Category Archives: Focus

Core-System Discovery

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You look.

Perhaps without success.

You look again.

And again.

So on and forth.

Till you find.

What?

An addition to your core-system.

What’s a core-system?

The better question here would be – what’s your core-system?

Now, fortunately or unfortunately, that’s for you to find.

In a nutshell, your core-system is that something which makes you tick. It has as many facets as you wish it to have. Each facet needs to be discovered, attached, fine-tuned, tried, tested and finally welcomed to or rejected from your core-system.

Facets are not limited to your professional life. Your core-system makes you tick on an all-round basis.

For example, brewing and savouring that perfect cup of tea could be an important facet. Finding, fine-tuning and enjoying your favorite media-source could be another. Blogging could be one. Sport. Hobbies. Family time. People skills. Yeah, now we’re getting professional. You can fill in your professional blanks.

Discovery costs. Time, effort, funds, nerve, sweat. It’s worth it many times over when you find a fit. Please believe me.

Some things don’t fit. You think you want them badly, but the harder you try, the more they refuse to fit. After trying your hardest, you need to conserve your life-force to look for another fit. What didn’t fit didn’t fit for a reason. It’s not mandatory for Nature to reveal that reason to you. Move on.

Keep looking for fits. Eventually, you’ll have a robust core-system, which will make you tick exceptionally.

Happy Findings!

🙂

It’s Boiling Down to Getting Your Basics Right Smartie

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Yeah, everything else is following.

We’re in flow. 

World moves. 

Decisions are taken as a matter of course. 

It’s the build-up where stuff happens. 

You’re nailing the build-up dear. 

Million dollar question – how?

It’s all about systems. 

Systems, systems, systems. 

Get your systems in place. 

Be cumulative.

Also, seamless. 

Minimum overheads. Low-maintenance. 

And, don’t stop flowing. 

No, this is not very vague. It’s all happening. I describe it as it happens. Words used are for lack of better ones. These words describe the situation more than adequately. Don’t want more from them. 

You’re in circulation. You can last. Very soon, something will stick. Your systems will start flashing. They’ll alert you to the next action zone. Engage where they’re telling you. It’s as simple as that. 

Don’t ignore the flash of your systems once it happens. Ignoring would be the opposite of flowing. Don’t stop flowing. 

You’re seamless, so you can expound upon something, anytime, anyplace. Good show. You can decide anytime, anyplace, whether you’re going with something. Need of the hour. 

You’re cumulative. Next time you tackle the same situation, you have that much more hit-power, because the learning from the past encounter is at your fingertips (because you’re seamless, remember). 

What’s gone into your systems?

Hit and trial. 

Chopping off loser ideas. Letting winning ideas grow. Models. Winning models. You’re full of them. Something will start flashing, sometime, someplace. Follow it. 

That’s how you flow, man. 

The rest, as they say, will be History. 

Whose Game Are You Playing?

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Are you playing your game?

No?

Why not?

Why do you play someone else’s game?

Do you think that’s going to make you happy?

Just for the record, working for someone doesn’t necessarily mean you’re playing that someone’s game. You’re walking a common path with someone. Could be your boss. Spouse. Parent. Sibling. Whosoever. You could still be playing your game.

Life’s a game too.

A game doesn’t mean you have to rule over someone, or something. Wherever there’s a lesson to be learnt, a game is on. When we talk about your life-lessons, we talk about your game.

If I’m not mistaken, life is about learning. For some of us. There are souls who come to spend surplus Karma. Once this is exhausted, their game changes by default, since the lessons start again.

We come face to face with people and situations… to learn. The same people and / or situations keep reappearing till some learning is fully learnt. They can appear in an overbearing role, but you’re still playing your game. You’re learning your lesson. Or not. These people and / or situations cause you to behave as per a groove which has encompassed your life. The lesson is to learn how to break out of the groove. If you’re learning the lesson, you’re playing your game. If not, you’re playing someone else’s.

Play the market. Play your game with the market. Someone else’s successful market game might lure you. It won’t give you lasting succes. Why?

Someone else’s successful market game caters to someone else’s psychology. In crux situations, you will falter in that game. You will lose it all. That someone will succeed. He or she has spent years devising a game which caters fully and totally to his or her psychology and risk profile. Not to yours. He or she cannot know as much about your own psychology and risk profile as you do. Therefore, devise your own market-play. Then, play it.

It takes years or perhaps a decade to discover and understand your behaviour, psychology and reactions to varied market situations. Be there. In the market. Make small mistakes. Learn your lessons. Understand your grooves. Devise a comprehensive strategy around this.
That’s your game.

What are you waiting for?

Play it.

🙂

Less is More

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Fill your plate.

Work.

Go all out.

Nobody’s asking you to work less.

Research.

Hit it with your best shot.

Do quality work.

Work with the best tools.

Enjoy your work…

…so much so, that time ceases to exist.

Yeah, that means you’ve found your calling.

However, connect less to live Mrs. Market.

Here, less is more.

Keep her away as much as possible when she’s live.

Only connect live when you really, really have to.

What are you achieving?

Minimal bogging down live market forces.

You’re away from the pandemonium, the confusion.

You’ve set your self up brilliantly, to think clearly.

Now, gather your thoughts, gather your research.

You get into the Zone.

You have a purpose.

It can be anything. A market instruction. An instrument alteration. A structural change. A query. A test. A probe. A check. Something small. Something big.

With your purpose right before your eyes, connect live.

Solve your purpose.

Disconnect.

Relax.

Let remnant market forces leave you, yeah, let them dissipate.

Do some other stuff for a while.

Then, when you’re ready, get back to your research.

If you’re not ready after a while, call it a day.

Go for a swim. Or something.

Who are You?

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Who am I?

Do I know?

Am I trying to know?

Is this an important question for me?

What’s my path?

Where am I on this path?

What are my basic goals in life?

What are my weaknesses?

What am I doing to make these my strengths?

What motivates me to perform?

Does my environment enhance my performance?

Or does it hamper me?

If it does, what am I doing about it?

Am I tweaking my environment?

