Anirudh Sethi Report

1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others?

8. Are you at equilibrium in your personal life? You’re not as talented as Tiger Woods, and you probably won’t be able to handle distressed calls for money or leaks on the home front. Are you sure that if you’re losing you won’t get hit on the head with a 7-iron, or berated until you have to give up at the worst possible time?

9. After the trade did you learn anything from the trade?

10. Are you organized sufficiently to have a record of all your trades for your accounting and learning?

11. Should you modify your existing systems based on it?

12. How does recency and frequency and value affect your future?

13. Did you fit your after activities to your mojo?

14. If you made a good profit, did you take some capital out of the fray for a rainy day?

15. Have you learned to say “fair” whenevever anyone asks you how you’re doing and are you sure that you don’t spend a fortune after a good trade, and dissipate your profits with non-economic activities?

16. Is there a better use for your time than monitoring the ticks or the market every minute of the day if you do, and if you don’t, do those who do so and have much faster and better equipment than you have an insurmountable advantage against you?

Probably you have heard of Peter Lynch. But did you know that in 13 years, from 1977 to
1990, the Fidelity Magellan Fund he managed grew from $20m to a whopping $14b?!
One of his famous buy, Subaru, was already up twentyfold when he bought the stock and he made sevenfold after that.

Quotes from Peter are as follows:
“Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.”

“If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them.”

“Investing without research is like playing stud poker and never looking at the cards.”

“Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they’re going to be higher or lower in two to three years, you might as well flip a coin to decide.” Read more…

There’s a lot of talk around the markets and in Washington about China’s currency policy. What many want to know is whether the US Treasury will name China as a currency manipulator. Perhaps a more important question is, should China be named as a currency manipulator? And if it were named as such, what actions could the US take? In recent days the Chinese and the US administration have taken shots in the press at each other. The US is hinting that China is manipulating its currency to boost its economy. The Chinese is firing back saying that the US “should not politicize the remnimbi exchange rate issue.”

First, some background on the problem. Basic economics says that if you keep the currency of your country at a weak (but not so weak as to cause a collapse in it) level you help boost exports. The currency becomes weaker making your goods cheaper for foreign consumption. In a freely floating exchange system, the market determines the equilibrium value. Speculators look at economic statistics like GDP growth, interest rates, inflation etc. to figure out what a currency should be worth and then place bets accordingly. If speculators think that an economy can grow strongly while keeping inflation at a benign rate, they will bid up the currency of that economy. As that happens, the country whose currency is getting stronger could see a decrease in exports. This is caused by the larger amount of currency the importer uses to make the same purchase as previously made. Read more…

1. What’s your game plan if it goes against you and threatens your survival?

2. Will you be able to get out? Did you take that into account in your workout?

3. More typically, what will you do if it goes way against you and then meanders back to give you a breakeven? Or if it immediately goes for you or aginst you?

4. Would you be willing to take a ½% profit if you get it in the first 10 minutes?

5. Did you test whether taking small opportunistic profits turns a winning system into a bad one?

6. How will unexpected cardinal events affect you like the “regrettably,” or the pre-annnouncement of something you expected for the next open? And what happens if you’re trading an individual stock and the market goes up or down a few percent during the day, or what’s the impact of a related move in oil or interest rates?

7. Are you sure that you have to monitor the trade during the day? If you’re using stops, then you probably don’t have to but then your position size would have to be reduced so much that your chances of a reasonable profit taking account of vig are close to zero. If you’re using 10% of your capital on a trade, they you’ll have to monitor it for survival. But, but, but. Are you sure you won’t be called away by phone calls, or the others? Read more…

Foreign investors funneled more than $15 billion to Indian equities in 2009, sending stocks up more than 75% and strengthening the rupee . With expected positive growth rates for the year and higher interest rates differentials that favor emerging markets, investors are looking to India as a good place to stash their wealth.

The Reserve Bank of India (RBI) has already taken the necessary precautions to stave off a potential asset bubble forming in India’s stock and real estate markets. India’s officials are welcoming the fund inflows with open arms, but Finance Minister Pranab Mukherjee says monetary tools will be implemented if inflows become disruptive to the economy.

RBI could stem inflows by:

We are expecting very soon by Next month or First week Jan’10

• Imposing taxes on inflows; this is considered to be the most likely tactic the government would take, especially when it comes to inflows that could lead to a housing bubble
• Auctioning quotas for foreign credit to increase the cost of raising funds
• Using market intervention bonds and raising cash reserve ratios

Richard Ambrose is the author of some amusing financial humor. He is the original author of The Lloyds Prayer that was widely circulated without proper attribution last week (my apologies, Richard!)

His most recent work takes a poke at one of my favorite CNBC curmudgeons, Mark Haines:

How To Be An Agreeable Guest Of Mark Haines on CNBC:

Each trading morning, CNBC’s anchor agrarian has two
guests he asks one simple question: “So, What Do You Think Of The Market?”

If you are chosen, you¹ll only have 20 seconds to answer so practice
practice practice!; Here¹s how to make sure you get it right!

“Good Morning Mark! ­ I’m (pick ONE)

a)  Very Bullish
b)  Bullish
c)  Bullish But A little Cautious (Use ONLY if market is currently down)

on the markets here because we believe (pick TWO)

a)  interest rates are going to stay low,
b)  there is real growth in the GDP,
c)  the rally is still intact,

And (pick ONE)

a)  stocks are a great value at current levels.
b)  the market will continue to go higher from here.
c)  stocks are undervalued at these levels.

We¹re bullish on (pick up to THREE)

a)  Technology
b) Energy and Commodities
c)  Blue Chip Industrials
d) (Insert Stock Names You Already Own At Lower Prices)

Mark will make some short meaningless comment signaling your time is up, then repeat your name and firm; SMILE and remember to reply:

“Thank you for having me on.”

-The RBI has focused on controlling asset prices and inflation by using alternative measures instead of hiking interest rates since sustainable signs of economic growth are not yet fully visible and credit growth has not picked up meaningfully Read more…