Conditioning

Why Malaysian drivers drive like assholes?
Why Malaysians are inevitably late for anything and everything?
.................... (fill in your favourite grouses) ......
also applies to why people get married in the first place?



Ever wondered why Malaysian drivers drive like assholes??!! Surely we are not like that in real life, only when we get into a car that we become monsters. When we socialise we are totally different, very few of us actually have chips on our shoulders, get to know us or come to our house and we become the most gracious hosts on earth. If we go back to our small towns and kampungs, we are generally much much nicer. So how did we get to be so un-civic minded in many areas?

We speed up when we see pedestrians trying to cross the road, we speed up when cars want to cut into our lane .... Its not that we are inherently bad, I believe its conditioning. This can be explained with a most remarkable but true experimental project.

A group of researchers put 4 monkeys in a cage with a ladder in the middle with a bunch of bananas at the top of the ladder. Naturally the monkeys will try to climb the ladder, but every time one of the monkeys starts to climb the ladder there will be a couple of zookeepers with big hoses who will spray all 4 monkeys until the monkey that was doing the climbing stops climbing to come down. After a few minutes another brave monkey will try to climb the ladder again, and all of them get sprayed again.

Now this happened over and over again, and following the umpteenth time, every time a monkey tries to climb the ladder, the other 3 will claw and drag that climbing monkey from the ladder. Till none of the 4 monkeys will dare to climb that ladder.


Then they take one monkey out of the cage and introduce a new monkey. The new monkey will naturally climb up the ladder to try to get at the bananas, and it will be clawed and dragged back down before the hoses start. The more the new monkey tried, the more ferocious and nasty the other 3 will be to whack it down. Till the new monkey dare not climb anymore.

They then take out another of the original monkey and introduce another new one ... the same chain of events occur even though just 2 of the original monkeys know why they did not want to climb the ladder. They keep adding new monkeys and taking out the original ones till all 4 monkeys are new monkeys and yet they would be conditioned not to climb the ladder - but they don't know why really.

That is conditioning, how many things in life that we do are due to conditioning, and we ourselves don't really know the real reasons why we are doing it. In much the same way, plenty of expats after driving for a couple of years in Malaysia will end up driving like a Malaysian.

Civic sense can be ingrained, it can be taught, or we can be conditioned to do things a certain way ... only when we take a step back and reassess the reasons why we shouldn't be doing so, will we be able to rise from the pack.

Inherently most people do not behave badly but due to conditioning. If you lack self-awareness and do less self introspection which leads to more self actualisation ... we will just be among the running pack. It is precisely that that parents behaviour and instruction are so important to our kids.

We end up doing a lot of things because thats the way things were done ... we do not question enough why are doing it, should we continue to do it that way or should we change our attitude because they are inherently flawed.

I absolutely abhor the way some adults treat their maids. Can you imagine what the kids are learning from all that? Hopefully they have the character strength to re-learn only the good stuff and throw away the bad stuff, but that does not happen all the time. 

In the same way that our government instill fear and divide us along religious and racial lines, thats conditioning. To break out of that mould, we have to keep drilling down on proper reasoning and on what is right and wrong. Life is so complicated and a bitch.

Special Update

Futures are down quite a bit and I have not seen such a waterfall in quite a while.

I just hope that this red holds tomorrow. We do need some good scare.

December Quadruple Witching

There was no follow through of the correction of yesterday, so my hope of a better entry to go long was dashed while my doubts for any lower prices were proved correct. But tomorrow is year end quadruple witching and lots of shenanigans will go on, even without any input from the fiscal cliff drama. Come to think of it, we are days away from the cliff and no resolution is in sight. And yet there is no panic anywhere. Remarkable to say the least. I am waiting for the cycles to bottom before deciding the next course of action. I have identified a number of shares and ETFs which I think will yield spectacular returns in the coming months.

I closed the short trade in silver today. While cycles still did not bottom, I think there is not much juice left and whatever little downside is there, better leave it for the next guy. It is called the greater fool theory. We don't want to be the last guy holding the can. Gold fulfilled my price target and I do not have any lower target for gold. Just waiting for going long.

The wheat trade, which I did not take because wheat did not cross $ 820, was cancelled today when it closed below $ 800. I do not think there is much downside in wheat but why take any chances. Better opportunities are coming up soon.

