AAR & TOL 01 (May 08 - Oct 08)

AAR & TOL 01 (May 08 - Oct 08)

Postby winston » Sun May 18, 2008 8:50 am

The US Army has an After Action Review (AAR) after any operation.

They will ask two simple questions:-
1) What did we do right and therefore, should continue to do?
2) What did we do wrong and therefore, should try to improve upon ?


The above is a continuos learning process that can implemented easily.

This AAR idea has since been used in the Corporate world.

===========================

Today, I will do an AAR on the earthquake incident in relation to my investments:-

1) What did I do right and therefore, should continue to do?
a) I knew about the earthquake the minute it was reported. Unfortunately, the HK market was closed so I was not able to do any trading.
b) I very quickly went thru my portfolio to see which stock would be hurt by the incident.
c) I then identified the stocks that may do well from the incident, the same stocks that did well from the snowstorms in December / January.

2) What did I do wrong and therefore, should try to improve upon ?
a) When the HK market opened the next day, all the stocks on my watchlist gapped up
b) Thereafter, I lost interest and went on to the things. They continued to go up for the rest of the week !
c) On hindsight, I should have bought some of these stocks during the pre-opening on Tuesday. I should also have waited for a pull-back to buy some more.
d) I should have been invested from Tuesday and thereafter, take my profit on Friday.
e) Why did I not do it ? Lack of focus and the expectation that the market is efficient. I thought that everyone else already knows what is going on and have invested accordingly, when the market gapped up on the Tuesday opening.
f) Lesson Learnt: When there is a short term trend, it could go on for a few days
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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After Action Review

Postby kennynah » Sun May 18, 2008 4:20 pm

last week, took a Long position in a US finance counter... not too good results, though didnt go too far off downwards... i was expecting rotational play between sectors, especially when i was expecting some decent index movement... my timing macam off...
anyway, will monitor come monday...to see if got any upside traction...if not, kill it off...
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Thinking Out Loud

Postby winston » Tue May 20, 2008 11:55 pm

Some thoughts on a Tuesday night:-

Some people managed to buy at the lows of March. Were they long funds, retail investors or short covering ?

I don't think a lot of retail investors bought in March because they have lost quite a bit and also, their fear level is very high.

I dont think the long funds were buying as they were raising cash in preparation for redemptions.

So it must be short covering then..

If the market rose due to short covering, where do we go from here ? More short-selling again ?


Long Funds will only buy when the index starts moving up as they dont want to miss the party. Do these long funds have cash to buy or not ?

HSI behaved very badly today. Reminded the people that the market can have >600 points drop anytime. Maybe time to buy a put on the HSI when it retrace some of it's correction..
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Thinking Out Loud

Postby kennynah » Wed May 21, 2008 12:10 am

TOL

right now, all US indexes are being punished by inflation theme...crude hit a all time high of 129.60pbl... gold (jun) just hit a high of 924/ounce

more importantly, everyone who trades TA will not be buyng when all TAs have broken down... they will either stay out or continue to short...

tomorrow, we will see US Crude and Distillate Inventories, which is widely expected to have surpluses...however, whilst this data is expected, Oil still ran up...why? i think it is bcos more and more people are getting knock into their heads that Inflation is here to stay and will spiral further up...

and also, we start recalling that Fed has stated before that they will reinstate O/N rates back if required... there's a great possibility that ECB may HIKE rate, since that is their #1 priority to maintain stable prices.. if this happens, USD will tank even further and will hurt US economy further... they are still a large importer of foreign goods.

of cos, a technical rebound to US indexes can always happen whenever a very large drop happens...but given what I am seeing so far, it doesnt look rosy for the US indexes yet....


20 May 2008 15:08 GMT
U.S. crude, distillate inventories seen higher in week to May 16 - poll

LONDON (Thomson Financial) - US stocks of crude oil and distillate stocks are expected to have risen last week, according to analysts polled by Thomson Financial News.

In the week to May 16, U.S. crude inventories rose by 700,000 barrels, analysts estimated, while refinery runs -- the capacity at which U.S. refineries were operating -- increased by 0.6 percentage points to 87.2 percent.

Distillate stockpiles -- which include heating oil and diesel -- were expected to have risen by 1.3 million barrels.

However, gasoline stocks are seen lower by 200,000 barrels, during a time when inventories are normally building ahead of the summer driving season.

The Energy Information Administration, the U.S. Department of Energy's statistical wing, will release its weekly snapshot of fuel inventories at 3:30 p.m. on Wednesday.
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Re: Thinking Out Loud

Postby winston » Sat May 24, 2008 12:39 pm

Some thoughts on a hot Saturday morning:-

1) The US markets have been dropping. Was it because of traders lightening up on their position before the long weekend or is it the start of a major correction ? The US closing and trading activities on Tuesday would be a good gauge of things to come...

