One of the nicest chart I have ever seen. This year we made more than 72%! So it is best time now to drink and celebrate.
http://www.marketwatch.com/story/5-things-you-dont-know-about-champagne-2013-12-30
Happy New Year Folks!
Tuesday, 31 December 2013
LAST BLOG OF THE YEAR
And the shortest one. Yesterday – Monday – the Dow closed at 16.504, which is new high again. This is the 51st record close in 2013. What a year!!! That was great year in Wall Street and we do hope is gonna be for the Main Street in 2014 either.
One of the nicest chart I have ever seen. This year we made more than 72%! So it is best time now to drink and celebrate.
http://www.marketwatch.com/story/5-things-you-dont-know-about-champagne-2013-12-30
Happy New Year Folks!
One of the nicest chart I have ever seen. This year we made more than 72%! So it is best time now to drink and celebrate.
http://www.marketwatch.com/story/5-things-you-dont-know-about-champagne-2013-12-30
Happy New Year Folks!
Monday, 30 December 2013
HOW TO LOSE MONEY ON GOLD
Easy. You only need to buy gold this January and holding still today. The SP500 gained this year 30% and gold lost the same percentage. Many of us well remember in the last couple of years how many times we heard the gold is a perfect investment for your savings, it is the perfect money haven. That is not true anymore. 30% is a brutal loss within a year, it is not a collapse, but might hurt much. The gold bubble has burst in 2013.
This year certainly started with expectations for 2,000usd, but now we are closer to 1,000usd. After 13 years long run, this year the price volatiled the trend and turned clearly south. 2013 is the first year since 2000 when the price went down on yearly basis. The long bull run is over. That 30% is the biggest annual lost since 1984. The popularity of gold is over, most of traders left the market only small investors are active, which is a clear indication of bearish sentiment.
Whata are the reasons? I have some ideas:
Technically all the support levels were taken this year, it was not a free fall, but consistent and steady. For the bulls, there is no bottom in sight from a technical viewpoint, just look at the chart:
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
This year certainly started with expectations for 2,000usd, but now we are closer to 1,000usd. After 13 years long run, this year the price volatiled the trend and turned clearly south. 2013 is the first year since 2000 when the price went down on yearly basis. The long bull run is over. That 30% is the biggest annual lost since 1984. The popularity of gold is over, most of traders left the market only small investors are active, which is a clear indication of bearish sentiment.
Whata are the reasons? I have some ideas:
- 13 years is a long period, always needs to come correction after that long bull rally
- The stock markets got started gain again, no more scares about the recession
- Many investors looking for alternative investments, like property, shares or bitcoin
- Tapering might mean smaller inflation too, which is bad for the value of gold
- The crisis is over
Technically all the support levels were taken this year, it was not a free fall, but consistent and steady. For the bulls, there is no bottom in sight from a technical viewpoint, just look at the chart:
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Friday, 27 December 2013
GREEN BARS EVERYWHERE
Thursday continued the rally on US markets and in Japan. This morning all the European markets have opened with gap. The optimism is all around us. This is a real Xmas rally. Behind the green day in US might be the US the weekly jobless claim which fell by 42k to 338,000, that is surprisingly good data.
Historically, the markets might do abnormally high returns in the trading days around Xmas holidays. Why? First, the people are more emotional and more optimistic in these days than usually. Second, the funds try to maximize the tax benefits before the closure of the year. Third, most of the professional traders are on vacation and they are mostly on the seller side of the market.
Historically, the markets might do abnormally high returns in the trading days around Xmas holidays. Why? First, the people are more emotional and more optimistic in these days than usually. Second, the funds try to maximize the tax benefits before the closure of the year. Third, most of the professional traders are on vacation and they are mostly on the seller side of the market.
Most of us are getting greedy:
But, what happens if there is nobody on the short side? Wast majority of American small investors are in euphoria. The bullish sentiment between them is the highest since 2007, the bearish are the lowest since 1987. The bull-bear spread has never been broader than now.
The change since last week is amazing:
Datas reported by AAII: http://www.aaii.com/sentimentsurvey
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
But, what happens if there is nobody on the short side? Wast majority of American small investors are in euphoria. The bullish sentiment between them is the highest since 2007, the bearish are the lowest since 1987. The bull-bear spread has never been broader than now.
The change since last week is amazing:
- Bullish: +7.6
- Neutral: -1.1
- Bearish: -6.5
Datas reported by AAII: http://www.aaii.com/sentimentsurvey
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Thursday, 26 December 2013
COPPER BREAKOUT
The industrial commodity made a breakout on Tuesday on CME and after seven months left the consolidation area. This is the highest price - 3,378 - since 2013 May. In the first quarter the correction was brutal was around 30% and since this March the copper has been ranging only, until now. On Tuesday gained closely 2% the price. In the last couple of weeks the prices have marched higher backing by the strong US macros and big Chinese liquidity poured by Chinese authority. The biggest copper buyer in the world is US and the second is China.
The traders seem now they are quite bullish. Technically the copper left the range at 3,370 and the area is opened now up to 3,470 that can be first key resistance level. We found a reversal head and shoulder pattern on the weekly chart too, which is signal of bullish sentiment.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
The traders seem now they are quite bullish. Technically the copper left the range at 3,370 and the area is opened now up to 3,470 that can be first key resistance level. We found a reversal head and shoulder pattern on the weekly chart too, which is signal of bullish sentiment.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Tuesday, 24 December 2013
NIKKEI HITS 6 YEAR HIGH
Couple a month ago we forecasted a strong bullish rally on Nikkei, we built up in the last couple of months a group of long positions on Nikkei and we have made a nice profit on that. Our idea was the big arbitrage between the US markets and the legging Nikkei.
After a bank holiday Monday in Japan, tonight the Nikkei hit a 6 year high, the weak YEN is supported this movement. The index gained on year to date basis 53,8% and stays now at 15,903. The telecom shares were traded higher. Generally all Asian markets gained in the last couple of days like ASX or Shaghai Composite or Hang Seng.
Technically the Nikkei shows very healthy patterns. The dips are higher and higher and we had a breakout after 9 months consolidation a few days ago at 15.720. That resistance level has been violated the very first time since this April. The sky is opened now heading north. The next resistance is at 17,500. That can be our next summer middle range target.
We are still far far away from the historical top at 1989. The Japanese market has two lost decades, which seems more than enough and could be a great buying opportunity recently. Who knows?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
After a bank holiday Monday in Japan, tonight the Nikkei hit a 6 year high, the weak YEN is supported this movement. The index gained on year to date basis 53,8% and stays now at 15,903. The telecom shares were traded higher. Generally all Asian markets gained in the last couple of days like ASX or Shaghai Composite or Hang Seng.
