Wednesday, September 24, 2008

Leveraging - The root cause for any crisis.

USA, the so-called role model for developed countries, is in the midst of a severe economic crisis. The magnitude of the crisis is such that it is hurting all countries across the globe one way or the other. We are going to feel the heat sooner or later, if not it being felt already.

I feel the root cause for the entire crisis is “Leveraging”. In fact, I feel that the root cause for any financial crisis is Leveraging. History proves it time and again, but many individuals as well as corporates cannot run away from this temptation for too long. I was wondering as to what would it have been, if there were no leveraging. One thing is for sure. The world wouldn’t have been as interesting a place to live in, as it is today.

Traders who resort to leveraging always get the feel that small traders are the ones who loose money in the markets and it goes on to fill the pockets of the biggies but the recent crisis has proved that none is above the markets. Bigger the pockets bigger the holes. Markets are supreme and anyone who tries to go over board and beat the markets is certain to get beaten. It is difficult to resist the temptation of leveraging and hence one must learn discipline and rules of the game ie.. entry and exit points. In case of the big bang investment banks, they certainly lacked the former. They were too aggressive and were trying to rule the markets. The extent of leveraging was such that even though they knew the exit point, there were no takers and the falls that ensued took everybody along. US was teaching lessons to the whole world but now it’s the time for it to learn. It surely completed a full circle.

Thursday, August 14, 2008

Mistakes investors should not commit

  • Dont sell stocks after the results. A stock which moves up despite a very bad result, is certain to go places. Read between the lines.
  • A long term holding shouldnt be sold at a small profit.
  • Dont get carried away by what you hear on TV or read in news papers and Magazines. They mostly post near term view points. Close ur eyes and think of the business for next 2 years. Make a detailed study before commiting funds.
  • Dont shuffle ur portfolio too often unless you want to make your broker rich.
  • If you have to sell some stocks from your portfolio, forget the buying price. List the stocks you must hold, sell the stocks which come last in priority
  • Intraday/short term stocks shouldnt be carried forward especially when you are at a loss.
Know your risk before you trade

Stock Market Proverbs

  • If you must play, decide on three things at the start: the rules of the game, the stakes, and the quitting time. Chinese proverb
  • Do not stand in a place of danger trusting in miracles. Arabian Proverb
  • Don't run too far, you will have to return the same distance. Biblical Proverb
  • When you go to buy, use your eyes, not your ears. Czech Proverb
  • When you want to test the depths of a stream, don't use both feet. Chinese Proverb
  • Even a clock that does not work is right twice a day. Polish Proverb
  • Be not afraid of growing slowly, be afraid only of standing still. Chinese Proverb
  • Fast Ripe, Fast Rotten. Japanese Proverb
  • Let him make use of instinct who cannot make use of reason. English Proverb
  • Never trust the man who tells you all his troubles but keeps from you all his joys. Jewish Proverb
  • You don’t own stocks. Stocks own you. TONY BALIS
  • Money is not a product by itself, it is a by-product, so don't chase it. Dhirubhai Ambani
  • There are two rules of investing, The first rule is don’t lose. The second rule is don’t forget rule number one. Benjamin Graham
  • In Stock Market, You can be right for the wrong reasons or wrong for the right reasons.John Allen Paulos
  • Only buy something that you'd be perfectly happy to hold if the market shut down for ten years. Warren Buffett
  • Never invest in any idea you can't illustrate with a crayon. Peter Lynch
  • I hate weekends because there is no stock market. Rene Rivkin
  • Secret of Making Profits in Share Market is Don't trade the obvious
  • An investor without investment objectives is like a traveler without a destination. Ralph Seger
  • Most people are beaten up by the market instead of beating the market.MARK T. HEBNER
  • Investment philosophy is the clear understanding that by owning shares of stocks he owns businesses, not pieces of paper.Warren Buffett
  • The investor’s chief problem — and even his worst enemy — is likely to be himself.BENJAMIN GRAHAM
  • To invest wisely, it is necessary to become aware of all the temptations to behave foolishly.
  • Sometime, A long term investment is actually a short term investment that failed.
  • The market is weird. Every time one guy sells, another one buys, and they both think they're smart.
  • The better the economy gets, the more the market should sell off.
  • When is good news really bad and bad news really good.
  • Trade what you see not what you think.
  • We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.Warren Buffett
  • There is only one success — to be able to spend your life in your own way.CHRISTOPHER MORLEY
  • He who hesitates is poor. MEL BROOKS
  • one who expect miracles in share market should leave it immediately.
  • Looking for guaranteed tips? search Beauty or Health pages.
  • Easiest way to earn money in stock Market. Ask a layman to trade, Sell whatever he buys, Buy whatever he sells.Hrishikesh SenGupta
  • Trading Stocks is simple mathematics 2+2= 4but our greed makes it 5 and our panic makes it 3Feroz Ahmed Khan
  • There is nothing so easy to learn as experience and nothing so hard to apply........... Josh Billings
  • Good judgment comes from experience, and often experience comes from bad judgment............Rita Mae Brown
  • If you don't like something, change it. If you can't change it, change your attitude. Don't complain............Maya Angelou
  • All change is not growth, as all movement is not forward.............Ellen Glasgow
  • Success is going from failure to failure without a loss of enthusiam. ...........Winston Churchill
  • It is always better to buy a good stock at a bad price than buying a bad stock at a good price.