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Wed, 26th April 2017

Anirudh Sethi Report

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Archives of “Debut albums” Tag

India : P-NOTE INVTS HIT 4-MONTH HIGH OF RS 1.78L-CR IN MAR

Investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by Sebi to curb inflow of illicit funds. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

According to Sebi data, total value of P-note investments in Indian markets – equity, debt and derivatives -increased to 1,78,437 crore at March-end, from Rs 1,70,191 crore at the end of February. Prior to that, the total investment value through P-notes stood at Rs 1.75 lakh crore in January-end and Rs 1.57 lakh crore in December-end. In March, investments through the route had touched the highest level since November, when the cumulative value of such investments stood at Rs 1,79,648 crore.    

Samsung forecasts best quarterly profit in over 3 yrs as chips soar

South Korean tech giant Samsung Electronics Co Ltd forecast on Friday its best quarterly profit in more than three years in the January-March period, beating expectations on the back of robust demand for memory chips.

The Apple Inc rival and global memory chip leader said first-quarter operating profit was likely 9.9 trillion won ($8.8 billion), compared with an average forecast of 9.4 trillion won from a Thomson Reuters survey of 18 analysts.

 Revenue for the quarter rose 0.4 percent to 50 trillion won, compared with analysts’ forecast of 49.4 trillion won.

Samsung shares touched a record high of 2.134 million won in late March on expectations of record earnings in 2017, as limited production capacity for the memory chip industry and growing demand for more firepower from devices such as smartphones and servers push up margins.

While Samsung will not provide detailed earnings results until the end of April, analysts tipped its chip division to earn a record 5.8 trillion won and propel the firm to its best overall operating profit since the third quarter of 2013.

Favourable memory market conditions will likely persist throughout 2017 due to diminishing production gains on investments and careful capacity management among chipmakers.

VIX Options Traders Flash Major Warning Signal

With VIX at multi-year lows (a 10-handle!!) and stocks at record highs amid Trumpian (Goldman) exuberance, it appears options traders in the VIX complex are anything but “believers.”

SVXY is an ETF that portends to track the inverse of VIX – in other words, as VIX drops, SVXY rises…

 

(ignore the decay issues for now).

So, if a trader buys Puts on SVXY, he is implicitly betting on SVXY dropping which is VIX rising and, ceteris paribus, stocks dropping.

So, despite all the hope; all the promise; all the hype; why are options traders panic-buying SVXY Puts at an extraordinary clip?

Oil climbs above $57 after non-Opec producers agree cut

The price of Brent Crude, the international oil benchmark, has risen above $57 for the first time since July 2015 after Opec won the support of countries outside its cartel for its planned supply cuts.

Russia, alongside 10 other countries including Mexico, Oman and Azerbaijan agreed to reduce their production by 558,000 barrels a day on Saturday.

The agreement, coming on top of Opec’s earlier promise to curb output by more than 1m barrels a day, has helped Brent to climb a further 5 per cent on Monday morning, to $57.06 per barrel.

WTI, the US benchmark, is also up 5.2 per cent this morning to $54.21 per barrel, its highest level since October 2015.

These 7 Things -Traders Must Avoid

  • Trading with no stop losses. You can’t control how big your profits are, the market will trend as far as it does. However, you can control and limit the size of your losses with a stop loss and a carefully managed positions size. Not having an exit plan if you are wrong can be very expensive when a trend takes off against your position and you start hoping instead of just cutting your losses and moving on.
  • Your opinion can cost you money. Trading your opinion against all other market participants can be very expensive. The market goes where it wants and when you disagree with where it is going it will cost you. Going with the flow in your time frame is the best way to make money. Fighting the flow of the market can be expensive.
  • Egos are expensive things. Inflated egos cause a trader’s #1 priority to be proving they are right and refusing to admit when they are wrong. It is very expensive for ego gratification to be higher on a trader’s list than making money.
  • Trading off predictions can cost a lot of money when they are wrong. There is more to be made by reacting to what the market is doing instead of predicting what you think it will do later. The future does not exist and it is expensive to pretend like it does.
  • Stubbornness causes small losses to become big losses. It causes a trader to make the same mistake over and over because they do not assimilate feedback. Instead they keep doing the same thing over and over and expect different results but keep getting the same results. Stubbornness is expensive.
  • Not having an exit strategy for a winning trade can be very expensive. It is possible to ride a big winning trade back to even. If there is no plan to lock in profits while they are there a winning trade can even turn into a big loser. Trailing stops and targets can put the profits in the bank.
  • Trading too big of position sizes for your account can be very costly because no manner how good your winning trades are you are set up to give back the profits with a few big losing trades in a row,