2) Did the market tanked because of Oil ? The resistance for Oil is supposedly US$138. If oil drops like a rock, would the market then reverses itself?

3) Gold does not seem to have a story and is following Oil upwards. If Oil reverses, wouldn't gold drop as well?

4) There are now a lot of commodity funds invested in commodities. When commodity crashes, it will come down very fast. At the same time, I think it will also recover very fast as there are many people on the sidelines waiting to get into commodities. Classic V shape. Is the V shape over ?

5) The S'pore and HK market are following the events in the US and Shanghai.

6) Shanghai should be safe until the Olympics. For "face reasons", the Chinese cannot afford a crash before the Olympics. Not so nice if the foreign presses are filming some retail investors breaking down the reception areas of the Securities firm. There will be more "support" from the regulators. It will be very easy for them to use the snowstorm and earthquake as an excuse to provide some liquidity into the market.

7) The short-sellers are also waiting to short the equity markets. It has gone up quite a bit from February / March. However, they need a "big bad news" to get things going. And there has been no real big bad news...

8) There are also plenty of cash on the sidelines waiting for the markets to correct.

My conclusion:-
1) keep a higher level of cash
2) lighten up on equities / take windfall profits
3) clean up my watchlist & wait for a chance to buy at cheaper levels. And buy only bigger companies that can withstand a major recession, in case things are really bad. Buy in stages.
4) continue to buy puts on the indices on any rebound and sell into any correction. I dont think there would be a major crash. It could be volatile but I think it will be range bound. People still remember how the market rebounded from the lows of Feb / march so they would be willing to hold.
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Re: Thinking Out Loud

Postby winston » Mon May 26, 2008 10:19 am

San San wrote:dear W:
can u elaborate on your point 6?


Hi San,

I've already posted some of the support provided by the regulators under the "HK & Chinese Stocks".

Example:-

1) On Sunday, April 20, the China Securities Regulatory Commission, the country's market overseer, said shareholders selling more than 1 percent of a publicly traded company's stock within a month would have to execute the transaction in a block trade, instead of releasing the shares onto the open market.

The intent was to make sure buyers were already lined up, which would slow the release of new shares onto a falling market and prevent investors from being spooked by sudden new supply.

2) On April 24, the government cut the tax on stock trading to 0.1 percent from 0.3 percent.

Going forward,
1) There is talk of having margin accounts
2) The regulators can increase the QFII quota. This would allow more Qualified Foreign Institutional Investors to invest directly into the Shanghai A share market.
3) The regulators can approve more Mutual Fund products.
4) The regulators can reduce the number and size of the IPOS
5) With the earthquake and snowstorm, the government has a good excuse that inflation target will not be met this year. Therefore, they don't have so much pressure to further increase bank reserve ratios, interest rate etc.

Take care,
Winston
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Re: Thinking Out Loud

Postby winston » Fri May 30, 2008 2:21 pm

TOL:-

When trying to catch a falling knife:-

1) first determine the market direction. Is it a bull market, a bear market or a flat market ? Always try to invest with the wind behind you..

2) it is also better to let the knife touch the ground first. Thereafter, it could be a "V" shape rebound. Or it could be a "L" trough for a long time...

3) if your hand is itchy and you must buy, then it is better to buy shares rather than call options. This is because if the stock continues to fall, your call options would be hurt very badly, unless you've a tight stop in place.

4) also, if you must buy, buy in batches rather than at one go.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Thinking Out Loud

Postby kennynah » Sat May 31, 2008 8:59 am

winston wrote:3) if your hand is itchy and you must buy, then it is better to buy shares rather than call options. This is because if the stock continues to fall, your call options would be hurt very badly, unless you've a tight stop in place.


actually...1st buy the mother shares and then sell covered calls, is a great introductory way into trading options...

winston wrote:4) also, if you must buy, buy in batches rather than at one go.


this is so JL's technique ;)

W: i noted you subscribe to a large extend JL's method of trading...
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Investor's Lounge

Postby winston » Mon Jun 02, 2008 4:25 pm

Just chatted with an Analyst.

Their house is quite bullish on the American market. They expect the American market to go up and for money to flow out of Asia into the US.

I was a bit surprised with this view as the consensus view was for money to flow out of the US to Asia, due to the growth in Asia.
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Re: Investor's Lounge

Postby iam802 » Mon Jun 02, 2008 4:42 pm

Couple of years back, I attended a talk by Mr. Lim Heong Chye (Chief Investment Officer for APS Komaba).

Mr. Lim highlighted that when equities market crashed, the 'fixed income' (or bond) market will be the only one that can absorb all the funds flowing out.

I would think, that if funds were to flow back to the US market, it would come from the bond market. After all, it is 'small' compared to the bond market.
1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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