Technically the Nikkei shows very healthy patterns. The dips are higher and higher and we had a breakout after 9 months consolidation a few days ago at 15.720. That resistance level has been violated the very first time since this April. The sky is opened now heading north. The next resistance is at 17,500. That can be our next summer middle range target.
We are still far far away from the historical top at 1989. The Japanese market has two lost decades, which seems more than enough and could be a great buying opportunity recently. Who knows?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Monday, 23 December 2013
SEAN HYMAN THE PASTOR WHO BECAME SUCCESSFUL TRADER
Thanks to Xmas today we are more Christian than normally, we introduce today the former pastor, Sean Hyman. He used to be a pastor and now he is a profitable trader but still believing in Jesus. He cites quotes from the Bible how being better trader. Stories about Jesus, Salomon, Peter ... etc. Like this Proverbs 14:15: “The naive will believe everything, but a wise man looks well into a matter.”
In his interpretation the Bible gives us quidelines for trading. If I understand him well his concept is the love of money is our biggest enemy and our greedy attitude is come from the devil. He states the money itself is not against the Bible, the love of money is against the Christianity. Unique and nonconventional theoretical view, but for him it is succesfull. On his page he is giving away his system for free.
Under this link there is a short interview with him: http://www.youtube.com/watch?v=MJXRaHsuMXE
And his presentation about his system: http://w3.newsmax.com/newsletters/uwr/video_money_code_intl.cfm?promo_code=146F3-1
He uses a triangle for analysis:
He seems a smart and skilled trader and I love to see a christian believer who says the market is not from the devil it is part of our life and we can do it honestly, profitably and in human way at the same time.
Merry Christmas!
The BFM Assets Team.
In his interpretation the Bible gives us quidelines for trading. If I understand him well his concept is the love of money is our biggest enemy and our greedy attitude is come from the devil. He states the money itself is not against the Bible, the love of money is against the Christianity. Unique and nonconventional theoretical view, but for him it is succesfull. On his page he is giving away his system for free.
Under this link there is a short interview with him: http://www.youtube.com/watch?v=MJXRaHsuMXE
And his presentation about his system: http://w3.newsmax.com/newsletters/uwr/video_money_code_intl.cfm?promo_code=146F3-1
He uses a triangle for analysis:
- Fundamental – for the big picture
- Technical – for timing
- Sentiment – RSIif above 30
He seems a smart and skilled trader and I love to see a christian believer who says the market is not from the devil it is part of our life and we can do it honestly, profitably and in human way at the same time.
Merry Christmas!
The BFM Assets Team.
Friday, 20 December 2013
PREDICT OR TRADE THE MARKET?
There are two kind of animals of investors. One is the trader and other one is the analyst who always forecasts and want to predict the future. I met a few years ago a super smart guy, who was the best analyst I have ever seen. But the problem was when he started to trade with real clients money he lost all the capital always. He was good at paperwork and his ideas were brilliants, but he couldn’t make money at all. He just didn’t trade, he forecasted and he believed always his predictions and stuck for them. Which did cost big money.
I know most of the companies, traders, investors, anchors, advisors ... etc. love to forecast and predict. Why? Two reasons. One is a marketing. They need to communicate and promote their services. So that is a business side. The other thing that they are convinced that what they trade is the best trade ever. I made thousands of predictions in my trading career and I was sure that I am right. This is the mental side of trading. We like to focus on the positive scenarios and ignore the risk of damage. In the last couple of years my attitude has totally changed and I don’t want to predict anymore, I only want to trade the market. I bet and see what happens.
Nowadays I found that everybody predicts for 2014 in terms of SP500, some forecaster says in 2014 the SP500 will be at 2014. This morning I saw a guy who said in 2014, the SP500 will hit the 1,890. Marc Faber a few days ago said in the interview SP500 will drop in 2014, 20% at least. Honestly all three guys are good and smart traders. Who is right? We don’t know obviously we can place the verdict only at the end of 2014. But I am sure about that they don’t have any crystal ball or holly grail. So, I am pretty sceptical, my thought is that all the forecasts are worthless. We don’t know anything about the future, we are all just guessing. Some prediction will closer some will be far from the reality.
As John Bogel once said „Nobody knows nothing” I love this quote. If you accept this statement you will never be disappointed if you lose. This is the part of the business. Try to never predict just trade and hope for the best, but plan for the worst. How can you do that? If you see a bullish market as now the SP500 just be bullish and stay in the profitable position as long as possible. Keep that position as high the market goes up. Believe me nobody knows where the top of the rally is.
The worst part of prediction that we like to listen to them. Cause we are frustrated about the unsure market conditions and moves and we love to find some guru or guidance. Don’t use any guidance just use your sober mind and make decision on your own ideas. Don’t listen to anybody because it is your money, your loss and your gain.
Have a good trade for 2014!
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
I know most of the companies, traders, investors, anchors, advisors ... etc. love to forecast and predict. Why? Two reasons. One is a marketing. They need to communicate and promote their services. So that is a business side. The other thing that they are convinced that what they trade is the best trade ever. I made thousands of predictions in my trading career and I was sure that I am right. This is the mental side of trading. We like to focus on the positive scenarios and ignore the risk of damage. In the last couple of years my attitude has totally changed and I don’t want to predict anymore, I only want to trade the market. I bet and see what happens.
Nowadays I found that everybody predicts for 2014 in terms of SP500, some forecaster says in 2014 the SP500 will be at 2014. This morning I saw a guy who said in 2014, the SP500 will hit the 1,890. Marc Faber a few days ago said in the interview SP500 will drop in 2014, 20% at least. Honestly all three guys are good and smart traders. Who is right? We don’t know obviously we can place the verdict only at the end of 2014. But I am sure about that they don’t have any crystal ball or holly grail. So, I am pretty sceptical, my thought is that all the forecasts are worthless. We don’t know anything about the future, we are all just guessing. Some prediction will closer some will be far from the reality.
As John Bogel once said „Nobody knows nothing” I love this quote. If you accept this statement you will never be disappointed if you lose. This is the part of the business. Try to never predict just trade and hope for the best, but plan for the worst. How can you do that? If you see a bullish market as now the SP500 just be bullish and stay in the profitable position as long as possible. Keep that position as high the market goes up. Believe me nobody knows where the top of the rally is.
