Sunday, May 15, 2011
Nikkei 1995 vs Nikkei 2011 - updates
Congrats to those who waited patiently and shorted around 10000 level.. nice level to enter.. on the way down down down .... See previous post
Into the killing zone: Silver (update)
Okie.. the BBs have thrown in the towel.. looks pretty much like a dead cat bounce.. now that the big fishes had unloaded their positions.. downside selling pressure is pretty much on the table in the near future... Downtrend line established. First target level 30.00.
Tuesday, May 10, 2011
Into the killing zone: Silver
This chap finally got seriously injured but not dead yet.. A massive selldown from almost 50 bucks to 33 bucks in a week !!! The massive shakeout has taken out most weak holders.. and now it has rebounded so the Big Fishes are most likely scooping up again.. looks like there is a chance that old high or should I say 50 bucks will be taken out in time to come...
Tuesday, May 3, 2011
Misguided and futile exercise = Market Manipulation???
May 3, 2011
WHENEVER large share offerings like last month's Hutchison Port Holdings Trust (HPHT) and Mapletree Commercial Trust (MCT) are floated, it is routine to see 'stabilisation managers' appointed to support prices just after listing. Similarly, when stock prices plunge, an inevitable clamour is raised for regulators to intervene via 'circuit breakers' to maintain and support the market.
In both cases, despite the obvious connotations of manipulation and the impression of a false market given, most observers have been led to believe that circuit breakers and stabilisation activities are acceptable because, when properly regulated, they can be beneficial to the financial market.
According to conventional wisdom, this artificial containment of volatility is desirable because it facilitates placements, promotes investor confidence, and encourages investment and capital raising. There's an odd logic at work here which essentially is that, although manipulation is frowned upon, controlled manipulation is OK if it serves a greater good. But does it really?
Silent risks
In their excellent article titled The Black Swan of Cairo, in the May/June issue of Foreign Affairs, writers Nassim Taleb and Mark Blyth argue that suppressing volatility makes the world less predictable and more dangerous.
'Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate below the surface,' wrote Messrs Taleb and Blyth.
'Although the stated intention of political leaders and economic policymakers is to stabilise the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to 'Black Swans' - that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.'
The writers conclude that it is both misguided and dangerous to push unobserved risks further into the tails of the probability distribution of outcomes and to allow these high-impact, low-probability 'tail risks' to disappear from policymakers' field of observation.
Although the study was mainly about the current turmoil in the Arab world, the same arguments apply to financial markets, which are just as complex as the political arena. The message isn't difficult to understand: try and keep a lid on things or stifle the market's natural tendencies, and you might succeed for a while; but eventually there's a price to be paid, which may be very painful (as many Arab regimes have discovered these past few months).
In the case of Wall Street, complacency and groupthink among regulators that theirs was the best policed market in the world led to a largely unnoticed buildup of risks in the housing sector, which in turn enabled the investment banks to pull off the sub-prime scams they did.
On a smaller but no less relevant scale is the adoption of price stabilisation for new listings. If the market is happy with the price and is comfortable with the company's prospects, the price will rise no matter what the efforts of the stabilisation manager; conversely, if the stock isn't popular or its prospects deemed to be less than stellar, the price will fall regardless of artificial, officially-sanctioned support.
Such has been the case with last month's mega-IPO HPHT, which was offered at US$1.01 and whose post-listing saw its stabilisation manager buy a total of 540 million shares between April 5 and 12 at prices ranging from US$0.975 to US$1.01. After April 12, after the manager stopped buying, the counter has not performed. The stock closed at US$0.92 last Friday.
Circuit breakers
Similarly, MCT's managers were active last week buying at the offer price of 88 cents. So far, that level is still holding (barely) but it remains to be seen if MCT goes the same way as HPHT - and if the efforts to stabilise price movements turn out to be yet another exercise in futility.
As for circuit breakers, our thoughts were already detailed in this column last week ('Does the SGX really need circuit breakers?', Hock Lock Siew, BT, April 25); suffice to say that, given the lack of evidence so far, it's hard to be convinced there really are benefits in halting trading during times of high turbulence.
The fundamental problem is that when it comes to complex systems like the stock market, trying to curb its natural behaviour by treating it in a linear domain leads to complacency, the buildup of larger-than-foreseen risks and, eventually, larger-than-necessary mistakes.
Markets would be far better off doing away with artificial controls that seek to suppress volatility or bias prices towards the upside, while protecting the downside, since these controls simply delay the inevitable.
