Steps are the New Currency

Walking walking walking…

… steps.

We’re logging them.

We’re thinking more about them than dollars, pounds, euros or rupees.

How many steps’ve you done today?

And who’s we?

We’s a collective. People who’ve gotten financial basics sorted, but perhaps not health basics. However these people have realized that. Smart.

Why smart?

Simple.

To enjoy one’s financial basics, one’s health basics need to be in place.

Place health before wealth, and you enjoy your wealth.

No health, but wealth, well, then you don’t enjoy your wealth.

We’re also in it for quality of life, right?

Therefore, yeah, treat steps as a very valid currency that gives you the ticket to enjoy other physical currencies and their benefits.

Logged 10k for the day yet? Or 15k?

Yeah? Super.

No? Why not? What are you waiting for? Step up, buddy!

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Can I Really Really Really Do Without Fundamentals?

I like to trade without a bias. 

Lack of bias means freedom… 

… freedom to think independently…

… not falling prey to another person’s opinion…

… which then allows you to listen to your system…

… trade identification…

…setup demarcation…

…trigger-entry…

…trade triggered…

…trade management…

… trigger-exit…

… exited.

That’s it, move on to the next trade. 

News gives me a bias. 

No news. 

You know what else gives me a bias?

Fundamentals. 

I don’t wish to look at fundamentals. 

If my eyes are seeing a setup in the EuroDollar, I would like to take it without the nagging thought of “what will happen if Scotland says NO or YES”.

I don’t want to care about inflation numbers, or job figures, or industrial output or what have you. 

I mean…can I just …do it?

Meaning, can I just do away with fundamentals, and focus on technicals only, which is my area of specialization?

Sometimes, I get a little unsure. 

I start looking around. 

How are others doing it? The experts, that is. 

My uncertainty gets fanned a little more, when I see experts not really ignoring fundamentals, even though they might be specialized in technicals. Hmmmm. I’m still not happy looking into fundamentals. I mean, why should I take time-out from my strong suit, and devote it to my very weak suit?

No, I decide. I’m really not going to look at fundamentals. 

What’s the worst that could happen?

Let me just see if the worst that could happen is bearable.

Ok…I ID a trade…demarcate a setup…and the trade goes against me because of the announcement of some number in the afternoon. People looking at fundamentals would have waited for the announcement of the number and then traded. Fine. 

In the world of trading, it is always good to have the worst-case scenario unwrapped and right before your eyes to see what it really means. 

You know, I can take this. 

Would you like to know why?

Firstly, I would like you to understand that we are looking at large sample-sizes here. Any sensible reasoning would only apply to large sample-sizes. 

Over the long run, and over many, many trades, Mrs.Market will go either way after an announcement of a fundamental number with a chance of roughly 50:50. 

If this is true, it is very good news for me, good enough to just kick fundamentals out of the equation. 

At times, the market reacts as per the crowd’s anticipation. 

At other times, it reacts in the opposite fashion. 

I assume that the ratio of the above two directions taken by Mrs. Market over a very large sample-size would be 50:50.

I think my assumption is correct. I don’t want to go through the labour of proving it mathematically. 

Ok, let’s assume that my assumption is correct. I then kick fundamentals, and go about my work while relying on my strong-suit, i.e. technicals. This trajectory will very probably have a happy ending. 

Now let’s assume that my assumption is wrong. 

What saves my day?

Technicals. 

Technicals very often give setups that factor in crowd behaviour and crowd anticipation of market direction. 

Technical setups get one into the build-up to an announcement. 

More often than not, one is already in the trade, in the correct direction, enjoying the build-up to an announcement without even knowing that the announcement is coming, if one is not following fundamentals. 

Technicals can actually do this for you. I’ve seen them do it. I mean, the GBPUSD has been giving short setups during the entire 1000 pip run-down recently. To have availed such a setup, people haven’t needed to know that a referendum is coming. All they’ve needed to do is to take the trade once they see the setup. 

Actually, that’s it. I don’t need more.  

I don’t need to reason anymore with myself. Everything is here. 

I think I can let go of fundamentals safely.

Even this trajectory should have a happy ending.

Happy Second Birthday, Magic Bull !!

Seasons change. So do people, moods, feelings, relationships and market scenarios.