Yeah, am I manipulative enough?

Am I content with the hampering?

Why should I be content with the hampering?

Because it makes me grow, as in evolve?

Maybe.

Who are you?

What are your defining questions?

How do you unravel?

Ultimately, what is your risk profile?

Who are you… sure… very valid question.

Why?

It’s the basic precursor question with regard to another important question.

Who are you as far as finance is concerned?

In the field of finance, you need to know your risk-profile, and you need to have a defined meta-game-plan.

Defined as per who you are.

Uniquely, for yourself.

Bye 🙂

The Womb in which One’s A-Game is Born

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Simple situations don’t challenge you, and if a human being doesn’t feel challenged, he or she doesn’t grow. 

What would you like your A-Game to be?

Simple? Bread-winning? No surprises in store? Straight-forward? 

Fine.

If you don’t wish to feel challenged by it, that is your right. What ? You want to enjoy your A-Game, though? And you want to keep enjoying it for life?

Let me tell you a secret. If you master something, it becomes boring after a while. Where’s the challenge? You probably won’t enjoy something like that for life…just an opinion.

It’s taken me ten years in finance to actually discover what my A-Game is.

I’ve had a choice all along, I won’t hide that from you.

I’ve chosen two market niche-segments. I find both intriguing. Both fully absorb me. I keep asking questions. My mind feels that it meets its match. I enjoy both segments. 

It doesn’t matter which segments I’m talking about. They are my A-Game, and that’s what counts for this discussion. How did I know this was my A-Game?

Over the last ten years, I’ve tried all market segments. Got knocked around, made mistakes. Lost money. Tuition fees. You can’t really study the markets in college. You really need to study the markets in the marketplace itself. Eventually, an area of specialisation will speak to you. It will exercise a magnetism which will envelope you. Wait for this moment before going all-in. Even after identifying your A-Game, play it small for a long time, and only scale up slowly, according to strict money-management rules. 

The womb in which your A-Game is born can be really complicated. You can be left feeling confused for years about what your calling is. Life does remain a bit boring till you get there. You feel that that something is missing in life. While playing your A-Game, that very feeling is gone. That’s how you know it’s your A-Game. 

If you have a choice, secure yourself and your family financially before your A-Game unfolds. That way, your A-Game won’t necessarily have to yield you money in the beginning. Eventually , it will do that also, and of this there is no doubt in my mind, since complete engrossment into something will make you excel at that something. Treat the money as a bonus as it starts to come along. Focus on the monetary angle alone, forced perhaps by necessity, can make you lose sight of the enjoyment angle, or it can make you choose the more monetarily lucrative but less enjoyable activity. It all depends on your life-situation at that moment. 

Actually, come to think of it, whatever one does in life can be approached from a commercial angle only, blocking the enjoyment angle out totally. If your bread and butter depends upon it, I fully understand your choice, but if you’re already financially secure, then … go for growth, challenge, enjoyment… and money will follow too. 

The Art of Emotional Recycling

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Taken a hit?

If yes, at least admit it… to yourself and for your own sake.

People take hits at various times in their lives.
That’s the way of the market.

That’s how it teaches us to make money next time.

Think of your loss as tuition fees.

In my opinion, the best way forward is to take lots of small hits in the first seven years.

Then, in nine cases out of ten, you won’t fall for the big ones.

Big hits can decapacitate a player, especially when they come late, since there is no time for full recovery. Besides, emotional breakdown at a late stage is very difficult to get out of.

Make it a point never to take a big hit.

That’s only possible, if at any given time, the capital that is risked is within reasonable limits.

Let’s say you risk not more than 1% of your networth at any given time. What’s the maximum hit you will take at one time? Right, 1%.

That’s bearable.

That’s something you can shake yourself out of, and move on.

Moving on is a huge quality to possess in the markets.

Taken a hit?

Move on and make your next trade.

All this while, you are putting any remnant emotional hurt in cold storage.

Yeah, there’s a certain portion of emotional hurt that won’t be nullified by family time, vacations, hobbies etc. We’re talking about the hurt to your ego. Only a big win will wash that away. Only then is your emotional recycling complete.

Put yourself in line for that win.

After a hit, rest, recuperate, grab your wits, focus, and…

… put on the next trade.

And How Are You This 20k?

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20k’s knocking on our sensory index.

How are you feeling, this 20k?

I remember my trading screen, the first time 20k came. Lots of blue till it came, and when it came, the screen just turned into a sea of red.

Sell orders hit their auto-triggers, as if it were raining sell orders along with cats and dogs.

What is it about round numbers?

Why do they engulf us in their roundness?

I don’t think I am making a mistake in stating that the first person to recognize the significance of round numbers in the game was Jesse Livermore, the legendary trader. Jesse developed a round number strategy that he pulled off repeatedly, with enormous success. It is because of Jesse Livermore that a trader takes round numbers … seriously.

So, what is it about the roundness of 20k?

Plain and simple. The 0s engulf the 2. You don’t see the 2 anymore, and the 0s scare you. Or, they might excite you. Round numbers make the human being emotional.

Big question for me, to understand my own mindset – how am I reacting to 20k?

I would like to share my reaction with you, because it could help you understand your own reaction.

Also, writing about it makes me understand my own reaction better. Thoughts get assimilated.

Yeah, it’s not all social service here, there’s some selfish element involved too.

Besides, I have a bit of a guilty conscience about the amount of research the internet allows me to do, free of cost. I mean, I can get into the skin of any listed company with a few button-clicks. All this writing – is a give-back. You’ll get your calling soon enough. Nature will tell you where you need to give back. When that happens, don’t hold back – give freely. It’s a million dollar feeling!

Back to the topic.

I’ve seen 20k twice before, I think, perhaps thrice. Oh right, between late September and December ’10, it came, was broken, then it came back, to be again broken on the downside, all within a few months.

The aftermath of the first time I saw it (in November ’07) hammered me, though, and taught me my biggest market lessons. I’m glad all this happened in my early market years, because one doesn’t normally recover from huge hammerings at an advanced stage in one’s market career.

