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Rakesh,
As a trader I use technical analysis exclusively. My bias toward technical
analysis carries into longer term investing except when I believe there are
extreme conditions in the market. I also have long had an interest in long
term market history because I do believe that there are lessons to be
learned from history and that markets move from one extreme to another and
back. However first and foremost in trading and investing is capital
preservation. Thus I was a couple of years early in starting to ease out of
equity investments and I may be a couple of years late in easing back in.
I believe that there are many similarities between the current US market and
both the Japanese and post-crash (29) US market. There are also many
differences ... one is the dependency of the US economy on services (the
Japanese and 29 economies were manufacturing based) and another is the more
homogeneous social makeup of the Japanese society. The later is significant
because the Japanese (and to a lesser degree European) social orders are
less driven by free wheeling capitalism which I believe has been carried to
an extreme in the US and (particularly in Japan) the homogeneous society has
eased the financial pain of depression. Never-the-less there is a creative
and free wheeling spirit here which should not be underestimated because it
has proven itself capable of adapting to (and leading) tremendous challenge
and change for several centuries.
Still, in my mind, the excesses have been carried so far over a period of
decades that there must be a long/steep corrective period. The pain will
happen ... it is up to those attempting to manage the economy whether the
correction will be long or will be deep. In the US I would add that there
has been a general preference for the public rather than business to take
the brunt of economic pain e.g. the banks are profiting handsomely on rate
spreads while the public is paying relatively high rates for credit.
All selling machines are always in gear and Wall Street is no exception.
When sales slow and inventories pile up at car dealers you don't hear them
running negative advertising, neither does Wall Street. The astute investor
will take some independent measures and reach conclusions independent of the
hype.
As for investing in a major turn in the markets, on technical basis I will
need to see weekly charts with well established bullish trends (particularly
good looking, bullish linear regression channels) and on a fundamental basis
I want to see companies with strong market positions, honest accounting and
good values in the stocks in which I invest ... this requires a major mind
shift from investing in markets which are already in a steadily rising bull
market.
What I really expect to see is the time come when absolutely no one wants to
own stocks (this last happened in the 30's and 40's) and that is when I
expect to start shopping for real bargains with real earnings and real
dividends. In the interim, I continue to like bonds and believe they are
probably a double over the next 5-10 years (look at the history of interest
rates in the 30's and modern Japan). I remain undecided on currency issues
because I think the issues are more degrees of pain rather than a safe
haven. If world economic woes bring a rise in nationalism and
political/social dislocation (I think this is a good possibility), arms
makers may lead an economic rebound.
More than anything else, one must continuously observe (independently of the
media), think, and adapt to conditions as they unfold.
Earl
----- Original Message -----
From: "Rakesh Sahgal" <rsahgal@xxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, September 09, 2001 8:08 AM
Subject: Re: [RT] Markets: Stock Index Futures and regulation
> Earl,
>
> In your write up on the prospects for the economy in your country you have
> primarily relied upon fundamental concerns(if I understand you correctly)
> which are coming to the fore now, rather being touted by the salesmen of
> Wall St. now when the markets have already tanked.
> These factors were not being cited by Wall St. gurus and their underlings
> globally earlier on, when the markets were touching the skies.
> Cant one infer from these shenanigans that "they" have exhausted
> inventories and and are now re-stocking or is this assumption erroneous?
> This I ask in light of the fact that sooner than later the easing
> liiquidity conditions will make themselves felt in the economy. Also how
> relevant are the comparisons of the U.S economy with the Japanese economy
> with their structural differences( or am I again ignorant of the
similarities)?
>
> Once Ira had posted that the Wall St. selling machine always finds
> stories/concepts to tout after the current rage is dead and buried. Are
you
> saying that the conditions are going to be so dire that the markets are
not
> going to reward performance and/or the prospects of performance of the
next
> great "find"?
>
> You further state in your message below, that you are willing to change
> your analysis contingent upon contrary evidence emerging. Given your very
> strong views what would you term conclusive evidence keeping in view the
> fact the charts will essentially lead the economy and corporate
> performance? Would you wait for confirmatory economic data and enter the
> markets on pull backs in the new trend or trade major support
> points/projections with stop losses?
>
> Look forward to your comments.
> Regards.
>
>
> Rakesh
>
>
> At 08:06 AM 9/8/01 -0600, you wrote:
> >Yes, that was a typo, I was referring to the introduction of single stock
> >futures. I do not disagree with your observations as they relate to
current
> >market conditions. My comments are directed toward conditions existing in
a
> >major cyclical bear market of the type and scope we have not seen for
nearly
> >a century. Should those conditions emerge, I believe that the enthusiasm
> >for, and regulation of, derivatives will change markedly.
> >
> >I should, perhaps, add a few caveats regarding my opinions. I am
personally
> >extremely bearish in my view of the equity markets for the next decade.
This
> >is reflected in the fact that my investments have been 100% in long term
> >treasuries and bond funds for well over a year now and I am even now
> >completing the process of switching bond funds (most of which contain
GSE's
> >and corporates) for treasuries. Futures trading is another matter, I
don't
> >care if the market goes up or down as long as it does one or the other,
> >preferably in a trending manner. Finally, my investment hat is in no way
> >married to the bear case should strong evidence emerge to the contrary,
> >however I am in no way interested in trying to time my investments to
catch
> >the absolute bottom in this market.