The worst part of prediction that we like to listen to them. Cause we are frustrated about the unsure market conditions and moves and we love to find some guru or guidance. Don’t use any guidance just use your sober mind and make decision on your own ideas. Don’t listen to anybody because it is your money, your loss and your gain.
Have a good trade for 2014!
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Thursday, 19 December 2013
IT IS NOT A TAPERING, JUST A "T"
Yesterday announced the FED the tapering, I would say it is not a tapering it is just a "T." This is what about the market and investors scared about in the whole year. And, what happened? NOTHING. The Fed directors voted to reduce monthly asset purchases to $75 billion from $85 billion due to the improvement in the outlook for the US economy.
The market’s reaction was absolutely and really positive. US indexes are at new highs again at record levels. This investors don’t have any concerns about that 10 billion cut. As I expected few months earlier any kind of tapering was priced in already. Never forget the market always do what is the most unexpected. Now the FED did the same. This decision was against the biggest consensus of not tapering. The FED and Bernanke showed to the audience at his last yesterday meeting that there is middle way solution. Very slight tapering, but tapering – I would say a bit tightening.
Last night the US markets showed that doesn’t care about anymore about tapering. The market is hungry and focusing only for good news. The time has come where the good news are the good news. Remember, in this whole year the good macro news meant bad news for investors, because there was a fear about the tapering.
The short conclusion is that nothing to do anymore with the yesterday tapering. The other fact is that we are fully heading to the end of the year. So this combination with the pretty bullish trend is which was not violated means the markets will keep going up in December with a lower volume.
Technically the market right after the news jumped up and then dived for few minutes and headed north again and reached new record levels.
On SP500 chart as we forecasted on Monday the market made a clear break out up to the 1,810 key level. Shortly I am sure is gonna take out that key resistance level at 1,810 and going up further. Don’t forget this yesterday reaction proved again how bullish the market sentiment now.
Do not miss anything; follow and like us on Facebook too: https://www.facebook.com/pages/BFM-Assets/169968313184534
The BFM Assets Team.
Tuesday, 17 December 2013
BIG MONDAY RALLY
We never know the stocks rose by good economic data or it was driven only by the low pre-Xmas volume. The fundamental news was yesterday that the industrial production jumped 1.1% in November, far more than the 0.6% expected by economists. It seems to me by now the market interpret the good news as good news. Previously the news meant bad news for the investors. If they did hear any good news they got started to scare about the tapering.
It was the biggest rally in the US markets since end of September. It is surprising before the Wendesday FED meeting. Frankly I expected a quiet Monday and Tuesday. Last week was generally a losing week so this Monday rally was a good start. The SP500’s gain was led by technology and energy sector, which is a good signal.
SP500 +0,63% to 1,786
DJIA +0,82% to 15,884
Nasdaq +0,71% to 4,029
The question is the same on Wendesday which ruled the whole 2013 year. Tapering or not. $85 billion bond-buying stimulus program is under consideration on FED meeting.
Technically the SP500 from the bottom level (1,760) made a break out on Monday at 1,776. The real confirmation will come for the bullish trend if the 1,786 key level will be taken. If it breaks we can wait for back testing the pervious top at 1,810. Today could come a correction and quite trading day but tomorrow we have to fasten our seatbelts.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
It was the biggest rally in the US markets since end of September. It is surprising before the Wendesday FED meeting. Frankly I expected a quiet Monday and Tuesday. Last week was generally a losing week so this Monday rally was a good start. The SP500’s gain was led by technology and energy sector, which is a good signal.
SP500 +0,63% to 1,786
DJIA +0,82% to 15,884
Nasdaq +0,71% to 4,029
The question is the same on Wendesday which ruled the whole 2013 year. Tapering or not. $85 billion bond-buying stimulus program is under consideration on FED meeting.
Technically the SP500 from the bottom level (1,760) made a break out on Monday at 1,776. The real confirmation will come for the bullish trend if the 1,786 key level will be taken. If it breaks we can wait for back testing the pervious top at 1,810. Today could come a correction and quite trading day but tomorrow we have to fasten our seatbelts.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Monday, 16 December 2013
BUY LOW, SELL HIGH?
In other words buy when there is a fear on the market and sell at the euphoria. Is that simple to make money? YES. I do believe, but most of us cannot understand that.
I am watching each day for few hours the CNBC and Bloomberg TV and last week I saw the same symptom what I had seen plenty of times previously. Namely how fast could change the sentiment of investors. Last Monday everybody, all anchors and normal investors were absolutely bullish and by last Friday most of them got sceptical. Within five days the sentiment of the mass turned from bullish to bearish.
Here comes the point if we want to make money we have to different things than the others do. Cause if we do what the mass does we will be also in the 90% of speculators who are losing his all money. We have to be contrarian. As my 3 Letter Rule, my number one "ABC Rule of Trading" says "LWAYS BE CONTRARIAN."
Most of you has heard about the „6 Months Rule of Forex Market”. It says within 6 months 90% of the traders losing their whole capital. That is true, no argue. My statistic is a bit worse, my bet is between 95-98%. I analyzed that majority what they are doing wrong. I found they have 10 big mistakes. The biggest one is that they are following the mass and following the media. They are weak, they don’t have any trading plan and easily can be oriented or reoriented.
I am reading and watching news too, but only for seeing the sentiment of other investors. I don’t trade that what they think or do. I totally do of the opposite of that. For instance I love the AAII Sentiment Index. It tells me more about the market that any other hell of indicators. http://www.aaii.com/sentimentsurvey
This is a great sentiment marker to me. I am simply bullish when most of the traders are bearish and I am being bearish when the majority is bullish. I don’t want to be only a member of mass. I want to be a part of the minority of 2-5% who makes money constantly.
It pays to buy when everybody else is selling, and sell when everybody is buying. I know it is not a popular thing and you will be alone with your opinion, but I can assure you it will bring money for you in long-term. Honestly I do believe this is the only way to earn money in the markets.
What is your guess? It is a good opportunity to buy or not the SP500 below?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
I am watching each day for few hours the CNBC and Bloomberg TV and last week I saw the same symptom what I had seen plenty of times previously. Namely how fast could change the sentiment of investors. Last Monday everybody, all anchors and normal investors were absolutely bullish and by last Friday most of them got sceptical. Within five days the sentiment of the mass turned from bullish to bearish.
Here comes the point if we want to make money we have to different things than the others do. Cause if we do what the mass does we will be also in the 90% of speculators who are losing his all money. We have to be contrarian. As my 3 Letter Rule, my number one "ABC Rule of Trading" says "LWAYS BE CONTRARIAN."
