Monday, October 27, 2008

Blessing to others

I give thanks to you, O Lord for your presence
Knowing that you will travel with me through this adversity.
You have chosen to forgive my arrogrance and pride.
I remember your faithfulness.
Though current perceived reality is harsh and threatening,
i trust in you and your truth.
A chance to be able to yield completely
in your Sovereignty
so that i can be of blessing to others
to proclaim :How great my God is!

Tuesday, October 21, 2008

Yieldedness

To you, O LORD, I lift up my soul;
in you I trust, O my God.

Cunning Bear and Sluggish Bull

This is an interesting article i came across 2 years ago.


***Characteristics of Bull and Bear markets***

The direction of the primary trend is the single most important piece of information that an investor can possess. It is critical to understand that the primary trend is the great all-powerful tidal-force of the market - the prevailing trend. The basic concept of the primary trend of the market is the most difficult concept to get over to people and that includes Wall Street professionals and money managers.

The most difficult thing to do in a bull or bear market is to exercise patience. In this world of instant information, perpetual talking, instant quotes, and fast moving markets, it is very easy to lose sight of the big picture. In this business of investing, the major consideration is always the direction of the primary trend of the market.

Patience has to do with the ability to sit through time, even boring time. A basic instinct among investors is "always to do something." Often, the correct posture is simply to sit with your basic positions and allow the primary trend to fully express itself. (Obviously in a bear market your positions would not be in stocks but cash deposits etc).

Big money is made investing early in a bull market and staying with the bull market for months, years and maybe decades, until the bull market finally expresses itself. The full expression of every major bull market is "super-speculation", while the full expression of every bear market is abject pessimism. Big bull markets and big bear markets always end in exhaustion. Exhaustion in a bull market occurs when the last bull has spent his money buying shares. Exhaustion in a bear market occurs when the last bear has dumped his last stock. Many events can temporarily halt a bull market - but nothing can end a bull market except exhaustion. The same principle applies to a bear market. The bear can be temporarily halted but once the primary trend turns down, the bear market will run to conclusion, and conclusion will be exhaustion - nothing will stop the bear market from fully expressing itself.

Primary trends always take much longer than anyone thinks possible - and ultimately, they go much further than anyone thinks possible. This applies to the stock market, the gold market, the money market (bonds) and the currency market.

All bear markets are deceptive. If they weren't, nobody would ever lose money. The reason people lose money in a bear market is simple - they do not believe they are in a bear market, so they sit and they lose their shirts. It's the same reason most people do not make money in a bull market. By the time the bull market is two-thirds of the way through its cycle, market talk is everywhere, and people finally believe it's a bull market. They get in late, get caught at the top and they ride down the first leg of the bear market before they realise that they are again on the wrong side of the fence. Thus it will ever be.

The key to a bear market is erosion, the gradual whittling away of profits and the gradual increasing of losses being sustained by the investing public. Holding common stocks in a bear market is as tantamount to gambling at Las Vegas. You may hit it in the short run, but the longer you gamble, the better the chances that you will lose your money. By the same token, the longer you hold your stock portfolio, the surer the odds that you will sustain declining profits or increasing losses. The bear's favourite advice - "Hold them for the long haul".

The stock market is like a living organism, an ever-changing animal. If the animal is a bear he is cunning and ruthless, without emotions and without pity. The bear has no mercy and no conscience. His first task is to lock in the largest number of people into the stock market - and lock them in with losses. The next step is to take the market down, while keeping this "losing majority" in the market; keeping them "happy, hoping, and above all holding"

How can the bear accomplish this feat?

He will do it with the help of a "cheering section" made up of amateur TV and newspaper "experts" and permanent - bull brokerage house analysts who make a living by way of commissions buying and selling shares. Very few analysts make insightful comments about the main or primary trend and cover up their ignorance by touting individual stocks or what percentage this or that stock or sector has risen. And of course there is the investors own reluctance to "take a loss" - so the investor listens to the "cheering section" of amateur "experts" - the investor is only human - and he hears what he wants to hear to avoid the pain, even thinking rationally about it. Of course, there's the other phenomenon that the average person has an ingrained inability to envision or accept change. The evolution from primary bull markets to primary bear markets entails massive change. White becomes black and day becomes night. This is more than the average investor can deal with.