A stream of words is a very powerful tool to understand and tackle such change.

Birthdays will go by, and, hopefully, words will keep flowing. When something flows naturally, stopping it leads to disease. Trapped words turn septic inside the container holding them.

Well, we covered lots of ground, didn’t we? This year saw us transform from being a money-management blog to becoming a commentary on applied finance. The gloom and doom of Eurozone didn’t beat us down. Helicopter Ben and the Fed were left alone to their idiosyncrasies. The focus turned to gold. Was it just a hedge, and nothing but a hedge? Could it replace the dollar as a universal currency? Recently, its glitter started to actually disturb us, and we spoke about exit strategies. We also became wary of the long party in the debt market, and how it was making us lazy enough to miss the next equity move. Equity, with its human capital behind it, still remained the number one long-term wealth preserver cum generator for us. After all, this asset class fought inflation on auto-pilot, through its human capital.

Concepts were big with us. There was the concept of Sprachgefühl, with which one could learn a new subject based on sheer feeling and instinct. The two central concepts that stood out this year were leverage and compounding. We saw the former’s ugly side. The latter was practically demonstrated using the curious case of Switzerland. There was the Ayurvedic concept of Satmya, which helps a trader get accustomed to loss. And yeah, we meet the line, our electrolytic connection to Mrs. Market. We bet our monsters, checked Ace-high, gauged when to go all-in against Mrs. Market, and when to move on to a higher table. Yeah, for us, poker concepts were sooo valid in the world of trading.

We didn’t like the Goldman attitude, and weren’t afraid to speak out. Nor did we mince any words about the paralytic political scenario in India, and about the things that made us go Uffff! We spoke to India Inc., making them aware, that the first step was theirs. We also recognized and reacted to A-grade tomfoolery in the cases of Air India and Kingfisher Airlines. Elsewhere, we tried to make the 99% see reason. Listening to the wisdom of the lull was fun, and also vital. What would it take for a nation to decouple? For a while, things became as Ponzi as it gets, causing us to build a very strong case against investing a single penny in the government sector, owing to its apathy, corruption and inefficiency. We were quite outspoken this year.

The Atkinsons were an uplifting family that we met. He was the ultimate market player. She was the ultimate home-maker. Her philanthropy stamped his legacy in caps. Our ubiquitous megalomaniac, Mr. Cool, kept sinking lower this year, whereas his broker, Mr. Ever-so-Clever, raked it in . Earlier, Mr. Cool’s friend and alter-ego, Mr. System Addict, had retired on his 7-figure winnings from the market. Talking of brokers, remember Miss Sax, the wheeling-dealing market criminal, who did Mr. Cool in? She’s still in prison for fraud. Our friend the frog that lived in a well taught us about the need for adaptability and perspective, but not before its head exploded upon seeing the magnitude of an ocean.

Our endeavors to understand Mrs. Market’s psychology and Mr. Risk’s point of view were constant and unfailing, during which we didn’t forget our common-sense at home. Also, we were very big on strategy. We learnt to be away from our desk, when Mrs. M was going nowhere. We then learnt to draw at Mrs. M, when she actually decided to go somewhere. Compulsion was taken out of our trading, and we dealt with distraction. Furthermore, we started to look out for game-changers. Scenarios were envisioned, regarding how we would avoid blowing up big, to live another day, for when cash would be king. Descriptions of our personal war in Cyberia outlined the safety standards we needed to meet. Because we believed in ourselves and understood that we were going to enhance our value to the planet, we continued our struggle on the road to greatness, despite any pain.

Yeah, writing was fun. Thanks for reading, and for interacting. Here’s wishing you lots of market success. May your investing and trading efforts be totally enjoyable and very, very lucrative! Looking forward to an exciting year ahead!

Cheers 🙂

A Matter of Pride

Eurozone this, Eurozone that…

Man, it’s getting irritating.

Can we, for one moment, imagine a world without the Euro? Yes. Why is it so difficult? What would the cost of that scenario be?

Deleveraging, people, that will be required. All of those nations that leveraged themselves into quasi financial extinction will need to deleverage massively, once the Euro is discontinued, for as long as it takes to pay off their debts.

What does deleveraging mean? It means not using leverage for as long as it takes. It means paying off one’s debts by working overtime and saving.

