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Friday, 29 March 2013

Orthodoxy vs Orthopraxy


It's a holiday!

Just thought I'll write something more celebral today (or so I think).

Let's introduce 2 big words:


Orthodoxy - correct belief

Orthopraxy - correct practice


No, I'm not giving a religious sermon today. Don't worry.

Just using these two spiritual words as moot points to explain how some traders and investors apply them on their financial journeys - sometime without being aware of it themselves!


Orthodoxy Traders

Should I use discretionary trading or should I trust mechanical systems trading? The faith is that once you get this big picture "belief" fit right with your temperament, the rest will fall into place.

How about the "correct" trade time frame to trade for you? 

Some will swear by day trading with no over night positions. The belief is that you with 1001 piranha bites, you too can reduce an elephant into bare bones. (Hmm, are there elephants in South America?) 

And the best thing is, you can have a full night's sleep in peace - every night.

Some will pooh-pooh these nimble-footed traders. Swing and position traders will prefer the meatier bite of a lion. A big kill can last you several days so lions don't have to hunt every day. Can sit in the shade and chill. 

But by going after bigger kills, you run greater risks of getting kicked in the face by hoves or gorged in the gut by horns if you are not alert. 

And if you can't finish your kill in whole that same day. you sleep at night tossing and turning afraid some other predators will steal your bounty in the middle of the night... 


Orthodoxy Investors

Oh! There's so many examples here. I'll just quote a few.

Buy and hold versus market timing?

Diversification versus concentrated focus?

You can't beat the market so do passive indexing versus I can beat the market active stock picking? 

Should I go for value, income, or growth stocks? (Hmm... Can I have all 3 in 1? Apple?)

Which asset class is the best? Some are one horse rider; while some have no problems riding camels, elephants, and dragons! (Opps! Please cross dragons out as I'm mixing fantasy with reality again)


Orthopraxy Traders and Investors

Both traders and investors in this school have a lot in common than they think! 

Investors buy when there's blood in the street and sell when everyone are in climatic raptures. It's similar to  a Trader's practice of fading a rally and buying the dip.

Traders let their profits run; cut losses when a trade goes against them. It's rhymes with an investor's maxim of weeding out losers and keeping only winners in a portfolio.

Buy low sell high. Can't be different between an investor and trader right?

It's all about "best practices" that bring home the bacon. Very practical stuffs. Can see and touch kind. 

Nobody cares about what you think; just your bottom line.


What if torn between Orthodoxy and Orthopraxy?
 
I have one good example here.

If you are a Buy-and-Hold believer, and you also a big fan of Warren Buffet's:

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1


Well, I have no solution as the solution has to come within from you.


It's like in the spiritual realms. First you have to decide to believe in one guru or many gurus.

Even if you believe in one guru, you'll still split into multiple denominations as everyone have their own interpretations on "correct practice".   
   
  
Me? I'll stick with my Hokkien street wisdom: 

Happy can oredi!



 

Tuesday, 26 March 2013

Who needs a bailout?





On 15 January 1998, Suharto signed a deal with the IMF for another bailout package full of unpopular austerity measures.

The body language of the then IMF Managing Director Michel Camdessus says it all.

After this "for your own good" treatment from IMF, most countries in Asia have  beefed up their reserves so they don't have to be talked down to ever again. 

With the recent "bailout" of Cyprus, it's good to be reminded of the painful costs of a bailout.


It goes for sovereign states as for individuals.

 
  


 

Saturday, 23 March 2013

林憶蓮-鏗鏘玫瑰 - Song dedication to Tulip Girl





A special song dedication to a Tulip trader friend.


I've noticed very few Investor bloggers put up Youtube songs in their blogs. On the hand, I've found quite a few Trader bloggers share music in their blogs.

I guess Traders are insanely aware of their emotional roller-coaster and inner demons. Music is a way to communicate with our souls.

Music drowns out the deafening white noise of our thinking. Only then can we hear the soft murmurs of our hearts. 




 
 

Thursday, 21 March 2013

Is Gold considered as investment or insurance?


It is quite interesting to listen to intellectual debates on whether Gold can be considered an investment (when it has no cash flow) or is it an insurance.


Investment

I remember around 2005, I remember reading in the Sunday Times about how a Singaporean investor became a millionaire by investing in Gold. 

He had sunk in his life savings of SG$500,000 into Gold when it was US$250 an ounce a few years back. When his story was published, Gold had doubled to US$500 an ounce. Making him a millionaire!

And he's not selling! He's convinced Gold will double again to $1,000 an ounce in the next few years.

Hey! He was right again!!! If had resisted the urge to sell, he is doing very nicely with Gold around US$1,600 an ounce today. Even with the appreciation of the SGD against USD.

For this investor, he already had the answer to the question. More importantly, he profited from his conviction.

Gold had outperformed STI from 2005 t0 2012 - yes, Gold beat low cost passive indexing even with no cash flows.

Caveat! Those who bought Gold below US$1,000 and those who bought Gold near the recent top at US$1,900 an ounce would have different responses and explanations to Gold prices today.

It goes to show with all investments (equities, property, commodities, etc), getting the semantics right is not as important as getting this question right: 

Are you early or are you late to the game?


Insurance 

Imagine you have SG$200,000 invested in a low cost passive ETF of STI in 2007/08.