The second / third time I saw 20k, I was profiting from it to a small extent. A vague kind of strategy was developing in my mind, and I was trying all kinds of new trading ideas so as to formulate a general strategy for big round numbers.

This morning, I saw 20k for the fourth time, for a few minutes.

By now, I was on auto-pilot.

A human being will have emotions. A successful market player will know how to deal with these emotions.

I bifurcated my emotions into two streams.

One was the fear stream.

The other was the exuberance stream.

The former helped me decide my future investment strategy.

The latter helped me decide my future trading strategy.

In my opinion, a good investment strategy in times of market exuberance would be to not look for fresh investments anymore. This morning, I decided to stop looking for fresh investments, till further notice.

Sometimes, when you’re not looking for an investment, you might still chance upon a company that sparks your investment interest.

If that happened, I would still scrutinize such a company very, very thoroughly, before going ahead. After all, these were times of exuberance.

Yeah, fresh investments would be on the backburner till margins of safety were restored.

Now let’s speak about the exuberance stream.

Market looked ripe for trading. Fresh market activity would take the shape of trading.

Trading is far more active an activity, when compared to investing. We’ve spoken a lot about the difference between trading and investing, in previous posts. Investors enter the market when stocks are undervalued, because the general market is unable to see their intrinsic value. Traders take centre-stage when stocks are overvalued, because the general market is repeatedly attributing more and more value to stocks, much more than should be there. Traders ride the market up, and then short it to ride it down.

Yeah, till further notice, I would be spending my energies trading. After a while, I would re-evaluate market conditions.

That’s what I thought to myself this morning.

So, … … , When’s Judgement Day?

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The “fiscal cliff” thingie has come and gone…

Gone?

People, nothing’s gone.

If something is ailing, it needs to heal, right?

What is required for healing?

Remedial medicine, and time.

Let’s say we take the medicine out of the equation.

Now, what’s left is time.

Would the ailing entity heal, given lots of time, but no medicine?

If disease is not so widespread, and can be expunged over time, then yes, there would be healing, provided all disease-instigating factors are abstained from.

Hey, what exactly are we talking about?

It is no secret that most first-world economies are ailing.

Specifically, the US economy was supposed to be injected with healing measures, which were to take effect from the 1st of Jan., ’13. Financial healing would have meant austerity and a more subdued lifestyle. None of that seems to be happening now. The healing process has been deferred to another time in the future, or so it seems.

You see, people, no one wants austerity. The consumption story must go on…

So now, since the medicine’s been taken out of the equation, is there going to be any healing?

No. Disease-instigating lifestyles are still being followed. Savings are low. Debt with the objective of consumption is still high. How can there be any healing?

Under the circumstances, there can’t.

So, what’re we building up to?

We’re all clear about the fact that consumption makes the world go round. What is the hub of the world’s consumption story? The US. That part of the world which does save, and where there is real growth, well, that part rushes to be a part of the consumption story. It produces cheaply, to sell where there’s consumption, and it sells there expensively. Yeah, like this, healthy economies get dragged into an equation with ailing economies. Soon, the entanglement is so deep, that there’s no turning back for the healthy economy. It catches part of the ailment from the diseased economy. Slowly, non-performing assets of banks in such healthy economies start to grow. The disease is spreading.

Hold on, stay with me, we’re not there yet. Yeah, what are we building up to?

Healthy economies take time to get fully diseased. Here, savings are big, domestic manufacturing is on the rise, and there a healthy demographic dividend too. Buffers galore, the immune system of a healthy economy tries to fight the contagion for the longest time. As entanglement increases, though, buffers deplete, and health staggers. Non-performing assets of banks grow to disturbing levels.

That’s what we are looking out for, when we are invested in a healthy economy which has just started to ail. Needless to say, we pulled out our funds from all ailing economies long back. Our funds are definitely not going back to economies which refuse to take medicine, i.e. which don’t want to be healed. Now, the million dollar question is …

… what’s to be done with our funds in a healthy economy which has just started to become diseased due to unavoidable contagion?

Nothing for now. Watch your investments grow. Eventually, since no one is doing enough to stop the damage and the spread, big-time ailment signs will invariably appear in the currently “healthy” economy, signs that appeared a while back in currently ailing economies. Savings will be disappearing, manufacturing will start to go down, and bad-debt will increase. Define your own threshold level, and go into cash once this is crossed. You might not need to take such a step for many years in a row. Then again, you might need to take such a step sooner than you think, because the ailing mother-consumer economy is capable of pulling everyone down with it, if and when it collapses. And it just stopped taking its medicine…

Let’s get back to your funds. In the scenario that you’ve gone into cash because you weren’t confident about the economy you were invested in, well, what then?

Option 1 is to look for an emerging economy that gains your confidence, and to invest your funds there.

Not everyone is comfortable investing abroad. What if you want to remain in your own economy, which you have now classified as diseased. There’s good news for you. Even in a diseased economy, there are pockets of health. You need to become a part of such pockets, just after a bust. So, remain in cash after a high and till after a bust. Then, when there’s blood on the streets, put your money into companies with zero-debt, a healthy dividend-payout record and a sound, diligent and honest management. Yeah, at a time like that, Equity is an instrument of choice that, over time, will pull your funds out of the gloom and doom.

You’ve put your funds with honest and diligent human capital. The human capital element alone will fight the circumstances, and will rise above them. Then, you’ve entered at throwaway prices, when there was blood on the streets. Congrats, you’ve just set yourself up for huge profit-multiples in the future. And, the companies you’ve put your money with, well, every now and then, they shower a dividend upon you. This is your option 2. Just to share with you, this is my option of choice. I like being near my funds. This way, I can observe them more closely, and manage them properly. I suffer from a case of out of sight, out of mind, as far as funds are concerned. Besides, when funds are overseas, time-differences turn one’s life upside down. This is just a personal choice. You need to take your own decision.

At times like this, bonds are not an option, because many companies can cease to exist in the mayhem, taking your investment principal out with them.

