Author: shyam

A dose of realism

When the markets keep going up and to the right, it is easy to forget that most of the momentum in the markets is built on quicksand, or so says Ambrose Evans-Pritchard:

 

Interest rates are already near zero across the developed world, public debts are much higher than in 2007, unemployment is already at a post-EMU high in Europe and 27% in Spain. And HSBC says that they “see building evidence of a cyclical downturn.”

 

The last time, the BRICS were in the mid stages of a roaring boom, strong enough to weather the Lehman shock. China responded with what is probably the greatest loan spree in history – $14 trillion of extra credit in four years. None of this can be done again. The BRICS are now nursing post-bubble hangovers as well, and China’s Politburo has no intention of repeating what it deems to have been a serious error.

 

So if this is right and if OECD economies are headed for a cyclical downturn, then all this talk about “tapering” by the US Fed is just that – talk. The Fed is unlikely to risk premature tightening that might plunge the US economy back into a recession. And if reduced Chinese demand for commodities keep raw material prices down, then as Jefferies’ strategists said recently, its almost a global “goldilocks” from the Indian viewpoint.

 

Source: No saviour in sight as world credit cycle rolls over

 

 

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Intraday Scanner

StockViz tracks more than a thousand different equity based variables and metrics on a daily basis. Our Intra-day scanner is based on our Anomaly Detection Algorithms that are constantly scouring stock-market action to surface trade ideas.

Average True Range (ATR) Anomalies

Stocks trade within a daily range. The range, per se, is dependent on liquidity and intrinsic volatility of the stock. However, occasionally, a stock starts trading outside of its typical daily range, as measured by ATR. This gives an opportunity to traders to either bet on mean-reversion or continuance. Our ATR Anomaly Detection Algorithm surfaces stocks that break-out both on the upside and on the downside.

Bollinger Band Anomalies

Bollinger bands are volatility bands placed above and below a moving average of a stock’s daily close. When stocks break-out above its upper band or below its lower band, it signifies that “something” is afoot. Savvy traders can now step in and either bet on mean-reversion or continuance. Our Bollinger Anomaly Detection Algorithm surfaces stocks that break-out both on the upside and on the downside.

You can see these algorithms in action at stockviz/Scan

 

Do you use a scan that we can help you automate? Let us know in the comments below!

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Grit, Rules and Determination

Francisco Dao has an interesting post over at Pando Daily about what sets apart dreamers from successful people.

 

In study after study, it’s been shown that discipline and impulse control are the primary traits of successful people and the best predictor of future achievement. In contrast, unwarranted, overinflated self esteem is often a sign of future failure. Compared to discipline, even legitimate measures of intelligence have very little bearing as predictors of success.

 

Discipline is hard. And trying to be dispassionate about the decisions you take is harder. In fact, successful people try and reduce the number of decisions they take daily. For example, US President Obama has tried to eliminate the trivial decisions that most of us face on a daily basis. Michael Lewis, who profiled the president for Vanity Fair, explains that:

 

The president started talking about research that showed the mere act of making a decision, however trivial it was, degraded your ability to make a subsequent decision. A lot of … the trivial decisions in life — what he wears, what he eats — [are] essentially made for him. He’s actually aware of research that shows that the more decisions you have to make, the worse you get at making decisions. he analogizes to going shopping at Costco. If you go to Costco and you don’t know what you want, you come out exhausted, because you’re making all these decisions, and he wants to take those decisions out of his life. So he chucked out all his suits except his blue and grey suits so he doesn’t have to think about what he’s going to put on in the morning. Food is just arranged for him and he’s not making any decisions about what he’s eating. What most people spend most of their life deciding about, he’s had those decisions are removed from his life. He does this so he creates an environment, a mental environment, where he’s got full energy for the decisions that are really important decisions.

 

The take away: follow a routine that reduces the number of decisions you take. Have rules that prevents you from being impulsive. And most importantly, invest without emotions.

 

Source:
The importance of grit, rules, and discipline
Obama’s Way

 

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Improving Consistency

Stumbled on an awesome post at KirkReport on improving one’s trading consistency. Six things you need to do to improve your consistency:

  1. Have A Consistent Daily Routine
  2. Adopt And Maintain A Consistent Strategy
  3. Simply, Simply & Simplify More
  4. Track What You Do Everyday
  5. Flowchart Everything
  6. Set Your Rules & Follow The Rules

Read the whole thing here.

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Is Commodity Disinflation a boon for India?

A giant wave of disinflation is hitting the world. Two factors seem to be playing a major role:

  1. The US Shale oil boom, and
  2. Slowdown in China

commodity prices

The combination of hydraulic fracturing and horizontal drilling has unleashed a natural-gas bonanza that has made the U.S. the world’s largest natural-gas producer. Five years ago, many companies built natural-gas import terminals, anticipating greater U.S. demand for imported fuel. Now, those terminals are being re-purposed to export gas to Japan and other parts of Asia.

The glut of cheap natural gas has had a knock-on effect on coal. American coal mined in the eastern U.S. is begin shipped overseas to Europe, especially the U.K., the Netherlands and Italy. And rising US supply of cheap energy is meeting falling demand of raw materials in China and Europe.

Spot iron ore prices fell to match their lowest level on May 15 on the back of a soft Chinese steel market. Iron ore is also under pressure from additional supply, with top miners on track to boost output. Rio Tinto, the world’s second-biggest iron ore producer, is slated to increase its annual production capacity to 290 million tonnes this year from 237 million tonnes currently.

The Chinese have been exceptionally slow in reducing supply in the wake of falling demand. Aluminum Corp. of China, or Chinalco, says that more than 90% of the aluminum produced in China is produced at a loss. Huaxin Cement Co’s President was on record saying that cement makers need to shut down old plants to avoid “catastrophe” for the whole industry. In 2012, the majority of Chinese steel companies operated at a loss. Some reports peg Chinese steel overcapacity at 20%-30% – putting China’s excess capacity at the same size as the total output of India, the world’s fourth largest steel producing country, last year.

So what does this mean for India? If the fall in commodity prices sustain, then India will figure among the biggest winners in terms of higher growth, lower inflation and better economic fundamentals. Lower commodity prices will likely lower WPI inflation, help moderate the current account deficit and help reduce the government’s fuel and fertilizer subsidy bill. This might embolden the RBI to cut interest rates and pave the way for a cyclical recovery.

Hang tight, we are just getting started!

Sources

Iron ore revisits 2013 low
U.S. Coal Finds Warm Embrace Overseas
India Inc sees gains from falling commodity prices

 

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