; not if he is speculating. If he is merely gambling the only advice I have to give him is, don't!
Suppose he buys his first hundred, and that promptly shows him a loss. Why should he go to work and get more stock? He ought to see at once that he is in wrong; at least temporarily."

(Edwin Lefevre - "Reminescences of a Stock Operator")

Buying in a bull market

"Let us suppose, for example, that I am buying some stock. I'll buy two thousand shares at 110. If the stock goes up to 111 after I buy it I am, at least temporarily, right in my operation, because it is a point higher; it shows me a profit. Well, because I am right I go in and buy another two thousand shares. If the market is still rising I buy a third lot of two thousand shares. Say the price goes to 114. I think it is enough for the time being. I now have a trading basis to work from. I am long six thousand shares at an average of 111-3/4 and the stock is selling at 114. I won't buy any more just then. I wait and see. I figure that at some stage of the rise there is going to be a reaction. I want to see how the market takes care of itself after that reaction. It will probably react to where I got my third lot. Say that after going higher it falls back to 112-1/4, and then rallies. Well, just as it goes back to 113-3/4 I shoot an order to buy four thousand at the market of course. Well, if I get that four thousand at 113-3/4 I know something is wrong and I'll give a testing order that is, I'll sell one thousand shares to see how the market takes it. But suppose thatof the order to buy the four thousand shares that I put in when the price was 113-3/4 I get two thousand at 114 and five hundred at 114-1/2 and the rest on the way up so that for the last five hundred I pay 115-1/2. Then I know I am right. It is the way I get the four thousand shares that tells me whether I am right in buying that particular stock at that particular time for of course I am working on the assumption that I have checked up general conditions pretty well and they are bullish. I never want to buy stocks too cheap or too easily."

(Edwin Lefevre - "Reminescences of a Stock Operator")

Some fundamentals of stock trading

"People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy on a rising market is the most comfortable way of buying stocks. Now, the point is not so much to buy as cheap as possible or go short at top prices, but to buy or sell at the right time. When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale up."

(Edwin Lefevre - "Reminescences of a Stock Operator")

Clever jokes

There are 10 types of people: those who understand binary and those who don't.

- Have you heard the latest stats jokes?
- Probably ...

Investing vs. Speculating

After a short intermezzo into the world of politics, back to economics and investing.

So, how could one define and contrast "investor" vs. "speculator"? This is also the main focus of the first chapter from Benjamin Graham's "Intelligent investor" - "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

Note that investing, according to Graham, consists equally of three elements:
- you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock;
- you must deliberately protect yourself against serious losses;
- you must aspire to "adequate", not extraordinary, performance.

The Economist

Although I read each weekly issue from local business magazine ("Money Express", "Business Magazin", and "Business Week"), from time to time I read "The Economist" or other foreign economics magazines.

In this week's issue, an unpleasant - but true and expected - surprise from "The Economist". Under the headline "Corruption in Romania - In denial", they run a story accusing both EU and Romania - The European Union conceals Romania's backsliding on corruption.

EU is accused in regards with last European Commission's report from February, which was a lot softer. Romania's authorities are being accused of "wilfully failing to co-operate".

The former prime-minister Adrian Nastase case is mentioned - "charged with several counts of corruption and bribery. He has now been exonerated by the parliamentary committee on legal affairs."

"In retrospect, the EU relied too much on individual politicians to back Romania’s anti-corruption drive, notably Monica Macovei, a much-admired justice minister. She was fired soon after Romania joined the EU in January 2007."

Some of the comments from The Economist website are quite interesting ...

Forex - about Stop Losses

"Take your losses when they are small because if you don't they are sure to get large. In this regard, discipline is of the highest importance. It is a cardinal mistake not to take a stop if is hit. It's even worse if the stock comes back and turns the trade into a winner because now you have been psychologically rewarded for making the mistake.

Get out quickly and re-assess the situation. If you think it will come back, put on a new trade with a new stop. Faith, hope and prayer should be reserved for God - the markets are false and fickle idols."

(whole article here)

Forex - Money Management

Forex, one of my passions ... I'm thinking of posting some small lessons for the beginners (both from my experience and from pro's books), but, until then, a very interesting article about MONEY MANAGEMENT - the most important thing for a trader.

"Put two rookie traders in front of the screen, provide them with your best high-probability set-up, and for good measure, have each one take the opposite side of the trade. More than likely, both will wind up losing money. However, if you take two pros and have them trade in the opposite direction of each other, quite frequently both traders will wind up making money - despite the seeming contradiction of the premise. What's the difference? What is the most important factor separating the seasoned traders from the amateurs? The answer is money management."

(read whole article here)

Environmental Friendly

Worldwide news

STARBUCKS (SBUX) announced it plans to close about 600 under-performing company stores (about 8% of the more than 7,000); there is a joke that there are too many Starbucks - in some areas it is possible to sit and sip the famous coffee in one Starbucks, while watching customers at the Starbucks across the street do the same thing.

Denmark is officially the first EU country in recession - the GDP fell 0.2% last quarter in 2007 and another 0.6% first quarter this year.

