Decoupling One o Two

Trade on.

Market forces.

You.

Connection.

Attenuation.

Life normal.

This is the real decoupling.

What was the other decoupling?

The myth one?

Myth?

I mean, Switzerland is kinda financially decoupled. The CHF just keeps its own despite anything.

Israel is also sort of decoupled. Despite everything. Functions on its own tangent. Matter of opinion.

These are exceptions. They prove the norm.

There are remote chances these exceptions won’t exist tomorrow. Having said that, let’s hope nothing like that ever happens.

However, permanent decoupling is mostly a myth. We’ll be better off not incorporating it into our investment or trading strategy.

Decoupling one o two is a different matter.

It is very welcome.

It gives longevity and harmony to a trader’s market- and normal-life.

Happy trading!

ūüôā

Advertisements

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 Sprachgef√ľhl, 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 ūüôā

Power of Compounding II – The Curious Case of Switzerland

What comes to mind when one thinks of Switzerland?

– Blood Money – world’s haven for,

– “Neutralness” – has never fought a war in modern times,

– Beauty – it is God’s own country, with its mountains, meadows, valleys, lakes, trails…,

– Discipline – blessed with the works, punctuality, law and order, you name it,

– Technological supremacy – for example their watch-technology, or their advances in heavy mechanical engineering,

– Culinary supremacy – as in their chocolates, or for that matter their herbal know-how, superior quality of their milk, and of course, their cheese,

– Love for their country – the Swiss really look after their country, are loyal to it, and would probably die for it willingly.

Only the first factor has a negative sound.

Well, they do provide a safe-haven. I mean, look at all the other factors. People feel that their money’s safe in a swiss bank. You can’t blame a country for being a safe country.

Most of the world is not safe today. So, most of the world’s money flows to locations that are considered safe. A good percentage of the world’s money is blood money, but that’s how it is. When foreign funds flow into a country, a country doesn’t ask questions. Do we in India ask questions? No. For all we know, it is Mafia money flowing into our country, inflating our markets. Nobody cares as long as it is coming in.

When foreign funds flow into a country excessively, as is the case with Switzerland, such a country can dictate the interest-rate it pays out for such funds. For many, many decades, Swiss banks have been in demand because of the safe-haven quality of their country, and the interest-rate doled out is a pittance, something like 0.5 % or perhaps 1% per annum, something in that range. I could be making a mistake of an odd 1 % here or there, but, you see, people don’t store their money in Switzerland so that it accumulates to an even bigger amount. They store it there so that the principal stays safe. Switzerland doesn’t participate in wars. Thus, wealth is not destroyed. In fact, during wars elsewhere, fund-flow towards safe-havens heightens.

And that’s the game. Almost unlimited inflow, pittance of a payout, loan the money further on 6%, 7%, 8%, huge differential, year upon year, decade upon decade, humungous compounding, enough to spark-off, inculcate and fully support massive all-round development – couple this with all the other factors given above about Switzerland, and you have a hugely positive n-th loop. A hugely positive n-th loop is the exact opposite of a hugely negative vicious cycle. Switzerland sets the framework for the all-round blossoming of life, and the inflow provides lubrication and fuels development. After a while, they don’t depend upon the inflow anymore. In fact, the Swiss were probably self-sufficent even before the inflow began. That’s how they were able to provide a stable system. The inflow is just a bonus. Due to the power of its compounding, all the other diamond qualities of CH sparkle even more brightly.

Living in India, with its legacy of corrupt leaders who have siphoned off most of our wealth towards safe-havens, how should one react?

It is not the fault of the safe-haven. We need to evolve and make our own citizens feel comfortable with keeping their funds here. Our system needs to provide that safety.

Only then will the funds stay here. If our funds are not staying in our own country, it is our own fault.