Everything looks up and in the moment it's the middle-age of economy's rising cycle. I hope it continues for another 3 years, but the S&P 500* (blue line) is concerning me. It has already reached the level of the last two economic booms. What if the 'economic cycle acceleration' theory is true? Basically couple years ago I was wondering about a possibility that the period between economic crisis and booms might get shorter. That's because : 90% of the world's wealth is owned by 10% of the population. Also, what is hard to measure, but true is that 10% of the population have much greater financial intelligence than the rest. So what happens? The smart rich people gain a lot of money every crisis by buying from bottom and selling in top. Also they do short selling* which basically means betting on the stock to decrease. Some people start to understand these patterns, but even more
(the 90% of fools) give away money.
In case of market's fool, It's like an investment firm. You don't take out money from the account in case you really don't need it. Because from every disposal, the government takes taxes. How much? Depends on the country. In Estonia, 20%. It's better to trade with 1000€ rather than 800€. Assuming you're gonna gain of course.
That's why these cycles might happen more rapidly in the decades coming. For example, take a look at the history. Technology bubble 1990, internet bubble 2000, financial bubble 2008. What next? Aftershock bubble 2015 maybe? It's should be noticed that the periods have decreased. Last one was in 8 years from the previous one. According to this, next one could be 2016. Because It's amazing how fast people's psychology changes. Today, a young woman gave me back my one euro coin that I had dropped. She could've kept it easily. Now that shows that the greed is gone for a moment there. But when people hear about the money made at the stock market by the smart people, they want in. Then the greed emerges again.
- Now, about my next indicator for analyzing stocks. This is a chart from 1994 to now. On that chart, there's S&P 500 (blue line) and BAC (red line) aka Bank of America. Same time the other banks have been rising along with the S&P 500, BAC has not. Which gives me a reason to buy, because many stocks have already made their fast climb. Why shouldn't BAC. Also USA would never let a huge bank like this go declare bankruptcy. So that will be another indicator I'll be testing by purchasing BAC.
What is going on with my portfolio?
- First, my long-term stocks :
C +1.3%
F +6.1%
PFE +2.5%
Average +3.3%
In comparison, S&P 500 has risen 4% in 6 weeks. That's the time I've been writing this blog.
Looks like I should be doing a lot better if I want to beat the market. Keep learning and keep trying.
Good quote for this:
"Give me guys who are poor, smart, hungry - and no feelings. When you feel, you lose a few, but you keep on fighting." That's what I'm trying here.
- My speculation stocks :
ITMN +6.2% Just like I said, the growth stopped. Could've sold it, but I was interested what was going to happen.
L +3.2% I will sell, because there's nothing to expect. It has been fluctuating between 39pt and 43pt for 6 months.
SBUX +1.2% Though the increase is slow, at least it's steady and Starbucks is a francise based on the number of customers, which is in the moment, increasing for sure.
ALXA -6.8% I sell, but will wait for an opportune moment for buying again. Simply I like the fundamentals (I mean news) of the company and the stock's movement.
KIM +2.3% Most certainly i will dump it, because it has made me nothing comparing to the market.
Average +1.2%
Week's S&P 500 +0.8%
Conclusion - the long-term shares have been better, but one week shows nothing yet.
*S&P 500 - An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
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