Do you think the Italians or the Greeks et al. are liking such suggestions. Of course not. That’s the thing with debt. If you can’t pay it off, you’re in deep sh*t. Nobody thinks of that while taking on debt.

When the Eurozone was formed, sovereign debt of financially weaker countries was sold worldwide using the Eurozone tag. As in “C’mon, it’s all Eurozone now, and these Greek bonds give a premium return as compared to German ones!” Ingenious way to market junk bonds. Meanwhile, citizens of these financially weaker Eurozone countries borrowed left, right and centre to build houses and to consume. As 2008 approached, many lost the earning power to pay back their monthly installments. Now, as more and more of this debt matures, these financially weaker Eurozone countries need to conjure up billions of Euros they do not have.

You’ve got to hand it to the marketeers. Pure genius. They always get you, don’t they.

The reason things are not really working is the looming idea of uncalled for hard work that the process of deleveraging requires. Even if one wants to put in hard work, where does one put it in, if there’s no work.

Thus, the only option remaining involves massive cutbacks, like you’re seeing in Greece just now. Consumer spending down to zero. Pension cuts. Medicare cuts. All-round cuts. To one level above slowdown, till the deleveraging process is over. Scenario will take long to smoothen.

After enjoying a penthouse suite, a 1-BHK feels pathetic.

Eurozone wants to remain alive financially, but are they willing to pay the harsh price?

What you’ve been seeing since this crisis exploded is infinite artificial maneuvering. This might stall the situation. The goal is to stall long enough so that the deleveraging process is over before the stalling process can be weaned off. And that’s a fatal error. Nobody understands deleveraging properly, because the world has never done it properly before, at least in modern financial times. Correct me if I’m wrong.

Deleveraging is going to take longer than all the stalling moves put together. That is my opinion. Stalling results in a false sense of security because of all the maneuvering to show that the economy is doing well. Owing to this false sense of security, people continue to consume. Instead of deleveraging, people leverage. Instead of decreasing, debt increases.

What’s the deal here? You see, pride and egos are at stake. Eurozone doesn’t want to become the laughing stock of the world, the focus of all jokes. Thus, for the sake of their pride, and to fan their egos, European leaders feel the need to keep the Euro alive, even if it costs them their elections, and their financial survival.

The Short-Term History of Idealism

1989, Konstanz, Germany.

I’m quietly eating a Nutella sandwich in the commom-room of our student-hostel. There’s a commotion near the TV area. The Berlin Wall is falling. A few students rush to pack their bags. They are off to Berlin. The one’s not going, including me, request them to bring back a few extra pieces of the Wall. That’s one Nutella sandwich I’ll never forget in my life.

Slowly, communist infrastructure in the Soviet Union starts to fall apart too. With the exception of a few strongholds, most of it is gone today.

The most repeated pro-communism argument I have heard after the fall of the Wall is this: Communism failed (wherever it failed) because it was too idealistic for mankind. So, according to this argument, mankind could not live up to the ideals of communism. All people were equal, but some were more equal than others, to analogically quote George Orwell.

Maybe, maybe.

And here is mankind again, trying to be idealistic. The epicentre of this idealism is, well, Germany. Its leaders, including the Pope, are asking its citizens to dig into their pockets and support the Euro against breakdown, come what may.

No other European nation is financially capable of bailing out the Euro. France’s economic problems are visible. It is now up to Germany. The question that remains is: IS THIS FAIR to the German citizens, who will have to take on pressurizing austerities for the follies of others to achieve this idealistic goal?

Well, what’s fair in life and the History of the world? Sacrifices have to be made for the greater good. Is the existence of the Euro “greater good”?

There exist discrepancies between the Euro nations regarding work-attitude and work-ethics. Europe is NOT one nation with one government. We are looking at diverse nations with diverse needs. Some hate to work overall. One likes its retirement age to be 57. The call to behave like one nation to tackle bankruptcy is the imposition of an artificial existence. History has shown mankind, that artificial existences tend not to last.

Left to sink or swim, people much rather decide to swim. Although a sovereign default will impose upon the concerned nations huge austerities in the short-term, they will opt to stay afloat rather than sink. Long-term work ethics will change. Attitudes will change.