You had the harrowing experience of seeing your "investment" got sliced into half at the lows during March 2009.

4 years just blew by just like that! And now you have recovered all your "invested" money. You did not make any money, but then you did not "lose" any money either. Or so you think.

SG$200,000 4 years ago can buy that stylo car you've always wanted. To  buy the same car now, you most probably need to take out an additional loan...

The same SG$200,000 4 years ago is around 20% deposit for the million dollar condo you are eyeing. Now you are kicking your idiot decision to invest in the stupid ETF instead of that condo. The condo is now valued at....

But if you had "invested" the same SG$200,000 in the STI ETF anytime during 2009, equities turned out not so bad as an "insurance" against lost of purchasing power 4 years later- just like Gold.

As some have discovered after buying insurance, you can overpay for the same benefits and protection! 

A variation of the above italics on investment:

Timing is everything! 



     
Traders' view on Gold

I prefer to use a Trader's view on Gold as it's more actionable, provides greater clarity, and less prone to distractions.

When you buy Gold, you are shorting USD.

When you sell Gold, you are long USD.

It's just this simple!


OK, maybe not so simple.  Remember that your profits for Gold is in USD. It will be reduced/or enhanced by the currency exchange movements between USD/SGD.  

If you are bullish on Gold, a better trade/investment could be to long Gold in JPY terms:

You buy a Gold ETF and you buy an equal amount in a currency ETF that shorts JPY.
 
Welcome to the world of pairs trading!
     
  
     


Tuesday, 19 March 2013

Letter: Greetings to a 15 Year Old - アンジェラ・アキ Angela Aki 手紙 ~拝啓 十五の君へ~





Translation from Youtube:


Dear you,
Who's reading this letter
Where are you and what are you doing now?

For me who's 15 years old
There are seeds of worries I can't tell anyone

If it's a letter addressed to my future self,
Surely I can confide truly to myself

Now, it seems that I'm about to be defeated and cry
For someone who's seemingly about to disappear
Whose words should I believe in?
This one-and-only heart has been broken so many times
In the midst of this pain, I live the present

Dear you,
Thank you
I have something to tell the 15-year-old you

If you continue asking what and where you should be going
You'll be able to see the answer

The rough seas of youth may be tough
But row your boat of dreams on
Towards the shores of tomorrow

Now, please don't be defeated and please don't shed a tear
During these times when you're seemingly about to disappear
Just believe in your own voice
For me as an adult, there are sleepless nights when I'm hurt
But I'm living the bittersweet present

There's meaning to everything in life
So build your dreams without fear
Keep on believing

Seems like I'm about to be defeated and cry
For someone who's seemingly about to disappear
Whose words should I believe in?

Please don't be defeated and please don't shed a tear
During these times when you're seemingly about to disappear
Just believe in your own voice

No matter era we're in
There's no running away from sorrow
So show your smile, and go on living the present
Go on living the present

Dear you,
Who's reading this letter
I wish you happiness



Friday, 15 March 2013

Time - the only constraint that matters


Last night, I had a chance encounter with two ex-bosses (husband & wife team) from my IMM  sofas selling days.

My, it's 20  years since we last saw each other!!! Their baby son (he was a toddler running in the showroom then) is now serving NS in the police force. Man, do I feel old! I was 25 not so long ago...

I was sadden to later learn an ex-colleague of ours has died at the young age of 43. Heart attack. He was related to my ex-bosses by marriage.

I had older colleagues and friends moving on before me; but this is the first time someone younger than me has left... It's a bit surreal. I am 3 years older than him.

We had an interesting relationship back then. 

I was the top retail salesperson at our IMM showroom and he the top "part-time" retail salesperson at our company's warehouse showroom

He works in the warehouse during the normal workweek and moonlights in sales during the weekends

So there was friendly competition between us, but since we both also came from humble beginnings, there was comradeship too.



Forever and ever

I wrote in "My Story" that money lost can be earned back; but time lost...

I used to make personal plans assuming I will live forever. 

I plan to retire at 55.

I plan to travel to XXX and YYY one day.

I plan to take up ZZZ lessons next year (and next year, and next year).

I plan to read this book soon. Sure one! Promise!

Sounds familiar? 



Balance between Time and Money



Vagaries of time

Time is the only constraint that really matters.

Hoarding sucks if tomorrow never comes.

Spending like it's no tomorrow can cause a big handover when you wake up at 90 penniless if had planned to live till 80 only.



What ifs

If you knew you have 6 months or 2 years more to live, would you continue the same path as today? Now that's the real test of our so called "passions"!

Some will continue working till their last breath as they are doing what they love.

Some will drop immediately the little lies and excuses they have told themselves . Nothing like a little urgency of time to shine some clarity in our lives. 

To focus on what really matters. From our own perspective - not anybody's else.



Relationships 

If relationships are important to you, that's another potential blindspot.

Do not assume people you care about have unlimited time too. Thinking they can wait till you have reached X goals or achieved Y successes.

"Success" can be a bit hollow if you have no one to share it with. 



Stress test your plans with Time

1.  Would you still be pursuing this course of action if you had 2 years more to live?

2.  Is the sacrifice in time away from people that matters worth it? 

 
Who knows? You may discover "enough" is good enough after all!



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