Bullion will give a return as long as there is uncertainty and chaos. Let there be prolonged stability, and you’ll see bullion tanking. Yeah, bullion could be option 3 at such a time. You’ll need to pull out when you see signs of prolonged stability approaching, though.

One can use a bust to pick up cheap real-estate in prime localities. Option 4.

You see, you’ve got options as long as you’re sitting on cash. Thus, first, learn to sit on cash.

Before that, learn to come into cash when you see widespread signs of disease.

Best part is, widespread disease will be accompanied by a big boom before the bust, so you’ll have time to go into cash, and will be ready to pick up quality bargains.

You don’t really care when judgement day is, because your investment strategy has already prepared you for it. You know what to do, and are not afraid. If and when it does come, you are going to take full advantage of it.

Bring it on.

Can We Please Get This One Basic Thing Right? (Part III)

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Yeah, we’re digging deeper.

How does an investor arrive at an investment decision?

It’s pretty obvious to us by now that traders and investors have their own rationales for entry and exit, and that these rationales are pretty much diametrically opposite to each other.

So, what’s the exact story here?

The seasoned investor will look at FUNDAMENTALS, and will exhibit PATIENCE before entering into an investment.

The versatile trader will look at TECHNICALS, and will NOT BE AFRAID of entry or exit, any time, any place. He or she will be in a hurry to cut a loss, and will allow a profit to blossom with patience.

What are fundamentals?

Well, fundamentals are vital pieces of information about a company. When one checks them out, one gets a fair idea about the valuation and the functioning of the company, and whether it would be a good idea to be part of the story or not.

A good portion of a company’s fundamental information is propagated in terms of key ratios, like the Price to Earnings Ratio, or the Debt to Equity Ratio, the Price to Book Value ratio, the Enterprise Value to EBITDA Ratio, the Price to Cash-flow Ratio, the Price to Sales ratio, etc. etc. etc.

What a ratio does for you is that in one shot, it delivers vital info to you about the company’s performance over the past one year. If it’s not a trailing ratio, but a projected one, then the info being given to you is a projection into the future.

What kind of a promotership / management does a company have? Are these people share-holder friendly, or are they crooks? Do they create value for their investors? Do they give decent dividend payouts? Do they like to borrow big, and not pay back on time? Do they juggle their finances, and tweak them around, to make them look good? Do they use company funds for their personal purposes? Researching the management is a paramount fundamental exercise.

Then, the company’s product profile needs to be looked into. The multibagger-seeking investor looks to avoid a cyclical product, like steel, or automobiles. For a long-term investment to pan out into a multibagger, the product of a company needs to have non-cyclical scalability.

After that, one needs to see if one is able to pick up stock of the particular company at a decent discount to its actual value. If not, then the investor earmarks the company as a prospective investment candidate, and waits for circumstances to allow him or her to pick up the stock at a discount.

There are number-crunching investors too, who use cash-flow, cash allocation and other balance-sheet details to gauge whether a coveted company with an expensive earnings multiple can still be picked up. For example, such growth-based investors would not have problems picking up a company like Tata Global Beverages at an earnings multiple of 28, because for them, Tata Global’s balance-sheet projects future earnings that will soon lessen the current multiple to below sector average, for example.

Value-based investors like to buy really cheap. Growth-based investors don’t mind spending an extra buck where they see growth. Value-based investors buy upon the prospect of growth. Growth-based investors buy upon actual growth.

The trader doesn’t bother with fundamentals. He or she wants a management to be flashy, with lots of media hype. That’s how the trader will get volatility. The scrips that the trader tracks will rise and fall big, and that’s sugar and honey for the trader, because he or she will trade them both ways, up and down. Most of the scrips that the trader tracks have lousy fundamentals. They’ve caught the public’s attention, and the masses have sprung upon them, causing them to generate large spikes and crashes. That’s exactly what the trader needs.

So, how does a trader track these scrips? Well, he or she uses charts. Specifically, price versus time charts. The trader doesn’t need to do much here. There’s no manual plotting involved. I mean, this is 2012, almost 2013, and we stand upon the shoulders of giants, if I’m allowed to borrow that quote. Market data is downloaded from the data-provider, via the internet and onto one’s computer, and one’s charting software uses the data to spit out charts. These charts can be modified to the nth degree, and transformed into that particular form which one finds convenient for viewing. Modern charting software is very versatile. What exactly is the trader looking for in these charts?

Technicals – the nitty-gritty that emerges upon close chart scrutiny.

How does price behave with regard to time?

What is the slope of a fall, or the gradient of a rise? What’s the momentum like?

What patterns are emerging?

How many people are latching on? What’s the volume like?

There are hundreds of chart-studies that can be performed on a chart. Some are named after their creators, like Bollinger bands. Others have a mathematical name, like stochastics. Names get sophisticated too, like Williams %R, Parabolic SAR and Andrew’s Pitchfork. There’s no end to chart  studies. One can look for and at Elliott Waves. Or, one can gauge a fall, using Fibonacci Retracement. One can use momentum to set targets. One can see where the public supports a stock, or where it supplies the stock, causing resistance. One can join points on a chart to form a trendline. The chart’s bars / candle-sticks will give an idea about existing volatility. Trading strategy can be formulated after studying these and many more factors.

Where do stops need to be set? Where does one enter? Exit? All these questions and more are answered after going through the technicals that a chart is exhibiting.

One needs to adhere to a couple of logical studies, and then move on. One shouldn’t get too caught up in the world of studies, since the scrip will still manage to behave in a peculiar fashion, despite all the studies in the world. If the markets were predictable, we’d all be millionaires.

How does the trader decide upon which scrips to trade? I mean, today’s exchanges have five to ten thousand scrips that quote.

Simple. Scans.

The trader has a set of scan criteria. He or she feeds these into the charting software, and starts the scan. Within five minutes, the software spits out fifty odd tradable scrips as per the scan criteria. The trader quickly goes through all fifty charts, and selects five to six scrips that he or she finds best to trade on a particular day. Within all of fifteen minutes, the trader has singled out his or her trading scrips.

