The Sages

If you are a Value Investor, you would look up to Buffett...

If you are a Trader, you would read Soros' books...

But if you are a regulator, Volker?

Anyway, the section on Soros was fascinating , especialy his trade log which has recorded 2% return per week... and the events leading to the 1 billion break of the Bank of England.

Notable points :
(1) George Soros is a master loss taker.
(2) He cuts his position whenever his back aches ( physiology giving hints to psychology?)
(3) His Quantum fund averages 31% for the last 30 years.
(4) He respects herds, not because they are right, but because they are like the ocean.

And a few more pointers later...

( I read that you need to read at least 2 -3 books per week to stay ahead of the pack. And you need to give up more of TV, social media. Can you be so disciplined as to to be able to read 2-3 books a week?.....sigh.... struggling to even finish one per week!....)

The Greatest Trade Ever

 

















 
It is no longer the USD1 billion that George Soros made in the 1990's...

But the USD15 billion that John Paulson netted in 2008... ( er , how much did Nick Leeson lose? GBP1.3 billion)

Even after adjusting for inflation, USD15 billion is a lot of money!

Better read upthis book if you want to know how to make it big this decade 2010-2020...

Some pointers :

(1) John Paulson was a Merger expert, not a Housing expert but he was willing to learn.
(2) It took him 2 years to make that money.
(3) He was using a negative carry trade, paying insurance for a calamity of a housing bubble bursting.
(4) His hedge fund used USd1 billion to make USd15 billion in 2 years.
(5) His lockup period was 4 years.
(6) Insurance premium was about 1% of value insured.   . For example USD12 billion cover, at 1% means USD120 million in premium. A new fund of USd1 billion would mean a burn out rate of 12% ( 120/ 1000 million ) . To reduce the burn out rate, put the unused money at money market at 5% . Net : 12% premium paid , 5% interest gains, less 1% management fee gives 8% real burn out rate.

Some quotable quotes :

(1) Go for the jugular...
(2) right on investment, wrong on timing...
(3) his job was not to convince...
(4) investments playing mind tricks...
(5) miserable for not getting in when the premium was cheap...

Models.Behaving.Badly

 

















 This book confirms George Soros'  theory of reflexivity in that the financial markets do not follow the rules and laws of the natural sciences.

Human behaviour, like the weather are very difficult to predict with certainty. Hence any flaw in the assumptions used by an trading model will render the models useless.

The other makes a distinction between intuition, theory and model. And his diagram on the Emotions listed in the original writer Spinoza makes understanding the emotions a breeze.

He did mention that it is every researcher's dream to come up with a theorem that will live longer than his life time , like Newton's Law of Gravitation, Law of Motions, Theorem Pythagoras....


Maybe one day I will come up with one theorem myself..... Well, someone has to to ...on some things that he knows best , right?

And his Financial Modeller's Hippocratic Oath...

•I will remember that I didn’t make the world , and it doesn’t satisfy my equations .

 

Though I will use the models I or others create to boldly estimate value, I will always look over my shoulders and never forget that the model is not the world.

I will not be overly impressed by mathematics, and I will never sacrifice reality for elegance without explaining to its end users why I have done so.

 

•I will not give people who use my models false comfort about their accuracy. 

 

•I will make the assumptions and oversights explicit to all who use them. 

•I understand that my work may have enormous effects on society and the economy, many beyond my comprehension.

 

The Japanese Kitchen

This is the book all Japanese food lovers must read!

If you were like me once who think that all Japanese food is raw sushi, then this book will open your eyes! Terayaki-grilled salmon is well cooked, as with the beef they serve together with your udons!

Cannot differentiate between udon, ramen, soba?

Or the difference between sake, saba, bonito, tai and suzuki?

Read on...

I was looking for for the nutritional value of the fishes... and tthe book confirmed my sense of smell! The fisher the fish taste, the higher the oil content ! For example, saba... the pacific mackerel has 17% fat content with the EPA ( cleanses blood, prevents artery blockages, hence reducing  risk of strokes  ) and DHA ( food for the brain ) being the source of that "fishy smell". Tai, the red carp, in contrast has very little fat, but lots of protein and Vitamin B1.

