Mind Over Money Matters – New Year Trades
I have been taking it easy for over a month now, spending time with the boy and handling our lives without foreign labour. Trying to get back into the swing of things has been difficult.
My mind is reeling in confusion because we had started the year on a high on the S&P and it was a sideways market before it all came tumbling down after last Friday’s Non Farm Payrolls which was abruptly erased after yesterday’s retail sales and AUD/USD dropped over 3% in the last 3 days (after an amazing peak) because they had poor employment numbers too.
It has been V shaped or inverted V shape for currencies including the USDJPY that dipped and bounced even after their Abenomics-failure current account deficit. And now we are back to where we started.
Almost as if there is an invisible force steering the markets back on to their original course – sideways and going nowhere in a gently rocking boat.
What happens after you conquer K2 ? You set your sights on Everest. But after Everest ? It must have felt that way every time a historic high is breached and that is the main cause for any a skeptic out there who has doubts on the current US market euphoria.
I believe current sentiments are intoxicated with a heavy bias, vesting all hopes on the developed markets to save the day. The speed at which the abysmal US payroll numbers was dismissed, I am guessing that the market’s mind is on money and holding hard onto their gains and winnings and praying fervently for the next big trade (like Bitcoin) because some of them hate their jobs and want to retire.
Behaviourally, this is starting to border on paranoia. When the IMF revises the global outlook for 2014, the markets react immediately even when 2014 has barely started. The urge to run ahead of itself is disconcerting and only suggests very short term thinking leading to short lived trends and reminiscent of quick get rich schemes. Yet someone will always be richer and run further than you will and the chase will continue.
Even experts get it wrong and this has been proven by Tversky and Kahneman in 1974. Systematic and predictive errors plague everybody’s decisions and analyses which is consoling to losers like me.
My big trade so far this year was in gold.
I decided to keep quiet about it because firstly, I was too lazy to write about it and secondly, I did not want to be embarassed because everyone hates gold and we are heading into deflation, and finally, I was feeling superstitious about sharing the idea.
Keeping to the 5 day trading time frame, as I mentioned in my post last week, Too Hot, Too Cold And The Duck Explodes – Faustian Market Extremes, I managed to catch the run up from 1190 to around this level.
I am now short the S&P 500 since last night as I flagged out in the same post, to sell into the rally to come. My target for a short term 5 day (max) trade is for a 2% correction only.
My new year’s philosophy came to me as I was busy cleaning dog vomit this morning. I am trading against greed which makes me less of a contrarian and more of a pessimist.
Because when you are cleaning dog vomit, your mind cannot be on money matters and there is no reason to be greedy or to worry about what car you will buy next with your bonus like the Citibankers in Singapore who received their bonuses today who own about half the Ferraris in Asia Square.
Warming up for 2014.