> >
> >Earl
> >
> >----- Original Message -----
> >From: <I4Lothian@xxxxxxx>
> >To: <realtraders@xxxxxxxxxxxxxxx>
> >Sent: Saturday, September 08, 2001 7:32 AM
> >Subject: Re: [RT] Markets: Stock Index Futures and regulation
> >
> >
> > > Earl:
> > >
> > > With all due respect, stock "index" futures have been a huge success.
I
> > > believe you wish to be skeptical of single stock futures. And given
then
> > > attendance and interest shown by the futures and securities industry
this
> > > week at a seminar in Chicago by the Futures Industry Association, I
beg to
> > > differ with your conclusion.
> > >
> > > Single Stock Futures, in my opinion, will be the single largest new
> >product
> > > we have ever seen introduced. There will be three exchanges in the
U.S.
> > > offering them, a very aggressive and with it Nasdaq-LIFFE, the yet to
be
> > > named but formidable Chicago Joint Venture of the CBOE/CME/CBOT and
the
> >just
> > > announced AMEX. What product have we had launched by three exchanges
all
> >at
> > > the same time?
> > >
> > > Keep in mind that the banks wanted nothing to do with the CBOT when
they
> > > launched the bonds. Six months later they were knocking down the
doors
> >for
> > > memberships and floor space. Look at the influence of stock volumes
from
> > > tine introduction of options trading in the 1970s and stock index
futures
> >in
> > > the 1980s. Volume took off and never looked back. Nearly 1/3 of the
> >weekly
> > > NYSE volume comes from program trading alone.
> > >
> > > The new single stock futures will offer tremendous capital and
operational
> > > efficiencies to some of the largest players in the industry. No more
> >waiting
> > > t+3 for stocks to settle. Same day settlement. Marked to the market
at
> >the
> > > same clearing house, the OCC, for all the single stock futures and
options
> > > trading. Same clearing house for settlement and delivery of options
and
> > > futures contracts.
> > >
> > > Take then that the biggest corporate names in the world are U.S.
companies
> > > that can be traded as SSF. Take then that the U.S. capital markets
are
> >the
> > > best in the world in terms of legal certainty, regulation and
fairness.
> > >
> > > These are all parts of the equation why single stock futures will
work.
> >Will
> > > they take volume from stocks? Yes and no. That same argument was
made
> >when
> > > options and indexes were introduced and they only added to the
liquidity
> >of
> > > the market. With the movement of time we have been able to introduce
> >better
> > > and better contracts to specifically meet the needs of traders,
hedgers
> >and
> > > investors. We no longer need to run into gold or soybeans to hedge
our
> > > inflation or deflation risk. These tools will only make what people
want
> >to
> > > do, and do, more efficient.
> > >
> > > And I for one and going to do my best to make sure they will be
> >successful.
> > > Part of the reason I write my daily industry newsletter is to help
people
> >in
> > > the futures and securities industry manage the changes all around us.
Just
> >in
> > > the last week I have had a President and CEO of a U.S. exchange sign
up
> >for
> > > the letter. A Senior Vice President of one of the Chicago exchanges
> >signed
> > > up. A large division of a clearing FCM will shortly be announcing
they
> >are
> > > going to license my letter to offer to their clients and to attract
new
> > > clients. They will be offering it at a single stock futures
newsletter.
> > >
> > > So, all the signs I see say that these new products are going to work.
> >And
> > > as the Nasdaq-LIFFE said, they are going to "make" them work. I have
> >never
> > > seen an exchange so confident, so focused on the good of the customer,
so
> > > focused on offering a level playing field for all participants as the
> > > Nasdaq-LIFFE. And I believe them.
> > >
> > > Regards,
> > >
> > > John J. Lothian
> > >
> > > Disclosure: Futures trading involves financial risk, lots of it! John
J.
> > > Lothian is the President of the Electronic Trading Division of The
Price
> > > Futures Group, Inc., an Introducing Broker clearing Man Financial Inc.
> > >
> > >
> > >
> > >
> > > In a message dated 9/8/01 7:17:41 AM Central Daylight Time,
> >eadamy@xxxxxxxxxx
> > > writes:
> > >
> > > << I doubt that stock index futures are going to get very far off the
> >ground.
> > > Essentially, stock index futures (low margin and high leverage) are
the
> >last
> > > nail in the coffin of post-29 market regulation. I believe that we
are in
> > > the early stages of a major cyclical bear market and I expect to see
> >stock
> > > market volumes diminish to levels not seen in decades as a byproduct
of
> > > severe price declines ... the pendulum always swings from one extreme
to
> >the
> > > other. I further expect that liquidity in the futures and options
markets
> > > will suffer.
> > >
> > > I find it especially ironic that the post-29 market and banking
> >regulations
> > > were removed just as the markets moved to such excess. The fact that
> >these
> > > regulations were seen to be inhibiting the upward move of the markets
> >should
> > > have been a warning rather than a reason to remove the regulations.
> > >
> > > Earl >>
> > >
> > >
> > > To unsubscribe from this group, send an email to:
> > > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> > >
> > >
> > >
> > > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
> > >
> > >
> > >
> >
> >
> >
> >To unsubscribe from this group, send an email to:
> >realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> >Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
Rakesh
> Sahgal
> C
> -165(1st Floor), Greater Kailash - I,
>
New
> Delhi - 110 048
>
India.
>
Tel.:
> 91-11-647-6462,91-11-643-0010
>
eMail:
> rakeshsahgal@xxxxxxx
>
rsahgal@xxxxxxxx
>
>
> Rakesh Sahgal
> Online Status:
>
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>
>
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