WHENEVER large share offerings like last month's Hutchison Port Holdings Trust (HPHT) and Mapletree Commercial Trust (MCT) are floated, it is routine to see 'stabilisation managers' appointed to support prices just after listing. Similarly, when stock prices plunge, an inevitable clamour is raised for regulators to intervene via 'circuit breakers' to maintain and support the market.
In both cases, despite the obvious connotations of manipulation and the impression of a false market given, most observers have been led to believe that circuit breakers and stabilisation activities are acceptable because, when properly regulated, they can be beneficial to the financial market.
According to conventional wisdom, this artificial containment of volatility is desirable because it facilitates placements, promotes investor confidence, and encourages investment and capital raising. There's an odd logic at work here which essentially is that, although manipulation is frowned upon, controlled manipulation is OK if it serves a greater good. But does it really?
Silent risks
In their excellent article titled The Black Swan of Cairo, in the May/June issue of Foreign Affairs, writers Nassim Taleb and Mark Blyth argue that suppressing volatility makes the world less predictable and more dangerous.
'Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate below the surface,' wrote Messrs Taleb and Blyth.
'Although the stated intention of political leaders and economic policymakers is to stabilise the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to 'Black Swans' - that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.'
The writers conclude that it is both misguided and dangerous to push unobserved risks further into the tails of the probability distribution of outcomes and to allow these high-impact, low-probability 'tail risks' to disappear from policymakers' field of observation.
Although the study was mainly about the current turmoil in the Arab world, the same arguments apply to financial markets, which are just as complex as the political arena. The message isn't difficult to understand: try and keep a lid on things or stifle the market's natural tendencies, and you might succeed for a while; but eventually there's a price to be paid, which may be very painful (as many Arab regimes have discovered these past few months).
In the case of Wall Street, complacency and groupthink among regulators that theirs was the best policed market in the world led to a largely unnoticed buildup of risks in the housing sector, which in turn enabled the investment banks to pull off the sub-prime scams they did.
On a smaller but no less relevant scale is the adoption of price stabilisation for new listings. If the market is happy with the price and is comfortable with the company's prospects, the price will rise no matter what the efforts of the stabilisation manager; conversely, if the stock isn't popular or its prospects deemed to be less than stellar, the price will fall regardless of artificial, officially-sanctioned support.
Such has been the case with last month's mega-IPO HPHT, which was offered at US$1.01 and whose post-listing saw its stabilisation manager buy a total of 540 million shares between April 5 and 12 at prices ranging from US$0.975 to US$1.01. After April 12, after the manager stopped buying, the counter has not performed. The stock closed at US$0.92 last Friday.
Circuit breakers
Similarly, MCT's managers were active last week buying at the offer price of 88 cents. So far, that level is still holding (barely) but it remains to be seen if MCT goes the same way as HPHT - and if the efforts to stabilise price movements turn out to be yet another exercise in futility.
As for circuit breakers, our thoughts were already detailed in this column last week ('Does the SGX really need circuit breakers?', Hock Lock Siew, BT, April 25); suffice to say that, given the lack of evidence so far, it's hard to be convinced there really are benefits in halting trading during times of high turbulence.
The fundamental problem is that when it comes to complex systems like the stock market, trying to curb its natural behaviour by treating it in a linear domain leads to complacency, the buildup of larger-than-foreseen risks and, eventually, larger-than-necessary mistakes.
Markets would be far better off doing away with artificial controls that seek to suppress volatility or bias prices towards the upside, while protecting the downside, since these controls simply delay the inevitable.
Sunday, April 24, 2011
Purpose Driven Life
A very good article.. IMHO. I thought I will post it up as a constant reminder to myself.