Crude is consolidating around $ 89-$90 range and let us see how it behaves in the next few days. Something very interesting in brewing the the oil fields which has the potential of an explosive return on investments.

It was a good decision not to short Nat. Gas because cycles did not top yet. Today we saw Nat.Gas go up and I think it might challenge $ 3.70 level soon. But the preferred trade in Nat. Gas now is on the short side and I am waiting for the cycles to top.

This coming Sunday will be the last free market report. 2013 will be an exciting period for investment / trading and I am sure we will do great.

Thanks for sharing my thoughts and good luck with your last minute holiday shopping.

Things That Make You Go " Hmmm".

One of those things that make you go  "Hmmm" could be my quick post of last night where I wrote that : We may see some pull back starting tomorrow afternoon
The other  "Hmmm" factors could be:

• Short trade in silver is doing well if you have taken it. If not, don't worry, may other opportunities are coming up.
• Now that you are seeing the price action of Crude, may be you will appreciate why I closed the short crude trade last week.
• Wheat is still in range of $ 800- $820 and is a candidate for a long trade with this consolidation.

So may be you can say "Hmmm", the system is working and is in fact getting better.

Jokes aside, I do hope that the correction continues for a while more. I would love to see a lower low in indices and that would make me more comfortable going forward.

The reason that we have for the 11 points correction in SPX is the same that was given on the way up. i.e. fear of the cliff. But if I am allowed to put in my 2 cents, I would say, cycles did not bottom yet although they are close to. The 1st ideal target would be around 1415-1420 in SPX and a close below that should take it closer to 1400. But again, time is running out. Therefore, at this point of time, I do not have any price target, only time target. Don't bother about the end of the world stories. 

You may want to watch this clip from Bloomberg

http://www.bloomberg.com/video/gundlach-fiscal-crisis-the-issue-not-fiscal-cliff-GjrJ7SShSTK09M8eE3TkFw.html

I think the circus will continue for a while.

Gold is now around $ 1670 and here my price target is around $ 1650, not a huge drop but enough to shake weak hands out. For 2013, it is going to be a huge winner. 

Let us see how far the correction goes and whether it goes any further at all. Again, no need to front run or take any positions. Time for actions is coming soon and we remain alert and keep the powder dry.

Thanks for sharing my thoughts. Hope you remember the Amazon link if you need it for your holiday shopping.

Quick Note

Quick note today as I am running late with an assignment.

The short trade of silver was triggered today, but I would urge readers to keep a tight rolling stop.  The stop would depend on your risk tolerance level but I personally would keep it really tight. For e.g. right now silver futures (/SI) is at $ 31.82 and in this situation my stop would be around $ 32.25. Better still, if you have not taken the trade, rather wait it out for the cycle to bottom by end of the year.

Wheat is showing the positive consolidation pattern and I am waiting it to break above $ 820, re-test the break and make that as new support, to go long.

Equity indices are on fire but lots of divergences for comfort. VIX has a negative divergence with SPX and so has Dr. Copper. So far cycles have not bottomed yet so I am not long but I have identified some very nice and juicy numbers for going long in a few weeks time.

We may see some pull back starting tomorrow afternoon but no need to guess and front run. Let everything line up in a row before we open fire.

That's all for tonight. Will see you tomorrow with a more detailed report.

Japan's Double Barrel Luck

The Japanese markets have been in the doldrums for the longest, no thanks to the silly yen strengthening phase following the financial crisis as investors somehow still think the yen is a safe haven. The Japanese market has two things going for them this time: the Federal Reserve move which basically tells all that rates will be very low and they will keep printing liquidity into the markets, which negates the need for some to still park money in yen as safe haven; the LDP election victory which propels the markets to a "regenerative phase".

Following is the latest strategy report by Bank America Merrill Lynch on Japan:


LDP victory brings our bullish scenario closer   

With the LDP (294 seats) and Komeito (31 seats) combined (325 seats) now 
controlling a more than two-thirds majority (320) of the Lower House, it now 
appears more likely that the new Shinzo Abe administration will be able to 
exercise strong leadership. Though an LDP victory was widely expected, what 
has not been fully priced into the market is the degree to which the new 
government will be able to put through its legislative program relatively 
unhindered.  

Consequently, Shinzo Abe will need to act quickly to implement the policies he 
had set out before the election. Those measures we believe that have yet to be fully factored into the market are inflation targeting, and long-term fiscal 
expansionary measures including corporation tax cuts and a raft of spending 
measures included under the broad title of “national strengthening.”  