Never-ending bailouts will tend not to affect faulty or wanting work-attitudes. That’s the danger here, a repeat loop mechanism, till the bulk of Germany’s resources are drained in supporting the Euro. That’s what we are looking at. First there’s 370 billion Euros for Greece to clear. The figures for Spain, Portugal and Italy are still unclear to the common-man. Figures are being revealed one by one in the media, from mini-bailout to mini-bailout. How long can this go on? Is Germany some kind of holy grail with a never-ending supply of funds and resources?

The questions Germany and its leaders need to address are these: Is the short-term mayhem after a possible Euro collapse the worst-case scenario for Germany’s industry and people? Or is it the slow, long drawn sucking out of its hard-earned life-time earnings and resources, drop by drop, possibly to the last few drops.

Only after answering these two questions will German leaders be ready to vote for or against the Euro in parliament.

One Step Closer to the Gold-Standard?

The gold-standard is an extreme scenario.

Imagine the world’s top currencies collapsing. For lack of a better alternative, the world resorts to gold for conducting international trade.

Probably a situation that’s not going to occur.

But then, are we doing anything to stop it from occuring?

Q: Is the US doing anything concrete to reduce its debt?

A: No.

Interpretation: USD will lose its stronghold as global currency at this rate.

Q: Does Europe have any concrete ideas about its financial future?

A: No.

Interpretation: Euro is nowhere near toppling USD from its global currency status.

Q: Is China doing anything concrete to increase transparency?

A: No.

Interpretation: Doesn’t make the Yuan a strong contender for top post.

Q: Is India doing anything concrete to reduce corruption?

A: Er…blah blah blah… No.

Interpretation: I’m not even trying to interpret the eyewash going on here.

Let’s move on to a country called Venezuela.

President Hugo Chavez just called all his gold home…!

Even if this is to taunt the US, it still is HOARDING.

Hoarding is infectious. The start of hoarding can trigger a “Domino-Effect”.

Whatever his ulterior motives were, Big Boy Hugo has taken the world one step closer to the gold standard.

To prevent hoarding from escalation, a counter statement needs to come, like NOW, from the major economic players of the world, something confidence-boosting. Don’t see that happening anytime soon. Seems that hoarding might escalate.

The gold-standard seemed to be a myth a few months ago. Now, at this stage, we seriously need to educate ourselves with regard to the gold-standard and position ourselves accordingly.

Did Europe Forget the Exit Clause?

It’s the early to mid ’90s. Reunification is getting set in Germany. Europe is slowly moving towards the Euro. Meanwhile, Yugoslavia disintegrates into smaller states.

My friend Jerome prepares his tuna salad to take to work. This pround Frenchman from Lyon then passes a remark that causes me to reflect. He says something to the tune of “Look at them, falling apart like this, while the rest of Europe comes closer.”

Europe, on the whole, is excited about the upcoming Euro. It adds to their identity on the world stage. The economic implications of the Euro look promising on paper. Europe goes ahead with the Euro soon after the turn of the millenium.

The “All for one, one for all” idea is an ideal. It’s utopic. Unfortunately, we live in the real world. The real human being is a selfish animal. In this real world, ideals have a tough time existing.

In its excitement, Europe probably forgets to add an exit clause. If there is an exit clause, we are not hearing about, and now would be the time to hear about it.

A decision taken while one is excited causes one to overlook the flip-side. This flip-side is emerging now. Certain nationals are more industrious and believe in paying their taxes. Others are lazy, corrupt and believe in cutting corners. Certain Euro nations are more economically astute and clued in. Others are perhaps not so intelligent or don’t want to be, and have made disastrous economic and financial choices.

The lack of an exit clause allows parasite nations (the truth is harsh) to stooge off the diligent ones till infinity, or till time does them apart.

Though it’s very late to say these words, one doesn’t see enough people saying them already. Not treating the financial disease at its root is causing it to spread. Unfortunately, everyone’s affected, at least for now. Whenever decoupling sets in, decoupled nations won’t be affected, but decoupling doesn’t seem to be happening anytime soon.

Would you like it if someone took your hard-earned cheese away? No, right? Well, nor do the Germans, or the French. Why would one expect them to like it, or pretend to keep lilking it?

Thus, why would one expect the Euro to remain intact till infinity?