Do you now see how different both games are?

I’m glad you do!

🙂

A Tool By The Name of “Barrier”

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Come into some money?

Just don’t say you’re going to spend it all.

Have the decency to at least save something.

And all of a sudden, our focus turns to the portion you’ve managed to save.

If you don’t fetch out your rule-book now, you’ll probably bungle up with whatever’s left too.

Have some discipline in life, pal.

The first thing you want to do is to set a barrier.

Barrier? Huh? What kind of barrier?

And why?

The barrier will cut off immediate and direct access to your saved funds. You’ll get time to think, when hit by the whim and fancy to spend your funds.

For example, a barrier can be constructed by simply putting your funds in a money-market scheme. With that, you’ll have put 18 hours between you and access, because even the best of money market schemes take at least 18 hours to transfer your funds back into your bank account.

Why am I so against spending, you ask?

Well, I’m not.

Here, we are focusing on the portion that you’ve managed to save.

Without savings, there’s nothing. There can be no talk about an investment corpus, if there are no savings. Something cannot grow out of nothing. For your money to grow, a base corpus needs to exist first.

Then, your basic corpus needs a growth strategy.

If you’ve chalked out your strategy already, great, go ahead and implement it.

You might find, that the implemetation opportunities you thought about are not there yet.

Appropriately, your corpus will wait for these opportunities in a safe money market fund. Here, it is totally fine to accept a low return as long as you are liquid when the opportunity comes. There is no point blocking your money in lieu of a slightly higher return, only to be illiquid when your investment opportunity comes along. Thus, you’ve used your barrier to park your funds. Well done!

Primarily, this barrier analogy is for these who don’t have a strategy. These individuals leave themselves open to be swept away into spending all their money. That’s why such individuals need a barrier.

An online 7-day lock-in fixed deposit can be a barrier.

A stingy spouse can be a barrier.

Use your imagination, people, and you’ll come up with a (safe) barrier. All the best! 🙂

Danza Kuduro x Gangnam Style = Indian Political Circus

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Can you ignore the circus around you?

Sooner or later, you’ll need to learn how to.

Why?

Because growth is where we are.

And, growth is dying in many parts of the world.

So, why do you need to ignore the circus?

To focus. The circus won’t let you focus properly.

And why do you need to focus?

To take advantage of the growth around you.

Growth is a coveted commodity, remember that.

One could say that you are lucky to be born in an area showing growth. You are in demand. People from other parts of the world want to participate in any available growth story. These are competent people, selling highly developed technology and expertise. They deserve to participate in growth stories, why not? The question here is about you.

Are you able to make the most of your times, and that too – ethically?

Then forget about the circus.

The circus won’t let you function ethically.

You need to learn to function despite the circus.

Welcome to the world of minimal exposure. At times, you will need the circus, since it controls the machinery of your system. That’s about it, that’s your minimal exposure. No more exposure than what is absolutely required – these are golden words summing up your policy of minimal exposure.

And you are totally going to succeed despite minimal exposure – many have done so already, so why should you be an exception?

The quality of success that emerges, after having followed a policy of minimal exposure, is sweet. It’s a no-strings-attached kind of success. It is lasting, and brings peace and exhilaration. Definitely worth striving for. So, circus shmirkus, don’t even bother, just go for it, and make the most of the growth happening around you. Because of your ethical angle, I wish even more, that you succeed.

All the best! 🙂

It Started With A K.I.S.S.

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In the year 1982, the band Hot Chocolate churned out a hit called “It started with a kiss”. The number hit the top ten. Whenever this song played during the span of the 80s, entire dance floors used to get the hint.

Well, unfortunately, the K.I.S.S. we speak about is a little different.

Ours is a formula.

Expanded, our formula stands for “Keep It Simple (Stupid)”.

Nevertheless, for us too, it all starts with the formula of K.I.S.S.

In the world of finance, we apply this formula everywhere. We don’t leave home without it. Anything that doesn’t conform to our formula is booted out of our lives.

For example, how diversified are you?

Are you so diversified, that you don’t know where which investment of yours is? That’s like way, way off our formula trajectory. Please lessen your level of diversification, such that you have all your investments on your fingertips.

Or, is your prospective investment product’s math complicated enough for you, such that you are not understanding the product fully? Leave the product alone. Again, it does not lie on the trajectory of our formula.

Then, is some investment officer talking razzle-dazzle lingo, trying to psyche and bulldoze you into an investment? Please show him or her the door. You got it. Eliminated by our formula.

Is some promoter’s lifestyle very sophisticated and complicated? Think twice before buying into his or her company, because the sophistication with all its complications is (with very high probability) being financed by company money, at the cost of all shareholders.

How many financial advisors have you got? Why do you even need financial advisors, when everything is available to you on the Internet? Is a financial advisor going to share the pain of your investment loss? Of course not. You are going to bear that pain fully. Therefore, once you yourself get going, the quality of investments you decide upon for yourself are going to be better than those selected by an investment advisor. You know yourself better than an investment advisor does. He or she doesn’t possess the power to understand and define you better than you do yourself. So, simple, do it yourself. Since any resulting pain is yours, you’ll try to avoid all pain, at any cost, and after a few hits, you’ll eventually start doing it well. You won’t sink, you’ll swim, believe me. Once you get the hang of it, staying above water can be simple. There’s nothing complicated about it.

I mean, we can go on here. Yeah, like we can go on K.I.S.S.ing here…, but I’m gonna stop, because I think you’ve got the message.

On that note, cheers, and here’s looking forward to keeping it simple…and not stupid.

The Road to Greatness

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” time goes by

so naturally

while you receive

infinity “

– (Guru Josh Project).

Are you systematic? Punctual? Disciplined? Persevering? Large-hearted? Do you think out of the box?

All of the above?

Relax. You are already on the road to greatness.

So what if the world hasn’t recognized you…yet?

Why do you want the world to recognize you?

Why does the world’s opinion of you matter to you?

Why do you need a stamp of approval to feel you’re on the right path?

Frankly, if you’re treading a new path, where no person has gone before, well, then, nobody’s qualified enough to give you that stamp of approval.