As the new cabinet is being drawn up, the focus is now on how and in what order of priority the new administration will put through its policy program, including drawing up a supplementary budget, expanding public works spending, reducing the rate of corporation tax and exercising greater influence over the BoJ’s monetary policy. For instance, if the government moves quickly to put pressure on monetary policy, we can expect the yen to continue to weaken, but if this is put off until after the new BoJ Governor assumes his post (April 2013), then in the near term we could see the market looking to lock in profits. However, at least we can say that waiting for weakness to seek buy-in opportunities is unlikely to be a viable strategy for the time being.  

Cut in corporation tax from 40% to 30% would raise ROE  

A reduction in the corporation tax rate from around 40% to 30% would, we 
calculate, raise TOPIX ROE from 7.8% (FY3/14 IBES consensus) to around 8.9%.  



Schedule  

The next BoJ monetary policy meeting is scheduled for 19-20 December, at 
which additional easing is a possibility. At this point, the market is not expecting explicit inflation targeting to be adopted. On 26-27 December, Shinzo Abe should be officially appointed prime minister at a special Diet session, immediately after which the new cabinet will be announced. Abe has expressed his intention to visit the US in January, so we expect significant diplomatic activity including related to China. From end-January to February we expect a supplementary budget to be unveiled comprising a boost to Apr-Jun GDP and confirming a hike in the rate of consumption tax. In March, two new BoJ Deputy Governors will assume their posts, followed in April by the new BoJ Governor. We expect government and BoJ links to become even stronger, and an increasingly dovish bias in central bank policy.  



When previously elected prime minister in 2006, Abe’s first visits were to China and South Korea to patch up relations that had previously worsened, and this time around we again expect him to take similar practical steps to deal with currently stained relations, though there is a risk of provocative statements being made.  

However, if the cabinet line-up is decided in order to balance factional interests, then the policy program implementation may not be as speedy as the market is hoping. If the cabinet includes a large number of younger politicians, as per the current shadow cabinet, it would strengthen the hand of prime minister, and consequently increase the possibility of the policy program proceeding in line with Abe’s intentions as indicated in speeches etc to-date.  

Do Gods Hate Bears?

Poor bears. They are not getting a break. That’s very unfair. What will happen to ZH and all those who are waiting for the next disaster (just round the corner) for the last so many years?

Now that the year is coming to an end, what have we learned? I don’t know about you, but here are few things I would include in the learning experience:

1.       News is noise: Believe me, very rarely price moves based on news. Rather, it is the price action which makes the news. Only few months back, analysts were falling over each other to bring positive news from Apple and up the price target. Now that Apple is around $ 500, they are finding news to downgrade it. My take, stay away from news, mute the talking heads and stop reacting to things.

2.       Stop chasing beta: The losses arise because we take undue risk. We take risk because we want to chase performance.  Relax; stop chasing some imaginary benchmarks, stop comparing how others are doing. Just focus on what is your own goal and be realistic about it.

3.       Don’t listen to too many gurus: I have seen otherwise intelligent folks reading 100s of blogs and newsletters and getting confused in the process. Identify someone who has been consistent and stick with him/her. Everyone is correct at some point or other. Even a broken watch shows correct time twice a day. The trick is to find someone who is correct more times than not.  But use him/her as a pole for pushing the boat. Nothing beats your own analysis and due diligence. After all, it is your money which is at stake.

Back to markets, thank my lucky starts I did not short the indices last week. I should run a subscription service just to advice folks not to front run and keep capital safe! In so far as the two picks of last night, I am still waiting for them to break the range. Silver did not test $ 33 nor did it break below $ 32. Wheat is also stuck between $ 800- $ 820 and a consolidation here will be good for going long.  Euro is also in a consolidation mode and despite all the very smart and witty posts regarding its demise, it is holding up.  Short term, we better have some weakness in the market soon before the cycles bottom time wise.

With the market remaining in the chop zone, it is very frustrating for investors and traders who always feel the need to do something. But as I have demonstrated time and again that break up or down of the range, coupled with cycle directions, provide the best guidance in this uncertain market.

That’s all for this evening. Patience is the watchword for now. Thanks for sharing my thoughts. As always stay nimble and stay safe.