Most of you has heard about the „6 Months Rule of Forex Market”. It says within 6 months 90% of the traders losing their whole capital. That is true, no argue. My statistic is a bit worse, my bet is between 95-98%. I analyzed that majority what they are doing wrong. I found they have 10 big mistakes. The biggest one is that they are following the mass and following the media. They are weak, they don’t have any trading plan and easily can be oriented or reoriented.
I am reading and watching news too, but only for seeing the sentiment of other investors. I don’t trade that what they think or do. I totally do of the opposite of that. For instance I love the AAII Sentiment Index. It tells me more about the market that any other hell of indicators. http://www.aaii.com/sentimentsurvey
This is a great sentiment marker to me. I am simply bullish when most of the traders are bearish and I am being bearish when the majority is bullish. I don’t want to be only a member of mass. I want to be a part of the minority of 2-5% who makes money constantly.
It pays to buy when everybody else is selling, and sell when everybody is buying. I know it is not a popular thing and you will be alone with your opinion, but I can assure you it will bring money for you in long-term. Honestly I do believe this is the only way to earn money in the markets.
What is your guess? It is a good opportunity to buy or not the SP500 below?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Friday, 13 December 2013
RED BARS EVERYWHERE
Yesterday,
better to say in the last 3 days the US markets are dropping after hiting this
week the SP500 the historic high. Heading south the Europeans and Asians too.
The sentiments are not bad yet. The bearish and bullish investors are on the
same level more or less. But the optimism has gone for a while. Most of the
investors are waiting for the next week FED’s decision about the tapering or
not. My bet is that no tapering.
The markets are now in quiet end of year mood. We have
to wait for any significant move for the next week.
Yesterday details:
SP500 -0,38% to 1,775
DJIA -0,66% to 15,739
Nasdaq -0,14% to 3,998. Since November 25
first time closed below the 4,000 key level.
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.
Thursday, 12 December 2013
CORRECTION IDEAS
There is a common rule on the floor that each year needs to come a correction which must be bigger than 10%. The two digit drop has not came yet this year. Let’s take a closer look what means a correction on the markets.
In the matrix by Big Bicture, you can see the corrections are always with us. This is the part of the investment business. The size might be different. This year on SP500 the biggest drop was 7,52% os it was a “refreshing” type of correction. This a normal phase of markets. There is nothing special with that. Without these effects the markets cannot go up again.
If you look at this chart below, you will see in the last 4 years the biggest yearly drops. That is obviously a bullish market, but once a year happens a double digit drop. Which called "correction".
The point is that you shouldn’t have to be scared if you see like that. If the plunge is over the market could recover easily if the trend is still seems intact and not violated. The point is the timing, proper money management and being disciplined. If you aware of this correction patterns you will never be surprised and shocked if the market goes against you.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
In the matrix by Big Bicture, you can see the corrections are always with us. This is the part of the investment business. The size might be different. This year on SP500 the biggest drop was 7,52% os it was a “refreshing” type of correction. This a normal phase of markets. There is nothing special with that. Without these effects the markets cannot go up again.
If you look at this chart below, you will see in the last 4 years the biggest yearly drops. That is obviously a bullish market, but once a year happens a double digit drop. Which called "correction".
The point is that you shouldn’t have to be scared if you see like that. If the plunge is over the market could recover easily if the trend is still seems intact and not violated. The point is the timing, proper money management and being disciplined. If you aware of this correction patterns you will never be surprised and shocked if the market goes against you.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Wednesday, 11 December 2013
HOW LONG COULD THE MARKET GO UP?
Yesterday in an interview on CNBC Dennis Gartman said „Write this down. It will continue to go up until it stops”. http://video.cnbc.com/gallery/?play=1&video=3000225315
Great, great point. I am reading a bunch of smart guys, traders, analysts comment and forecast that the SP500 is gonna go up to 2.000 shortly or the target is 2014 for 2014. What I learned in my professional career that NOBODY, KNOWS NOTHING. These guys who are forecasting now the SP500 over 2.000 most of them were cry babies about the markets in the last couple of years and visioned the crash of the market in each quarter. Now they are the promoters of the rally.
All in all the most beautiful part of the trading is that we cannot be sure about anything and we are not able to predict anything. We are only guessing. In my interpretation as Gartman said, stay in the rally until the bullish market sentiment doesn’t change. Grab the bull and ride on that as far as possible. If some trend get started we never know where and how ends, but we have some canary in a coal mine. Namely some fundamental and technical indicators to watch.
The other issue is the next tapering gossip:
The market told me last week don’t sell on the tapering if comes. Against the good fundamental macro news the markets got higher last week. Made a biggest and strongest one day rally in a month. Nobody scared about the plenty of good news which push the FED into the tapering way. In my view if we see some tapering or tightening next week by FED won’t have a huge effect on the markets. It is built already in the prices. Tapering is less of an issue recently. The taper worries rules the whole years of 2012 and 2013. It seems to me is over. Look at the optimism of SP500. This is a bull chart, isn’t it?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Great, great point. I am reading a bunch of smart guys, traders, analysts comment and forecast that the SP500 is gonna go up to 2.000 shortly or the target is 2014 for 2014. What I learned in my professional career that NOBODY, KNOWS NOTHING. These guys who are forecasting now the SP500 over 2.000 most of them were cry babies about the markets in the last couple of years and visioned the crash of the market in each quarter. Now they are the promoters of the rally.
All in all the most beautiful part of the trading is that we cannot be sure about anything and we are not able to predict anything. We are only guessing. In my interpretation as Gartman said, stay in the rally until the bullish market sentiment doesn’t change. Grab the bull and ride on that as far as possible. If some trend get started we never know where and how ends, but we have some canary in a coal mine. Namely some fundamental and technical indicators to watch.
The other issue is the next tapering gossip:
The market told me last week don’t sell on the tapering if comes. Against the good fundamental macro news the markets got higher last week. Made a biggest and strongest one day rally in a month. Nobody scared about the plenty of good news which push the FED into the tapering way. In my view if we see some tapering or tightening next week by FED won’t have a huge effect on the markets. It is built already in the prices. Tapering is less of an issue recently. The taper worries rules the whole years of 2012 and 2013. It seems to me is over. Look at the optimism of SP500. This is a bull chart, isn’t it?