OPEC production cut “deal” – what we know so far

Just waking up? OPEC have cobbled together an agreement (but not really)

 OPEC says it will limit output to 32.5 to 33 mln bpd (this compares to the most recent known group production at 33.24 mln bpd)
  • So, that’s a reduction of about 700K barrels per day 9depending on where in the range the cut comse to)
  • Now OPEC will try to reach an agreement with non-OPEC producers
  • A committee has been set up to choose how the cut will be allocated between members
  • The committee will report in November

If you’re a cynic on OPEC sticking with an agreement, here’s where I reckon the deal can break down, and quickly …

  • OPEC will try to reach an agreement with non-OPEC producers
  • A committee has been set up to choose how the cut will be allocated between members, to report in November
On the first point, just good luck with that. On the second point – how to allocate cuts has been, and will remain, the sticking point. It always is! And they’ve announced a committee to deal with it. Oh dear.
OK,, we’ll see. But don’t hold your breath (srsly, DO NOT hold your breath until November, that won’t work out well for anyone at all).

Coming up from Japan today, the Cabinet Office release their monthly economic report

This monthly report is not a game changer, but it gives a bit of a summary on economic developments, coloured a little by the government of the day, of course

I don’t have a time for its release, but will keep an eye out.
Meanwhile, USD/JPY is on the move early (its 7.50am-odd in Tokyo)
No Federal Reserve news hitting, but tripping a few stops under 102

A Venerable Technique

JL-One of intelligent honest things that Livermore did was to get out of one market by selling a related market, inducing the other traders to think that there was weakness in one market which would carry over to the related market. The art of indirection and letting people use their own intelligence and inferences to come to their own conclusion. for example if he wanted to get out of cotton, he’d sell some coffee. If he wanted to get out of a common, he’s sell the preferred or a related company that owned a big chunk of it, like sell Christiana which owned general motors et al. This technique one wonders how often is it used today. When it happens, is it artful indirection or chance? How to quantify and what predictions to be made? Would the robots be smart enough to do this?

Don’t focus on making money; focus on protecting what you have

  • You need to determine where you will get out before you get in. You need to specify your exit point when you get in. When you set an exit point, you need to know how much money you are willing to lose on this idea and also at what exit point you think you are wrong in your assessment. You should not place a stop too close, because that is likely to lead to multiple losses.
  • Some times, options can provide the same protection as stops.
  • At the portfolio level, it may also be prudent to specify a maximum loss from the starting stake for each year.
  • Be willing to get out quickly when you are wrong.
  • If you are not sure whether you are wrong or right and you have made a loss, partially liquidate 50%. If you continue to be wrong, liquidate 50% more. Then what is left is not a big deal.
  • When your losses are small, you will bet again. When your losses are big, you are afraid to bet and you lose great opportunities.
  • Never risk more than 1% of total equity on any trade is probably a effective money management tool for many.

10 Trading Principles of George Soros

“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

Understanding that he was not always right enabled him to cut losses short and position size right.

“My approach works not by making valid predictions but by allowing me to correct false ones.”

Soros’ is flexible in his trades, he changes his mind and reverses positions when needed. He does not marry his trades.

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

George Soros knows that the key to profitability for him is more about big wins and small losses than his winning percentage. 

“The markets are always on the side of exuberance or fear. It’s fear and greed. Right now greed has the better of it, which is rather nice (for investors) as long as it doesn’t get out of hand,”

Market trends are caused more by the extremes of  investors emotions than fundamental reasons.

“Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes.”

The problem is not in a losing trade but in failing to cut the loss or add to a losing position.

“The worse a situation becomes, the less it takes to turn it around, and the bigger the upside.”

The more extended a trend gets from its average the greater the odds of a snap back and reversion to that mean.

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”