One of the most difficult procedures on the stock market is to identify the big picture. One reason why it is so difficult is that the market tries to disguise the direction of the primary trend. In a bull market one of the main disguises is the barrage of items, comments and analysis that serve to frighten investors and keep them out of the market. In a bull market "investors climb a wall of worry", the bull market does not like company. It always aims to confuse and disappoint the greatest number of investors possible.

In a bear market, the continuing ocean of optimism serves to keep investors in the market, happy, hoping and holding even though the great majority of stocks are heading south "a bear market descends on a stairway of optimism and hope." Gradually, a background of pessimism builds that ends in a crescendo of fear until finally - abject terror. The operative sentence towards the end of a bear market - "I cannot take it anymore." Get me out at any price, just get me out.

Bear markets move much faster than bull markets. The action tends to be more concentrated, more violent, and more emotional. Bull markets gradually build a background of optimism, optimism that ends in a crescendo of enthusiasm and finally - frenzy. The operative sentence toward the end of a bull market is - "I have got to get in, buy me anything."

The bear market is in no hurry. The bear has got all the time in the world. One thing is certain however and that is when the super-bullishness does burn out, the parabolic will break down and the ensuing correction will develop into a full fledged bear market and will accelerate in earnest often wiping out a major portion of the entire preceding rise.

In a bull market values increase through time and all situations tend to work out favourably. Conversely, in a bear market values decrease through time and all situations tend to work out unfavourably.

Bear markets don't work the way bull markets do. In fact bear markets often work in the opposite way to bull markets. Dull areas become sell areas. Bullish appearing technical methods become bear traps. Hopeful areas suddenly turn into panic areas. Remember "everyone loses in a bear market and the winner is the person who loses the least" (Richard Russel). Why gamble when you don't have to, and you don't have to until the bear market has finally run to conclusion and conclusion will be exhaustion.

In a bear market, the bears are right, just as in a bull market, the bulls are right. For example, in a bull market a build-up in the short position is very bullish since in a bull market the shorts are positioning themselves against the primary trend and are therefore wrong. But in a bear market a build-up in shorts is not bullish, since in this case, the shorts are aligned properly in harmony with the primary trend of the market. Therefore, those believing that a build-up of shorts in a primary bear market is a bullish factor do not understand what's going on.

In a bull market bad news is "appreciated" since ironically and intuitively bad news helps to build the proverbial "wall of worry in which the bull market climbs." But in a bear market bad news drives stocks lower since the bad news is in harmony with the basic trend - in other words bad news should be taken for just what it is - bad news.

In a bear market the technical indicators that you used during the bull market are not going to work. Be forewarned (this is one of the tricky factors that hurt so many sincere analysts during the 1968 - 1974 bear market collapse). Bull markets do not go straight up and bear markets do not go straight down. It is not wise to play for bear market rallies. Professional investors buy into a bull market's downside correction, and will sell into a bear market's upside correction.

There is no point in playing for a bear market rally as the odds are against you and bull traps abound and render your technicals useless. A bear market is a force unto itself, and it does not give a darn about oversold conditions or any of the dozens of other studies that "worked" so well during the bull market. Example, unlike corrections in a bull market, a bear market "sneers" at so-called "supports." The bear makes a practice of cutting through "supports" like a hot knife through butter as though they do not exist. This is one of the surprising and frightening characteristics of bear market action.

***

Thursday, October 9, 2008

The Sky is falling!

The global finanical meltdown has affected the man on the street.

It is not about liquidity anymore, it is about confidence!
Confidence is harder to restore than liquidity.
Merely injecting liquidity might not solve the root problem.

This is because Fear is a greater force than Greed.
Losing $5000 has a greater heart stopping adrenalin effect than gaining the same amount.

People want to preserve capital in the midst of global bad news. It will take some time to heal.

Meanwhile, buckle up and if you can, enjoy the ride.

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