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Tuesday, 10 December 2013
THE US ECONOMY IS NOT IN CRISIS MOOD
Last week we have had some good news regarding the US economy, which might be a good indicator for FED tapering or not. Seems the economy is in good shape so as the rumour says on the market comes the tapering or tightening next week. Last Friday the market made the biggest daily gain within a month. So the bulls are still out there. My guess is that we don’t need yet the canary in a coal mine.
The good macros were the followings:
Monday jumped a bit again the US stocks. SP500 gained close the record level. The market didn’t have any concerns about the stimulus reduction gossips probably next week. It seems the market ignoring that news and only focuses on the fundamentals.
SP500 +0,18% to 1.808
DJIA +0,03% to 16.025
The European markets specially FTSE still lagging. In the whole November and December couldn’t get up higher just plunges without any new record.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
The good macros were the followings:
- 7% unemployment rate from 7,3%
- Hourly wages up with 4cent, +2% YTD
- US GDP jumped up to 3%
SP500 +0,18% to 1.808
DJIA +0,03% to 16.025
Nasdaq +0,15% to 4.068
The European markets specially FTSE still lagging. In the whole November and December couldn’t get up higher just plunges without any new record.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Friday, 6 December 2013
SOME WISDOMS FROM WARREN BUFFET
I am not kind of the person who is crazy about Warren Buffet as the new runner investors and the media are. But I have found some pretty remarkable rules from him. He is not the prototype of speculator but a perfect prototype of investor.
The “Oracle of Omaha” is a buy and hold investor and that made him close the richest man on the planet. In point of trading I listed some of his wisdoms below:
Take a look at our Swiss fund and begin to invest with us!
The “Oracle of Omaha” is a buy and hold investor and that made him close the richest man on the planet. In point of trading I listed some of his wisdoms below:
- It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
- Risk comes from not knowing what you’re doing.
- I never attempt to by saveshare" target="_blank">make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
- We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful
- Time is the friend of the wonderful business, the enemy of the mediocre.
- Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
- If I ever write a book, it will be titled ’why smart people do stupid things’.
- History does not tell you the probability of future financial events happening.
- The best buys have been when the number almost tell you not to
- We don’t spend any time looking back at Berkshire. There’s so much to look forward to that it just doesn’t make sense to look behind. You can only live life forward.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Wednesday, 4 December 2013
THAT 2000 NASDAQ 4.000 IS DIFFERENT FROM THE RECENT 4.000?
Yes, no doubt. After 13 years the Nasdaq hit again the 4.000 level. Made a nice gain over 35% this year. The question for me was how is that possible to compare the two period 1999 and 2013. And I found some remarkable differences which has been changed since 2000 inside the Nasdaq.
- At 2000 Nasdaq were merely tech index almost. Now underrepresented the tech companies, they are under 60% from the composite. So now it is a broader index than ever was.
- At the .COM bubble huge majory of companies were not profitable at all. The P/E ration did not exist at many cases. That is not true today.
- There were many hot tech companies without any profit. That is not true today.
- Look at the profitability of Google. This is profitable company and price is over 1k per share. So now the index is much more reasonable priced than at 2000.
- The market generally is not yet so pricey as it was 13 years ago.
The Nasdaq is the best performer index in US. Beat SP500, DJIA and Russell. And, we see the first break out after 13 years. The upside seems much stronger than the short side.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Tuesday, 3 December 2013
SELL OFF AND CORRECTION ON MONDAY
US indexes plunged yesterday. The rally
stopped for a while. The markets are still close to record highs, but in a
short term can possibly come some correction day in short term basis. This
pullback is the part of cycles. But the bottomline is still that the markets
are bullish. The fundamentals are positive.
- S&P500 fell 0.3%, to 1,800
- DJIA -0.48% to 16,008
- Nasdaq -0.36% to 4,045
Only three weeks left from this year so the volume is going to be
downcreased shortly. I don’t expect big movements in the rest weeks. This year
all in all was a great year for the markets SP500 gained more than 25%, Nasdaq
44%, Dow 23%. And, all are on historical highs.
The European markets are lagging, but day by day come good fundamental
news from Europe. Today the Spanish unemployment report is far better than was
expected
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.Monday, 2 December 2013
SOME BITCOIN UPDATES
One of my friend wrote me yesterday a mail and
he mentioned he bought this May Bitcoin for 200USD which worths now around 2.000USD.
He is happy with that obviously but he mentioned if he had bought at 2010 now
his 200USD might worth now around 2M. That is crazy.
- Parity with an ounce of gold. The
Bitcoin on Friday was over the first
time in the History above the gold price. The cross was at 1242.
- UK Royal Mint has been working on plans since this summer to issue physical Bitcoins in
collaboration with the Channel Island of Alderney
- Over 400 online retailers started
last Friday offering special deals just for Bitcoin users
-
Now you are able to buy ticket to
space on Virgin Atlantic
- Single bitcoin's value hit $1,000
last week
-
Now the price is around 1.022USD
Here is a great story about Bitcoin by BBC: http://www.bbc.co.uk/news/uk-wales-south-east-wales-25134289
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.
Friday, 29 November 2013
INDEXES VS. STOCKS
Quite
often I am asked why I prefer index buying instead of single stocks. I do
believe I have some reasonable answer for that and here below I am gonna
summarize my approaches.
Those are my biggest reason why I am trading indexes
against the stocks. But I have a piece of good news there is one huge common
thing. The market is so bullish. So bear in mind and buy the dips.
1.
Hard to collect the relevant
information
You are aware that
I am so bullish on the stock market. But honestly I never buy any single stocks
just indexes. Cause I don’t like the luck in the trading and investing. In the
single stock trading I see many risk, namely I don’t have enough relevant information
about that certain company. Is there any crazy guy in the board, is there any
risk behind the curtain, is there any risk on the management ... etc. On one single
stocks I cannot see the risks well, but on the indexes I just need to open FT
or WSJ and read the relevant information in 20 minutes about DJIA or DAX. You will
not find a simpler solution to diversify and reduce the risk with indexes.
Honestly I don’t need to know anything about the single companies at SP500,
what I only need to have is a general view about the direction of the market.
2.
Volatility
The volatility is
much bigger on single stocks than on indexes. You can make a fortune on 3D
printing companies this year over 100-200% profit. I am happy if you did that.
Or if you bought Tesla or Starbucks you have made over 50% in this current
year. But never forget this is an optimal scenario, but sometimes will come the
worst case scenario when you can lose 50% easily on some single stocks. Just
remember for Apple, Enron, Arthur Andersen, Nortel ... etc. On stocks the
volatility is much bigger than on indexes that is the reason why I am buying only
index. I can’t do 100-200% per year, but honestly I don’t really want to do
that because it is too risky. The flip side is that I cannot afford to lose 50%
neither. If you are super lucky, never forget will come the super unlucky days
too. That is the behaviour of this business.