Right, the road to greatness is paved with identity crises.

Greatness is achieved, if you do something differently, and do it well. With the passage of time coupled with your perseverance, you discover and outline a new dimension in your field. You’ve struggled along the path, because it’s a new path, with no roadmaps. People have made fun of you and have ridiculed you, because you are different, and refuse to conform to a norm set by “average” society. Exactly that’s the struggle.

Averageness is comfortable. For greatness, one needs to pull the extra distance.

Alone.

Because one is not average, one needs to discover who one is. This happens along the path.

The path to greatness is not comfortable.

Nevertheless, it is enjoyable.

Yes, after a while, struggle starts to get enjoyable, once you become used to it. You start enjoying being pushed to your limits. The biochemistry of your body’s peak-performance state can actually give you a huge kick, as in a “high”. Try and stay there, as long as you can. This “high” is only happening to you. Stay there, as “(the) time goes by, so naturally, while you receive … … infinity.“ – (Guru Josh Project).

The Cat that Survives Curiosity

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So, what are the Joneses upto?

Or the Smiths?

Naths?

You know something, who cares?

You’re trading, right?

Fine, then just mind your own business, and focus on your return.

I mean, people, let’s just go beyond poking our noses into others’ businesses.

Don’t we have our own businesses to take care of?

Isn’t that enough for us?

If not, and if we start poking around, seeing what kind of return XYZ has made, or for that matter how many winning trades ABC has pulled off, well, we are doing ourselves a great disservice.

For starters, we don’t seem to have much confidence in our own trading system, if we’re poking around like that.

You should be pulling off the winning trades, you.

And XYZ’s or ABC’s performances should have no meaning for you.

They are trading according to their system. Let them be. What’s good for them is not necessarily good for you.

You are trading according to your system. Period.

Not minding your own business can seriously affect even a successful system which has temporarily hit a string of losing trades.

Random losses in a row happen. A winning system can well yield ten losses in a row, for example. Improbable, but not impossible.

Ask a coin, which functons at 50:50. On average, you’re flipping heads and tails equally. Nevertheless, you could land heads (or tails) ten times in a row over many, many coin-flips. Part of the game. Accept it.

Since you have a system, you’re functioning well beyond 50:50, right?

Thus, chances of a large number of losses in a row are even lesser for you.

Tweak at your system if you feel it’s lost its market-edge.

To remind you, an edge starts occurring when one functions beyond 50:50.

After a while, one gets bored, and tells oneself, that from now on, one wants to function at 55:45 and beyond (for example), come what may.

One then tweaks at one’s system, and raises the bar.

Tweak at your system if you feel the urgent need to raise the bar.

Keep raising the bar to your comfort level.

Leave other people alone. Don’t bother with their systems. Focus on your own trading.

Be the cat that survives curiosity.

Making the Grade

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It’s your convocation. From now on, you’ll be a degree-holder.

Yippeeee!

Just pause for a second.

All your life, you’ll be introducing yourself as a master’s in this or a bachelor’s in that, or perhaps even as a Ph.D. in xyz.

Have you even once considered, that your respective field will continue to evolve, long after you stop studying it?

For example, one fine day, in a Chemistry lecture to class XII, I noticed that the stuff I’d learnt for my master’s degree exams was the very stuff I was now teaching these 17-18 year-olds. That was a big realization for me. It then dawned upon me, that I had to either keep moving with the developments in the subject, or I needed to change my profession. I moved on from Chemistry in 2004.

So, for heaven’s sake, a paper degree is not your ticket to your subject for life. Things, people, seasons, subject-matter, issues at hand – everything changes. Every decade or so, there’s a complete overhaul. To stay on top, and still feel like a degree-holder of your subject, you need to be with things as they move, through the whole decade.

Does your marriage give you a licence to stay married to that same person for life without working on the relationship day in, day out? No, right?

Your degree doesn’t make you a king-pin in your subject for life either, without the appropriate ground-work everyday. Let’s please digest this truth.

The worst-case scenario of whatever I’ve said above happens in the markets. It is a worst-case scenario, because you enter the markets with some finance degree, thinking that the degree has taught you to play the markets successfully. Nothing is further from the truth. Here, you have a piece of paper that gives you false confidence, and you see your balloon bursting after your first few live shots at Mrs. Market.

Financial education in colleges and universities lacks two basic factors. The thing is, these two factors are game-changers. Get them wrong, or don’t know much about them, and your game becomes a losing one.

What are these two factors?

Everything and everyone around us teaches us not to be losers. We are taught to shove our losses under the carpet.

Cut to reality: winning market-play is about losing. Losing, losing, losing, but losing small. To be successful in the markets, we need to learn how to lose small, day in day out. It’s not easy, because our entire system is geared up to win, every time.

Then, everything and everyone around us teaches us to seal that win and post it instantly on our resume, on facebook, on twitter. Modern society is about showing off as many wins as possible. Losers don’t get too many breaks.

Cut to reality: winning market-play is about winning big, very big, every now and then, amidst lots of small losses. That can’t happen if we immediately book a winner. We need to learn to nurture a winner, and to allow it to win big. Again, that’s not easy, because as soon as a winner appears, our natural instinct tells us to book it and post it. So bury your “win it-cut it-post it” attitude. Instead, win, let the winner win more, and more, and when you feel it’s enough, without getting greedy, cut it, and then keep quiet, bring your emotions back to ground zero, and move on to the next winning play.

The reason, that most teachers of finance in colleges and universities don’t know about these two factors, is that their own money is almost never on the line. They have almost never felt the forces of live markets through this “line”, day in, day out. The line one puts on is one’s connection to market forces. Only a regular connection to these forces teaches one about realistic, winning market-play.

One could argue that the case-studies examined in finance school are very real. Well, they are very real for those protagonists who actually went through the ups and downs of the case-study in real-life. They got the actual learning by being exposed to live market forces. You are merely studying the statistics and drawing (dead) inferences, devoid of first-hand emotions and market forces. Whatever learning you are being imparted, is, well, theoretical.