| 23 Apr 2011 Figuring out the purpose of life To find happiness in our careers, we must know how to allocate our time, energy and talent A RECENT edition of Harvard Business Review carried an article, 'How Will You Measure Your Life?', written by Harvard Business School (HBS) professor Clay Christensen. Prof Christensen's class is structured to help his students understand what good management theory is and how it is built. To that backbone, he attaches different models or theories that help students think about the various dimensions from which a general manager can stimulate innovation and growth. In each session, they look at one company through the lenses of these theories - using them to explain how the company got into its situation and to examine what managerial actions will yield the needed results. On the last day of the class, he asks his students to turn those theoretical lenses on themselves, to find cogent answers to three questions: First, how can I be sure that I'll be happy in my career. Second, how can I be sure that my relationships with my spouse and my family become an enduring source of happiness? Third, how can I be sure I'll stay out of jail? 'Though the last question sounds light-hearted, it's not,' said Prof Christensen. 'Two of the 32 people in my Rhodes scholar class spent time in jail. Jeff Skilling of Enron fame was a classmate of mine at HBS. These were good guys - but something in their lives sent them off in the wrong direction.' One of the theories, he said, that gives great insight on the first question - how to be sure we find happiness in our careers - is from Frederick Herzberg, who asserts that the powerful motivator in our lives isn't money. It's the opportunity to learn, to grow in responsibilities, contribute to others, and be recognised for achievements. Prof Christensen told his students about his vision of sorts while he was running the company he founded before becoming an academic. 'In my mind's eye, I saw one of my managers leave for work one morning with a relatively strong level of self-esteem. Then I pictured her driving home to her family 10 hours later, feeling unappreciated, frustrated, underutilised, and demeaned. I imagine how profoundly her lowered self-esteem affected the way she interacted with her children. 'The vision in my mind then fast-forwarded to another day, when she drove home with greater self-esteem - feeling that she had learned a lot, been recognised for achieving valuable things, and played a significant role in the success of some important initiatives. I then imagined how positively that affected her as a spouse and parent. 'My conclusion: Management is the most noble of professions if it is practised well. No other occupation offers as many ways to others to learn and grow, take responsibility and be recognised for achievement, and contribute to the success of a team. 'More and more MBA students come to school thinking that a career in business means buying, selling, and investing in companies. That's unfortunate. Doing deals doesn't yield the deep rewards that come from building up people,' he said. Create a strategy for your life As for the second question - how can I ensure that my relationship with my family proves to be an enduring source of happiness - Prof Christensen said that just like in a company, it depends on how masterfully we allocate our resources. So if a company steers its investments to initiatives that offer the most tangible and immediate returns, they shortchange investments in initiatives that are crucial to their long-term strategies. Over the years, he said he'd watched the fates of his HBS classmates from 1979 unfold. More and more of them come to reunions unhappy, divorced, and alienated from their children. 'I can guarantee you that not a single one of them graduated with the deliberate strategy of getting divorced and raising children who would become estranged from them. And yet a shocking number of them implemented that strategy? 'The reason? They didn't keep the purpose of their lives front and centre as they decided how to spend their time, talents and energy.' Having a clear purpose in life is essential. Prof Christensen recounted that when he was a Rhodes scholar, the academic programme was very demanding. But he decided to spend an hour every night reading, thinking, and praying about why he was on this earth. It was a challenging commitment, because every hour spent doing that could have been used to study applied econometrics. But he stuck with it, and ultimately figured out the purpose of his life. 'Had I instead spent that hour each day learning the latest techniques for mastering the problems of autocorrelation in regression analysis, I would have badly misspent my life. I apply the tools of econometrics a few times a year, but I apply my knowledge of the purpose of my life every day. It's the single most useful thing I've ever learned.' He promises his students that figuring out their purpose in life would be the most important thing they discovered at HBS. His purpose grew out of his religious faith. But faith isn't the only thing that gives people direction. One of his former students decided that his purpose was to bring honesty and economic prosperity to his country, and to raise children who were as capably committed to this cause, and to each other, as he was. After deciding on one's purpose in life, the next question is how to allocate one's personal time, energy and talent. 'People who are driven to excel have this unconscious propensity to underinvest in their families and overinvest in their careers - even though intimate and loving relationships with their families are the most powerful and enduring source of happiness.' If you study the root causes of business disasters, over and over you'll find this predisposition towards endeavours that offer immediate gratification. If you look at personal lives through that lens, you'll see the same stunning and sobering pattern; people allocate fewer and fewer resources to the things they would have once said mattered most, said Prof Christensen. 'Marginal costs' mistakes Finally, the answer to question three is to avoid the 'marginal costs' mistakes. Unconsciously, we often employ the marginal cost doctrine in our personal lives when we choose between right and wrong. A voice in our head says: 'Look, I know that as a general rule, most people shouldn't do this. But in this particular extenuating circumstance, just this once, it's ok.' The marginal cost of doing something wrong 'just this once' always seems alluringly low, said Prof Christensen. It suckers you in, and you don't ever look at where that path ultimately is headed and at the full costs that the choice entails. 'Justification for infidelity and dishonesty in all their manifestations lies in the marginal cost economics of 'just this once'.' Timely reminders, indeed. |
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