3.
Which indexes we trade?
We only forcusing
on the flagship indexes and don’t care about the small composites. We trade
DJIA, SP500, Nasdaq, FTSE, DAX, CAC40, Nikkei, Hang Seng. There is no sense to
trade belgian or greek markets because all the markets are correlated so sooner
or later the arbitrage is disappearing.
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.Thursday, 28 November 2013
THANKSGIVING AND BLACK FRIDAY
Today,
tomorrow we have a space being a bit relaxed. Today the US markets are closed,
tomorrow only half day opened. We don’t expect big moves further in the last
two days which rest.
Take a break for this week and focus on the
next week market movements. Don’t forget anybody says it is bubble. Don’t
believe them. It is not. It is merely a bullish market.
And what is our behaviour on the bullish
market?
- Very bullish or
- Bullish or
- Neutral
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.
Wednesday, 27 November 2013
NASDAQ IS OVER 4.000
After 13 years the first time traded the Nasdaq over 4.000. The index
yesterday closed at 4.017 with a daily gain of 0,58%. The lowest rate was in
the last 52 month was at 2936. It is more than 50% gain. That is brutal. So
most of investors get started talking about the bubble effects. Just take a look
behind the curtain and look at the core facts and try to summarize a bit.
In 2000 at the Dotcom Bubble was the price last time here at 4.000. Let’s
look at some data comparing that period and the recent one. In 1999 and 2000
the market was super overvalued. I remember well that time there was a real
euphoria, everybody just closed the eyes and was buying like an idiot. That was
one of the most crazy bubble in the history of markets. Now is perfectly
different. I don’t see the same investor attitude around me. I don’t realize that the markets are
overheated.
|
December 1999
|
Today
|
|
|
P/E ratio
|
29.7
|
19.1
|
|
CAPE
- Shiller PE ratio
|
44.2
|
24.4
|
|
Price/Book Ratio
|
5.1
|
2.6
|
|
Price/Sales Ratio
|
2.4
|
1.6
|
All in all today the Nasdaq is far less overvalued
than it was in 1999 and 2000. The market’s current valuation is still solid and
seems no extreme at all.
Take a look at
our Swiss
fund and begin to invest with us!
The BFM Assets Team.
Tuesday, 26 November 2013
SOME BUBBLES FROM THE LAST DECADES
I love George Soros’s quote about why we surprised when burst the bubbles. He said once “The only surprise is that we are always surprised.”
Frankly in each last four decades we have had some kind of bubbles. We have seen few bubbles during those periods.
The US stock market crashes happened in 1987, 1998, 2000, 2008. The difference between them each time was that these bubbles driven by different stocks, industries. What is the common thing? It is us, the investors, the human beings with our all irrationality, inconsistency and in some case incompetence. Look at the chart below how big is the correlation between three crisis 1929, 2000, 2007. That is shocking how same we act as a herd.
There is no doubt. Bubbles happen again and again thanks to our common greediness. Plus there need 4 other things occur bubbles:
We are recreating in each decade a new bubble because we love the hypes. The only problem is that. Most of us don’t make money in bubbles but make a brutal loss. We have to learn how to avoid those losses.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Frankly in each last four decades we have had some kind of bubbles. We have seen few bubbles during those periods.
- 70’s: there was GOLD bubble price gained from 35USD up to 850USD.
- 80’s: Nikkei went up from 8000 to over 40000, before crashing with 80%.
- 90’s: Nasdaq dotcom bubble index went up from 440 to 5000 – 80% loss finally
- 2000’s: Housing bubble in US, Dubai, Spain, Iceland. Gained 200-500% the prices
The US stock market crashes happened in 1987, 1998, 2000, 2008. The difference between them each time was that these bubbles driven by different stocks, industries. What is the common thing? It is us, the investors, the human beings with our all irrationality, inconsistency and in some case incompetence. Look at the chart below how big is the correlation between three crisis 1929, 2000, 2007. That is shocking how same we act as a herd.
There is no doubt. Bubbles happen again and again thanks to our common greediness. Plus there need 4 other things occur bubbles:
- Strong fundamentals behind the market
- Optimism about the new age
- Huge liquidity of cash
- People start to think this time is different
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Monday, 25 November 2013
AGAINST ALL THE BUBBLE CONCERNS...
The SP500 is up 9 points, Dow up 70 points. What a crazy rally today again. The Iran nuclear agreement pushed higher the prices. On the other side pushed down the TWI oil with 1%.
The Citi’s Panic/Euphoria level close the red level which has not seen since 2007/2008.
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The BFM Assets Team.
The Citi’s Panic/Euphoria level close the red level which has not seen since 2007/2008.
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Friday, 22 November 2013
HOW CAN YOU BE EASILY BETTER TRADER?
Forget the past. I would say forget the losing position and forget much faster the winning one. Why? Because our memory is our biggest enemy. Keep us focusing on the past not the current position.
According to one Stanford's study in 2005 it proved one very impressive thing. Scientists gave a group of participants $20 each. They were then made an offer: You can flip a coin up to 20 times. If you lose the coin toss, you owe $1. If you win, you get $2.50. Everyone in this situation should make as many tosses as possible, since there's a 50/50 chance of accurately guessing a coin toss, and the reward for winning is far larger than the penalty of losing. But the researchers found only one group of participants willing to make large numbers of tosses: Those with a lesion in the area of their brains that controls emotion. Participants with normal brains threw in the towel after flipping a few losses in a row. People don't like losing money, and even if you know the odds are in your favor, a couple losses will turn you off. But those whose brains suppressed emotions kept on betting, regardless of past losses. Not surprising, given the odds and payoffs of the coin-toss game, they ended up with more money.
We're as human beings more likely to remember negative, emotional events than ordinary or positive ones, especially in the short run. So our memory is one of the most frightening things in trading.
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According to one Stanford's study in 2005 it proved one very impressive thing. Scientists gave a group of participants $20 each. They were then made an offer: You can flip a coin up to 20 times. If you lose the coin toss, you owe $1. If you win, you get $2.50. Everyone in this situation should make as many tosses as possible, since there's a 50/50 chance of accurately guessing a coin toss, and the reward for winning is far larger than the penalty of losing. But the researchers found only one group of participants willing to make large numbers of tosses: Those with a lesion in the area of their brains that controls emotion. Participants with normal brains threw in the towel after flipping a few losses in a row. People don't like losing money, and even if you know the odds are in your favor, a couple losses will turn you off. But those whose brains suppressed emotions kept on betting, regardless of past losses. Not surprising, given the odds and payoffs of the coin-toss game, they ended up with more money.