Theory doesn’t cut it in the markets. Theory doesn’t make the grade.

So, what makes the grade?

I consider a seven year stint at managing your own folio a basic entry requirement into bigger market-play. What happens during this time?

Each body cell gets attuned to real market forces, live. You get to know yourself. You build up an idea about your basic risk-profile. Your market-strategy takes shape. It is fine-tuned to YOU.

During this stint, money needs to be on the line, again and again, but the amounts in play need to be small, because you are going to make many, many mistakes.

And please, make whatever mistakes you need to make in this very period. Get them all out of your system. Make each mistake once, and never repeat it, for life. Point is, that after this stint, money levels in play are going to shoot up. Mistakes from this point onwards are going to prove costly, even devastating. The kinds, where one can’t stand up again. You don’t want to be in that situation.

Once you are comfortable managing your funds, and don’t get rattled by Mrs. Market’s constant action, her turnarounds, crashes etc. etc., your market decisions are such, that you start applying your knowledge of money-management successfully. You have now become a practitioner of applied finance.

Applied finance is advanced level market-play. To win at applied finance, your money-management basics need to be fully in place and rock-solid. You can define applied finance as Money Management 2.0.

Winning at applied finance is self-taught. You don’t need a degree for it. In my eyes, a degree here is in fact detrimental, because you then spend a long time unlearning a lot of university stuff during real market-play. You actually see for yourself, that most of what you learnt applies only in theory. The stuff that makes winners, where is that? Why wasn’t it taught? Well, you’ve got to go out there and learn it for yourself.

Let theory be where it belongs. Respect it, but leave it in its appropriate world. The world needs its theoreticians to make it go round, but you need to go beyond theory, to win big.

Put on your practical shoes when you put your good and real money on the line, and be ready for anything.

Let your mistakes teach you.

Keep making the grade, day in day out.

Long after society tells you that you’ve made it.

Going All-in Against Mrs. Market

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Yeah, yeah, I’ve been there.

And it backfired.

Luckily, my stack-size in those days was small. That’s the good part. The shocking bit was, that back then, I had defined my stack-size as my networth. Biggest mistake I’ve made till date in my market-career, and I was very lucky to escape relatively unhurt.

Wait a minute, why is all this poker terminology being used here, to describe action in the world of applied finance?

Well, poker and market action have so much in common. Specifically, No-Limit Hold-’em is deeply related to Mrs. Market. We’re talking about the cash-game, not tournament poker. It’s as if Hold-’em is telling Mrs. Market (with due respect to Madonna):

i’ve got the moves baby
u got the motion
if we got together
we’d be causing a commotion

A no-limit hold-’em hand is like one trade. Playing 20-50 hands a day is excellent market practice. You’ve got thousands of games available to you online, round the clock, and most of these are with play money. Even though the “line” is missing here because of no money on the line, this is a no-cost avenue for trade practice, and it’s entertaining to boot.

Back to stack-size? What is stack-size, exactly?

Well, your stack size is the sum of all your chips on the table. You play the game with your stack, and on the basis of your stack-size. The first thing you need to do before there’s any market action is to define your stack-size.

A healthy stack-size is one that allows you to play your game in a tension-free manner. My definition, you ask? Well, I’d start the game with a stack-size that’s no more than 5% of my networth. Segregate this amount in an account which is separate from the rest of your networth, and trade from this segregated account. That’s the wiser version of me speaking. Don’t be like the stupid version of yours truly by defining your entire networth as your stack-size.

In this 5% scenario, you have 20 opportunities to reload. It’s not going to come to that, because even if a couple of your all-in bets go bust, you will eventually catch some big market moves if your technical research is sound and if you move all-in when chances of winning are high.

Wait patiently for a good hand. Then move. One doesn’t just move all-in upon seeing one’s hole-cards. If these are strong, like pocket aces, or picture pocket pairs, one bets out a decent amount to build up the pot. Similarly, if a promising trade appears, and the underlying scrip breaks past a crucial resistance, pick up a decent portion of the scrip. Next, wait for the flop (further market action) to give you more information. Have you made a set on the flop? Right, then bet more, another decent amount, but not enough to commit you fully to the pot. Then comes the turn. The scrip continues to move in your direction. You’ve made quads, and you’re holding the nuts. Now you can commit yourself fully to the pot and move all-in. Or, you can do so on the river, checking on the turn to disguise your hand and to allow others to catch up with your nuts somewhat, so that they are able to fire some more bets into the pot on the river. Your quads win you a big pot. You fired all-in when the scrip had shown its true colours, when winning percentages were high. You exhibited patience before pot-commitment. You allowed others to fire up the pot (scrip) further, and you deservedly caught a big market move. Just get the exit right, i.e. somewhere around the peak, and you’re looking at an ideal trade strategy already, from entry to trade management to exit.

Fold your weak hands. If something’s not working out, give it up cheaply. Ten small losses against a mega-win is enough to cover you and then some.

Often, a promising trade just doesn’t take off after you enter. The underlying might even start to move below your entry price after having been up substantially. You had great hole cards, but didn’t catch a piece of the flop, and now there are two over-cards staring at you from the flop. Give up your trade. Muck your hand.

At other times, you move all-in and the underlying scrip tanks big against you in a matter of hours. Before you can let your trade go, you’re already down big. You’ve suffered a bad beat, where the percentages to win were in your favour, but the turn-out of events still caused the trade to go against you. Happens. That’s poker.

Welcome to the world of trading. Pick yourself up. Dig out another stack from your networth. Don’t allow the bad beat to affect your future trades. If you are thinking about your bad beat, leave the table till you are fresh and can focus on the current trade at hand.

And then, give the current trade at hand the best you’ve got.

The Concept of “Sprachgefuehl”

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That’s a German word. And it’s deep.

Literally translated, “Sprachgefuehl” means “feeling for language”. In practical terms it would mean / entail achieving fluency in any language by getting a feel for its structure.

Life has a language.

Everything that makes up life has its own micro-language. All the micros add up to the macro.

