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We had a great time at Chili’s discussing market forecasts and trader psychology. (Not to mention watching
Paul Krugman and Robert Prechter’s Gloom and Doom Prophecies
Recently, there has been a lot press talking about the pessimism in the market. Some, however, are forecasting economic disaster. Nobel laureate economist Paul Krugman has sounded the drum for the “Third Great Depression”, the first being in 1873, the second in 1929. Robert Prechter, who is famed for calling the crash of 1987, is calling a bottom in the Dow Jones at $1000 (Presently the Dow is at $10,200.) These are incredible prophecies from very respectable economists, which leads some to believe their story and stay safe in U.S. Treasuries.
We at the Scarlet Kings, however, do not share this view. Kevin Day explained that the pessimism in the press is a fad. Let’s remember that Paul Krugman writes a column for the New York Times, and sensationalism sells oftentimes more than the boring facts. Furthermore, the American people who make up its market, over the long-run, are very resilient people and Kevin believes that these people can and will lead the country out of any catastrophe, if there was one.
It is true, however, that
Let’s also not forget that even if the
SFEG (Sante Fe Gold Corporation)
In his last trip, Kevin Day, who has owned this stock since 1996 and is very good at practicing the golden investor attribute of patience, made a trip to the actual site, the Lourdsburg Mill, where
· The mill is currently producing around $50,000 per day in gold and silver reserves, which comes out to roughly $1.2 million per month
· The company will be adding a second shift for production as the permits to mine are finally in place
· There are at least 2 million ounces of proven gold reserves with additional reserves being a great potential in the Ortiz mine, where production will be starting very soon
· Q3 earnings are what investors should be waiting for
We have all waited patiently for the dividends to pay off, especially Kevin, and hopefully they will not be long in coming now.
The Need for a Republican Candidate for the 2012 elections
Given that President Obama’s ratings are hovering near record lows, one must ask who will be in office two and a half years from now. He has been in office one and a half years and has had many empty promises which has disheartened and fractured the Democratic party. It is unlikely that he will run for office again, and as Kevin Day has said, Hillary will run instead and most probably win, if no serious opposition is posed. The campaign to secure this position will be starting shortly and it will be interesting to watch how this all unfolds. Bottom line is that the Republican party needs to mark out its candidate clearly and quickly if they are to stand a chance.
Perhaps we could all endorse Kevin Day to run as the Dark Horse candidate for the Republican primaries, which is probably a much better choice than the likes of Palin or Guliani :)!
The Trader’s Psychology
“When we lose, we think we’re going to win; when we win, we think we’re going to lose. So we keep our losers and get rid of our winners – hence 90% of us lose.” – Andrew Whatley (I, personally, think he deserves a medal for this very simple and insightful phrase)
VJ Arjan is currently reading a book entitled The Psychology of Trading by Brett Steenbarger. There is a reason, the author explains, why only a small majority of traders and investors actually win in the marketplace. The reason is that most are mentally hard-wired to lose. For example, let’s pose the following question:
If one has a choice to have:
Option 1: $500 guaranteed
or
Option 2: A 50% chance for $1,000 and a 50% chance for nothing
about 90% will take the $500 guaranteed because one is afraid of loss more than afraid of not gaining more.
It is certainly an interesting way to perceive the markets but it is very true. How many of us, the writer included, have panicked at the least sign of counter-trend movement, whilst the greater part of the move remained still to come? For some solution to this problem, we came up with the following:
Establish precise profit / loss objectives BEFORE entering any position, whether for trading or investing.
Furthermore, Tommy Schultz recommended that if the way of the speculator involves taking great risk for great profits then it may be prudent for the trader/investor to decide to create wealth of the amount which will take care of all necessary expenses and then to use the rest in high risk strategies for maximum gain. This way the concept of the pain of loss is thrown out the window and the gains (and the losses) may be allowed to occur and not be stopped by one’s emotions.
A Lesson in Geopolitics by Jeff Harrington
Some very interesting geopolitical thoughts to ponder about the way our world works came from the mouth-and-brain known as Jeff Harrington (the writer has given him a nickname ironically of Master Harrington) :).
Interestingly enough, it turns out that the
Somehow
Jeff further explains that
Why go in and do this? Well, it turns out that the days of the gentleman diplomats are over and the world turns on the grooves of Realpolitik, or the politics of reality. If the
What the Future Holds
The Scarlet Kings next month will have its second year anniversary!
The first of these meeting started at the end of July in 2008, although I did not officially create the blog until October 2008. During this period, the members who have come and contributed or just came and listened to our meetings have witnessed possibly the most brutal collapse of the financial system that will occur in our lifetimes and its subsequence bounce back from life support amidst a host of other trying issues. Perhaps, there is more mayhem to come. Who knows…
All I can say is that I sincerely appreciate and am immensely grateful for all who came and made this organization one that I feel proud to be part of. Not because I am the organizer and feel this way by default, but I have yet to find a group of people who are so well versed and so perceptive about the world that we live in, which leads all attendees to benefit not only in expanding our horizons and our “mental box”, but financially as well.
We all ruminated on where we would be in the future. Perhaps we who come to these meetings will become titans and captains of industry. Maybe seeds of greatness are being planted here and the great Redwoods will tower high in the near future.
All that I do know for certain is that as long as we are alive and kicking that all of us who do come and have continued to do so will be at least worth what the top 3-5% of individuals in this country carries in their bank accounts. In addition to that, we will have gained and enriched our perspectives that may serve to make us into molders of the world around us.
To the future ladies and gentlemen!
Simulated Portfolio
| Date | Security | Entry (Oct 08) | Current Price | Profit/Loss |
| | FXI (iShares FTSE/Xinhua | $25.16 | $40.64 | $1,548 |
| | ILF(iShares S&P Latin America 40 Index) | $26.60 | $44.91 | $1,831 |
| | EWZ(iShares MSCI BrazilIndex) | $37.69 | $67.75 | $3,006 |
| | PBJ(PowerShares Dynamic Food & Beverage) | $13.27 | $15.65 | $238 |
| | GUR (SPDR S&P Emerging | $29.74 | $40.39 | $1,065 |
| | FCX (Freeport-McMoRan Copper & Gold Inc.) | $29.06 | $65.98 | $3,692 |
| | WLT (Walter Industries – metallurgical coal) | $38.75 | $68.00 | $2,925 |
| | VALE (Companhia Vale do | $13.12 | $26.31 | $1,319 |
| | GVA (Granite Construction Inc.) | $35.67 | $24.55 | -$1,112 |
| | MT (Arcelor-Mittal ADR) | $26.25 | $30.26 | $401 |