Interestingly enough, the book started with a brief history of Japan, with its feudal past and class system ( ( soldiers, farmers, artisans, merchants). Rice, was a currency, and farmers are taxed for more than half of their annual output. Hence, they grow soba, millet and barley to sustain themselves. Little do they know that such variety of grains are in fact more nutritious than the prized rice ( which can cause rickets if polished rice are eaten in exclusivity of other grains!). Soba has 13% protein, B1 and B2( which polished rice lacks!). Soya beans has 35% protein, 20% fat, B1, B2, calcium , iron... no wonder tofu is the rage now!

The nutritional value of vegetables such as taro, yam, kabu 9 turnips) and hakusai are listed for easy reference.

The recipes looks yummy... and the recipes are easy enough to follow!

Too lazy to head to the restaurant? prepare your own Japanese meals at home then with the help of this wonderful book!

Highly recommended.... yummy for the eyes, and brains!

My summary..

The 3rd Alternative

The late Stephen Covey is indeed a master of finding Win-Win situations





If you are able to open your mind to search for something better than what you ever imagine can be done, make sure you spend at least 2 weeks to learn and apply the principles outlines in this book.

For example :
(1) The ACCA formula : Ask, Criteria, Create , Arrive ( 3rd Alternative)
                                     vs Ask, Justify, Haggle, Arrive ( 2 Alternatives )
(2) Me, You, Seek, Synergise


There are many principles worth looking into :

(1) Magic Theater
(2) Talking Stick
(3) Ubuntu : I can't be truly human unless I fully see and value your humanity as well. I can't demonise you , which means to literally see you as an inhuman demon, and still remain human myself.
(4) Ahimsa : do no harm to living creature
(5) HHH vs GGL : hardened human heart vs Genuine gestures of Love
(6) Retributive justice vs Restorative Justice

And many , many more...

(1) Money is only a kind of wealth, a mark of secondary success.
(2) Primary success, arises from our chararcter,  is measured in terms of the contribution we make . Integrity, Honesty, Hard work, Compassion for others. Spiritual wealth=primary wealth.
(3) We are a poor village. We have no answers. We suffer until the rich and educated come to our aid.

Profitability of Technical Analysis

Here is  book which made up Fred Tam's Master Thesis.

In his thesis, Fred tested 13 technical systems to 38 index-linked counters to find out whether the the technical systems were able to return "abnormal returns". In layman's term , can any of the 13 system return better than just simply buying and holding. If so, then it may be worthwhile to apply the trading systems tested to better grow your investing portfolio.

It proves that in the period tested, certain systems do give abnormal returns.

(1) Channel Breakouts gives the best abnormal returns ( 20-20, 20-10, 20-5)
(2) The RSi, Momentum and DMI do not give superior returns.

The results are back tested only , and hence, it is not forward tested.

As usual, past performance cannot guarantee future results and hence all results must be read with this limitation in mind.

My take is .... no matter what system you use, so long as it is consistently profitable over a substantial period of time ( at least 1,000 market days) then the system is robust and good.

 There are many local thesis  and good write-upson technical analysis on the local stock and futures market :

(1) http://psasir.upm.edu.my/291/1/549566_FEP_2004_10.pdf
(2) http://lcchong.files.wordpress.com/2011/06/my-trading-ideas-for-the-forex-and-fkli-spot-market-06072011.pdf
(3) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1706683
(4) http://umexpert.um.edu.my/papar_cv.php?id=AAAMJCAALAAC1MdAAk

A book a Fortnight.... Da Vinci Code

Looks like I have to change my byline to READ A BOOK A FORTNIGHT...

Well some technical books are difficult to finish and digest in 1 week... It normally takes 2 weeks or more.

Novels are easier...

Maybe I should do a novel, then a technical book in rotation...

Today is a Highly Technical Book by Fred Tam

It is about Fibonacci numbers, the origins and the applications to trading.

Good for good night reading but in trading, there is a risk of overtrying to fit the prices into waves and Fibonacci retracement.

I do not use Fibonacci per se ... but the ratios are there for a guide. Any retracement mot exceeding 80% is valid by my books... be it 50%, 61.8%, or even just 38.2%. No need to lose too much sleepover it.

Some swear by it... as long as you make money consistently from it, well and good. Everybody will make money their own way!

Here is an extract from DESIDERATA  ( Desired Things, 1927 prose poem by American writer Max Ehrmann) http://www.businessballs.com/desideratapoem.htm:

".... Be yourself...

...You are a  child of the universe, no less than the trees and the stars.
    You have a right to be here

   And whether or not it is clear to you ,
   No doubt the universe is unfolding as it should .

.... Be cheerful
     STRIVE TO BE HAPPY "

Be happy, ok?