Most of the time, we are stuck in the micro. We learn many micro-languages. With some, we experience difficulty. Ultimately, either we swim or we abandon the micro-cause.

Learning and expertise of these micro-languages makes up life for us as a whole. In our current multi-tasking scenario, flexibility and efficiency is required. To tackle this, there’s no better concept to implement than the concept of “Sprachgefuehl”.

Sprachgefuehl involves plunging in, as in immersing oneself into the thick of things without bothering about formal training. For a limited period, one takes in an overdoze of the micro-language. The idea is to allow one’s system to start speaking the language on auto-pilot. If there’s danger of sinking, one can always abort, but, as another German saying goes, “what doesn’t kill only toughens u up”.

The learning process is enhanced by one’s mistakes. Because of not adhering to boring, attention-deficit causing formal rules, many mistakes are made. Believe me, these very mistakes are your best teachers. The learning they impart is priceless and irreplaceable.

Why am I going on and on about this?

What does this have to do with the markets?

In fact, everything.

Sprachgefuehl involves getting into the Zone to be able to anticipate the movement and structure of a language.

Getting into the Zone is what its all about. We are able to reap profits from Mrs. Market because we are able to get into the Zone. If we lose that ability, Mrs. Market manhandles us. Period.

Sprachgefuehl keeps our instincts sharp. It’s great Zone-practice. Whatever you are doing in life, you can use this concept for entry into and proficiency at life in the Zone.

With that, any kind of market-play will also come naturally to you.

Things That Make Me Go Ufff!

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Pot-holes, potty pancakes, speed-breakers without warning, cars parked in the middle of the road…

Ghost-drivers, dangling electricity wires, open garbage piles, spiky iron-rods dangling from trucks…

Power-cuts, red-tape, policy paralysis, red-siren cars…

Politicians, their “Gandhi-mileage” fixation, mass-corruption, and highly selfish lives…

Negligence to the extent of culpable homicide, fire-brigades arriving late due to pathetic infrastructure, lack of facilities in government schools, over-flooded government hospitals…

Aid that doesn’t reach the needy, lack of development in states far away from the capital, mis-reporting of economic figures to paint good numbers, lack of political will to tackle inflation…

Spurious liquour that kills hundreds, a judicial system that makes you want to stay away, police that intimidates you instead of helping, religion that is used as a weapon…

The police-criminal nexus and profit-sharing, political rallies where “supporters” are paid to join the rally, the bullying of private organizations and non-government organizations by governmental agencies, extortion of small businesses by local government bosses…

Curriculums that cause school-going kids to become sick, no stray-animal policy imposition, lack of sewage infrastructure despite imposition of corresponding taxes, the embracing of nuclear power without possessing the precision and attitude to deal with it safely…

Traffic-cops that are fully focused on their own pockets, millions of bottle-necks that induce road-rage, a totally warped sex-ratio due to generations of male-bias in our society, the black-market in cooking-gas cyllinders…

The 440 V electric bursts that annihilate home-appliances despite surge-protection, slap-fixation by the media that makes one slap look like a million slaps, the fact that we Indians still haven’t learnt to queue up, the lack of realization by us that India is neither an oil-rich nor a water-rich nation…

Spurious everything, rotting food-grain, street-lamps burning in broad daylight, never-ending toll-tax even after an infrastructure has paid for itself…

The dizzy figures of each new corruption scam…

The speed at which an epidemic spreads owing to an overall lack of cleanliness…

A burgeoning population and zilch efforts to harness and enjoy its demographic dividend…

The gross misuse of one’s connections that one has to resort to, to beat the system and sometimes, to survive…

The lack of common-sense that prevails in our society…

These are some of the things that make me go ufff!

It’s because of many of the above-stated issues that the chances of India becoming a super-power in the near future are highly unlikely.

What happens after that depends on how well we tackle these and related matters.

Is This Blood?

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When there’s blood on the streets, that’s when you should go out and invest.

That’s an ancient proverb.

The 64 million dollar question is, IS THIS BLOOD?

I’m going to focus on India, because that’s my playground.

So ICICI Bank breached the 700 mark, did it? The 2009 low was around 250 bucks. At 700, it’s not blood. True, the banking sector is down. However, we are nowhere near blood levels. State Bank of India might have fallen around 50 % this year, but it’s still double the price of its 5 year low.

The Sensex shows an average price to earnings ratio of around 14. Remember 2008 and 2009? Average PE of about 9? Well, in my opinion, those are blood levels. These aren’t.

True, the mid-cap segment has taken a hammering. Let’s take Sintex Industries. At 75 levels, this stock has fallen big. Nevertheless, it’s still double the price of it’s 2009 low. At 98 rupees, Jain Irrigation has really fallen too. The PE ratio has come down from 35+ to around 14, and this looks attractive. Even Sintex’s sub-5 PE ratio looks very attractive, also because the company is aggressively pursuing water-purification and “green-innovation”. Agreed, attraction to invest is present, especially in the mid-cap arena, where you’re likely to find quality in management too, as opposed to the small-cap area, where this is less likely. However, to say that there’s overall mayhem here would be going too far.

The BSE small-cap index has halved since late 2010, but is again at double the 2009 low. Many small-cap stocks are bleeding badly, though. Most small-caps haven’t proven their pedigree yet. Thus, people are letting them bleed.

Then there are stocks like Karuturi Global and KS Oils, that have been hammered down to penny-stock levels. One has problems getting into such stocks, because the underlying story can be shady. With penny stocks, there’s always the danger of oblivion, i.e. they might cease to exist down the line. Such stocks need to be traded at best, with small amounts and for the short-term. In their present conditions, they are not investment-grade stocks.

The picture that emerges is that there are selective attractive bets being offered by Mrs. Market. There are good investments to be made for long-term investors, if you possess patience and holding-power. I’m short on patience, so I like to trade India. That should not deter you. If you are a long-termer, and have what it takes, well, then you are a long-termer. And this market is offering you some good bets, so be very selective and go for it, but don’t bet the farm, since we’re not seeing all-out blood on the street yet.