ECB raises benchmark rate to 4.25 pct

The European Central Bank raised its benchmark interest rate today by a quarter percentage point to 4.25 percent in an effort to contain the escalating inflation in the 15-nation euro zone.

Bank president Jean-Claude Trichet is expected to explain the decision at a news conference, with attention focusing on whether more increases are coming.

Trichet has stressed that his main objective is to keep prices stable, and all but promised an increase this month at last month's meeting. But he has also suggested that repeated interest rate hikes are probably not likely.

(source: George Frey, AP Business Writer)

Quote of the day

"The United States have developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market." — Jay Leno

Business learning

A very rich source for business learning: Charlie Rose – Video Archive, choose Business.

One hour interviews with Michael Dell, Richard Branson, Jim Collins, Warren Buffett, Lee Iaccoca, Michael Porter, Andy Grove, Bill Gates – sharing about them and businesses they’ve created or run.

Enjoy!

History repeating?

A little old, nevertheless a very interesting reading:

The Lessons of the Roman Empire for America Today

I'll try to share some comments later ...

Market timing

"[...] back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he "could calculate the motions of the heavenly bodies, but not the madness of the people". Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price - and lost £20,000 (or more than $3 million in today's money). For the rest of his life, he forbade anyone to speak the words "South Sea" in his presence."

Quote of the day

"If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them."

(Henry David Thoreau, Walden)

EMO Joke

- Knock knock!
- Who's there?
- Any.
- Any who?
- An EMO kid ...

(heard on Radio GUERILLA)

Interesting figures

Do you know that population with internet access spend 1 trillion hours watching TV per year???

If TV consumption decreased by as little as 1%, it would be enough to bring to life 100 projects about Wikipedia size per year.


source: Business Magazin, Clay Shirky "Web 2.0 Expo" presentation

Germany vs Spain

The final is about to begin. Quite a little bit of a surprise, I'm not sure how many would have predicted that Germany would reach the final. Spain, yes, they deserve to be here ... don't get me wrong, Germany as well (if they made it), especially after the match against Portugal.

Although the bookmakers see the Spain as the favorite here, I don't not what to say ... you know the definition of football: a sport between two teams, 11 against 11, played with a round ball, for 90 minutes, and where the Germans always wins.

I really hope we all see a really good match, and may the best team win!

PS my bet on this match, small stakes, is draw for first half, with Spain winning in the second half ...

Britain's Got Talent

I had the chance to be in Leeds, UK, one month ago, and I watched on TV one of the semifinals of "Britain's Got Talent". The winner of the semifinal, George Sampson, won the contest in the end, but below his performance - extraordinary - from the semifinal:

Re-visiting Graham. "The Intelligent Investor"

An excellent article from Barton BIGGS in this week's Money Express ...

So I think there couldn't be any better time than this to re-visit Benjamin Graham's "The Intelligent Investor", "by far the best book on investing ever written" (to quote Warren Buffett).

As Buffett wrote after Graham's death:
"Walter Lipman spoke of men who plant trees that other men will sit under. Ben Graham was such a man."

And what is an intelligent investor in Graham's view?
"The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists."

Dow Jones ...

down nearly 360 points, or 3.03%, to the lowest level for the last 20 months or so!!!

oil hit a new record, at $140.39 ... next stop $150? I think the question is how fast, and not if ...

Inflation ...

short update: as already priced by the market and expected by investors, NBR raised the monetary policy rate to 10% ... still no change in minimum reserve requirements ...

so, FED @ 2% (with Mr. Bernanke prepared to start raising the key lending rate fearing inflation might take off), NBR - 10%, and ECB - Mr. Trichet signaling interest rate hike to 4.25% ...

inflation - the disease of last century and this one as well?

Learning from past mistakes ... really?

they say an intelligent one could learn not only from his past mistakes, but from others as well ...

hmmm ... is this really the case?

ask yourself, how many married friends do you have?

and now, the tricky part: are you married? :)

Behavioural Finance

very interesting and challenging last night conference from Romanian Banking Institute, CFA Caffe - "Neuroscience and Behavioural Finance", with focus on investment and asset allocation (in bear markets) ...

2 remarkable speakers - Dr. Helmut Henschel, CFA and Adrian Mitroi, CFA, participative audience, topics discussed, made us forget (at least for those 3 hours) another RED day ... 2% down ...

definitely we are in a bear market, we short rallies ... but, on a longer horizon, I'm still bull on Romanian market ...

eOK

i've discovered - reading a business magazine - an interesting website, a new - let's call it - business idea: http://www.eok.ro/ ... LEGAL music distribution ... songs cannot be bought, just listened to for free on the website ...

who's behind this new concept? Florin Grozea, component of Hi-Q band ... congratulations!

Finally ...

... blogger ... life really surprises you sometimes ...

what you'll find here? articles about financial markets, stocks, investment ideas (both from my practical experience, and from various books), football (Romania has 22 million coaches, in case you don't know that already), movies, music, Eliade ... and other things that worth couple of minutes of your life ...

but enough for the first post, let the show begin.