We're as human beings more likely to remember negative, emotional events than ordinary or positive ones, especially in the short run. So our memory is one of the most frightening things in trading.
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The BFM Assets Team.
Thursday, 21 November 2013
NIKKEI FORECAST FOR 2014
Since last October when Nikkei violated the long short term channel has been gained more than 70%, since this January more than 50%. Since end of this May Nikkei has been been only ranging and consolidating. What seems now clearly there is a key resistance at 15.700 now the price is fluctuating around 15.450. Can be sure if that resistance is taken the bullish run continues further. We are so close for that level, less than 2% so it might happen any day. If it is broken the next target for Nikkei must be the 20.000. Still we are far from the historical high which was above 40.000.
And what is the realistic scenario for 2014? There are some argues about this year 50% gain means the market is overbought, meaning bubble. I am convinced about that is not bubble yet. It is only a kind of strong run after almost two decades of falling market. Normally after this sort of bullish year in the following year keep going the bullish upside run. Maybe not that strong as this year but still produce nice returns.
The upside potential is still strong in 2014. So the long term opportunities are very good regarding the Nikkei.
Fundamentally there are few remarkable datas:
- The growth – this year Japan GDP is in 3,5% plus
- Inflation – the prices after decades started to rise again, which boost the corporate profits up
- Aggressive asset buying program by BoJ – which offers cheap money for the market
- P/E ratios are big time lower than in US – most of company shares are good bargain
Take a look at our Swiss fund and begin to invest with us!
The BFM Assets Team.
Wednesday, 20 November 2013
DO WE HAVE TO LOVE OR HATE OUR PORTFOLIO?
Literally the question is that if we trade oil, gold, dollar, IBM we have to create any mental commitment to those assets or not. My bet is better not to do that.
I have read once from a trader who said. We have to only love our dog, wife, children, but not our stocks. It sounds reasonable, but what is the real sense behind this sentence.
As we are human being we are weak and mentally easily manipulated. Let’s say you own some oil long contract and you are convinced that the price needs to go up. Maybe you have some fundamental arguments maybe only your sentiment is bullish. But here comes the problem since the computer and internet take off after ’80s there are hundreds of articles within only one day on the internet about oil. So the next day you decide you want to be well informed and knowing everything about the oil. So you start reading. After few hours you filled up with miriads of new informations and get frustrated and not so sure about your oil long anymore. Too much information makes you unsure about the simple thinks too. This is a conformity bias. We don’t want to be different than others. And if you read that everybody is shorting the oil you think the sell side is better. So you cover your long, just for being the part of herd.
The other big mistake, I call this unreasonable commitment to our assets. The point is that we love our assets what we own. If it is not making profit anymore for us like Apple has done in the last 2 years we are still holding because we created some sort of mental relationship with that investment. Personally I cannot afford to build up any personal relationship with my investment because it is business and it is about money and profit not about the love.
Let me give you an example. Most of investors don’t buy no name companies just buy the flashy stocks like Apple, Starbucks, Facebook, Twitter...etc. They can be crazy about these corporates and still holding when all the rationality dictates to sell. The point is that most of those trendy companies usually underperform the market. Cause they are super expensive.
The most profitable shares are unknown for most of us. The big mass don’t want to own them. Because they don’t know and in some cases they hate those without any rational motivation. But these small cap companies are much cheaper and deliver higher performance.
So what I suggest close out all your preconception and just analyze each company with cold blood and head. Cause the investment is more serious than use our emotions. It is about money.
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The BFM Assets Team.
I have read once from a trader who said. We have to only love our dog, wife, children, but not our stocks. It sounds reasonable, but what is the real sense behind this sentence.
As we are human being we are weak and mentally easily manipulated. Let’s say you own some oil long contract and you are convinced that the price needs to go up. Maybe you have some fundamental arguments maybe only your sentiment is bullish. But here comes the problem since the computer and internet take off after ’80s there are hundreds of articles within only one day on the internet about oil. So the next day you decide you want to be well informed and knowing everything about the oil. So you start reading. After few hours you filled up with miriads of new informations and get frustrated and not so sure about your oil long anymore. Too much information makes you unsure about the simple thinks too. This is a conformity bias. We don’t want to be different than others. And if you read that everybody is shorting the oil you think the sell side is better. So you cover your long, just for being the part of herd.
The other big mistake, I call this unreasonable commitment to our assets. The point is that we love our assets what we own. If it is not making profit anymore for us like Apple has done in the last 2 years we are still holding because we created some sort of mental relationship with that investment. Personally I cannot afford to build up any personal relationship with my investment because it is business and it is about money and profit not about the love.
Let me give you an example. Most of investors don’t buy no name companies just buy the flashy stocks like Apple, Starbucks, Facebook, Twitter...etc. They can be crazy about these corporates and still holding when all the rationality dictates to sell. The point is that most of those trendy companies usually underperform the market. Cause they are super expensive.
The most profitable shares are unknown for most of us. The big mass don’t want to own them. Because they don’t know and in some cases they hate those without any rational motivation. But these small cap companies are much cheaper and deliver higher performance.
So what I suggest close out all your preconception and just analyze each company with cold blood and head. Cause the investment is more serious than use our emotions. It is about money.
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The BFM Assets Team.
Tuesday, 19 November 2013
THE COMMON GAME NOW IS THE GUESSING. BUBBLE, NO BUBBLE, BUBBLE, NO BUBBLE...
Each day I can find hundreds of articles, blogs which are concerned about that market is in bubble, the other half is positive about that is not yet a bubble. I belong to the no bubble school.
Why? Very simple. I have 6 arguments only.
- If not yet everybody is optimistic is good because the sceptical’s potential buying power will later come in the market, at the final parabolic phase.
- In bubbles everybody convinced that nothing wrong can happen. Now is not true yet.
- The market just broken out from 14 years ranging period last month.
- There is cheap money out there. The interest rates are in historical low levels.
- Ther is QE which protects the market from the big correction, over 15-20%.
- Fundamentally the US corporates are more profitable then ever.
- Very bullish
- Bullish
- Neutral
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Monday, 18 November 2013
NIKKEI OVER 15.000
Last happened this remarkable and impressive break out. First six months of this year jumped up the Nikkei with more than 50%. Since last November gain is more than 75%. Started the index this January below 10.000 and last week closed again after this May over 15.000. There is a strong buying sentiment.
