After the Party
11/02/2005
This Hindu New Year I was asked which trading book I found the most useful of all time. Now, I am not being a religious extremist(!) when I say it was the Bhagavad Gita - the 5,000b.c. ancient Hindu scripture.
This is not because I am sitting in front of a trading screen praying for the stock to go my way, but because the Gita, like the advice from some of the world's leading traders I met for my book The Mind of a Trader talk of the importance of emotional detachment in the pursuit of wealth.
And trading is the pursuit of wealth. The focus should be on the actions, in a disciplined way, not on the end goal of profit. Do what you must do, your duty to your trading plan, and the Maserati will come when it is time. Most traders do not understand that.
What of the markets. Okay, here's a thought: The US is the dominant deficit economy in the world. China is the third largest surplus saver in the world. They have provided much of the liquidity to fund US imbalances.
China will invest domestically; it will be forced to draw on its own savings. That is likely to mean a weaker dollar and higher US interest rates. Indeed US rates are at 4%. Remember when the US was at 1% and the UK at 4%?
Hedge funds certainly had an awful month in October. 10,200 on the Dow certainly looks more likely than 10,700. US rate rising decision was unanimous, expect more rises. That will make it easier for the UK to raise rates too and expect that before year end. We should remember in the last quarter the US economy grew a strong nearly 4% annual growth.
On the UK front it is amazing to think the likes of O2 are up nearly 100% in a year, or BPB and Exel are up over 70%. Even with blue chips the performance is there. As for yielders giving you the most dividend for every £100 of shares - Advent Capital comes in at 13%, City Lofts at 12%, BRIT Insurance at 8%. If you just buy the top 20 highest yielders and assuming they keep their dividends steady and return 0% in capital growth you are still up around 8% return in a year - not bad.
Value-Growth
Just some of the names from my Alpesh Patel Special Edition ShareScope trading software on my value growth criteria which are based on stocks meeting revenue and profit growth and good value based on criteria such as price earnings growth: Remember they are for a 6 month outlook: Galliford, Lonmin, Telford Homes, Printing.com.
Remember I am targeting about 20-25% with the value growth criteria. Last year it produced 33% return.
On my momentum value indicator (which tracks stocks with value but which in the short term also have money going into the shares) I have: First Derivatives (new), PSD, Laird, PD Ports among others.
Crazy Small Stock
These are high risk volatile stocks which could move sharply higher or move sharply lower in my view, but will almost certainly not stand still. Names on the radar include: Deltron, Heart of Midlothian, Greenwich Resources.
Also, if you would like a free multi-media CDROM on 'Investing Better', which covers spreadbetting, CFD trading and momentum indicators like the MACD, posted to you then drop me an email with your postal address to alpesh@tradermind.com.
Spreadbetters
Spreadbetters and futures traders often look at hard and soft commodities. Here's my quick take on the action for the week ahead:
- Oil: Sideways
- Copper: Higher
- Gold: Down
- £/$: Sideways
- Dow: Sideways to up
- FTSE 100: Up
- Soyabean Oil: Down
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