If we look at the 20 years historical chart we could discuss about not only lost decade, but lost two decades in terms of Nikkei and Japanease markets. In 1989 the historical high was over 40.000. Recently we are far far away from that level. In big picture the Nikkei is legging behind the US and most European markets. They are at historical record levels, but not the Nikkei. This arbitrage might give us good opportunity on the buying side. The inner behavior of indexes that they are moving in correlations so the Nikkei needs to catch up the gap between itself and the US markets.
Possibly can occur 2 different scenarios:
My bet is the Nikkei is gonna catch up cause it shows a brutal strength, only last week gained more than 7,7%. This is best week so far in this year.
This morning made some corrections the Nikkei Composite, but I am not concerned about that. This is a normal process of the market movements. The weaker Yen against the Dollar is also supporting the bullish stock market.
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The BFM Assets Team.
If we look at the 20 years historical chart we could discuss about not only lost decade, but lost two decades in terms of Nikkei and Japanease markets. In 1989 the historical high was over 40.000. Recently we are far far away from that level. In big picture the Nikkei is legging behind the US and most European markets. They are at historical record levels, but not the Nikkei. This arbitrage might give us good opportunity on the buying side. The inner behavior of indexes that they are moving in correlations so the Nikkei needs to catch up the gap between itself and the US markets.
Possibly can occur 2 different scenarios:
- Nikkei gets start to go up stormy or
- US markets start to come off
My bet is the Nikkei is gonna catch up cause it shows a brutal strength, only last week gained more than 7,7%. This is best week so far in this year.
This morning made some corrections the Nikkei Composite, but I am not concerned about that. This is a normal process of the market movements. The weaker Yen against the Dollar is also supporting the bullish stock market.
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The BFM Assets Team.
Friday, 15 November 2013
MARX AND THE MARKETS
Marx was right in terms of crisis again. The last Credir Crise since 2007 was the biggest crunch since 1929. Marx’s Law of Fall of Rate of Profit perfectly describes the last and current years process of capitalism.
What is the correlation between Marx’s Rate of Profit Theory and the markets? Marx analysed the corporate profitability and cyclical crisis of capitalism. He proved that if the Rate of Profit starts falling in the capitalist system it is the bell of next big correction and shortly the crisis come. We had a brutal profitability drop between 2007-2009 in all industries across the board. From that recession US has recovered in fastest phase, but many regions like China, Russia still suffering from that.
But what is the rate of profit, which is an indicator of crisis?
= Rate of Profit
S – Surplus Value. This is the source of profit.
C – Constant Capital. Machinery, office, paper, printer, all expenses excluded wages ... etc.
V – Variable Capital. Expenses of wages.
If the Rate of Profit gets falling that means the certain company or the whole industry or the whole economy profitability is getting smaller. Why? Because the C – technology is getting more expensive and V – wages are higher and higher. When we are in upward period of cycles and the development is over all, the wages are improving, but after a certain point it starts to affect on the Rate of the Profit. The increase of expenses side reduce the profit. Above a critical and certain level needs to be reduced the salaries or make the working days longer or if necessary workers are fired. The rate of unemployment initiate to increase. That is what we saw in 2007-2010 period. The rate jumped up from 5% to 10% and by now normalized between 7-8%.
In the period of the deepest crisis the purpose of companies is reducing the C (Constant expenses) and V (wages). On wages the cut the costs back as you see above and on C they start to use more efficient technologies which can reduce the daily process expenses. The options are finding synergies inside the company, no travel expenses with video technologies, more computerisation.
After those steps the S gets start to increase again and parallely during the crisis the cost of C and V are lowering. In the Marx’s Theory the Rate of Profit starts to recover again during the crisis, which we see now in US. The american flagship companies like Apple, BoA, Starbucks, Tesla, Facebook sitting on more profit and cash then ever. The level of profitability is on historical high. And, how effect on the markets upon those data. Just look at the chart below. This is more than obvious. It is a brutal five years bull market.
All in all Marx was right in terms of the Rate of Profit. It has been recovered again and the crisis is over. This is cycle behaviour of Capitalism. The Capitalism is the most virulent system in the history. Learn always from the crises and reborn again. As Schumapeter called this event creative destruction.
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What is the correlation between Marx’s Rate of Profit Theory and the markets? Marx analysed the corporate profitability and cyclical crisis of capitalism. He proved that if the Rate of Profit starts falling in the capitalist system it is the bell of next big correction and shortly the crisis come. We had a brutal profitability drop between 2007-2009 in all industries across the board. From that recession US has recovered in fastest phase, but many regions like China, Russia still suffering from that.
But what is the rate of profit, which is an indicator of crisis?
= Rate of Profit
S – Surplus Value. This is the source of profit.
C – Constant Capital. Machinery, office, paper, printer, all expenses excluded wages ... etc.
V – Variable Capital. Expenses of wages.
If the Rate of Profit gets falling that means the certain company or the whole industry or the whole economy profitability is getting smaller. Why? Because the C – technology is getting more expensive and V – wages are higher and higher. When we are in upward period of cycles and the development is over all, the wages are improving, but after a certain point it starts to affect on the Rate of the Profit. The increase of expenses side reduce the profit. Above a critical and certain level needs to be reduced the salaries or make the working days longer or if necessary workers are fired. The rate of unemployment initiate to increase. That is what we saw in 2007-2010 period. The rate jumped up from 5% to 10% and by now normalized between 7-8%.
In the period of the deepest crisis the purpose of companies is reducing the C (Constant expenses) and V (wages). On wages the cut the costs back as you see above and on C they start to use more efficient technologies which can reduce the daily process expenses. The options are finding synergies inside the company, no travel expenses with video technologies, more computerisation.
After those steps the S gets start to increase again and parallely during the crisis the cost of C and V are lowering. In the Marx’s Theory the Rate of Profit starts to recover again during the crisis, which we see now in US. The american flagship companies like Apple, BoA, Starbucks, Tesla, Facebook sitting on more profit and cash then ever. The level of profitability is on historical high. And, how effect on the markets upon those data. Just look at the chart below. This is more than obvious. It is a brutal five years bull market.
All in all Marx was right in terms of the Rate of Profit. It has been recovered again and the crisis is over. This is cycle behaviour of Capitalism. The Capitalism is the most virulent system in the history. Learn always from the crises and reborn again. As Schumapeter called this event creative destruction.
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